A Marketing Project On Fabindia

12 December,2008

School of Business Management NMIMS Anurag Kalita Kopal Doshi Shristi Dalmia Amit Baweja Ashit Shetty MBA (CP) DIVISION: D

(331) (313) (308) (306) (355)

A study submitted to Dr. Rajan Saxsena in partial fulfillment of the requirements of the Customer Acquisition and Retention Course.

Declaration

We hereby declare that out report titled “Fabindia” is an original work. The list of references used has been detailed at the end of this report, and the rest of the document contains our thoughts, learnings and recommendations. We also declare that we have not consciously attempted to plagiarize from any existing literature.

Anurag Kalita

(331)

Kopal Doshi

(313)

Shristi Dalmia

(308)

Amit Baweja

(306)

Ashit Shetty

(355)

MBA (CP) DIVISION: D

Table of Contents 1: Introduction..................................................................................................................................................... 1 2: Industry Overview........................................................................................................................................... 2 3: Target Customer .............................................................................................................................................. 2 4: Marketing Mix................................................................................................................................................. 3 5: Competition Analysis...................................................................................................................................... 4 6: Customer Connect Initiatives .......................................................................................................................... 5 7: SWOT Analysis ................................................................................................................................................. 6 8: Future Plans..................................................................................................................................................... 7 9: Recommendations........................................................................................................................................... 8 10: Appendix........................................................................................................................................................ 9 11: References................................................................................................................................................... 21

1: Introduction “Fabindia was founded with the strong belief that there was a need for a vehicle to market the vast and diverse craft traditions of India and thereby help fulfil the need to provide and sustain rural employment.” “Our endeavour is to provide customers with hand crafted products which help support and encourage good craftsmanship.” In 1958, John Bissell left New York, to work as a consultant for the Ford Foundation. Highly impressed with the Indian handloom textiles, he decided to exhibit this craft to the outside world. This led to the genesis of Fabindia in 1960, primarily as an export house, in order to provide equitable employment to traditional artisans and to fuse the best aspects of East-West culture. In 1975, the first Fabindia retail outlet was opened in Greater Kailash, New Delhi. By the early eighties, Fabindia had forayed into the production of garments made from hand-woven and hand block printed fabrics. Fabindia started dealing in a wide range of upholstery fabrics, durries, home linens, furniture, lights and lamps, stationery, home accessories, pottery and cutlery. In 2004, their food products range and in 2006, Fabindia Sana, their authentic body care products range was launched. Recently, they have also ventured into the jewellery segment. However, the major chunk of Fabindia’s product range is textile-based. Customer Acquisition and Retention

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The company has continued to focus mainly on the artisans and sources its products from over 15,000 craftsperson across India. With a strong foundation, as stated above, the company has been successful in increasing their presence all over India. They have also opened some international stores in Italy, UAE, Qatar and China.

2: Industry Overview The apparel industry is one of India's largest foreign exchange earners, accounting for nearly 16% of the country's total exports. The 1996 Indian textile exports approximately amounted to Rs. 35,000 crores of which apparel occupied over Rs. 14,000 crores.1 The Traditional clothes market is growing at 11 per cent a year.2 An estimated 30,000 readymade garment manufacturing units and around three million people are working in the Indian textile industry. Many leading fashion labels are being associated with Indian products. However, till today, the industry is dominated by sub-contractors and consists mainly of small units of 50 to 60 machines. India's supply base is medium quality, relatively high fashion, but small volume business.

3: Target Customer Fabindia started as a wholesale export company and is still active in the wholesale sector. The target customers in each segment:

Retail: Fabindia initially focussed on providing an Indian experience to the foreign buyer. In the 80’s, it realised there is an untapped market among the upper and higher middle class. With the economic boom in the 90s, the focus has shifted to the upwardly mobile consumers in metros who like Indian prints. They are now also focusing on tier 2 and tier3 cities. The target audience is college going youth and young professionals and just married couples in the higher middle class category.

