44373870 marketing-project-on-indian-luggage-industry

[MARKETING MANAGEMENT] December 15, 2007

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Travel Equipment Market

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AcknowledgementExecutive Summary 07Indian Luggage Market 09Critical View of the Luggage Industry 11Per 1997 12Post 1997 13Environmental Scanning 14

1.1 Technological Environment14

1.2 Social Environment14

1.3 Economic Environment14

1.4 Political Environment15

Porters Model 16Major Players in the Organized Sector 22V.I.P 23

1.5 Product Portfolio 24

1.6 Objectives28

1.7 Segmentation29

1.8 Distribution Network29

1.9 Product Differentiation 30

1.10 Positioning30

1.11 Strategy31

1.12 SWOT Analysis36

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Competition from Samsonite & the Unorganized Sector 38

1.13 Critical Aspects42

Samsonite 43

1.14 Brand Portfolio44

1.15 Products Lines and Width45

1.16 Distribution Network48

1.17 Positioning49

1.18 Segmentation49

1.19 Product Differentiation49

1.20 Business Strategy of Samsonite50

1.21 Swot Analysis of Samsonite50

SAFARI 52Products & Pricing 52

1.22 Packs52

1.23 Luggage52

1.24 Business Gear53

1.25 Shoulder Bags54

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1.26 Tote Bags54

1.27 Places and Promotions55

1.28 Push strategy55

1.29 Pull Strategy55

References 56

Executive Summary

Brief Insight into Indian Luggage Industry

The luggage industry in India is currently undergoing a

consolidation phase. Competition in the sector is expected to

intensify with the entry of foreign players like Delsey of France.

Companies with good research and development facilities are

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expected to survive while others may end up as contract

manufacturers for the bigger players. The luggage market

comprises of three segments namely the premium segment with

15% of total market share, the popular segment and the standard

segment. Samsonite (International) and VIP are the dominant

players in the premium segment with a market share of 52% in

the popular segment. V.I.P. industries and Universal dominate the

low-end standard segment.

The luggage market is dominated by the unorganized sector with 50%

market share. Northern and western India are the biggest markets in the country.

V.I.P. and Samsonite are focusing on developing their distribution networks. Both

players are also into exports. V.I.P.’s export touched Rs.134 million in 1997-98

and is mainly targeted at Gulf and West European Markets. Samsonite posted an

export turnover of Rs.150 million for the year ended December ’98. Luggage

manufacturers, particularly V.I.P. have slashed prices following decline in prices

of raw materials.

The organized sector (8%) is growing at a lesser pace when compared to the

unorganized sector (25%). The organized sector will have to face the reality that

players in this sector may become organized and come out with branded products

emerging as competitors to the existing players in the organized sector. The

organized sector has to be cautious of the developing grey market.

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Indian Luggage Market

The Indian luggage market is worth nearly one thousand crores. A considerable

portion of the market is unorganized. The table below gives the distribution of the

market between the branded sector and the unbranded sector.

Market Size: Rs. 900 crores

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Organized Sector 60%

Unorganized Sector 40%

The market for luggage in India can be subdivided into three segments,

comprising of the premium, regular and economy segment. The current growth

rate of each of these segments shows that the premium segment is the fastest

growing one - five times as fast as the economy segment, and two and a half

times as fast as the regular segment.

Growth Rates (Organized Sector)

Premium 25%

Regular 10%

Economy 5%

The organized sector is dominated at present by the Piramal fleet of companies -

VIP Industries and Aristocrat. Between them, they account for 85% of the

organized sector market. Their chief competitor is the Rs.41 crore Safari

Industries, whose share in the branded market is nearly 14%. The rest of the

market is comprised of other brands like Encore, Unilite, Genius, Club and

Novex. But the entry of Samsonite India, the 60:40 joint venture between

Samsonite and the Bombay-based Rs.28 crore Tainwala Chemicals, would

change the whole scenario.

Organized Sector

Company Market

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share

VIP 70%

Aristocrat 15%

Safari 14%

Others 1%

MARKET DISTRIBUTION

UNORGANISED SECTOR

40%

VIP42%

ARISTOCRAT9%

SAFARI8%

OTHERS1%

UNORGANISEDSECTOR

VIP

ARISTOCRAT

SAFARI

OTHERS

Critical View of the Luggage Industry

The luggage Industry can be traced into a triangle with the MNC giant Samsonite

International trying to steal the limelight, the $50 million Indian giant VIP

Industries at one of the vertices and the triangle completed with the $120 million

unorganized sector at the third end. The other small companies find place

somewhere in between. This then is the Indian moulded luggage industry in a

nutshell.

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Going back in time, the history of Rs. 10 billion Indian moulded luggage industry

can be observed in two phase’s viz., the pre-1997 phase and the post-1997.

Pre-1997

During this period, the companies were more interested in volume sales rather than

satisfaction. The Indian market was dominated by both the small and big players.

It had still to witness the onslaught of the multinationals. American Tourister,

currently the world’s second largest luggage manufacturer was there on the scenes

but, had to retreat in 1985 due to poor sales.

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Quality of the Indian luggage at that time was suited mostly for the low end mass

market and not for the premium end quality conscious customer. Innovations were

very few. People had got used to the old type of luggage which had a top, a bottom

and a lock to keep it intact. The manufacturing process concentrated more on

volumes than on quality. And surprisingly, nobody was complaining. The reason:

lack of quality awareness among the customers.

