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...

Weaving
...Weaving Bharat
Bharat into
into
India
India

Dr Amit Rangnekar

Case
How does Fabindia, committed to protect
traditional Indian weaving and printing
skills, continue their growth and profit
trajectory, while maintaining their
commitment to rural development?

Fabindia 2008
Indias most well known brand of ethnic chichandloom garments, linens and handicrafts
Commercially successful adaptation of
handloom fabrics to urban tastes
Sales Rs 3 Billion
CAGR 40-50%
85 retail outlets
Committed to nurture Indias artisans,
profitably

Mission
In addition to making profits, our aims are
constant development of new handwoven
products; a fair, equitable, and helpful
relationship with our producers; and the
maintenance of quality, on which our
reputation rests.
John L. Bissell, Founder of Fabindia

Founding Ideology
A vehicle
to market
the vast
and
diverse
craft
traditions
of India

Provide
work &
employme
nt to
Indias
skilled
rural
artisans

Protect
and
sustain
traditiona
l weaving
and
printing
skills

Policy
I dont believe in charity or giving things
out free. I believe that the only way to
alleviate rural poverty is to generate
sustainable employment, and the only way
to do that is if we run our business in a
profitable manner. Yes, it seems
contradictory that we pursue both a social
goal and profit, but I believe this is the
only way to do it. William Bissell, MD,
Fabindia

Genesis
1958- John Bissell , US delegate, in India to
advise Indian government on Cottage Industries
Worked with Macys, understood the demand for
novel, high-quality cotton fabric in the US market
Traveled extensively across India
Artisans- rich in talent and skill but with little
market knowledge or ability to access consumers
Envisioned an entrepreneurial opportunity to to
enable artisans to find markets
There is heart in India.

Evolution
Founded 1960, Delhi, as an export house
Export of hand woven soft home
furnishings
Upholstery fabric, rugs & bed linens
1965, revenues Rs. 2 million ($44,444)
Committed to nurture scores of weavers
and artisans who depended on Fabindia
for their livelihood

Key Drivers- Relationships


AS Khera- supplier of high-quality
dhurries (handwoven variety of rugs) and
home furnishings from Panipat
Habitat- a British interior design firm,
founded by Sir Terence Conran, a
renowned interior designer
Sales to Habitat often accounted for the
entire output from the Panipat unit

Progress
1976- Fabindia Overseas Pvt. Ltd.
Opened first retail store in Greater
Kailash, Delhi
Merchandising- ad hoc
Whenever John Bissell saw something he
liked, he invited the weaver or
craftsperson to display and sell his or her
merchandise from the store

1970s & 80s


1977- Exhibited, marketed, and sold a
calligraphy-based home collection designed
by Riten Mazumdhar
First move to incorporate contemporary
design in its products
Great response
Confidence to innovate and sell directly to
consumers
Early 1980s, introduced ready-to-wear
garments
Slow response
Continued export focus

How they began Garments


John Bissell was fascinated by Khadi and
wished to wear khadi shirts. The very first
time he made this request we didnt have
much time, and it was left to Johns Hindi
teacher Benjamin Singh to moonlight as a
tailor and make the shirts. Naturally, we
started with mens shirts, and that too only
size 40, as that was the size John used to
wear. For years we used to hear customers
comment that the sleeves on our shirts were
too long. You see . . . John had long arms!

1990s
1992- Fabindias main customer, Habitat,
acquired by a larger firm- long
relationship abruptly ended
1993- John Bissell suffered a paralytic
stroke, son, William Bissell, stepped up
1994- Second retail store in Delhi
1998- John Bissell passed away
1999- 32-year-old William Bissell, MD of
Fabindia

Post Liberalisation Policy


Textile exports- Textile duty concessions on
machinery import, free foreign exchange availability
Currency devaluation helped exports
Reforms changed consumption patterns & dynamics
Various sectors opened, MNC competition stepped
in
Affluent, upwardly mobile consumers, lifestyle
products
Indian middle class booming
Upper class households, double digits growth

Income Distribution in India


(2003)

Classificatio
n

People
(Mn)

Household
Income
$ US

Deprived

783

78

<600

Aspirants

140

14

1000-3000

Climbers

48

4.8

3000-6000

Strivers

27

2.7

6000-12500

2.18

0.22

>12500

Rich Total
Near Rich

1.55

12500-25000

Clear Rich

0.44

25000-50000

Sheer Rich

0.14

50000125000

Super Rich

0.03

>125000

Total

1 Billion

Expansion
Strategy- Eschew exports, expand retail
Liberalisation, changing macroeconomic
climate
Our internal rigor, depth and breadth of
management, and clarity in planning
process would contribute to our ability to
grow. William

