FABINDIA – A SILENT SOCIAL WORKER

PIALI HALDAR
RESEARCH SCHOLAR,BITS, MESRA, NOIDA(EXT)
ASSTT. PROFESSOR, AIM, NEW DELHI

PROF(DR) S L GUPTA
PROFESSOR, BITS, MESRA, RANCHI.
NOIDA(EXT)

Abstract
Fabindia which is very common name for urban Indian, they know that Fabindia is a
branded retail chain stores. They sell handlooms, garments, handicraft items, organic
food through their retail chain. Fabindia started as an exporter of home furnishing
products and later slowly they entered into retailing of handlooms, ready-made garments,
handicraft items etc in domestic market. Initially they have created employment for
people of rural India, later they have made the rural community part of their organization,
and they have adopted the community-owned-corporation business model to create a
win-win situation for both rural producers and urban consumers.

Introduction

Fabindia, the label spells that they are “natural”, “vibrant” and “handmade”. Fabindia
stores are warm and colourful which showcases the most beautiful and fabulous fabrics
and handicraft products from all over India. Fabindia is working with village-based
artisans across India and who are working on handlooms textile and specialty products.
Their commitment towards rural artisan has helped to preserve the traditional crafts of
India and create employment in rural areas. To become a commercial entity is not the
sole objective of Fabindia.

Fabindia works with craftsmen and women who make the products in their homes or in
their place of work. The organisation closely works with the artisans by providing various
inputs including design, quality control, access to raw materials and production
coordination. It does not have a company owned production unit. Fabindia has a
consistent mark up price on all its products to recognize and appreciate the crafts people’s
creative investment in the products. Fabindia retails its products through exclusive
company-owned stores across India.

Fabindia’s History
Fabindia’s history began with coming of John
Bissell to India in 1958, before any American
companies were sourcing handloom products from
India. John Bissell was previously working as a
buyer for Macy's New York. He left his position
and had started working as a consultant for the
Ford foundation, where he was given a two-year
grant to instruct Indian villagers in making goods
for export. He firmly believed in the emerging
Indian textile industry and was determined to
showcase Indian handloom textiles with a way to
provide employment to traditional artisans. What
Bissell discovered was that a village-based
industry of India has a profusion of skills hidden
from rest of the world.
So he was determined to showcase Indian
handloom textiles to the world, Bissell established
Fabindia in 1960. Initially his goal was to
establish Fabindia as an export company. It started
with exporting fabrics, durries and rugs to USA and other Western countries. In the
beginning the company operated from Bissell’s residence in the posh area named Golf
Greens in New Delhi. In order to fuse the best aspects of East & West he adopted a
collaboration approach of business. Thus Fabindia started out as a company exporting
home furnishing and started selling diverse handicraft items made in India to the world.
By year 1976, Fabindia had opened its first retail store in India at Greater Kailash, New
Delhi with a range of upholstery fabrics, durries and home linens. Very soon they created
their name in garment manufacturing made from hand woven and hand printed fabrics.

1960 – John Bissell started Fabindia as a wholesale export company

1976 - Opened first Fabindia retail store in New Delhi
Early 80’s – Added ready to wear garments to the retail offering
1990’s – Marketing focus shifted from export to domestic market
1999 – William Bissell takes over as MD of Fabindia
2001 – 6 stores in Metros
2004 – Organic Food Products range were launched
>20 stores across the metros, and started expanding to Tier 2 and Tier 3
cities.
2006 – Launched Personal care products range Fabindia Sana.
2008 – Handicraft jewelry was introduced.
2009 – 105 retail stores across India
Currently – 4 countries, 48 cities 125 stores