Institutional Buyers: It has a dedicated team to handle institution buyers like heritage hotels, resorts and corporate houses. They target organisation which want to portray Indian roots and eco-friendly culture. 1

Ministry of Textiles report, http://apparel.indiamart.com/industry/apparel/

2

“ Womenswear brand W plans expansion”: Sravanthi Challapalli, Business Line Feb. 9 2008

Customer Acquisition and Retention

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4: Marketing Mix

PRICE -List Price

CUSTOMER COST -Discount

PROMOTION

-Affordable and quality products

-Word of Mouth

COMMUNICATION- Rely on Customer Recommedation

PRODUCT-Nine different Product Offerings

CUSTOMER VALUE- Products are hand made & traditional

PLACE

CONVENIENCE-Outlets at major, upmarket locations

-99 Outlets across India

Fabindia’s Marketing Mix can be defined under the following parameters:

4.1: TARGET MARKET Price: Fabindia’s Product range enables it to provide a wide range of products in a wide price range. The products range from garments for men and women to upholstery, furniture etc. Obviously these products have different price ranges. But Fabindia has tried to make sure that the customer cost remains affordable and gives ‘value for money’. To this end, it has expanded its range of garments starting from Rs. 200 to more Rs.2000 in order to provide something for all its customers.

Promotion: Fabindia has traditionally relied only on word-of-mouth as a marketing tool. It believes that the product speaks for itself and this strategy has up till now worked very well. Thus, Communication for Fabindia is completely customer driven. It believes that the only problem in this strategy is that customers do not know the location of the stores, but once that is overcome, no other strategy is needed. In order to do this, it has started using tools such as Mobile Marketing and giving Advertorials in newspapers to increase awareness about its store locations. Also, Fabindia uses a lot of in-store posters to create consumer awareness about the products and where they come from, i.e. the rural suppliers etc.

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4.2

Product : Fabindia’s products are its differentiating factor and it has made sure over the

years that the quality and the style of the products is maintained. It has a large product range which includes -Garments for men and women, Accessories, Home Linen and Furnishings, Home Products, Floor Coverings,

Body Care Products and more recently, Organic Food

Products and ethnic Jewellery. All the products have at least one factor which is handmade and thus, supports artisans. This is a very strong customer value leveraged by Fabindia, which is that of traditional, ethnic products which support poor artisans and provide livelihood to a large number of people.

4.3

Place : Fabindia has stores in more than 95 locations across India. The stores include the

premium, regular and concept stores. It is trying to increase coverage in order to make sure that the products are available at the largest number of places possible. It also differentiates its stores according to the products stored. For eg. In Mumbai the Khar Store is only a Furniture and Upholstery while the nearby Pali Hill stores Garments, organic products, Body products and Jewellery. This also ensures convenience for the customers since the products are either available in the same store or in nearby stores.

5: Competition Analysis Competition Faced by Fabindia is from both the organised and unorganised retail sector. (Appendix 10.1) The unorganised sector has the local tailors who provide customised garments to the customers at reasonable prices and the local NGOs selling wares. However, the scale of operations does not pose a major threat to Fabindia. A far greater threat is posed by the organised sector especially Government owned Khadi Gram Udyog outlets and Cottage Industries Emporiums across the country. The product mix offered by both is similar to Fabindia. Also, they have the backing of the governments. However, the quality of products and service provided by Fabindia is perceived to be higher than that of the government run outlets.

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The organised retail sector also includes outlets by corporate houses like Lifestyle and Westside which cater to the same demographic profile. However, the products served are more contemporary in nature and does not aim at the same target audience. Stores like Anokhi have the same target audience, but do not have the reach of Fabindia.

