Archies: The Way Indians Greet

It (Archies) is a phenomenon that touches your life from womb to tomb. - An Archies Retail Outlet Owner, in December 2001. A company in trouble! In February 2002, the Delhi High Court dismissed an application for injunction filed by leading Indian greeting card and gift company, Archies Greetings & Gifts Ltd. (Archies). The company wanted a stop order to restrain Hindu fundamentalist groupsthe Shiv Sena, the Vishwa Hindu Parishad (VHP) and the Bajrang Dalfrom "interfering in the Valentine's Day celebrations and sales promotions in its showrooms and outlets." Archies filed the application fearing that the groups will vandalize their outlets as they had in February 2001. The Court's decision shocked Archies' management, for any disruption of business on Valentine's Day would translate into huge revenue losses for the company. The dismissal of the injunction appeal came at a time when the company was facing a host of problems on various other fronts that were taking a toll on its performance. Background note Archies was the brainchild of Delhi-based Anil Moolchandani (Anil), whose family business was selling saris. In the late 1970s, he decided to buy and sell good-quality posters through mail-order catalogs, advertised in one of the popular magazines in those days, Sun. When the demand increased, he started getting posters of film stars, natural sceneries printed by local printers. An avid music enthusiast, Anil decided to sell books containing lyrics of hit English songs. He wrote down the lyrics of songs himself while playing them on a gramophone. He began to sell songbooks containing the lyrics of hits from groups such as ABBA, Beatles and BoneyM. He came up with songbooks containing hits of a particular year and sold over 10,000 copies per year. Anil then decided to enter the greeting cards business. He observed that in India, cards were typically sold out of dusty shoeboxes marked `Birthday' and `Anniversary' kept in the corners of stationery shops. In 1979, Anil and his brother Jagdish Moolchandani (Jagdish) got `Archies Gifts & Greetings' registered as a partnership. The name Archies was chosen after Anil took a fancy to a neighbor's dog named Archie. During a visit to South-East Asia, Anil was impressed with the exclusive greeting card shops offering good ambience and soft backdrop music. He decided to try out this concept in India as well, which led to the launch of the first Archies' outlet in Delhi in 1984, named `Gift Gallery'. Commenting on the runaway success of the shop, Anil remarked, "Theme cardsValentine's Day, Mother's Day, Father's Day, Friendship Daywere concepts entirely alien to Indian buyers. They immediately caught the fancy of teenager shoppers." The company started producing cards and stationery products with Disney characters, under license from Walt Disney Ltd., USA. In 1987, the first exclusive Archies gallery was set up in Delhi. The 1000 sq. ft. rented shop became an instant hit with college students who flocked to buy cards and gifts. With sales touching Rs. 2.2 mn, the Moolchandanis managed to break even in the first year itself. Following this, the brothers decided to franchise the name to interested parties. In 1990, the brothers established Archies Greetings & Gifts Pvt. Ltd. In 1994, Anil decided to install a printing unit for the company, because it was no longer economical to get printing done from outside. In 1995, Archies was incorporated as a public limited company, with its initial public offering of Rs. 74 mn. The issue was oversubscribed 4.5 times. By the end of the 1990s, Archies was operating in three clearly demarcated businesses greeting cards, gift items and stationery products. The greeting cards division contributed 69% to the company's revenues in 1999-2000 with a sales volume of 85.8 million cards and was growing at 15%. Archies had an in-house creative team of about 85 people. It had cards for almost every major festival in both English and Indian languages. It was the first company to retail regional language cards on a national scale. Besides the retail route, it also sold greeting cards to corporate clients (Reliance, Samsung, LIC, Birla International and Dabur).