Vision Plan I (2003)


Triple sales from Rs 360 mn ($8 mn) to Rs 1
billion ($22.2 mn) in four years
Culture shock for merchandisers & staff, used
to a more informal, instinct-driven environment
William walked in and said that we were
going to be a 1 billion company in 4 years. I
just went blank. We were a nice little company
doing good business, and suddenly we had to
go for planned growth. We werent sure where
it was going to come from. Charu Sharma,
Head of the garments business
Targets achieved in half the projected time

Vision Plan II (2005)


Bissell, forced to formulate second vision
plan
Double Sales from Rs 1 billion to Rs 2
billion ($22.2 mn) by March 2009
Now it appears that the company may
achieve the target by March 2007. This
means that we will have to execute Vision
Plan III soon, which will have financial as
well as organizational implications. Sunil
Chainani, Director

Fabindia
Value
Chain
g

cin
r
u
so es
ng iliti
o
r
St pab
ca

Co

rm
o
nf

ce
n
a

o
Pr

22,000
Traditional cotton & silk-weavers & printers
Weavers
& Artisans

Fabricators

Tailors create merchandise to specifications


Variety

t
c
u

ng
a
r

155,000
SKUs

Availability

85
Fabindia
Outlets
Reach, width, depth

Sourcing system
Key to success
Network of 22,000 artisans, scale up to 1
Lakh by 2010
Back-to-the-grassroots approach
Fabindias success lies in getting small
handloom and craft units scattered across
remote villages to develop products that
appeal to urban consumers. Well continue
to develop our supply chain the hard way
rather than take the easy way of using millmade fabrics Sunil Chainani, Director,
Fabindia

Statewise
Sourcing

Supply Chain
Artisans- Weavers, printers and fabricatorsRural India
Designers interact on specified weave,
color & print
Combine knowledge of customer tastes,
aesthetics & weaver capabilities
Range- Weave X color X print- 4,000+
combinations
Occasional designs from artisans, scaled
up, if approved
No written contracts with suppliers

Suppliers as Shareholders

Most weavers, grown with Fabindia


Now shareholders of Fabindia subsidiaries
Hold 51% stake in 35 companies in different states
Trade shares with Fabindia, pledge shares to avail
loans
Dah Chanderi, floated with 450 Chanderi weavers
(MP) generated Rs 2 crore new business in 2 years
Rajasthan weavers subsidiary announced 50%
dividend
200 community owned (supply-region) firms to be
set up by 2010, through financing arrangement
with ICICI bank

Supply-Region Companies
Supply-region companies, will streamline &
strengthen our supply chain, eliminate
middlemen, provide jobs to rural artisans,
and giving our suppliers ownership in this
business. These companies, manned by locals
across Indias handloom & craft-rich regions,
will gradually take over design, distribution,
quality control, warehousing, and some
processes like dying from the parent
company Prakash Tripathy, Director
Aggregating fragmented handloom weavers
can ensure steady supply, enhance range &
enable retail scale up

Impact of Suppliers as
Shareholders
They now have a sense of ownership of the
company. They now understand when we
tell them not to raise their labour costs as
the higher profits will come back to them as
dividend as well as capital appreciation
Fabindias evolving supply chain is
responding to the need for large
investments in enhancing product quality
and sophistication. So, well provide better
quality and designs to our customers
William Bissel

Supplier Selection
Referrals from existing suppliers
Interviewed and assessed for potential
Team visits production facility to get a feel
of capability
Given a trial order
Regular orders if performance is
satisfactory
Work on trust and understanding

Supplier Management
Bank loans against buying commitment from
Fabindia
Buy almost 100% capacity, captive consumption
Understand supplier limitations, social sensitivity
Never return goods for delayed delivery, even if
summer collection fabrics are delivered in August
For variations- reprocess / reprint fabric or find
alternate uses- coasters, covers, binders
The weaver and his family have perhaps put in 2-3
months worth of labor into this, and if we return the
goods they will have to incur heavy debts till they
complete the next order. So we make a noise about
the delay . . . but accommodate them.

