MANIK

MINOR PROJECT

ON

“SCOPE OF BRANDED LUGGAGE RETAIL IN PATNA”

By:

Manik arora

MASTER OF FASHION MANAGEMENT

Batch (2010-2012)

CERTIFICATE

NIFT PATNA

This is to certify that the Minor Project document submitted to the

Department of Fashion Technology NIFT, Patna by Manik arora as

part of the academic requirements is a original work done by him.

Place: Patna

Date: 20/05/2010

Jaya Mathew (mentor)

Associate Professor NIFT PATNA

NIFT PATNA

DECLARATION

I, Manik arora, hereby declare that the Minor Project document

submitted to the department of fashion technology, NIFT, Patna as

part of our academic requirements is a original work done by me

under the supervision of Asst Prof : Jaya mathew (Mentor) NIFT,

Patna.

NIFT PATNA

TABLE OF CONTENT

EXECUTIVE SUMMARY........................................................................5

OBJECTIVES.....................................................................6 RESEARCH METHODOLOGY........................................7 INTERNATIONAL LUGGAGE INDUSTRY...................8-16 INDIAN LUGGAGE INDUSTRY.....................................17-29 STUDY ON VIP INDUSTRIES LTD.................................30-48 STUDY ON SAMSONITE..................................................49-58 BIBLIOGRAPHY................................................................59

EXECUTIVE SUMMARY

NIFT PATNA

Luggage industry in India, much like furniture retail, has largely operated in

traditional domain. The buying behaviour however, changed with the way India

travelled .The air travel gave impetus to the growth of branded luggage, just as

being associated with a brand became a norm with the ‘I wish to express myself

with the brands I own’.

The luggage industry as a whole has increased over the years. With the recent

weight restrictions on luggage added by the Airline industry, sales should

continue to increase over the years to come. The industry (US) revenue for the

year 2006 was approximately $720,000,000. The gross profit was 34.14% at

$245,808,000. There were 193 establishments in this industry that year.

Samsonite is the biggest player in international luggage market.

The Indian luggage market is worth nearly two thousand crores. Brands market

of luggage stands at around Rs.1000 crore, with premium at around at around

Rs.250 crore, mid segment at Rs. 400 crore and economy at about Rs. 350

crore. Brands market of luggage stands at around Rs.1000 crore, with premium

at around at around Rs.250 crore, mid segment at Rs. 400 crore and economy at

about Rs. 350 crore. The industry is Oligopolistic in nature moving towards

Duopoly with two companies enjoying the market share a bit over 80%. Vip

industries ltd. And samsonite captures more then 80% of the organized luggage

market.

TOPIC: “SCOPE OF BRANDED LUGGAGE RETAIL IN PATNA”

NIFT PATNA

Objectives

To study the luggage industry and its nuances in the international scenario.

To study and analyse Indian luggage industry in the retail context.

To study the feasibility of setting up of a branded retail outlet for luggage in Patna.

NIFT PATNA

Research Methodology:

Secondary Research- The secondary data and theoretical

information regarding the luggage retailing and market would

be conducted using reports, trade journals and internet.

Primary Research- Questionnaire survey to understand the

scope of opening a branded retail store for luggage would be

done with customers and retailers.

Sample size - 100

Sampling method – convenience & judgemental

NIFT PATNA

Luggage industry as a whole

The luggage industry as a whole has increased over the years. With the recent weight restrictions on luggage added by the Airline industry, sales should continue to increase over the years to come.

The industry (US) revenue for the year 2006 was approximately

$720,000,000. The gross profit was 34.14% at $245,808,000. There were

193 establishments in this industry that year.

Total import export value for the year 2006 was $4,408,764,000. There

were 164 countries that conducted foreign trade with the US. In 2006, 10

more than 2005. The top trading Countries were: China, $3,268,770,000

(74.14%); Canada $135,944,000(3.08%); Italy, $125,378,000 (2.99%);

Vietnam, $122,227,000 (2.77%); and Mexico, $83,358,000 (1.89%).

Their combined total represents approximately 85% of all Imports and

exports.

Total import value for the year 2006 was $3,703,527,000. This represents

a 15.9% increase for the year 2005. The US. had imported industry

related merchandise from 122 countries in 2006. The top importing

Countries were: China, $2,955,195,000 (79.79%) Italy,

$125,378,000(3.39%); Vietnam, $111,638,000(3.01%); France,

$54,475,000 (1.47%); and the Philippines, $53,597,000 (1.45%) Their

combined total represents approximately 89% of import from all

Countries.