Then came the discounts war in the 90’s. Customers were availing 50-60%

discount on the maximum retail prices. Even as the sales soared companies started

to bleed. At this juncture, the aggressive Piramal group took over Universal

luggage and its brand Aristocrat. This gave a body blow to all competition. The

battlefield now comprised VIP Industries, Universal as part of the Piramal group)

and Safari to name a few until the entry of world number one the $737 million

Samsonite International, in late 1996. Till then competition was restricted to sales.

Service and customer satisfaction didn’t assume importance. In short, it was more

of selling than marketing.

Post-1997

This was the period when the industry witnessed a paradigm shift in terms of

quality and service. Liberalized baggage rules, presence of multinational and freer

import of luggage helped the Indian consumer to access international quality

luggage. In fact it ushered in a phase where even the domestic companies showed

the keenness to compete with the foreigners instead of following them. Sanjeev

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Aga, former CEO, VIP Industries says. “A few years back we were not aware of

our own strengths. We assumed that the best was Samsonite or Delsey and we

tried to come close to their standards. But now, we feel that we must do better to

outsmart them in the market.’ The company already seems to have moved in that

direction. While between 1990 and 1996 VIP had registered only eight new

designs in the next two years (1997 and 1998) the company registered 16 design

patents. The Indian consumer today has more choice than before.

Environmental Scanning

Political Environment:

Government has placed the raw materials required for the industry under OGL

(Open general license). Raw materials can be freely imported. There is no

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restriction on the export of finished product and very little barriers were there for

foreign firms to enter into Indian market.

Excise duty, Import duty, Custom duty, Sales tax have a substantial bearing on the

cost structure of the final product. International prices of raw materials are highly

flexible. There is no policy to control the burgeoning grey market.

Social Environment:

Luggage sales show a peak during the marriage season. This season witnesses a

spate of purchases of luggage.

Brands are promoted as status for consumers & tourists.

Economic Environment:

The luggage industry’s growth rate is dependent on the level of business & leisure

activity in the country. The positive signal in the growth of the economy works

well for the luggage industry. The growth in the tourism industry affects the

performances of the luggage industry which shows peak sales during the months of

September-January. The potential market growth @ 8-10% is making India a base

for the Multinational Companies.

Technological Environment: -

The luggage industry has graduated from the tin trunks; plywood suitcases to the

newly developed technologically superior plastic moulded suitcases with a lot of

features added on to cater the requirements of the customers. The luggage now is

developed for aesthetics, comfort & convenience in use. Technology is also

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developed in the manufacturing of the luggage with specialized moulding

materials used to mould the plastic material. The features like the locks, wheels,

handle etc. have been developed over the years. The industry has about 300

models in various segments. Technology has made it possible for companies to go

for a large production (VIP is 12000 per/day (286 models) & Samsonite is 1500

per/day (85 models)).

The amount of Research & Development investment being done by the companies

is also on the rise. This is more prominent in the organized sector with VIP

spending @ 7% of its turnover & Samsonite spending @ 9% on Research &

Development Internationally. The unorganized sector spends very little amount on

Research & Development spending is towards product development, capacity

utilization, distribution network & communication.

PORTERS MODEL

Threat of Entry:

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The industry is Oligopolistic in nature moving towards Duopoly with two

companies enjoying the market share a bit over 80%.

1)Barriers To Entry:-

a)Economies of Scale:-

Existing distribution channels.

Brand awareness of existing players.

b)Product Differentiation:-

The existing players in the industry have managed to

differentiate their product from each other depending on the

segments they are in.

c) Capital Requirements:-

Total project cost=25 cr.

Payback period is 3-5 yr.

Access to Distribution Channel:-

Existing competitors have tie ups with wholesalers & retailers

for marketing their products based on the long term

relationship, high quality services or exclusive relationship. A

new entrant will have to invest heavily to develop a distribution

channel.

d)Cost disadvantages independent of scale:-

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No demographic survey to demarcate buyer profile & helps to

focus marketing efforts. This translates into greater costs in

product development & selling & distribution.

e) Possibilities of a new entrant getting into a Joint Venture with

the players in the market are less. [Given an Oligopolistic

nature of the market, this is becoming duopoly in nature]. This

would mean that the new entrant would not be able to take

advantage of the existing player’s strengths (production or

distribution) & will have to start fresh.

f) Favorable access to Raw Material.

2)Expected Retaliation:-

Expanding of the distribution network by the existing player.

Accessibility of product.

Price cuts & discount.

3) Entry determining price :-

Given the strong brand & market presence of the existing

players & their well established distribution network the new

entrant will have to plan for heavy initial investment in order to

make his presence felt. This will have to be done under the

prevailing price structure taking into account retaliation from

the existing players

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Thus the returns may not be as soon as expected which itself

may form a barrier to enter into the industry.

4) Bargaining Power Of Suppliers :-

Dominance of few suppliers & lack of substitute products.

Although there is an additional capacity of the raw materials

required for the moulded luggage, there is limited to the

quality of the available material. There is no substitute raw

material to the material used at present i.e. Polypropylene &

ABS. This shifts the bargaining power towards the suppliers of

the raw materials. Raw materials make up for 50% of the cost.

Although Reliance has the process to supply quality raw

material the volumes of the luggage industry do not justify

their production & supply.

5) Suppliers :-

Raw materials used for moulded luggage are mainly

Polypropylene & HDPE Acrylonitrile Butadine Styrene (ABS).

These are by products of petroleum.

There are plenty of suppliers. Moreover the materials can be

imported as PP is under the OGL because of which companies

like Samsonite & VIP imports their raw material.