Stock Management
Weavers deliver fabric in 20 & 50 metre rolls
(thaans)
Difficult to predict quantity & frequency of
delivery
Thaan- colour coded for print, weave & length,
formally stocked, entered in database
Fabric sorted and stored
Tailors issued fabric depending on design &
quantity of garments ordered by the warehouse
Trust embedded in supply chain reduces
problems
Stocked in individual store bins for despatch

Crafts
Bagh

Ajrakh

Ikat

Chanderi

Indigo

Block Print

Kalamkari

Chikankari

Bandhani

Applique

Indian Retail
Historic /
Rural
Reach

Weekly
Weekly
Markets,
Markets,
Village
VillageFairs
Fairs
Melas
Melas
Source of
Entertainm
ent

Traditional /
Pervasive
Reach

Convenience
Convenience
Stores,
Stores,
Kiranas
Kiranas

Neighbourh
ood
/Convenienc
e Stores

Govt
Supported

Modern
Formats/
International

Exclusive
ExclusiveBrand
Brand
Outlets,
Outlets,Hyper
Hyper&
&
Super
SuperMarkets,
Markets,
PDS
Outlets,
PDS Outlets, Department
Department
Khadi
Stores,
Khadi Stores, Stores,
Stores,
Cooperatives.
Cooperatives. Shopping
ShoppingMalls.
Malls.

Availabilit
y/ Low
Costs /
Distributi
on

Shopping
Experience/
Efficiency

Fabindia- Extending Reach


Year wise store
openings
27

Geographic
Tier
distributio
n

Total
Stores
85

58

03 04 05 06 07 08

03 04 05 06 07 08

Tier 1

Tier 2

Tier 3

Store formats
Premium

Wide product
range
Significant
inventory of
high-end items

Regular

Concept

Wide product
range
Lower
inventory of
high-end items

Test stores in
new markets
Fewer stock
keeping
units (SKUs)

Retail

Prefer to lease property, owns only 6 stores


Each store, a profit centre
Store area from 500 sq ft to 8000 sqft
Variance in size, type & location
Average bill value Rs. 1,250 ($28)
Fairly constant- across stores, regions or
cities
2008- 85 stores
82 in India, 3 abroad- China, Italy, UAE
Multiple Fabindia stores planned in West
Asia

Retail
Spiralling real estate prices slowing down
retail expansion
Try to be first mover in new markets to
get cheaper prices
Fabindia has decided not to expand
through the franchisee route in the
domestic market because we do not want
to dilute our brand, adds Shilpa Sharma,
Head, Marketing

Store Management
Store managers allowed to be entrepreneurial
Store wise budgets for order goods & expenses
Store budgets based on location, previous years
sales, and other macroeconomic indicators
Stock planning- Store specific, based on
knowledge of available merchandise & local
tastes
Merchandisers at HO keep store managers
abreast of new styles and other developments
Mystery shoppers- monitor and control quality of
the sales process and customer service

Store Staff
Encouraged to wear clothes that fit Fabindias
ideology
Wearing machine-made, synthetic fabrics
doesnt quite convey our ideology; managers may
have a quiet chat with executives who
consistently wear synthetic clothes. Staff
members wear uniforms that we provide, Store
Manager, New Delhi.
Routinely sent on field visits to supplying
weavers
Training programs in New Delhi, to Fabindias
ideology & share John Bissells passionate
commitment to handlooms and rural
development

Distinct Ambience
We pick our store locations carefully and
choose buildings to create a unique
consumer experience. For instance, in
Bangalore we opened our store in the home
of the famous architect Charles Correa. We
chose the Ilford House in Chennai and
Jeroo in Mumbai. All these buildings are
heritage landmarks that have a charm of
their own. Our stores are destinations.
Chainani
Inside store aesthetics, highlight connection
to all things natural

Communication
No advertising
We are promoting an alternative vision for the future. It
is collaborative [with the suppliers] in the true sense of
the word; it is participatory [with the customers that
share our views], and our products have an intrinsic
value proposition as opposed to an imposed value. It is
due to this intrinsic value of our products that we have
never felt the need to advertise. While we will announce
the opening of a new store in the local newspaper, we
never spend any money on ads per se. Bissell
"Our constant endeavour is to resist the temptation of
going `mainstream' which is more of a commodities
game, and develop and widen the niche markets in
which we are the dominant player" Bissell

Handlooms- Government
Support
Lackluster support program to promote handlooms
Handlooms (khadi) symbols of self-reliance &
Indianness
1957- Khadi & Village Industries Commission
(KVIC) to create commercial khadi products,
increase rural employment
Strong government interest- 7,050 khadi outlets,
significant sales (Rs. 5.8 billion, or $129 million)
Poor shopping experience- badly lit stores,
unenthusiastic salespeople & merchandise- neither
modern nor youthful

Fabindia Distinctiveness
Products convey a sense of youth & quality
Perceived as trendy yet traditional, affordable,
distinct ethnic chic
Garments- Simple, functional & style conscious
Emphasis on utility & contemporariness
Varied and more upscale product mix, class appeal
Better, brighter stores
Informed & eager salespeople
Sourced from all across India
Key product requirement- Should have at least 1
handmade element- handwoven fabric or block
printed by hand or finely hand embroidered