6: Customer Connect Initiatives “A delighted Customer is our Best Brand Ambassador” Fabindia does not follow any customer acquisition strategy. It mainly focuses on customer retention. Fabindia creates its market through its existing customers which is quite evident from the fact that about 85% of its customers are repeat customers. The Unique Selling Proposition of Fabindia is the quality of the fabric and the traditional style, which is always in vogue. They have designed the stores’ decor and ambiance keeping this in mind. They constantly try to improve upon the quality of the products in order to retain their customers. (Appendix 10.3) The company concentrates on customer feedback by maintaining a visitors’ register to record customer views. The store managers prepare a report, which is periodically reviewed by the Product Selection Committee at Fabindia in order to know about the buying pattern among consumers. Recently, CRM software has been implemented in some of the stores which will help in maintaining a centralized database. This will help Fabindia in retaining customers by building lasting relationships and improving loyalty. The implementation, however, is still in its nascent stage, but is soon expected to be spread across all the stores in the country. Fabindia also has the Mystery Shopper Program in order to gauge the customer satisfaction level. Mystery shoppers posing as normal customers perform specific tasks such as purchasing a product, asking questions, registering complaints or behaving in a certain way and then provide detailed reports or feedback on their experiences to the management. It serves as an effective tool to improve the customer experience.

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7: SWOT Analysis

STRENGTHS

 Brand recognition and loyalty

 No

specific

promotions

strategy

 Diverse product mix

 Limited channels of business

 Partnering with suppliers

 Sourcing

 In-house manufacturing  Different categories of stores

skewed

towards suppliers  Inconsistent

 Price Trends Setter

quality

of

products  Inconsistent service in stores

 Customer Loyalty

producing

competitors  Not in touch with Fashion

THREATS

Trends

 In store merchandising & navigation  Promoting e-business channel  Organic foods market  Customer

acquisition

OPPORTUNITIES

 Substitute

strategy

WEAKNESSES

 Differentiable products

strategies

7.1: Strengths The product mix available at Fabindia can be easily differentiated by the customer. The uniqueness of the fabric or styling has created a new category as identified by the customer as ethnic wear. This leads to a very high brand recognition and connects with the customer value. It has an enviable presence in diverse product lines as garments, furniture, furnishing and upholstery, body care, organic foods and the very recently introduced jewellery line. Due to its variety of stores, it can reach to different categories of customers.

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7.2: Weakness This absence of promotions strategy is believed to be resulting in sales below its potential levels. The sourcing strategy followed for accepting raw materials is heavily supplier centric. In the past there have been incidences when due to delay in sending supplies for winter garments manufacture, inventory was carried over to the next year and suppliers were not made to share the damage. It operates through its own stores and that too fed by a centralized hub model of supply chain management.

7.3: Opportunities Merchandising within stores is still in a rudimentary stage. The shopper navigation can be greatly enhanced by focusing on the store layout and appropriate merchandising techniques which succinctly create individual product areas. There is great opportunity to grow along with the fast growing organic foods department. Out of the total customer base for Fabindia, a high percentage comprises repeat customers. This leads to an inference that Fabindia can focus on customer acquisition strategies.

7.4: Threats Already many firms have tried to recreate the model of Fabindia. Hence, .Fabindia needs to innovate and diversify into different product categories. It should be nimble and responsive to changing tastes of its customers. Also as it is suppliers are mostly artisans and manufacturing is labour driven, controlling costs can be a challenge. Also it needs to ensure that the customer service provided and the quality of products is consistent.

8: Future Plans The future plans of Fabindia include leveraging the Organic Products section, since it is still in a nascent stage in India. It plans to expand nationally, as well as internationally. It is also trying to reduce the number of defects in the products to a minimal which include bleeding of colours, shrinkage etc.

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9: Recommendations Since the number of stores has more than doubled in the last four years, it needs to consolidate its position and make sure that the supply chain problems are overcome. Also, as the survey and the interview have pointed out, the visual merchandising of the stores needs to be improved dramatically. In order to increase awareness about the location of the stores, it needs to market itself more aggressively. It also needs to develop the online store and increase awareness about it.

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10: Appendix 10.1: Competitors of Fabindia

STRENGTHS

WEAKNESSES

UNORGANIZED SECTOR Tailoring Outlets

1. Reaching out to customer 1. Very with larger dispersion. 2. Ensures

fragmented

business

approach.

convenience

of

demanding service. NGOs

Promoting 1. Strong

Handicrafts

community

based 1. Lack of retailing expertise

operations.

and inability to minimize

2. Complementary manufactured

products with

costs.

other 2. Products are mostly produced

firms.

for souvenirs or artifacts of collector’s interest.

