ARCHIES- THE WAY INDIANS GREET

ARCHIES CASE STUDY• PRESENTED BY

• VEENA MANIK 63

• LATIKA NICHANI 73

• AANCHAL SUKHRAMANI 103

All about Archies:Archies- Brainchild of Delhi-based Anil Moolchandani(Anil)

Stared with selling posters of film stars,natural sceneries and other subjects of interest,printed by local printers.

Also sold books containing lyrics of hit english songs.In 1979,Anil and his brother Jagdish Moolchandani got ‘Archies Gifts & Greetings’ registered as partnership concern for starting cards business.

Later in 1984, launched first Archies outlet in Delhi named,”Gift Gallery”

In 1990,the brothers established Archies Greetings & Gifts Pvt. Ltd.,

In 1995,Archies was incorporated as a public limited company with initial offering of Rs.74 million

By end of 1990’s Archies was operating in three demarcated businesses-greeting cards,gift items and stationery products.

Gradually in 1997 to 1999 music cassettes and CD’s were retailed from its music division, the division began to sell deodrants and perfumes.

The company sold its products through a vast distribution network that covered every major state in India and even in remote towns.

Archies had 4 branch offices,these catered to the needs of both franchisees and retailers and were managed by the company’s representatives as well as its clearing and forwarding agents.

By 2002,Archies had 240 Archies Gallries,112 Archies Card Shops and 58 Paper Rose Shoppes.

Over 50 Vision 2000 stores in 120 cities across 8 countries.

Q.1:Analys the circumstances in which Anil Moolchandani started Archies and highlight the reasons for the company’s runaway success. Why do you think Archies could not sustain its profitability growth in 2000-01?

Solution:

Circumstances in which Anil Moolchandani started Archies are:

In 1970 Anil decided to buy and sell good quality posters through mail-order catalogs,as soon as demand increased he started selling posters of film stars, natural sceneries and other subjects of interest,printed by local printers.

He was an avid music enthusiast and would meticulously spend hours listening to sound tracks and translating lyrics which he finally started selling.

Increase in customer demand made his songbooks sell like hot cakes.

He observed in India,cards were typically sold out of dusty shoeboxes kept in corners of stationery shops,his observation led to commencement of greeting cards business.

In 1979,Anil and his brother Jagdish Moolchandani got,”Archies Gifts & Greetings” registered as a partnership concern for starting the greeting cards business.

His visit to South East Asia embarked the concept of starting a proper retail shop which had good ambience and soft backdrop music,and launched first Archies outlet in Delhi and name ‘Gift Gallery’

Gradually his business started growing tremendously. Huge amount of investments gave him double returns.

Reasons behind such huge success were:The key to understanding Archies is to realize that it is not in the

business of cards or gifts, but in franchisee management. They made branded franchise and they were 1st one to do that.

By franchising, Archies was not only able to save on real estate costs, but share the advertising and promotion expenditures with franchisees.

Archies franchisees made their own investment in the business and paid royalty to Archies for the turnover generated from the sale of Archies products.

Archies’ quality control team monitored the franchise stores and ensured that the ambience, space allocation, lighting and display were standardized across all outlets.

Archies constantly updated its strategies to ensure a smooth functioning of its franchising setup.

Another success factor was the company’s ‘localization’ strategy.

Archies became the first to come out with cards for Indian festivals such as Holi, Diwali, and Rakshabandhan. Their such initiatives were backed by aggressive promotional campaign.

Archies was the first cards and gifts company in India to advertise on a satellite television channel.

With its tie-ups with companies like Pepsi and Pidilite, it built a strong brand equity.

The tie-up with HelpAge helped attract corporate clientele.As a result of the above initiatives, the company went from

strength to strength and remained the undisputed market leader throughout the 1980s and the 1990s.

Reason behind why Archies could not sustain its profitability growth in 2000-01 is:

In the late 1990s, sending greetings through the Internet and mobile phones became very popular with youngsters, who formed a major part of Archies’ clientele.

E-greetings provided an opportunity to send personalized messages at a nominal cost and did not take more than a few minutes.

Similarly, SMS was also very cheap and much more convenient than sending a paper card.

Internet caused a substantial dent in their revenues. E-commerce was not happening from their site as expected and ads were also not forthcoming.