A Journey from Export to Retailing

The Fabindia was set up in 1960 by John Bissell to provide a platform for weavers and
printers to market their produce matching with the demand of international consumers.
William Bissell inherited this company built by his father John Bissell who married to an
Indian woman and settled down in India. He started an export business by exporting
handmade textiles and crafts to the west.
His son, William Bissell, the current Managing Director of the company, returned from
Wesleyan University, US, and joined the business, registered it in name of Fabindia
Overseas Private Limited. In 1993, Bissell’s father fell ill and in 1999, John Bissell died
leaving the business to his 31 year old son. He continue with the same belief in handmade
fabrics, when he really got involved in the business. He did not see a place as an exporter
in the future. According to him, the export industry would become a two-player business,
i.e., for producer and exporter, with no place for intermediaries like Fabindia. To create a
unique identity, he took the responsibility to make some crucial changes for future
marketing strategy. By 2001, Fabindia started focusing on domestic market, starting with
handful of boutiques stores in Mumbai, Chennai, Kolkata and Bangalore. In 2004 they
increased their presence in other cities with 20 stores in different parts of India, by the
end of 2007 the expansion reached to 75 stores across India.
William Bissell was very clear, he decided not to dilute the business ethos, but to reinvest
itself by diversification in itself, and he introduced new line of apparel, organic food,
furniture and jewelries. The company adopted around 40,000 reliable artisans to
strengthen the supply chain from villages in different parts of India including the states of
Gujarat, Rajasthan, Andhra Pradesh, Uttar Pradesh and many more, where the weavers
and artisans produce exclusively products for Fabindia.

Fabindia exports to 33 countries worldwide and has stores in Dubai, UAE, and in Rome,
Italy and USA. At present have 125 retail stores across India. They participate in the
Indian Handicrfts and Gifts Fair, New Delhi in Spring and Autumn. They display their
collection drawn from various part of India. Fabindia has a dedicated team of
professionals to handle products customization and interior consulting for heritage hotels,
resorts and corporate houses.

Fabindia was awarded “Best Retail Brand” in year 2004 by The Economic Times of
Inida. In 2008 Fabindia was named one of the India’s Top Marketers by Business Today,
India’s leading business magazine. In 2009 the company was featured as an example of
game-changers magazine. In 2010 the company has been recognized as one of the most
innovative models by a Monitor-Business Today survey conducted across industry.

The non-textile range was added in 2000, while organic foods which formed a natural
extension of Fabindia’s commitment to traditional product introduced in 2004, followed
by personal care products in 2006 and handicraft jewelry was introduced in 2008. Today
Fabindia has become a successful retail business, presenting Indian textiles in a variety of
natural fabrics, and home products including furniture, lights and lamps, stationery, home
accessories, pottery and cutlery. Fabindia has become the largest platform for products
which are derived from traditional craft and skill. The company is closely operating with
the artisans, and providing them support to produce quality product.

Business Model
Fabindia adopted one of the Business Model of Community-owned businesses which
differ from traditional businesses in many ways; they have given life to new business
ideas. In many ways, a community-owned business have similar mercantile endeavor, it
satisfies the market need and it offer the potential to generate a profit. Supported the
traditional craftsmen of India by providing a market and thereby encourage and sustain
rural employment.

Community-owned businesses fall into four broad categories:

• Cooperative: A communally owned and managed business, operated for the benefit of
its members;

• Community-owned corporation: A traditional, for-profit corporation that integrates

social enterprise principles;

• Small ownership group: A small, ad hoc investor group that capitalizes and/or
operates a business as a partnership or closely held corporation; and

• Investment fund: A community-based fund that invests debt or equity in local business
ventures.

Cooperatives
Cooperatives are democratic organizations where each member has an equal vote, and
they operate as not-for-profit businesses. Unlike a typical nonprofit, co-operatives often
distribute surplus revenues as "patronage dividends" to members.
Cooperatives are a special breed of organization, where people do a business activity for
their mutual benefit. Definition of Cooperative according to the International Cooperative
Alliance, "A cooperative is an autonomous association of persons united voluntarily to
meet their common economic, social, and cultural needs and aspirations through a jointly
owned and democratically controlled enterprise."
The cooperative is original based on the following ideas as per Rochdale Principles:
1. Open Membership
2. Democratic Control
3. Dividend on Purchase
4. Limited Interest on Capital
5. Political and Religious Neutrality
6. Cash Trading
7. Promotion of Education
The principles have been expanded slightly over the past 150 years to include
reinvestment in the cooperative, sustainable development, and a responsibility to
strengthen the cooperative movement as a whole.