ORGANIZED SECTOR RETAILING HOUSES : Garments Based (Shoppers 1. National presence of outlets. Stop,

Westside,

Trends, Globus)

Reliance 2. Retailing

expertise

and

competitive pricing. 3. Agility for quick product development cycles.

1. Diversity of product is very less. 2. Retailing brands and in-house labels have a considerable share of product mix. The trends are designed as per recent

garments

and

accessories trends. Government Initiatives

Handloom 1. Strong legacy attached to 1. Business products.

Customer Acquisition and Retention

is

heavily

influenced by bureaucratic

9

(Khadi Gramodyog, Cottage 2. Subsidized Industries Emporium, State

manufacturing

and costs.

2. No

Government departments) Designer Boutiques

approach of employees. significant

product

evolution. 1. Scope

of

product 1. No uniformity in price across

customization.

products.

2. Highest level of customer 2. Limited models of SKUs intimacy. Organic Foods (Reliance, 1. Well Godrej Agrovet, ITC Foods,

houses

Organic India)

equity.

manufactured.

established business 1. Profitability with

high

brand

concerns

as

organic market is still at nascent state.

2. Established

and

technologically

equipped

supply chains. FABINDIA MODELLED GARMENT HOUSES Anokhi

1. Differentiable products. 2. Established

brand

market. Bombay (Swadeshi) Stores

1. Servicing customers.

1. Minimal product lines. and 2. Handicrafts

from

western

regions high

value 1. Only located in Mumbai 2. Priced at a much higher prices than average Fabindia prices.

Customer Acquisition and Retention

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10.2: Questionnaire for Customer Survey NAME: SEX: AGE: LOCATION: EDUCATION BACKGROUND: -

High School College Graduation Post Graduation

CURRENTLY WORKING AS:

QUESTIONS: 1: How much do you generally spend on Clothes per month? -

0-500 501-1000 1000-2000 >2000

2: How much do you generally spend on Home Furniture and Furnishings per year? -

0-5000 5000-10000 10000-15000 >15000

3: Have you heard about Fabindia If yes, how did you find out about Fabindia? -

Internet SMS Print Ads Word of Mouth Gift certificates

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-

Others ____________________________

4: Have you visited any of the Fabindia outlets? -

-

Yes (Specify Frequency) -Once a week - 1-2 weeks - 3-4 weeks - > 1 month No

5: Were you able to find a Fabindia Outlet in your city? -

Yes ( Specify) No

6: Rate your experience at Fabindia in terms of your satisfaction level for the following: Highly Satisfactory

Satisfactory

Average

Unsatisfactory Highly Unsatisfactory

Service Products Range of products available Location of the Store Display of goods at the store Quality of Products

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Price

7: To whom would you recommend Fabindia ? (Tick whichever is appropriate) -

Friends/ Relatives

-

Business associates

-

Teenagers/ College goers

-

NRIs/ Tourists

-

Elderly

8: Which of the following do you think was instrumental in your choosing to buy the products? Rank them on scale of 1 to 5 with 1 being the most important. -

Traditional work

-

Support to poor artisans

-

Quality of the product

-

Price

-

Range of products available

-

Convenient Location of the store

-

Service provided by the staff

-

The ‘Fabindia’ Brand

9: Which of the following words would you associate with Fabindia? -

Traditional

-

Indigenous

-

Versatile Customer Acquisition and Retention

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-

Artistic

-

Comfortable

10: Which of the following products of Fabindia were you aware of before you visited the store? -

Garments (Men)

-

Garments (Women)

-

Accessories ( Duppattas, scarves etc.)

-

Home Linen and Furnishings

-

Home Products (Furniture, Tableware, Ceramics etc.)

