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8/4/2019 22574825 Strategic Analysis FabIndia
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FABINDIA
Group 3: HIGH FLYIERS
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TIMELINE
FabIndia
1960- Incorporation in Delhi
1976- First retail store in GK
1977- Contemporarizes design
1981- Introduction of garments
1992- Liaison with Habitat ends
1994-Second store opens in Delhi
1999- William Bissell becomes MD
2003-Vision Plan I originates2004- Goes online
2005- Vision Plan II is born
2006- Garments make 70% revenue
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FABINDIA UNDER JOHN BISSELL
Founded by American, John Bissell to: Develop market for hand-woven products
Provide rural employment
Incorporated in 1960 in Delhi to export upholstery fabric
By 1965, revenues of Rs. 2 million due to:
AS Khera, supplier of hand-woven rugs etc from Panipat Habitat, major UK buyer of Fabindia Panipat products
1974 saw Fabindias first retail store in Greater Kailash with ad-hocmerchandising
1977-Featured contemporary design to attract consumers anddesigners
Garments were introduced in 1980s after John Bissell got khadishirts made for himself
Habitat was acquired in 1992 and Fabindia could no longer continueselling to it
John Bissell dies in 1998, passing the baton to son William Bissell
who becomes MD in 1999
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FABINDIA UNDER WILLIAM BISSELL
Williams vision included expansion, depending less onexports and setting up retail operations
India saw robust economic growth, change inconsumer patterns and growth of middle class by 2006
2003 saw the birth of Vision Plan I
Planned to grow to revenues of Rs. 1 b from Rs. 360 m in 4years
Achieved it in two years and Vision Plan II came along
It planned to achieve revenues of Rs. 2 b by March 2009
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COMPETITOR ANALYSIS
Organized Retail:
Retail Stores (Shoppers Stop, Pantaloons, Globus, etc.)
Strengths:-
1. Strong Pan-India presence and
awareness
2. Man-power expertise
3. Competitive Pricing
4. Robust supply chains and short
product development life cycles
5. High marketing communications
spend
6. Quality consciousness and
adherence to standards
Weaknesses:-
1. Product diversity lacking
2. Stock as per running trends and
serve to fads-inconsistency
towards churning out quality
offerings in hand crafts
3. Authenticity of handcrafts-No
craftsmark present to validate the
crafts as against the Fabindia
offerings which have the same
imprinted on them
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COMPETITOR ANALYSIS
Government Initiatives ( Cottage Industries Emporium, Khadi
Gram Udyog, State Government Department)
Strengths:-
1. Source of finances is fixed and
subsidies boost these initiatives
over time
2. Tie-ups with foreigngovernments facilitating
permanent trade of national
handicrafts.
Weaknesses:-
1. Ambience-non-attractive to
modern day shoppers are fed on
the excellent ambiences of the
retail formats.2. Standardization defeats
customization hands-down.
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Designer Boutiques: (Ritu Kumars, Ritu Beris, Rohit Bal, Manish
Malhotra, Sabyasachi Mukherjee, etc.)
Strengths:-
1. Product customization
facilities-extremely high
2. Highest level of
customer intimacy-
Relationship marketing
Weaknesses:-
1. Exorbitant prices-not
meant for masses
2. Not a robust supply chain-
not meant to be a pan-
India operation
COMPETITOR ANALYSIS
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Unorganized Sector:-
Mom-and-pop stores and local tailoring units:-
Strengths:-
1. Effective in addressing
high geographical
dispersion
2. Customization facility
available
Weaknesses:-
1. Source of finance-not secure
2. Next-to-nil brand equity
3. Customer loyalty-low
4. Scarcity of skilled manpower-
lack of ability to employ the
same-critical for expansion.
COMPETITOR ANALYSIS
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NGOs & SHGs
Strengths:-
1. Strong commitment towards
local communities
2. Helps in making its clients
self-reliant
3. Encourages womenentrepreneurs and hence a
women can supplement the
males income towards a
family
Weaknesses:
1. Lack of expertise on partof the manpower
2. Lack of ambition to
spread out on a pan-India
or even a regional basis
3. Lack scales of economy
COMPETITOR ANALYSIS
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SWOT ANALYSIS
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STRENGTHS
Quintessential Indianness in fabric through the years
Popular for authenticity of hand-woven fabric
Sourcing system from rural India
Strong supplier relationship
Provision of capital loans (in agreement with banks)
Leniency on order fulfilment & no-return policy
100% use of suppliers capacity
Sustainable employment opportunities to rural skilled poor
Employees are given autonomy and hence inducing accountability
Focus on customer retention instead of generation Large chunk of buyers are repeat purchasers
Product quality improvement done keeping this in mind
Word-of-mouth strong enough not to require any advertising
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Delays in delivery from artisans Opportunity losses due to irregularity Difficult to predict quantity and time ofthaan coming from weaver
Also arises as different stores are encouraged to order different stock
Insignificant spend on marketing communications Losing out on attracting new customers instead of depending only on
repeat purchase
Not enough personnel to push Fabindia to greater growth Unavailability of people experienced in retail sector
Unavailability of people believing in the same mission More formal processes would face resistance from existing employees
Untimely delivery of products Transport, storage and shelf-life issues of organic foods
Suppliers were spread pan-India
WEAKNESSES
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Latent potential of organic foods market Leveraging changing consumer tastes & perceptions Awareness generation of merit in these foods
Utilize multi-brand retail outlets and construction groups Display of Fabindia products in MBOs and department stores
Leverages footfalls of the store, increasing likelihood of sales
Use of Fabindia home furnishings in modular flats of buildings If consumer buys this flat or any other, and is impressed, will use