Community-owned Corporations

While cooperatives have a set of principles and a codified movement, but the
"community-owned corporations" more loosely described traditional business with a
social-enterprise component. Several communities are currently developing community-
owned businesses or opening retail stores that are not operating in cooperatives.
In order to foster broad community ownership, the stakeholders are allowed to purchase
the share of the company. The members are allowed to purchase company’s fix no.
shares. The money are raised partially or entirely from the grassroots. The shareholder
can buy or sell their share among them as per their requirement. Since shareholders'
money can only be used to capitalizing the business, the money cannot be transferred to
any other business.
A community-owned corporation has greater flexibility than cooperative, primarily
because it does not necessarily require that each owner make an equal investment or has
an equal vote.
Like cooperatives, community corporations may require a similar level of energy and
volunteer commitment to sell shares to a large number of people. A community-owned
corporation is a good choice when it comes to sharing ownership limits.

Small Ownership Group

Small ownership groups is a type of partnerships where members are closely held
together, this type of corporations also called private-stock corporations, are such
traditional forms of business ownership where a small group, or even an individual
entrepreneur, can open a business with a community-minded purpose.

Partnerships and private-stock corporations have different legal structures, in a

partnership, the individuals are owners; in a corporation, they own shares, even though
the stock is not publicly traded or easily sold, but both can embody social-enterprise and
community-ownership principles. The most notable functional difference from a
"community-owned corporation" is that small ownership groups tend not to be open to
outsiders.
The small ownership group aspect lessens the risk to each individual investor, helps in
bring money as one of their chief resources for the group, a business can raise capital
relatively quickly.
In a cooperative or community-owned corporation, the number of members is large
compare to small ownership groups, where a small group of investor comes together for a
business. Relationship breakdowns are one of the most common causes of business
failures.

Investment Funds

An investment fund provides venture capital (equity) or loans (debt) to an entrepreneur.

Unlike traditional venture capital, community-development investment funds have less
interest in high returns and more interest in stimulating new businesses – especially great
business ideas, which cannot gain access to sufficient capital through traditional channels
and can raise venture capital fund easily for community development programme.

An investment fund is well suited to attract the best new ideas when the organizing entity
itself is not interested in starting and operating the business, or when it wants to stimulate
the development of multiple businesses. Flexible venture capital is also an excellent tool
for leveraging additional private and public capital.

Community-based investment funds have been used to catalyze a wide range of business
types, but are more common in industrial and knowledge-based business development
than in the retail sector. Because an investment fund is not selling a specific concept with
cool imagery (a grocery store or a mercantile, for example), it may be harder to motivate
individual investors (Bloom).

Business Model Adopted by Fabindia

Fabindia adopted a business model which is principally very democratic in nature that is
in nutshell, of the artisans, by the artisans, for the artisans. They have adopted the
business Model commonly known as Community-owned-Corporations(CoC) in 2007,
when Fabindia was facing with the problem of sourcing products from thousands of
artisans scattered across the country, for its stores. Fabindia promotes inclusive
capitalism through this unique CoC model i.e., Artisans Micro Finance Private Limited
(AMFPL) which is Fabindia’s wholly-owned subsidiary. It act as value adding
intermediaries, between rural producers and urban consumers. The artisans were then
organized into 17 centres based in different geographic locations. Fabindia now sources
all its products only from these centres. Each of these centres, in turn, sources from rural
artisans in their respective regions.

William Bessell had tried to implement CoC concept in 1988, when he set up the
Bhadrajun Artisans Trust in Jodhpur, Rajasthan. The trust was conceived as an artisan’s
cooperative for leather workers and weavers. But the cooperative Model he adopted was
not very successful due to collective ownership and decision making, where each
member has one vote regardless of investment – did-not turn out as he expected.

DAH Jaipur is one of the 17 CoC, small community-owned firms promoted by Fabindia’s
wholly-owned subsidiary, i.e., Artisans Micro Finance Private Limited (AMFPL. Rural
artisans and craftsmen are slowly making their way into the mainstream by owning
shares, which gave them ownership rights and rewards, which they can use as collateral.
Fabindia is successful in bringing artisans and professionals together, DAH Jaipur logged
for Rs.1 crore in 2008 and is reached to Rs.19 crore in 2009, is expected to reach Rs.30
crore by end of this year. DAH currently sourcing their products like printed fabric, home
furnishing, furniture, garments, accessories and gift from close to 2,400 artisan
shareholders, and expected their number to touch 5,000 by the end of this year. Similarly,
cumulative monthly sales for the other 16 CoCs average have reached to Rs.30 crore.