-

Organic Food Products

-

Floor Coverings

-

Body Care Products

-

Jewellery

11: Which of these products would you buy from Fabindia? -

Garments (Men)

-

Garments (Women)

-

Accessories ( Duppattas, scarves etc.)

-

Home Linen and Furnishings

-

Home Products (Furniture, Tableware, Ceramics etc.)

-

Organic Food Products

-

Floor Coverings

-

Body Care Products

Customer Acquisition and Retention

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-

Jewellery

12: Have you bought any Products from the Fabindia Online Store? (Specify) -

Yes _______________________________________________________________

-

No________________________________________________________________

13: What would you like to change in the outlet?

Interpretations:

Why Choose Fabindia Range of products available

17

33

8 17 25

Quality of Products

Service provided by the staff The ‘Fabindia’ Brand

Customer Acquisition and Retention

Highly Satisfactory

17

Satisfactory 25

58

Unsatisfactory

15

Customer Feedback - Areas of Improvement Loyalty Program

8.33%

Wider Range in Home Products

25% 41.67%

8.33% 16.67%

Customer Acquisition and Retention

More International Stores Better Display

16

10.3: Transcript of Interview with Zonal Manager Fabindia Interview with Ms. Shraddha Pandey, Zonal Manager Fabindia, [email protected] Q: Can you give an idea how many customers walk into Fabindia stores without knowing what the store is all about? A: Very few. Almost all the customers are repeat customers. Q: There is an issue of supply chain with organic products. The products are not always available. So how do you deal with customers in that case? A: We are the biggest seller of organic products in India. And as the market of organic products is at a very nascent stage, people understand if there is non availability at some point of time. Q: As you have said that most of the customers of Fabindia are loyal customers, so what does Fabindia do to acquire new customers? A: Virtually we do nothing. Fabindia creates its market through their existing customers only. We have 99 stores all over India. Recently we have opened a store in Bhopal also. Initially there was not much market but over a period of time every store flourishes. Q: Keeping this thing in mind, what kind of growth figures do you have in mind for Fabindia, because you don’t advertise as such, so customers coming in might be less compared to the scenario where advertising is also done? A: Its growing at a fairly fast rate as evident from the number of stores which are opening every year. And I don’t think advertising will affect much of our customer base because almost 85% of the customers are loyal customers. Sometimes people are so much inclined towards uniqueness of Fabindia that they don’t believe in telling others that they are wearing a Fabindia garment. Else word of mouth is the main factor of success of Fabindia. Q: Can you tell us something about the mystery shopper program in Fabindia? A: In mystery shopper program, a person hired by management goes to every store and shops there and then give a feedback according to the customer perspective. The store people never come to know or for that matter suspect anyone whether he is a mystery shopper or not. There are almost 200 customers coming everyday to Fabindia so anyways you can’t judge. As far as report is concerned, the feedback is given to every individual shop and that is a very detailed feedback. It consists of minute details like signages outside, restrooms, behavior of staff, etc. So it serves as a tool to provide better customer satisfaction.

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Q: As the number of customers visiting Fabindia is pretty large, there must be some customer complaints also. What are those and how do you handle them? A: Main complaint is regarding the faulty product. Sometimes Fabindia product color fades off. But in the maximum cases we replace the product. As far as organic products are concerned, there is a less scope of fault because they all are kept on shelf after taking care of its expiry date etc.. Q: What is the competitive strategy of Fabindia? A: I don’t think there is any threat to Fabindia when competition is concerned. The companies like Anokhi, Khadi Bhandar, W, etc are not that big in supply and distribution network as Fabindia is, so I don’t think we face a significant competition. Q: Don’t you think that not having a competitive strategy is a loophole in a way. Suppose a big company enters the market with a buzz, then it might eat upon some share of Fabindia? A: I don’t think so. While looking at Fabindia, don’t look it just as a store. See the depth in the network. The supplier who is providing sari to Fabindia is doing it from past 20 years. He looks upon us as the people who have transformed his life. I have been to a village in Uttar Pradesh and trust me there are lot of villages which are entirely made up of people supplying to Fabindia. We are very fair people, and clear in our mission and vision, so there won’t be any problem arising in upcoming years also. Q: You have 3 kinds of stores, how do you differentiate which place which store will suit the best? A: It depends upon mostly on the demographics of the place. Like if its Dehradun, we will open a concept store. Sometimes a concept store is transformed in a full fledged store depending upon its sales. So it all depends on where & at what scale we are opening a store. Q: As majority of the revenues of Fabindia comes from garment business, what is the positioning of other avenues like furniture in Fabindia marketing? A: Furniture market of Fabindia is also doing very well. Actually the demand is high and we are not able to cater to all of that. This is because of the reason that the furnishing is unique and it also comes under handcrafted products. Quality checks are periodic and it helps us to provide quality products to the market where the demand is high. Q: What are the different marketing channels used by Fabindia?