There has been no shortage in the supply of the material. Due

to the excessive capacity & the South East Asian Crisis the

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prices of the raw material have dropped by about 46% in the

last two years.

Thus in the scenario of enhanced competition in the moulded

luggage industry the diversity of suppliers & over capacity

without the scope of forward integration has limited the

bargaining power of the suppliers. The unorganized sector

sources its raw materials (recycled plastic) from a number of

local sellers.

6) Bargaining Power Of Buyers :-

The organized sector has few buyers compared to the suppliers

of raw material, which is available in plenty.

The raw material forms 50% of the total cost of the product.

There is no restrictive sale policy by the government as

regards to the raw materials. Hence buyers can have resource

to the international market. The raw materials are under the

open general license which can import freely.

In the unorganized sector the suppliers of the raw material

(recycled plastic) are many & this shifts the bargaining power

to the buyers.

There is no scope of backward integration by the buyer

because of the number of suppliers & the free import policy.

There is no product differentiation of the raw materials.

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7) Intensity of rivalry among existing competitors :-

The moulded luggage industry can be divided into 3

segments:-

Standard

Popular

Premium

In each segment there are 2-3 competitors. VIP is the leader

overall but in each segment there is intense competition as

each company tries to maximize its market share.

8) Slow Industry Growth :-

The growth in the moulded luggage industry has been sluggish

& the competition is getting intense. Compared to the growth

rate of soft luggage market or 25% the growth rate of moulded

luggage is about 8-10%, which is relatively slow.

9) Differentiation & Switching Cost :-

There is a lack of switching costs in this industry leading to

intense competition levels. Product differentiation exists

amongst the players in the standard and popular segments.

10) Diverse Competitors :-

Diversity in terms of strategy origins triggers off intense rivalry.

In this industry the competitors are into the market with

different means of capturing the market. This leads to intense

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competition especially during the season of marriage &

travelling which are considered periods of peak sales.

11) Exit Barriers :-

Exit barriers may be economic strategic or emotional in nature.

The specialized machinery used in the manufacture of luggage

the investment companies make in terms of production human

resource, building up distribution network are enormous &

makes it difficult for the company to exit. This then intensifies

the rivalry among competitors with each player trying to

optimize utilization of assets.

12) Substitute Products :-

The presence of substitutes which perform functions essentially

similar to the existing one & offering price advantages put a

capacity on the profits of the industry.

The luggage industry can be divided into the hard moulded

luggage & the soft luggage. The soft luggage is a perfect

substitute for the moulded luggage. With a growth rate higher

than the moulded luggage there is a capacity to the extent the

hard luggage market growth. Also the flexibility of the soft

luggage in terms of size design price etc. makes it a potential

threat to the hard moulded luggage market.

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MAJOR PLAYERS IN THE ORGANIZED SECTOR

• V.I.P.

• Samsonite

• Aristocrat

• Safari

• Giordano

• Delsey

• American Tourister

• Rimowa

• Kipling

• Jansport

• Blue & Blues

• Jang

• Fiorelli

• Others

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V.I.P.

VIP Industries Ltd. is the flagship company of the DG Piramal

Group. Established in 1971, it is a leading luggage manufacturing

company, which manufactures strollys, suitcases, executive

cases, backpacks and other hard and soft-sided luggage. It owns

reputed brands such as VIP, Alfa, Footloose and Buddy. It has two

manufacturing units in India and various subcontract operations

in China and Indonesia. Currently, it has a workforce of nearly

2000 people.

VIP is a well-known and reputed brand name in India.VIP has been

increasing its presence in world markets in the luggage industry.

The company has operations across the globe in five continents.

It has offices in the USA, South Asia, Middle East, Africa and

Europe, Worldwide, VIP products are sold across 1300 retail

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outlets in 27 countries. Currently, it exports its product to West

Asia, Europe, the USA, and select African and South East Asian

countries.

Product Portfolio

The product portfolio of VIP Industries Ltd. today includes a

diverse range of hard-sided and soft-sided luggage. The range

includes strollys, suitcases, duffles and overnight travel solutions,

executive cases, backpacks, and even school bags. VIP Industries

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Ltd. has renowned brands like VIP, Alfa, Footloose, and Buddy

covering the entire spectrum of travel products. VIP Industries

Ltd. has a license and markets Delsey products in India and

SAARC countries.

These products reach over 8000 retail outlets across the country.

Outside India, we have a network of over 1300 retailers across 27

countries. Our range includes injection moulded PP cases;

vacuum formed ABS cases as well as soft-side luggage in nylon,

polyester and EVA material.

Luggage Hard suitcase, soft

suitcase,

hard upright, soft

upright, cabin

luggage.

Polypropyle

ne,

polycarbon

ate, ABS

nylon.Travel

Bags

Totes, travel bag,

trekking

bag, trolley tote.

Nylon,

leather

Backpac

ks

School bag,

trekking bag,

laptop backpack.

Nylon

Executiv

e bag /

Portfolio

Briefcase, soft

executive bag,

laptop bag, Laptop

trolley,

messenger bag

Nylon,

synthetic

(foam),

polyurethan

e, leather.