NIFT PATNA

The total export value for the year 2006 was $351,283,000. This

represents a 26.5% increase from the year 2005. The US had exported

industry related merchandises to 140 countries in 2006. The top

exporting countries were Canada, $102,421,000 (29.16%); Japan,

$63,621,000 (18.11 %); Mexico $43,314,000 (12.33%); United

Kingdom, $14,295,000 (4.07%); and Spain, $10,664,000 (3.04%).

Their combined total representing approximately 67% of all export to

all Countries

(Source: www.researchmarkets.com)

US luggage retailing scenario

NIFT PATNA

Facing increasing price pressures and lengthy consumer purchase cycles,

makers of luggage, bags and continually update their products and selling

strategies stay at the top of the game.

The U.S. luggage and leather goods market, like the apparel market, is

growing at about 3 percent to 4 percent annually at retail, where the

sector accounts for about $7 billion, including sales of five major product

groups -- luggage, casual bags, backpacks/daypacks, business and

computer cases and men's and women's accessories.

Also reflecting trends in the apparel industry, makers of luggage, bags

and cases continue to send more production offshore. Whereas

international sourcing accounted for an estimated 60 percent to 65 percent

of their production two years ago, it now makes up closer to 65 percent to

70 percent of the overall manufacturing picture.

In fact, the industry's leading trade group, the Luggage & Leather Goods

Manufacturers Association (LLGMA), changed its rules several years ago

and no longer requires potential members to have U.S. production

facilities. Now mandating only that members have an office in the United

States.

There's no doubt that the industry is operating in a rough-and-tumble

environment. Its modest retail sales growth has come, in great part,

because of large increases in the number of units sold, say observers,

even as the market becomes more price competitive

NIFT PATNA

The luggage, leather and accessories industry is fragmented. There are

many small firms -- although there has been consolidation -- sharing the

$3.5 billion wholesale pie. The LLGMA alone has more than 300

members, some of which are expanding into allied travel products, i.e.

luggage makers entering the briefcase business. And there are scads of

other suppliers that aren't even on the radar screen.

By all accounts, the 90-year-old, $700 million, publicly held Samsonite

Corp. is the big fish, with an estimated 30 percent of U.S. market share.

Insiders point to JCPenney's Jaguar line as having the second-largest

market share, with 7 percent of overall sales, followed closely by Atlantic

Luggage Co., which captures approximately 6 percent of the dollars.

After that, the remaining players account for smaller, single-digit

percentages of the pie. Still, name recognition is high for those at the top

of the list, including Hartmann, Tumi, Boyt, Trayelpro and others.

Major players: World wide

NIFT PATNA

PREMIUM SEGMENT

NIFT PATNA

It’s a division of the holding company LVMH.

It was founded in 1854 by Louis vuitton.

Headquartered in Paris, Louis Vuitton is an international

trendsetting enterprise that employs more than 9,500 people in

more than 300 locations in 44 countries around the world.

PRODUCTS AND PRICE RANGE

MID SEGMENT

NIFT PATNA

Men’s bags Messenger bags and totes

Rs.30000-60000

Briefcases and work bags

Rs.50000-90000

Clutches Rs.32000-40000Hand bags Shoulder bags and

totesRs.45000-75000

Top handles Rs.30000-60000Clutches Rs.32000-40000

Travels Softsided luggage Rs.45000-75000Rolling luggage Rs.70000-150000

Hardsided luggage Rs.175000-285000Accessories Rs.10000-15000

http://en.wikipedia.org/wiki/File:Louis_Vuitton_Logo.svg

The Kipling story is one of great passion, creativity and

entrepreneurial spirit. In 1987, three friends in the fashion capital of the

world (Antwerp rules!) decided that women needed high-quality bags that

were iconic and chic and feminine and fashionable and… not boring! So

they created a line of casual and colourful bags that were affordable,

sporty and functional, packed with attitude but never serious or stuffy or

stuck-up. In a word… FUN! They named the brand Kipling, after the

well-known and well-travelled author Rudyard Kipling.

Today, Kipling mascot monkeys, by far the world’s best-travelled

primates, dangle from a full range of handbags, luggage and carry-alls.

Trendy yet practical, upscale yet reasonably priced, durable yet daring,

Kipling bags are the must-have accessories of over 35 million women in

more than 60 countries.

Since taking over as artistic director and Vice-President in 2006, Isabelle

Chéron has transformed Kipling into a cutting-edge brand with ultra

fashion-forward collections.

Under her watch, Kipling has launched special capsule collections with

exciting young designers and labels like Cathy Pill (Belgium), El

Delgado Buil (Spain), Gloria Coelho (Brazil), Girls from Omsk

(Belgium) and Peter Pilotto (UK).