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A: We do mobile marketing, i.e., invertising and also advertorials, i.e., whenever a new store or a new range of products is launched, we put a news in the newspaper, so that customer comes to know. We don’t believe in conventional advertising. It’s the word of mouth that helps. Q: Do you have any customer loyalty program? A: No, we don’t have. Actually we think that in these programs, it’s the customer who ultimately pays for that. We rather keep our prices fixed and work on a fair margin. Q: The perception in the mind of a consumer is that Fabindia is for upper middle class and high class people. So what does Fabindia doing to break the ice? A: Yes, I think that is a barrier and we are working on this front. I guess the USP of Fabindia is the quality of the fabric, and the style, which will never go out of fashion. So we are constantly improving upon the quality of the products and that way retaining the new customers and moving out of that niche segment slowly. We believe that a customer comes again and again to buy the products. Q: How do you take care of customer feedback? A: This aspect of marketing is dealt by the store manager of every store. We have a Product Selection Committee which reviews the position of the store periodically on the basis of the report of the store manager. As he is always present in the store, he knows what does a customer feels and likes. Moreover, we have a customer comment register in which he can write something if he wants. More recently, a CRM software is implemented on some of the stores which will help in keeping a centralized database. But that is just at its nascent stage. Q: Anything which you consider as the weakness of Fabindia? A: Our fabric still shrinks sometimes. We are working on that though. You have to realize that the person who is working on that is weaving under the bulb. So we are putting up a system where we can recheck the material before reaching the end user. Q: Where do you see Fabindia in the coming future? A: When I joined Fabindia, we had 40 stores, & now the number is more than doubled. So we see Fabindia to launch more products which are close to customers same way as we launched organic products, Sana, and jewellery.

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11: References and Bibliography JOURNAL 1. Wharton School of the University of Pennsylvania, “The Poor as Stakeholders: Can 'Inclusive Capitalism' Thrive in India?”, Knowledge@Wharton, November, 2008. 2. Jain R., “Mobile Magic: Making wishes come true now”, Netcore Solutions, June, 2006. 3. Mohanty B. & Roy R., “Fabindia Overseas Private Limited*”, Xavier Institute of Management, Bhubaneswar, Vilakshan, XIMB Journal of Management ; March, 2008 4. Khaire, M. & Kothandaraman P., “Fabindia Overseas Pvt. Ltd.”, ONLINE 1. The Economic Times: “Fabindia launches its first-ever jewellery line” http://economictimes.indiatimes.com, 12 August 2008. 2. Wikipedia, The free encyclopaedia: “1worldspace satellite radio” http://en.wikipedia.org/wiki/Fabindia, December 2008 3. Business Standard: “LUNCH WITH BS: Fabindia MD William Bissell” http://www.business-standard.com/india, 14 November 2006 4. Fabindia, Company information and online shopping portal http://www.Fabindia.com, 5 December 2008 5. Rediff.com: "The amazing success story of Fabindia" http://www.rediff.com, 18 June, 2008. 6. Infochangeindia, “The Fabindia School: Harbinger of change in rural Rajasthan” www.infochangeindia.org, 2 November, 2008. BOOK 1. Saxena R., Marketing Management, SAGE Publications, New Delhi, First Edition

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