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Belts Pure Leather

Reversal belt with

reversible buckle &

regular buckle

Regular belt with

fancy buckle &

regular buckle

Casual belts

Leather

Wallets Pure Leather

3 to 10 credit card

holder with pockets

for coins and

identity card

Card holder with

pockets for coins

Zip pockets, 2 fold

wallet with pockets

for coins and cards

3 fold wallets with

pockets for coins

and cards

Credit card holder

with 10 to 20

pockets

Leather

Travel

Accessor

ies

Security leg wallet,

hip money belt,

neck safe pouch,

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secret wallet, shoe

bags, passport

control with 7

compartments,

hands free CD case,

MP3 player case,

iPod case, eye glass

holder, cell pouch,

foldable bag, key

lock, number lock,

luggage tag, travel

pillow, toilet kit,

luggage strap, key

pouch, travel

security with

number lock etcHandba

gs

Office / Everyday

bag, mess bag,

shopping bag,

leather bag, leather

purses, leather

wallets, jewel bag,

fancy, vanity hard,

vanity soft

Leather,

Nylon

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The company entered the nineties with four sub-brands,

segmented on form and customer profile. Market Positioning

:

• Skybags - soft luggage range, for the business traveler.

• Alfa - economy range, for the first-time buyer or the up

grader to the branded segment.

• VIP range - priced twice as much as Alfa, for the

stereotypical Indian luggage customer.

• Odyssey - for the exclusive, lifestyle buyer.

VIP Industry is Asia’s largest luggage manufacturers & world’s

second largest luggage manufacturer. It has some of the finest

brands & has been ranked second in the recent brand awareness

survey. The growth rate and sales in each of these brands in 1992

indicate the skewed growth towards the upper end of the market.

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BRAND Contribution

to sales (%)

Growth Rate (%)

Skybags 10 35

Alfa 40 3

VIP range 35 10

Odyssey 15 30


These all brands are found in the lower segment. It has

manufacturing facilities in Nasik, Nagpur, Jalgaon & Sinner. It

proposes to start manufacturing units in Sri Lanka & other SAARC

countries. VIP manufactures 280 models. The manufacturing long-

term objective capacity is 12000 units per day. VIP has a strong

4000 dealer network in place.

Long Term Objectives:

To achieve 50% of the turn over from exports & become a

major player in the International market by the year 2005.

To get a major chunk of the unorganized sector through their

product ‘MANTRA’.

Short Term Objectives:

To have a volume & value growth of 15%.

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Segmentation

VIP is catering to income group of 5000-10000 for the standard &

popular segment product & their premium product is targeted to

an income group of 10000+. They are catering to all the four

zones.

Distribution Network

VIP has 21 branches & a strong dealer network of approximately

5000.

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Market Distribution – in India

Sales Channel Share (%)

Army canteens 30-40%

Luggage shops 60%

Market Distribution – World over

Sales channel Share (%)

Department Stores 41

Luggage shops 21

Catalogue stores 16

Variety stores 15

Mail order 2

Others 5


Product Differentiation

VIP has made a dent into the unorganized sector as the only

branded product present in the standard segment.

Premium Segment :-

There is hardly any differentiation in the product offered by VIP.

Product is almost same as to the product of their competitors

Samsonite in features. The differentiation is only in terms of

prices (VIP is @ 20% cheaper than Samsonite.)

Popular Segment:-

It is the segment where VIP makes money. This segment provides

a better margin. The luggage is of the frameless type & the

company has a large market share. The product is promoted as

sturdy & enduring hard knocks of travel in India.

Standard Segment:-

Product has the bare minimum features & is differentiated on low

prices. Product is promoted as value for money.

Positioning

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It positions itself as an A-Z luggage company without diffusion of

the mother brand.

V.I.P. is looking at tapping the lucrative European market where

people are buying more luggage

Strategy

VIP has established itself in the Indian market using product

innovations, stress on quality and brand building. VIP was the first

to introduce “non reversible multi safe lock”, soft grip handle,

dual action lock and central locking system. These innovations

together with brand building made VIP a market leader.

Then VIP faced the problem faced by most of the giants: the

brand becoming generic to the category and local brands eating

into the share of the company.

In 1997 came a formidable threat to VIP – Samsonite. With in

short time Samsonite established its presence in the luxury

segment of the market. While VIP was very dominant in the mid-

segment, it had no presence in the luxury segment. Samsonite

posed a major threat to VIP and garnered a market share of about

35% in the luggage market within a short period of time. This

forced VIP to seriously reconsider its marketing strategy. To

counter the threat of Samsonite, VIP launched Elanza range of

premium luggages. Samsonite meanwhile also wanted to enter

the popular segment (800- 2000 range). It launched the brand

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“American Tourister “to enter this segment posing a major threat

to the market leader. More over Samsonite had an international

contemporary look and appealed to the new generation than VIP

which was not perceived as a vibrant brand.

In order to attract the new generation and create a new brand

identity, VIP embarked on a rebranding exercise. The usual ads of

VIP was appealing to the middle class and focusing more on

emotion. The “Kal Bhi, Aaj Bhi” ads were very powerful and

appealed to the middleclass. But since the consumers changed, in

order to succeed, the brand had to have a contemporary look.

The new strategy of VIP is focusing on capturing or owning the

concept of “Travel”. The logo was changed to a more

contemporary logo and the ads were changed to communicate

the new positioning. The agency thought of the most appropriate

moments of travel and decided that the “time of departure “are

the most critical constituents of travel. The ads aimed to tie the

brand to Travel. Thus originated the “Bye- Bye “campaign with a

very youthful imagery that appealed more the new generation

travelers. The baseline was changed to “Happy journey” thus

attempting to own the concept of traveling.

The new campaigns were supported by new ranges of products.