The structure and ownership pattern is same for all CoCs. AMFPL has 49% equity, 26%
to the artisans, non-profit organization, suppliers, self-help groups, 10% to the employees
and rest 15% is raised from outside source such as private equity or venture funds. DAH
Jaipur has raise 15% fund from Aavishkaar Venture Fund, a Mumbai-based venture-
capital funds of Rs 34 lakhs. Axis and ICICI Bank provide debt fund to these companies
on a 1:5 equity-to-debt ratio. While the power of community and governance is very
clear, liquidity is limited as the shares are bought and sold among the artisans.

Over the period of time, AMFPL propose to reduce its share to these companies to 26%,
with growing ownership of artisans. The company spends the equity raise for building
common facilities for the artisans like warehouses, dyeing houses, technical support
system, and regional offices. Currently they are creating yarn and fabric banks for
weavers and painters for quality supplies.

The artisans not only found a platform for selling their products, but they themselves feel
as a part of the company and they are willing to do their best to ensure rapid growth of
the company. They understand it very well that their growth depends on the growth of the
company; higher profit will lead to higher dividend for them, which they can invest to
produce more. Most of the artisans who do not have any other source of income other
than daily wage are proud to be the owner of the company.

Half of the 40,000 artisans who are associated with the company are shareholders of
CoCs. AMFPL desire to cover 1,00,000 artisans within next two years. Fabindia is doing
a great job by bring products of customers choice matching with the urban lifestyle and
by giving sustainable livelihood to the rural people. Fabindia links over 40,000 craft
based rural producers to modern urban markets, which are not only helping in pressing
India’s traditional craft of India, but creating opportunities for artisan and marginal
craftsman.

Fabindia was founded with a strong belief that they will act as a marketing vehicle for the
rural artisan and reach the customer at affordable price. They have been successful in
their vision in fulfilling the need of the rural artisan by helping them in marketing their
product with contemporary designs which customer accepts for their aesthetic values.

Fabindia started with textile-based products range which includes ready-to-wear

garments, and accessories for men and women, teenager, and children, bed sheet, bath,
table and kitchen linen, floor covering, upholstery fabrics and curtains. Cotton, silk, wool,
grass, linen, and jute are the basic fibers used. Later they added the furnishing products
like furniture, lighting, stationary, tableware, cane basket, and selection of handcrafted
utility items. Organic products like cereals, grains, pulses, spices, sugar, tea and coffee
were also added. Recently, Fabindia enhanced their product range by adding authentic
personal care products like soaps, shampoos, hair oils, pure oils, moisturizers, body
scrubs, face packs, hair conditioners and special care products.

Corporate Social Responsibility Activities of Fabindia

CoCs has improved the life of the artisans by giving them loan by offering their shares as
collateral or they can easily sell their shares when they need money for their children
education or marriage. Seeing the problems that everyone faces, like lack of basic public
services like water, electricity, education which threaten the growth in rural India, they
have started schools for local children, hospital and also taken up reforestation projects in
Rajasthan.

Conclusion

Fabindia has grown from Rs.36 crore rupees in 2000-01 to Rs.130 crores in 2005-06. The
company has achieved a phenomenon growth in past few year, and the company has set a
very ambitious target of reaching 250 stores and a turnover of Rs.1000 crore by 2011.
They have gradually achieved a strong foothold in India and have become a niche player
with its innovative product line with a rural flavour.

Since its inception, the company was successful in creating a unique image and repeat
customers by its unique selling proposition of quality fabric, traditional style and
consistent quality. In fact, large percentage of the customers buys from Fabindia, because
it has significant contribution in improving the life of rural artisans.

Bibliography
www.fabindia.com
www.fobres.com, Naazneen Karmali, Fabindia, 2009
www.indiamarks.com
www.cluegroup.com,
www.economictimes.indiatimes.com, Are we ready to shell not more for Green tag?
Economic Times 21 January 2010
www.economictimes.indiatimes.com, Fruits of the Loom, Economic Times 12 October
2010
www.avishkaar.com
www.businessindia.com, Manjeet Kripalani, FabindiaWeavers in Artisan Shareholders,
March 2009