Every year, 6 million Kipling bags are purchased from Kipling’s 215

stores and 450 corners and shop-in-shops, or from 4,000 multi-brand

stores.

Kipling is part of VF Corporation, a global leader in branded apparel and

accessories.

NIFT PATNA


Hand bags Shoulder and hobo Rs.1500-4500Satchels Rs.2500-4500Totes Rs.4500-7500Cross body Rs.2400-4500Clutch/wristlet Rs.1500-4500

Backpack All purpose Rs.5000-10000Laptop backpack Rs.9000-10000Wheeled Rs.9000-10000

Luggage Wheeled Rs.10000-17500Carry on acceptable Rs.5000-18000Duffles and weekenders

Rs.4000-7500

Travel and totes Rs.3000-12500

ECONOMY SEGMENT

NIFT PATNA

Immigrant Sol Koffler founded American Luggage Works in Providence, Rhode Island in either 1932 or 1933 with his life savings. He was determined to produce luggage priced at $1 in the midst of the Great Depression. The company's breakthrough came soon after when Koffler devised a new line that was significantly better than that of the competition; he named it American Tourister.

In 1970, American Tourister launched a memorable ad campaign, highlighting the durability of its product by unleashing a "gorilla" (actually a man in a costume on it. The commercial ran for fifteen years. It was also shown briefly in the 1995 movie, Apollo 13.

In 1993, American Tourister was acquired by Astrum International, which also made Samsonite luggage. Astrum was renamed the Samsonite Corporation two years later.

American Tourister has now become a lower-end version of its Samsonite sister brand.


Travel Cabin bags Rs.1200-5000Suitcases Rs.1000-2000Duffles and small bags

Rs.1200-2000

Business Laptop cases Rs.2500-4000Attaché/briefcases Rs.2200-2400

Casual Backpacks Rs.600-1000Laptop backpacks Rs.1000-1600

INDIAN LUGGAGE MARKET

The Indian luggage market is worth nearly two thousand crores. A

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

NIFT PATNA

distribution of the market between the branded sector and the unbranded

sector.

Market Size: Rs. 2000 crores

Organized Sector 50%

Unorganized Sector 50%

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%

Brands market of luggage stands at around Rs.1000 crore, with premium at

around at around Rs.250 crore, mid segment at Rs. 400 crore and economy at

about Rs. 350 crore.

NIFT PATNA

BRANDED SEGMENT SHARE

LUGGAGE CATEGORY

IN RS. CRORE

ECONOMY 250

MID-RANGE 400PREMIUM 350

Brands market of luggage stands at around Rs.1000 crore, with premium at

around at around Rs.250 crore, mid segment at Rs. 400 crore and economy at

about Rs. 350 crore.

Critical View of the Luggage Industry

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

NIFT PATNA

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.

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

NIFT PATNA

companies showed the keenness to compete with the foreigners instead of

following them. Sanjeev 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

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

for foreign firms to enter into Indian market.

NIFT PATNA

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 developed in the manufacturing of the luggage with specialized moulding

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

NIFT PATNA

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:

NIFT PATNA

1 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.

NIFT PATNA

d) Cost disadvantages independent of scale:-

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

NIFT PATNA

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 ( HDPE

Acrylonitrile Butadine Styrene). 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 Butadiene 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.

NIFT PATNA

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

the excessive capacity & the South East Asian Crisis the 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.

NIFT PATNA

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 competition

NIFT PATNA

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

NIFT PATNA

design price etc. makes it a potential threat to the hard moulded

luggage market.

MAJOR PLAYERS: INDIA

VIP SAMSONITE AMERICAN TOURISTER VICTORINOX SAFARI DA MILANO LOUIS VITTON

NIFT PATNA

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.

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

NIFT PATNA

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 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 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.

NIFT PATNA

These products reach over 8000 retail outlets across the country.

Outside India, There is 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.

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.


Business Laptop stroll Rs.5000-7000

Business stroll Rs.5000-8000

Business satchel Rs.2000-5000

Business briefcase Rs.2000-5000

Business 4-wheel Rs.4000-7000

Business

lap.backpack

Rs.2500-3000

Casual 4-wheel Rs.5000-7000

Vanity case Rs.3000

Duffle Rs.2500-5000

NIFT PATNA

Laptop satchel Rs.2000

Suitcase Rs.1500-3500

Strolly Rs.5000-8000

Leisure Vanity case Rs.1000-1500

Duffle Rs.1500-2500

Suitcase Rs.2000-4000

4-wheel Rs.5500

Strolly Rs.3000-6000

Accessories Camera pouch Rs.800

Travel safe vallet Rs.1100

Toilet kit Rs.1800

Travel document case Rs.400

Business leisure Laptop satchel Rs.3000

Laptop backpack Rs.3500

Lap.strolly Rs.6000

NIFT PATNA

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.