The sub brands of VIP include Delsey (international brand from

France) to capture the premium segment, Footloose: the trendy

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bags for the youth, Buddy: school bags and Alfa: value for money

segment.

VIP is a market leader that is trying hard to retain its leadership

position. It had failed to create barriers for competition by

keeping many categories open for competition to enter. Now also

leather bag category is now seeing lot of action with big players

like Hidesign taking the lead. VIP does not have a presence in this

segment. But with its strong brand equity and ability to change

with the consumer trends will help VIP in its future battles.

Advertising Strategy

Their advertising strategy is to promote image of sturdiness,

value for money & toughness. Plan to spend RS 20 cr. for the

same. Its price ranges from RS 225 to Rs.8000. The company has

also been in fresh talks with French company Delsey, for

marketing the latter's premium luggage range.

Pricing Strategy

Market Segmentation

Segment

Price range

(Rs)

Market share

(%)

Premium

1500+ 15

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Popular

700-1500

30

Standard

300-700 55

The premium segment is at the top of the rung in India. It is

followed by the popular segment which is slightly larger than the

premium segment but smaller than the premium segment, the

latter segment is the largest and contributes to maximum sales in

developing countries. In contrast, the standard segment in the

developed countries is very small.

Such constitution of the customer profile is aiding the

unorganized sector in India which manufactures low cost goods.

The high quality manufacturers are finding it difficult to penetrate

the market due to high production costs. The target customers at

the high end (premium segment) form just 15% of the total

customers while the low end standard segment constitutes 55%.

The premium segment is controlled by the Apollo group (US)

company, Samsonite (I). The popular segment is dominated by

the domestic giant, VIP Industries. The standard segment, the

largest segment, is serviced by VIP Industries and Universal. The

unorganized players price their products at around Rs 300 per

piece.

Apart from competition and undercutting by the unorganized

sector, the moulded industry is facing a tough fight from the soft

luggage segment as well. This segment has caught customer

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fancy in the last few years. Even though the soft luggage

segment forms just 15-20% of the total industry. It is growing at

the rate of 25% which is much higher than the moulded luggage

segment growth.

The industry majors differ in opinion on the growth rate of hard

luggage or moulded luggage. VIP Industries optimistically puts

the growth rate at 10% while the multinational Samsonite says

the hard luggage market has shrunk by 4%. But, both the

companies are not ready to ignore the hard luggage market for

soft luggage. Abroad, most of the luggage manufacturers are into

both hard and soft luggages. In India too, VIP and Samsonite

manufacture both soft and hard luggage.

Universally, the luggage business is seasonal in nature. In India,

luggage sales depends on two factors—tourism development and

on the marriage season. The marriage season extends from

March – June and from October – December. These months see

good luggage sales. Also, the domestic tourists usually plan their

yearly trips during the holiday season between April – June.

During this period, there is fierce competition among the luggage

manufacturers to grab the market share.

However, socio-political turmoil in the last few years has affected

the Indian tourism industry. Market sources say all such problems

have retarded the cumulative annual growth rate of the moulded

luggage industry to 5%. However the Kargil issue at Kashmir has

worsened the chances of revival of the Indian tourism industry,

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thereby reducing the chances of improvement in the growth rate

of the luggage industry.

SWOT Analysis

1. Strengths:-

• Very high brand awareness (2nd in India).

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• 52% market share in organized sector (largest in Asia).

• 11% through Universal luggage.

• Form 31 years it has been in this market.

• It has 21 branches & a strong dealer network of about 5000

outlets.

• Low raw materials cost.

• Real Value for money.

• Money power & aggressive management.

• All plants are ISO Certified (government recognized R & D unit

in Nasik).

2. Weakness:-

• Less Research & Development expenditure.

3. Opportunities:-

• Scope to increase exports.

• Economy is reviving.

• Untapped lower segment area.

4. Threats:-

• Worsening situation in Kashmir for tourism.

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• Unorganized sectors are cheaper by 25% due to less amount of

excise duty.

• Excess capacity in the South East Asian countries.

• The players in the unorganized sector getting them organized

and coming out with branded products.

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Competition from Samsonite & the Unorganized

Sector

The Indian moulded luggage industry at the present juncture is

witnessing a bitter battle among the competitors. However, the

unorganized sector is having an upper hand grabbing a larger

share whenever the market grows. VIP has money power and an

aggressive management. Samsonite has a reliable parentage,

money power and R & D support. The unorganized sector relies

on low cost products for their good sales. The sufferers are those

lacking in money power which does not allow them to spend on

advertisements and R & D.

In the long run, companies with sound R & D are expected to

sustain competition. While VIP spends 2-3% of its turnover on R &

D, competitor Samsonite does not spend anything in India. The

parent company spends 9% of its turnover in R& D. This will help

Samsonite introduce new products periodically. In fact, Samsonite

proposes to reduce its price range from the present Rs.1500-1700

range to the Rs.1000 + category. On the other hand, VIP plans to

introduce products both in the premium and lower end segments.

But both the companies are keeping their cards close to their

chest.

The fight is expected to become fiercer when the world number

four Delsey (of France) also makes an appearance in India.

Internationally, the companies are trying to enter fast growing

areas because of very low growth in the developed markets. Take

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the case of Samsonite International. It has witnessed a growth

rate less than 0.6% during 1998. Certainly, the international

majors cannot ignore the Indian market.