Standardisation
Original crafts- a niche market
Larger market- increasingly full of fake
handloom products
Fabindia has to constantly educate
customers
Fabindia products bear Craftmark,
industry certification for original
handmade products

Product Mix
Home furnishings
Upholstery & curtains
(30%)

Garments (70%)
Womens wear
Indian (30%)
Western (20%)
Mens wear (28%)
Accessories (15%)
Infants, kids, teens (7%)
Maternity wear

(30%)
Bed linens (30%)
Table & bath linens + floor
coverings (20%)
Furniture, lighting, home
accessories (20%)

Range

Body care

Body wash
Shampoo
Soap
Oils
Skin care

Organics

Cereal
Honey
Preserves
Jams
Relishes
Coffee

Garments (70%)

Range

1981
Launched mens shirts, khadi not fashionable
Sold through upholstery stores
Mens- 1 shelf, 4 shirt sizes, 20 pieces / size
Womens- 1 shelf, then 1 store corner, then two
Garments- men, women, children, infants,
maternity wear & accessories
2004- Premium line @ Rs 2,500 ($55-plus), huge
success, expected to generate 30% of revenues

Policy

Forbidden scale economies, home fabrics &


garment fabrics separate

Segments

Home
Pre
1990s

Post
1990s

Custome
rs

Customised- linens,
upholstery &
Founding Business
cushions from local
Largely unorganized
showroom, few
furnishings sector,
organized outlets
carpenter crucial
Few local renowned
fabric showroomstarget affluent
Indians, stock silks
and brocades

Up market
customerstowels and bed
sheets from
abroad
Middle-classpurchase
unbranded
home
furnishings

Fabindia
Complete home
solution- one-stop
shopping experience
for home needs
Western model of
standardized off-theshelf home furnishings

Home (30%)
Home
furnishings

60%- upholstery, curtains & bed linens


40%- bath, table & kitchen linen linens, floor
covers, furniture, lighting & home accessories
SKUs- Bed linens 3,500, Home goods 10,000
Wide variety

Target

Upwardly mobile middle-class Indian family


with a sense of style

2007

Home sales Rs. 591 million, 300% growth in 5


years

Furniture (2004)
Material

Design

Products

Wood & metal (no compressed board or plywood)


Timber- sourced only from sustainably farmed
plantations
Fabrication- crafts peoples collective workshop
funded in Delhi
Fabindia aesthetic
Simple, functional & style conscious
Futons, chairs, shelves, dining & coffee tables

Organic
Products(2004)
2006

Target

60 to 200 products, 150,000 SKUs


Ready-to-eat items- dry fruits, cereals & pickles- popular
Price- 20%100% premium on competitive non-organics
Sales- Rs 24 million

Fabindia customers, who understand intrinsic value


Loyal customers, once they purchase

Drivers- retail network, genuine organic food range, shift


Challenge
towards organics, greater health awareness
Threat- shaky supply chain, stock outs
, inconsistent quality & supply, spread out supply chain
Transport, storage & shelf-life issues-

Organics
Organic products suppliers- small-scale
corporations & individual farmers, or notfor-profit organizations
Challenge- 150,000 SKUs, inconsistent
quality & supply, spread out supply chain
Transport, storage & shelf-life issuesendemic to food products & organics
No two stores order alike
Solution- work only with reliable and
proven suppliers

Competitive Landscape- Garments


Burgeoning middle class, high disposable incomes

Op

po

r tu

s
e
i
it

12 million mom & pop stores, deep local connect


Apparels market $16 bn, Tailors in smaller towns
Organized retail only 3% of total retail market
Only Foreign single-brand stores allowed

ts
a
re
h
T

Stiff local competition in apparels- khadi, branded,


unorganised
Powerful Indian conglomerates- Tata, ITC & Reliance
Indian organised retail- Future Group, Shoppers Stop,
Cottonworld, Cottons

Competitive landscapeFurnishings
Most sell a mix of synthetic and cottons

pe
om

None focused on traditional weaves and prints

on
i
t
ti

Niche competitors- government-supported khadi stores


Anokhi, founded by a British woman, similar to Fabindia
S Kumars, launched home-textile brand with 24 stores
Domestic furnishings sector- Rs. 18 billion @ 25% pa

t
r
o
pp

tie
i
un

Home linens market- moving towards branding,


international brands entry imminent
Fabindia stores from 500 to 8000 sq. ft. in area