The gift items division, which became operational in 1994, contributed 15% to the turnover as in 19992000. Growing at 30%, the division was primarily outsourced by the company. The gift items include photo albums, frames, clocks, stuffed toys, mementos, sunglasses, pen stands, etc. In 1997, the music cassettes and CDs from its music division were also retailed. In 1999, the division began to sell deodorants and perfumes under the brand names, Boyz and Gals. The stationery product division contributed 16% to the company's revenuesall its products were manufactured in-house. The division was growing at 10-15%. In April 2002, Archies entered the Rs. 8 mn kids stationery business and launched crayons, pencils, erasers and rulers. The company planned to reach the Rs. 100 mn mark by 2005, cashing in on the fact that the Archies brand name was very popular among kids. Export revenues touched Rs. 20 mn in 2002.. The story behind the success According to analysts, Archies' franchisee model contributed a great deal to its success. By franchising, Archies was not only able to save on real estate costs, but share the advertising and promotion expenditures with franchisees. Archies' quality control team monitored the franchise stores and ensured that the ambience, space allocation, lighting and display were standardized across all outlets. Another success factor was the company's `localization' strategy. While many players sold cards for Christmas, New Year and Valentine's Day, Archies became the first to come out with cards for Indian festivals such as Holi, Diwali, and Rakshabandhan. 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. The company entered into arrangements with movie producers, through which it offered items associated with the latest Hindi, English and various regional language movie releases. 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. During 1995-96 and 1999-2000, the company's net profit grew at a compounded annual rate of 68%, while sales grew at 26%. The nearmonopoly status and the healthy track record helped revenues increase from Rs. 460.5 mn in 1998 to Rs. 712.1 mn in 2000. In the late 1990s, sending greetings through the Internet and mobile phones became very popular with youngsters. 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. Though the Moolchandanis initially denied that e-greetings posed a major threat to the paper cards industry, they had to admit that the Internet caused a substantial dent in their revenues. This compelled the brothers to launch archiesonline.com in May 2000. Tackling the e-greetings threat In late 2000, archiesonline.com entered into strategic alliances with various portals like Yahoo.com, Jaldi.com, Indiagreetings.com, Mantraonline, and UthPlanet.com. For Diwali, the company came out with novel concepts like e-crackers that enabled surfers to burst `pollution-free' crackers. The website became very popular in a short span of time and began to receive over three million page views per month, but Archies discovered that the company gained no monetary benefit. In fact, the venture was proving to be a drain on the company's finances. Hence, Archies decided to make archiesonline.com a paid site. Archies snapped its ties with Yahoo! because Yahoo! did not want to be associated if it wanted to stop the free card service. Archies then approached indiatimes.com for a tie-up and finalized a 50:50 profit-sharing agreement. As per this agreement, archiesonline.com charged Rs. 399 per user for 100 e-greetings per year. Although most of its existing registered users stopped using the website, Archies was not much worried because it wanted to have millions of people to come to its site and shop. In June 2001, Archies ran a nationwide advertisement campaign across various newspapers and television channels. The idea was to `equate e-cards with fun' and tell people that when it came to `serious expressing of emotions', an Archies card was the best option. The company spent 6% of its turnover on the campaign, which had the tagline, `When you really mean it, send an Archies card.'

Despite all the above measures taken to maintain its profitability, the company's revenues in 2000-01 took a severe beating due to a nationwide postal strike in end-2000 that affected the sale of Christmas and New Year cards. Similarly, in 2001, the Valentine's Day celebrations were hit hard due to opposition from religious fundamentalists and the earthquake in Gujarat, which was one of the key markets for Archies' products. To add to the company's woes, serious problems cropped up as a result of some of its strategic initiatives. Rationalization gone wrong? The distribution revamp! During the financial year 1999-2000, Archies' initiatives to convert its network of franchisee outlets into company-owned outlets and its distributor set up into a Carrying and Forwarding (C&F) set up were proving to be major burdens on its finances. According to the new distribution system, in place of 68 distributors in 21 states, Archies appointed 10 C&F agents in 10 states who catered to distributors who in turn reached out to the retailers. In the earlier set up, Archies had to accept the distributors' decision when they picked up only those products, which they believed would do well. As a result, Archies could not push its entire range of products into the retail channel. However, after Archies adopted the concept of C&F agents, it faced bottlenecks in some parts of the country. Though the C&F agents were themselves responsible for the distribution of products across the allotted territory, many were unable to exploit the market properly. During the conversion stage (from distributors to C&F agent set up), the company took back all the stock lying with the distributors. This increased the level of inventory, which increased the working capital requirement. This forced the company to outsource fund requirements, and therefore, incur a heavy interest burden. ITC's entry into the greeting cards business was not great news either. In addition, analysts also questioned the company's entry into the highly competitive music and perfumes businesses. Archies was in direct competition with giants such as Saregama and Tips Cassettes in the music segment and with Hindustan Lever and Cavin Kare in the perfumes/deodorants segments. The futureShifting focus Archies decided to focus more on the gifts segment, as it believed the segment was under-exploited. The company planned to develop and introduce new lines in the gift segment including higher-end items, which were lacking in the present set up. The idea was to make an Archies gallery a `one stop gift shop' for people from all walks of life. The company had already begun importing high-end gift articles such as crystal, soft toys and Feng Shui. The company also decided to outsource certain gift articles, which it had manufactured till now. The company expected the share of the gift segment to go up from 20% to 50% in the future. Archies priced the products competitively. For instance, perfumes started at Rs. 99, as against other brands, which started at Rs. 150. The company also planned to co-brand the gift items in the near future. For the greeting cards business, Archies decided to renew its focus on the corporate sector, which had largely remained unaffected by ecards. In May 2002, Archies decided to change its name to Archies Limited. Anil's business acumen and entrepreneurial spirit remained the same. Summing up his vision for the company, he said, "Five years from now I think we will have 100 Vision 2000 stores, which will contribute at least 40% to sales. C&Fs will contribute 40% to sales and the balance 20% will come from distributors. And, if the dotcom takes off, then you never know."