In the Budget ’99 however, the finance minister has allocated

Rs.1.33 billion for tourism development as against last year’s

figure of Rs.1.19 billion. This excess allocation is sure to benefit

the tourism industry in turn benefiting the tourism dependent

industries (moulded luggage and hospitality industries).

Another major area can be looked into by the luggage

manufacturers is making India a manufacturing base in the way

Samsonite has cashed on the cheap and skilled manpower

available in India. As stated earlier, due to poor product quality,

except for VIP and Samsonite none of the local manufacturers are

in a position in export. On the flip side there is excess soft

luggage capacity in countries like China and Taiwan. Market

sources say that these countries have 50% excess capacity which

will find their way in the international market.

Hence the local companies may have to encounter tough

competition. As such any rise in domestic sales and export sales

will definitely benefit the domestic industry.

Thus, the present status of the industry is highly competitive and

the final consumer will be benefiting. Today, he has more options,

more designs, and better quality products to choose from. The

consumer is the king.

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The Moves:

Samsonite was considering launching Oyster (its highest volumes

earner worldwide) in the range of Rs.2000, so that it would be

priced above VIP, and its brand image would be strengthened.

But, early this year, VIP Industries launched Elanza, a slick brand

of premium moulded luggage targeted at the top end of the

premium market. Elanza boasts of two patents, for its bumper

and fabric lining. The 79-cm Elanza was priced at Rs. 3750, while

the 69-cm one sells for Rs. 3250 in India. Moreover, Elanza has

been made available through select dealers only, in order to

maintain its premium image. At present, VIP plans to export 90%

of its production of Elanzas.

This caught Samsonite totally unawares. The branded luggage

scores on perceived value pricing, and so at the moment

Samsonite is keenly tracking Elanza’s performance in the market.

VIP set the price so high to preempt Samsonite’s entry in the

super-premium segment of the market.

VIP plans to make this price permanent, subject to the successful

sales of Elanza. This means that Samsonite would go ahead and

launch Oyster at Rs. 2000. The market research study clearly

indicates that Samsonite would lose heavily on its brand equity if

its product is cheaper than the existing ones in the market.

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The options available to Samsonite are

♦ Reduce price and target lower segments - This again is

not possible. The high brand image of Samsonite

demands a correspondingly high price. It is only the

premium segment that Samsonite can target, as it is

unknown in the other segments.

♦ Increase price and raise perceived quality - If Samsonite is

forced to enter at a higher price, it might take greater

amount of time to gain a footing in the Indian market. This

might give VIP Industries just enough time to strengthen

itself. But this option would ensure that Samsonite retains

its major strength - its brand equity.

VIP Industries is now concentrating on expanding its product

portfolio to plug in any existing holes. It has launched six new

products in 1995 in the higher end of the market (one of them

was Elanza). Also, VIP is planning to launch more products in the

super-premium category in order to counter Samsonite at all

price points.

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The Critical Aspects to the success of the strategy

adopted by VIP Industries are:

• Elanza must be marketed successfully so as to

establish itself in the market. The earlier premium

product of VIP Industries, Amadeus, failed to take off in

European market channels like Italy. But VIP officials

state that Elanza, which is considered to be the most

sophisticated and extensively developed product of VIP

ever by insiders, is proving to be a success.

• VIP must introduce more products in the super-

premium category and gain a foothold at all the price

points. Unless this is accomplished soon, VIP will find

Samsonite’s product range too formidable totackle.

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Through its premium pricing of Elanza, Blow Plast has forced

Samsonite to hike up its entry price. By coming in at a higher

price point, Oyster would find it difficult to garner desired

volumes. By using such a competitive pricing, Blow Plast is

hoping to gain time to plug every hole in the market, before

Samsonite starts breathing down its neck.

With Samsonite having invested heavily in the plant at Nasik (it is

the third largest manufacturing plant of Samsonite), it would not

give in a hurry. Whether VIP would be able to ward off

Samsonite’s challenge will not be clear for a couple of years.

SAMSONITE

The world's #1 luggage maker, Samsonite offers a broad range

of luggage and luggage-related products, including suitcases,

garment bags, casual bags, business cases and other travel

bags. Samsonite also license their trademarks for use on

products such as travel accessories, personal leather goods,

handbags and furniture . Samonsite also makes travel gear for

Timberland. Samsonite is the world leader in the luggage

market, with an emerging presence in Asia. It has set up a

manufacturing plant in Nasik, which has started operating.

Samsonite products are produced around the world at 14

Samsonite-operated manufacturing facilities or by third-party

suppliers. Samsonite benefit from their large size through

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volume-driven purchasing and manufacturing economies. It sell

their products in more than 100 countries at approximately

27,000 retail locations, including department stores, specialty

stores, catalog showrooms, mass merchants and warehouse

clubs. In the United States, they sell their products through 195

Samsonite-operated stores. Samsonite is the top seller of

luggage in the United States, Europe, and Japan. In addition to

its world-renowned Samsonite label, the company also markets

the popular American Tourister and Lark brands. Under those

names, Samsonite offers a full line of luggage, including

softside and hardside suitcases, garment bags, casual bags,

business cases, and other travel bags and accessories.

Samsonite started its operation in Denver, Colorado, USA in

1910. It entered the Indian moulded luggage market only

towards late 1996 with plant in Nashik in collaboration with the

Tainwalas. Samsonite It has selected Denver, Belgium for

manufacturing hard luggage & Hungary, the Slovak Republic for

the manufacture of soft luggage.In Nasik, India both the hard

and soft luggage is manufactured.