Large number of the 0.6 million registered users stopped using the service because they became paid service and hence suffered massive drops in their registered base.

In addition to this problem, Archies’ initiatives to convert its network of franchisee outlets into company-owned outlets and its distributor setup into a carrying and forwarding2 (C&F) setup were proving to be major burdens on its finances.

Along with internet debacle and distribution error,Archies outlets were targeted in Mumbai,Delhi and other parts of country by Hindu fundamentalist groups.

These groups vandalised their outlets by interfering in the Valentine’s Day celebrations and sales promotions in its showrooms and outlets.

This affected their business severely. As a result, in 2000-01, for the first time in it’s over 20-year history, the company experienced a negative growth.

Turnover declined from Rs 710 million in 1999-2000 to Rs 680 million in 2000-01, while net profits for the same period declined by around 32% from Rs 130 million to Rs 91 million3.

Thus, these were major reasons which irked profit sustainability growth.

Q.2:Critically comment on Archies’ franchising and distribution strategies for expansion. Do you think the company’s strategy in the initial years was right in the light of the rationalization exercises? Give reasons to support your stand.

Solution: Archies as mentioned in the case is the 1st company to start

franchise system. Their systematic selection of cities i.e. earlier 4 major cities and

later in suburbs and eventually overseas made them to have a proper grip on the entire market and create awareness all around.

The company sold its products through a vast distribution network that covered every major state in India and even in remote towns.

Archies had four branch offices in Mumbai, Ahmedabad, Ludhiana, and Hyderabad to extend its reach and penetration.

These branch offices catered to the needs of both franchisees and retailers, and were managed by the company’s representatives as well as its clearing and forwarding (C&F) agents.

The company had systematic segregation of channels which did not create chaos and made the distribution process clutter free.

Yes, I think company’s strategy in the initial years was right in the light of rationalization exercises.

Firstly,the sky rocketing profit figures in initial stages itself shows that their strategies were apt.

Introduction if theme cards, good ambience shops,in-house printing set up,tie up with US-based Gibson card manufacturing company,systematic demarcation of business,outsourced designs of cards from overseas where some of the smart rationalisation exercises.

Vast distribution network,corporate clients,use of latest technologies and automation,introduction of kids range,movie-specific items are again some of strategies which support my stand that company’s strategy in the initial years was right in the light of the rationalization exercises.

Q.3:Do you think the measures taken by Archies to meet the threat of e-greetings were adequate? Was the company’s decision to make its website a paid one, a sound business move? Justify your answer. Yes, I do think the measures taken by Archies to meet threat of e-greetings were adequate. But, company’s decision to make its website a paid one was not a sound business move at all.

The website Archisesonline.com was systematically designed giving ample room to customes for varied activities.

Creation of virtual marketplace for retailers and distributors,attracted many new retailers and franchisees as well.

Popularity of website in a very short span as mentioned in the case its self depicts that measures taken to meet threats of e-greeting were adequate.

Problem commenced when they made it a paid one. They did so because online venture was proving to be a drain on the company’s finance.

Amidst growing technology when there are free sites why will a person prefer a paid one, was a huge question to be answered by the company.

Its clearly aint a smart move for such a renowned company, bearing loses is also not a viable option but then many other known websites could have been approached for tie ups.

Youhan Darrab Aria (Aria),Chief Officer (Logistics and Finance) of online portal himself admitted that being a paid site made htem suffer massive drops in their registered user base,this justifies that turning online portal a paid one wasn’t a sound business decision.

Q.4:Discuss if Archies will be able to maintain its marketshare and leadership in the future with the entry of players such as ITC? Will the company’s current strategies help sustain its competitive position? Archies revamped its ditribution and retail exercised to combat the glitches which occurred earlier.

Their idea to make Archies gallery a ‘one stop gift shop’ was again a smart move.

They started outsourcing because they realised that time has come to be agile.

Flexible pricing strategies for different product and different areas were been kept targetting all income groups.

The successful brand image been build over the years will continue to sustain the strong competitve forces.

Their agility to respond to competition will make them surpass all problems.

Hence,the company’s current strategies will definitely help to sustain its position in the market.

THANKYOU