Disney in France Disney Theme Parks and Resorts The Walt Disney Company is a brainchild of Mr. Walt Disney, after whose name the theme park and its related entertainment businesses were named. Until 1992, the Walt Disney Company had experienced nothing but success in the theme park business. Its first park, Disneyland, opened in Anaheim, California, in 1955. It was an instant success. In the 1970s, the triumph was repeated in Florida, and in 1983, Disney proved the Japanese also have an affinity for Mickey Mouse with the successful opening of Tokyo Disneyland. Disney in France Having wooed the Japanese, Disney executives in 1986 turned their attention to France and, more specifically, to Paris, the self-proclaimed capital of European high culture and style. Paris was chosen because of demographics and subsidies. About 17 million Europeans live less than a two-hour drive from Paris. Another 310 million can fly there in the same time or less. Also, the French government was so eager to attract Disney that it offered the company more than $1 bn in various incentives, all in the expectation that the project would create 30,000 French jobs. From the beginning, cultural gaffes by Disney set the tone for the project. By late 1986, Disney was deep in negotiations with the French government. The minister of culture announced he would boycott the opening, proclaiming it to be an unwelcome symbol of American clichs and a consumer society. Unperturbed, Disney pushed ahead with the planned summer 1992 opening of the $5 billion park. Shortly after Euro-Disneyland opened, French farmers drove their tractors to the entrance and blocked it. This globally televised act of protest was aimed not at Disney but at the US government, which had been demanding that French agricultural subsidies be cut. Still, it focused world attention upon the loveless marriage of Disney and Paris. Then there were the operational errors. Disney's policy of serving no alcohol in the park, since reversed caused astonishment in a country where a glass of wine for lunch is a given. Disney thought that Monday would be a light day for visitors and Friday a heavy one and allocated staff accordingly, but the reality was the reverse. Another unpleasant surprise was the hotel breakfast debacle. "We were told that Europeans 'don't take breakfast,' so we downsized the restaurants," recalled one Disney executive. "And guess what? Everybody showed up for breakfast. We were trying to serve 2,500 breakfasts in a 350-seat restaurant at some of the hotels. The lines were horrendous. Moreover, they didn't want the typical French breakfast of croissants and coffee, which was our assumption. They wanted bacon and eggs." Lunch turned out to be another problem. "Everybody wanted lunch at 12:30. The crowds were huge. Our smiling cast members had to calm down surly patrons and engage in some 'behavior modification' to teach them that they could eat lunch at 11:00 AM or 2:00 PM." There were major staffing problems too. Disney tried to use the same teamwork model with its staff that had worked so well in America and Japan, but it ran into trouble in France. Controversies erupted when Disney's American managers required English to be spoken at all meetings and enforced Disney's appearance code for staff, which strictly regulated the use of makeup, facial hair, tattoos, and jewellery. In the first nine weeks of Euro-Disneyland's operation, roughly 1,000 employees, 10% of the total, left. One of the biggest problems, however, was that Europeans didn't stay at the park as long as Disney expected. While Disney succeeded in getting close to 9 million visitors a year through the park gates, in line with its plans, most stayed only a day or two. Few stayed the four to five days that Disney had hoped for. It seems that most Europeans regard theme parks as places for day excursions. A theme park is just not seen as a destination for an extended vacation. This was a big shock for Disney. The company had invested billions in building luxury hotels next to the park-hotels that the day-trippers didn't need and that stood half empty most of the time. To make matters worse, the French didn't show up in the expected numbers. In 1994, only 40 percent of the park's visitors were French. One puzzled executive noted that many visitors were Americans living in Europe or, stranger still, Japanese on a European vacation! As a result, by the end of 1994 Euro-Disneyland had cumulative losses of $2 billion. The company changed the name to Disneyland Paris in an attempt to strengthen the park's identity.