BRAND PORTFOLIO

The brands of Samsonite collectively,serve every segment of the

market, reaching customers in all walks of life, all over the world.

It meets the discerning needs of the luxury market through their

Lambertson Truex and Samsonite Black Label brands, while the

innovative, high-quality offering within our time-honored

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Samsonite brand serves both middle- and upper-market customer

segments. Its American Tourister brand provides affordable,

quality products to value-conscious consumers. Each of our

Samsonites brands has been carefully developed to meet the

precise quality, value and pricing needs of the consumers within

its market. Despite their diversity, all of the brands share a

common philosophy: to deliver durable, high-quality products that

reflect Samsonite’s commitment to excellent craftsmanship,

innovative design and exceptional functionality.

The brands of Samsonite are:

• SAMSONITE

• SAMSONITE BLACK LABEL

• AMERICAN TOURISTER

• LAMBERTSON TRUEX

• LARK

Samsonite complement their owned brands through their global

licensing program, through which they leverage Samsonite’s

luggage expertise to partner with market-leading lifestyle brands,

such as Lacoste, with whom they develop handbags and casual

bags, and Timberland, with whom they offer travel gear,

accessories, backpacks and outdoor items.

PRODUCTS LINES AND WIDTH

The products lines of Samsonite Includes:

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• Suitcases

• Carry-ons

• Garment bags

• Backpacks/Duffels

• Kids Luggage

• Business/Computer Bags

• Golf Travel Bags

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BASED ON SIZE

SMALL

(TOTAL 6 PRODUCTS)

MEDIUM

(TOTAL 20 PRODUCTS)

LARGE

(TOTAL 21 PRODUCTS)

(SHOWN ASIDE IS THE MODEL NO. OF TWO PRODUCTS WHICH HAVE THE LOWEST AND THE HIGHEST PRICE RESPECTIVELY IN EACH CATEGORY.)

Samsonite® Elevation 21" Upright

700 Series Samsonite® Outline® 8 22" Spinner

Samsonite® Elevation 25" Upright

S amsonite® Pro- DLX 24" Upright

Samsonite® Ascella 22" Expandable Upright

Samsonite® Pro-DLX 28" Upright

http://www.samsonitecompanystores.com/webapp/scs/servlet/SItemDisplay?productId=250748&storeId=10151&langId=-1&pc=C05


















• Accessories

SUITCASES

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BASED ON EXTERIORS

SOFTSIDE

(TOTAL 25 PRODUCTS)

HARDSIDE

(TOTAL 13 PRODUCTS)

HARD AND SOFT

(TOTAL 8 PRODUCTS)

(SHOWN ASIDE IS THE MODEL NO. OF TWO PRODUCTS WHICH HAVE THE LOWEST AND THE HIGHEST PRICE RESPECTIVELY IN EACH CATEGORY.)

American Tourister® D'Lite 25" Exp Upright

Samsonite® Pro-DLX 29" Spinner Upright

325 Series Samsonite® F'Lite 28" Upright

700 Series Samsonite® Outline® 8 29" Spinne r

450 Series Samsonite® Sahora Spinners Hybrid 24" Upright

600 Series Samsonite® Carbon EXP™ 29" Hybrid Upright Suiter

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DISTRIBUTION NETWORK

Samsonite is present in 150 items with 450 outlets. They are not

interested in mass appeal & would like to concentrate on the top

23 cities. Samsonite is distributed primarily through:

• Samsonite Outlet Stores

• Samsonite Black Label Stores (Boston, New York, Short

Hills, San Francisco, Chicago, Dallas)

• Samsonite Classic Stores (King of Prussia,PA ;

Detroit,MI ; Arlington,TX ; Tampa,FL ; Concord,CA ;

Nashua,NH

• Department Stores like Macys in the USA and John

Lewis Partnership in the UK

• Online retailers like Ebags.com and KJ Beckett

• Warehouse Clubs like Costco

• Military Stores like AAFES

PRODUCT CATEGORY

PRINCIPAL PRODUCTS

MAIN DISTRIBUTION CHANNELS

LuggageHardside and softside

luggage, garment bags, carry on bags

Direct retail stores, specialty stores and high–end department stores

Mid–level department stores, specialty stores, national chains, warehouse clubs,

direct retail stores

National chains, mass merchants, specialty stores,

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direct retail stores

Casual and Outdoor

Bags

Duffel bags, tote bags, backpacks, shoulder and hip bags,school bags,

handbags

Specialty stores, department stores, national

chains,warehouse clubs, sport and outdoor retailers

National chains, mass merchants, specialty stores

Business and

Computer Cases

Briefcases, business cases, computer

cases

Direct retail stores, specialty stores and high–end department stores

Department and specialty stores, office superstores, OEMs, warehouse clubs

Mass merchants

Positioning:

High Quality / High Price

Samsonite positioned itself as Internationally acclaimed quality

product with visible benefits.

Segmentation:

The top premium segment i.e. Rs. 1500-7500 is the main area

of attention of Samsonite where it already has 60% of the

market share.

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Product Differentiation:

The main differentiation factors based on the target consumer

that wish to cherish exclusivity are:

• Reliability

• Perceived Value of the Product

• International Quality

Business Strategy Of Samsonite:

• Expand Channels of Distribution and Product Offering

• Strengthen Marketing and Product Innovation.

• Continue Worldwide Expansion.

• Improve Distribution Systems in the U.S.

SWOT ANALYSIS OF SAMSONITE:

Strengths:-

• Reliable parentage & money power.

• Research & Development support (9%

worldwide).