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.

Brands, positioning and selling & distribution network

Company operates under four major business segments:

Company caters across the consumer segment with its various brands

in Hard as well soft luggage:

Delsey & VIP cater to high end segment

Aristocrat caters to mid segment

Alfa for lower end price segment

SkyBags is a separate line catering to mid & sub mid via Hyper

stores.

NIFT PATNA

For marketing and selling, Company opts various channels such

as:

ORS – sale via departmental stores like Lifestyle, Shopper’s

Stop etc.

Hyper Stores – Like Big Bazaar, Vishal etc. Co sells only

SkyBags via this channel. This segment has seen 100% growth

in last year.

MBO – Multi brand Outlets which sells all brands

Distributors – They sell Alfa & Aristocrat mainly to smaller

vendors

Exclusive Shop- Here co has various formats depending on the

brands, price points and target customers. VIP has 450

exclusive outlets.

VIP Lounge – These are the premium shops selling VIP

& Delsey brands. Have 150 outlets

VIPIL – These 250 outlets sells all the brands of the

company except SkyBags.

Travel Zone (TZ) – These are the economy shops selling

only Aristocrat and Alfa brands via these 50 outlets.

Positioning

NIFT PATNA

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

NIFT PATNA

launched the brand “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 bags for the

NIFT PATNA

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.

NIFT PATNA

Pricing Strategy

Market Segmentation

Segment Price range

(Rs)

Market share

(%)

Premium 1500+ 15

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 standard

segment but smaller than the premium segment, the standard 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

NIFT PATNA

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 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.

NIFT PATNA

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, thereby reducing

the chances of improvement in the growth rate of the luggage

industry.

SWOT Analysis

1. Strengths:-

2nd largest manufacturer in the world. (after samsonite).

66% market share in organized sector (largest in Asia).

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.

NIFT PATNA

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

Nasik).

2. Weakness:-

Less Research & Development expenditure.

Over employed organisation.

3. Opportunities:-

Tie up with the French Co. Delsey and Acquired worlds 4’th

largest

co. Carlton for 20 Crores to cater upper segment.

Economy is reviving.

Untapped lower segment area.

4. Threats:-

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.

Low demand Industry

Competitions

NIFT PATNA

Price war

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.

NIFT PATNA

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 has 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 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

NIFT PATNA

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.

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, 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.

NIFT PATNA

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 pre-empt 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.

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.

NIFT PATNA

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.

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.

Through its premium pricing of Elanza, Blow Plast has forced

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

NIFT PATNA

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 volume-

NIFT PATNA

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 Samsonite

NIFT PATNA

brand serves both middle- and upper-market customer segments. Its

American Tourister brand provides affordable, quality products to

value-conscious consumers. Each of our Samsonite’s 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.

NIFT PATNA

PRODUCTS LINES AND WIDTH

The products lines of Samsonite Includes:

Suitcases

Carry-ons

Garment bags

Backpacks/Duffels

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

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

NIFT PATNA

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

















RESPECTIVELY IN EACH CATEGORY.)

Kids Luggage

Business/Computer Bags

Golf Travel Bags

Accessories

SUITCASES

BASED ON EXTERIORS

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

NIFT PATNA

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 CATEGOR

PRINCIPAL PRODUCTS

MAIN DISTRIBUTION CHANNELS

NIFT PATNA

Y

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,

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

2 Positioning:

High Quality / High Price

NIFT PATNA

Samsonite positioned itself as Internationally acclaimed quality

product with visible benefits.

3 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.

4 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

5 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.

6 SWOT ANALYSIS OF SAMSONITE:

Strengths:-

Reliable parentage & money power.

NIFT PATNA

Research & Development support (9%

worldwide).

High Quality.

25% market shares in world (50% in the

organized sector).

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.

NIFT PATNA

BIBLIOGRAPHY

www.researchmarkets.com business.highbeam.com vipindustries.co.in www.samsonite.com en.wikipedia.org www.louisvuitton.com www.kipling-usa.com www.americantouristerindia.com Magazines : Images retail

NIFT PATNA

http://www.americantouristerindia.com/

http://www.kipling-usa.com/

http://www.louisvuitton.com/

MANIK

Documents

Transcript of MANIK