Fabindia furnishings
Leveraging Web 2.0 tools and techniques Tying up with matrimonial sites for designer fancy wedding wear
Interactive website for designing as per individual requirements Customization level is high
Lead time between fixing of occasion date and event can be used for
delivery
OPPORTUNITIES
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Unorganized local operators
Handloom retail shops/chains in regional pockets
Souvenir shops providing indigenous products at lower prices
Entry of organized brands and companies into retail
High expected growth & entry of business houses in large ways
Competitors access funds from conglomerate partners or markets
Tilt of Indian consumers towards foreign brands
Foreign brands alter lifestyle choices of the target market
Imported or designer home furnishings have greater flaunt value vis-a-vis
Fabindia
Development of government co-operatives
Boost in future to KVIC and state handloom units
Improvement in their ambience and shopping experience
Rising prices of real estate could hamper growth
Opening new stand-alone stores will be tough
Experimenting with formats and markets may not be advisable
THREATS
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BUYING BEHAVIOUR
&THE WAY AHEAD
Note: We opine that Fabindia cannot continue relying on just customer retention to fight off
competition, and must focus on generating new customers also
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ORGANIC FOOD
Increased consciousness about health, nutrition andphysical well-being
Display of price elasticity- Do not mind paying more for
better health
Organic food perceived as healthy, nutritious, non-syntheticand detoxifying
Natural food encouraged by environment savvy consumers
Domestic brands selling organic foods are trusted more ascompared to multinationals selling organic food
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THE WAY AHEAD
Capacity expansion in terms of number of suppliers andquantity produced
Significant investments in supply back-end needed
Skilled agricultural labour and experts are required fordeveloping organic food chain
We suggest investing in mutually beneficial CSR initiatives Educating cultivators on soil building, pest management, crop
rotation and heirloom variety preservation
Provision of organic soil nutrients like plant residue, mulch, greenmanure etc
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APPAREL
Quality and prestigious brands are causingcustomers to drift
Usually garments of different brands are triedwhile shopping
Influencers are primarily of similar age groups
and endorsers
Consumers now identify with western brandswhich are high priced and are influential in
making choices
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THE WAY AHEAD
Capturing attention and engaging customers is critical
Fabindia can safely outclass many established brands inthe same retail space
We propose franchise model and selling in other stores Higher brand awareness and attracts consumers towards
handcrafted apparel
Reduces investment in Tier 1 and metros where real estate
prices are high Consumers can directly compare brands in same segment
Build partnerships with matrimonial sites to promotetraditional design as wedding wear
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FURNITURE AND HOME FURNISHINGS
Consumers tend towards non-branded playersand hence brand consciousness is low
Influencers tend to be the family members,especially the lady in the family
Builder groups can be used as a platform to
display furniture in modular flats
Consumers will hence get a touch-and-feel of theproduct instead of going to the Fabindia store
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FINANCIAL COMPARISONS
Financial aspects of Fabindia have been compared withPantaloons
Though not a direct competitor, it represents the Indian
Retail Industry very well
Financials for its direct competitors such as Anokhi,
Co-optex etc. were not available, restricting comparison
This assessment contrasts the performance of Fabindiawith respect to the biggest retailer of India
Hence, we get a sense of the feasible options available with
Fabindia to raise funds
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The interest coverage ratio of Fabindia is far higher than that of
Pantaloons. Hence, raising funds through debt is not a big
challenge.
17.35
8.41
9.27
10.75
16.54
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
2002 2003 2004 2005 2006
FabIndia
Interest Coverage Ratio
3.27
4.13
3.31
2.06
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2005 2006 2007 2008
Pantaloons
Interest Coverage Ratio
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The interest cost as a percentage of sales for Fabindia is far lesser
than that of Pantaloons. Hence, raising funds through debt is
again not a big challenge.
2.14
1.49
2.25
3.67
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2005 2006 2007 2008
Pantaloons
Interest Cost as a Percentage of
Sales
0.48
1.09
1.14
0.96
0.69
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2002 2003 2004 2005 2006
FabIndia
Interest Cost as a Percentage of Sales
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The PAT as a percentage of sales of Fabindia is higher than that of
Pantaloons. Though retail industry works at low margins, Fabindias
margins are quite high. Hence, raising funds through debt is not a
big challenge.
3.413.27
3.63
2.71
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2005 2006 2007 2008
Pantaloons
PAT %
4.79
5.66 5.78
6.306.02
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2002 2003 2004 2005 2006
FabIndia
PAT %
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RECOMMENDATIONS AT A GLANCE Heavy investments in back-end of value chain
Supply chain development for efficiency and qualitymanagement
Expansion aiding strong regional presence Outlets to counter regional competition
Sourcing from local suppliers for outlet and other regions will beeasier
Growth through harnessing new customers Cannot depend on existing customers to counter competition
Must create new customers in all segments
Tie up with different types of graduate schools for talent Rural management graduates for managing supply chain and
rural initiatives
Management graduates for helping growth in front-end andretail arms
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THANK YOU