• High Quality.

• 25% market shares in world (50% in the

organized sector).

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Weakness:-

• 80% of raw materials imported

• Low brand awareness

Opportunity:-

• Increase distribution network

opportunity.

• Use it as a base for exports.

• Economy is reviving

Threats:-

• Worsening situation in Kashmir

• Other MNC’s entering in the

market.

• 4% decline in the market in

1997-98.

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SAFARI

Products & Pricing

Packs:-

1. Original Packs

• Deluxe: We took our traditional Pack and added soft padded leather shoulder straps and a waist belt for comfort on those long portages

Prices: Rs.1950-3150

• Utility: These less expensive packs allow occasional campers to have their own rugged gear

Prices: Rs. 1350-2150

• Heavy Duty: A heavy duty durable version

Prices: Rs. 1100-1900

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• Rambler: A versatile gear hauling pack with three outside pockets

Prices: Rs. 990-1750

2. Heavy Packs

• Heavy Duty: A heavy duty durable version

Prices: Rs. 1450-2100

• Monarch: Made of more functionality features and with waist belt and sternum strap

Prices: Rs. 1450-2150

3. Child packs

• A miniature Pack that makes a great kids pack. Lots of bright colors

Prices: Rs. 990 onwards

Luggage

1. Utility Luggage Bags

• Premium Bags


• Standard bags


• Trolley Bags

Prices: Rs.1300

2. Sportsman Luggage

• Sportsman garment bags : Hang your suits or skirts in this classy garment bag.

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Rs. 2000-3500

• Sportman Duffel: Meticulously crafted and thoughtfully designed, we know you'll love this duffel!


• Extended Sportsman Duffel: Zippered end pockets make it simple to find those frequently retrieved items


• Boot Duffel: The large top compartment is sealed with a full length zipper, and hidden beneath it is a lined compartment.

Rs. 2100 onwards

3. Leather Luggage

• Leather Duffel: A real value, our leather duffel is an honest investment in your personal travel comfort and security

Rs. 3000 onwards

• Pebbled Leather Duffel: Our Leather Duffel available for a limited time in a soft pebbled leather


• Leather Bookbag: A stylish messenger bag style bag that will last for generations.

Rs. 1500 onwards

Business Gear

1. Briefcases

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• Executive Briefcases: These bags are made out of our new velvety soft, full-grain, waterproofed leather.

Rs. 3500 onwards

• Leather Briefcase: An elegant leather briefcase


• Pebbled Leather Bags: Our Leather bags available for a limited time in a soft pebbled leather.


2. Laptop Cases

• Laptop Backpack: A very popular Large Standard Daypack, and added a padded protective sleeve for your laptop

Prices: Rs.1400 onwards

• Canvas Leather Laptop Pouch: A non-bulky padded pouch for your laptop


• Leather Laptop Pouch: A non-bulky padded pouch for your laptop

Prices: Rs. 900-2000

Visit hrmba.blogspot.com for more project reports,


Shoulder Bags

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1. Leather Bags

• Serengeti Book Bag: These book bags are made out of our new velvety soft, full-grain, waterproofed leather

Rs. 1500 onwards

• Pebbled Leather Mini-Haversack: Our Leather Mini-Haversack available for a limited time in a soft pebbled leather

Rs. 1450 onwards

• Lady Slipper Bag: A handcrafted all leather backpack handbag

Rs. 900 onwards

2. Shell Bags

• Deluxe Bags

• Standard Bags

• Classic Bags

Tote Bags

1. Sportsman Tote Bags

2. Zip Top Tote Bags

3. Mini Tote Bags

Other Products include

• Key Fob

• Leather Document Brief

• Leather Fold up Hat

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• Wallet- Trifold wallet

• Notepad holder

• PDA case

Places and Promotions

The company should adopt two strategies for allocating its products.

PUSH Strategy:

Manufacturers Wholesalers Retailers Customers

Push strategy under which the products can be sold at different wholesalers, retailers, franchisee shops, etc

Pull Strategy under which manufacturers promote their products using advertising and promotions. In this strategy the consumers are persuaded to buy the products directly through the intermediaries.

The consumers may also buy their products online.

They should have their wholesaler at a particular place and the retailers or franchisee shops should be located at public places, malls, etc. Also, retail shop should be near airports, railway-stations, bus stations, public places, etc. This would contribute in impulse buying too.

The promotional activities may include electronic hoardings in airports, railway stations, etc. Conventional methods of advertising can also be used such as print media, television, etc.

References

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• http://www.la411.com/company-V.I.P.%20Travel

%20Values&lid-3600517.htm

• www.vipbags.com

• www.vipmoderna.com

• www.bags-luggage.com

• www.google.co.in

• www.yahoosearch.com

• www.wikipedia.com

• www.travelequipments.com

• Philip Kotler, Principles Of Marketing (2nd European

Edition), Prentice Hall, 1999

• Prof. Karpagam, ICFAI Business School

• Prof. Harshita Shrimali, Pacific Institute of Commerce

and Management

• Visit hrmba.blogspot.com for more project reports,


•

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http://www.travelequipments.com/

http://www.wikipedia.com/

http://www.yahoosearch.com/

http://www.google.co.in/

http://www.bags-luggage.com/

http://www.vipmoderna.com/

http://www.vipbags.com/

http://www.la411.com/company-V.I.P.%20Travel%20Values&lid-3600517.htm

http://www.la411.com/company-V.I.P.%20Travel%20Values&lid-3600517.htm

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