Case Analysis Submission FABINDIA OVERSEAS PVT. LTD.

Date: 03RD OCT 2011 Submitted To: Prof. A Sivakumar

Submitted By: Group 16

Ankit P Maheshwari (10306) Pritesh Ranjan Singh (10325) Sukanya Bose (10344) Anant Shrivastava (10358)

Retail Management TAPMI, 2010-2012

FABINDIA OVERSEAS PVT.LTD.

Case Analysis
Fabindia started as a wholesale export company and has since successfully established itself as a major retail player in the Indian market. FabIndia had 49 stores in 2006 and they want to scale the same up to 200 stores by 2011. The net total sales from these outlets are Rs. 1.3 Billion and the company wanted to scale up to Rs. 8.6 Billion by 2011. The biggest problem facing the company was to plan this growth in a manner that they maintain their founders objectives. FabIndias stores were divided into three categories premium, regular and concept. They were doing well in the last two but wanted to improve the product quality and revenues from the premium category. They wanted to differentiate their products and encourage customers to buy the same. All the FabIndia stores had a distinct ambience and they tried to provide the store owner with as much entrepreneurship opportunity as possible. They store were started after internal analysis on strategic locations. The company wanted to increase these stores so that they have more presence in the market. They wanted the customers to be more aware of their products, especially in the premium category. The company was not advertising enough about their stores. The ambience and locations if advertised again and again could lead to a lot of benefits to the company. The biggest issue now was to identify the new locations and people who would be able to maintain the same vision of earning profit by giving back to the society. They wanted to stay close to their founders mission as it had benefited them as well as the society. The company is also facing stiff Competition; it came from the organised and the unorganised sector. The unorganised sector mainly included the local tailors who provide customised garments to the customers at reasonable prices and the local NGOs selling wares. Although they all worked on a small scale and didnt pose a big threat to the company. The biggest threat for the company was in the organised sector especially Government owned Khadi Gram Udyog outlets, Cottage Industries Emporiums across the country and the foreign retail chains which were planning to enter the market and benefit from the same. The product mix available at Khadi Gram Udyog outlets and Cottage Industries Emporiums was also similar to what was offered by Fabindia. Also, they have the backing of the governments. Since India is also ranked as the most potential retailing destination, all the major foreign players were planning to enter the market. Some other competitions include the stores backed by Indian companies like Lifestyle and Westside which cater to the same demographic profile. These however sold the products which didnt aim at the same target audience. Stores like Anokhi have the same target audience, but currently didnt have the reach of Fabindia. In order to grow according to its plan the company should increase the number of outlets at a steady rate. Also it is critical that more advertisement is done so that people become aware of their existence and develop a habit of shopping from them. The company needs to ensure more capital funding and the supply chain also has to scale up to the level of the growing plans.

Competitive analysis is as shown below: Fabindia Caters to niche Variety of products (garments, home furnishings, organic, handicrafts, etc.) Uncertain supply chain Lack of organizational structure

Secondary Competitor
Tailoring Outlets NGOs promoting handicrafts

Strength
Reaching out to customers with large dispersion Ensures convenience of demanding services Strong community based operations Complementary products manufactured with other firms National presence of stores Retail expertise and competitive pricing Scope of product customization High level of customer intimacy

Weakness
Very fragmented business approach

Lack of retailing expertise and inability to maximise cost

Retailing houses Stop, Westside, Trends, etc.) Designer Boutiques

(Shoppers Reliance

Diversity of product is very less No uniformity across products in price

Analysis is done to check the feasibility of expansion of organic food segment Pros 1. Perfect product for product line extension as it matches with their ideology and customers perceive it as genuinely organic owing to the Fabindia brand name 2. Potential to increase same-store sales owing to SKUs in more variety 3. The number of products stocked tripled and revenues from organic products increased by 100 times in two years when organic products were introduced which is a healthy growth 4. Organic food is in line with the founding mission as organics are pertinent to rural employment Cons 1. Special Organic Food stores: Absence of a constant supply chain leads to irregular supply, hence it is not advisable to open specific stores for organic food as it will lead to demand which could not be met. 2. Dairy products: Need to invest in cold

How would FabIndia maintain the support of its network of suppliers by: Satisfying the cause of its expansion and Keeping its mission intact

The suppliers of Fabindia are not linked with the market so as to feel the direct heat of uncertainties of their unstable work culture (untimely delivery, quality-pattern discrepancies). The lack of their linkage to the market gets forth the following cause/effect: suppliers not being adequately market oriented difficult to access export market due to issues of certification, logistical difficulties, and high costs of meeting global standards

To gain higher efficiency and effectively from the suppliers, Fabindia needs its suppliers to be viable to their produce so as to improve their livelihood and increase its sales/market presence in a standard format. Market orientation and linkage is must to survive and grow in competitive markets, Fabindia must implement some ways to implement structure in its supply chain to strengthen its operations. Also in order to achieve the revenue sales of year 2011 target and to keep its mission of empowering the rural craftsmanship, company needs to develop the domestic market as an alternative which should be more affordable and sustainable But, issues which are holding it back are: small producer inclusion their stay in value chains and producer resources and capabilities

Various strategies followed by Fabindia in order to operate in this situation are: Multiple and fragmented procurement sources (private, NGOs, farmers groups and individual farmers) Training and financial support to suppliers Partnership with small producers No direct working with producers Partnership in Community owned companies of producers

Now, to expand in order to expanding market needs, the company should develop its support of suppliers by making use of Producer Company clause in the Companies Act to organise/encourage market oriented and business like co-operatives (New Generation Cooperatives) and convert existing coops into NGCs. This implementation of the companies Act will help the company as well as the rural artisans to walk hand in hand in the competitive market and also empower the craftsmen to meet the future market demands.