Competitive landscapeOrganics
Domestic market in infancy, limited competition

rt
o
pp

s
e
i
it
n
u

Estimated 23 million potential organic product


consumers
If 1% of Delhi or Mumbais population switched to
organic foods, we would not be able to meet the
demand. Purohit, Head Organics
Indian majors Godrej & Pantaloons expected

p
m
o

et

n
o
i
it

Indian Government dedicated Rs. 1 billion ($22.2


million) for promotion of organic agriculture

Finance
Grown with little outside funding, healthy internal
accruals
Bissell family stake- 58%
Reportedly, PE firm WCP Mauritius Holdings, invested
$11 million (Rs 44 crore) for a 6%
Fabindia valued at $183 million (Rs 732 crore)
Can growth plans be sustained without further funding?
We have been ploughing back profits into expansion on
an ongoing basis. Well invest several hundred crores
over the next few years. Options like IPO & private
placements will be considered only when an
extraordinary need arises. Chainani

Financials

Net Profit
Sales
Rs Million

2002

2003

2004

2005

1294

2006

The Fabindia Customer


Middle / Upper Class,
Brand loyal
Simple &
functional
products

Sense of tradition & ethnic taste,


but style conscious

Customer

Understand & accept the nature of the fabric

Like the
shopping
experience,
one stop shop
for ethnic
needs

The Fabindia Customer


Fabindias regular customers tend to be
Indians who are not insecure about their
identity; who appreciate the fact that they
have an extraordinary culture and that a
handmade product has an intrinsic value,
not an externally imposed price of a big
brand, inflated manifold by advertising
and packaging Bissell

Executing the Fabindia Vision


Sales Rs 1.3 bn
(2006)

Sales 8.6 bn
(2011)

Fresh produce, dairy, baked


goods, organics outlets
Garments, furniture,
furnishings
Increase rangewidth & depth
Stores-49
to 200

Expand organics range

Launch premium products


Increase sales / store

Open new stores

Foods
focus
More
uses
More
usage
More
users

Challenges
Intensifying
competition

Supply Chain
Vagaries

Executing
the Vision

Finances

Growth

Commitment to
Founding Mission

Talent

Reach

82 outlets India
3 abroad- UAE, China,
Italy
33 Online stores abroad
Institutions & Heritage
hotels
Textiles

Garments- men,
women, children &
infants
Garment accessories
Home furnishings
bed, bath, table &
kitchen linen, upholstery
fabric, curtains, floor
coverings

2008

Sourcing

22000 Artisans
across India

2008

Non Textiles

Furniture- lights, lamps,


stationery, tableware, cane
baskets, utilities
Organic foods- spices,
cereals, grains, pulses,
sugar, tea, coffee, herbs,
honey, fruit preserves

Sana Bodycare- soaps, oils


shampoos, & special skin
care products

References
Fabindia is now a Harvard case study- The
Hindu Businessline 15 April 2004
http://www.thehindubusinessline.com/2007/04/15
/stories/2007041502740100.htm
Meera Mohanty
Fabindia Overseas Pvt. Ltd, JUL Y 0 9 , 2 0 0 7
Harvard Business School Case Study, MUKTI
KHAIRE & PRABAKAR PK KOTHANDARAMAN
Weavers to become shareholders of Fab India
subsidiaries 6 May, 2008,
http://economictimes.indiatimes.com/Weavers_to_
become_shareholders_of_Fab_India_subsidiaries/a
rticleshow/3013640.cms
Fabindias Fabulous March, Kapil Bajaj,
October 3, 2007 Business Today

Include change management styles from NDTV profit, presented at khandala


Two things subordinates want in a boss- acknowledgement and care
To understand the mind of field people during conferences
On a
whiteboard, draw 3 columns Start, Stop, Continue & let people write in confidence
People start writing in short what they want, dont want, should continue, which helps get insights
into what people would otherwise not disclose
eg
start- managers incentives , stop- deductions, continue- bonus offers
3 key things to transform- awareness, acceptance, action- from both sides
eg Lion turns vegetarian, people would be aware but would not accept, unless lion does so for an
acceptable amount of time to build trust, similarly within an organisation
To understand the mind of office staff
On our notice board on each floor, draw 3 columns its good out here, could be better, no good & let
people write iconfidentially in brief
People start mentioning things they are happy with, unhappy with, and improvements
eg good- soup, could be better- salaries, timings etc, no good- cooling, coffee etc
OR
Have an issue, say increments, and draw good, could be better, bad.
Then keep a lot of bindis on the notice board, let people paste bindis under good, could be better,
no good. Whichever gets maximum bindis needs immediate attention