FABINDIA CASE ANALYSIS

PROBLEM ESSAY

The key problem that Fabindia management faces is that consumers are unaware of the underlying social mission in their business plan because of which there is a mismatch in sustaining growth while maintaining commitment to rural development. The consumers should be able to identify with its ideology and be proud of using the products. Senior management of Fabindia plan to grow revenues to Rs. 8.6 billion in 2011 from Rs. 1.3 billion in 2006. This is possible only if the consumer base of the Fabindia products grows proportionately. The retail sector in India is increasingly getting organised and the Western brands are also entering the market. Therefore there is an urgent need to further differentiate itself from them and to strengthen its niche.

The major challenge confronting William Bissell is to keep the growth trajectory aligned with their primary commitment to rural development. By making the consumers aware of this commitment, the Fabindia management will be bound to work within this framework. Fabindia is in a business where its suppliers are from rural India and are highly fragmented. To ensure smooth functioning of this supply chain, it is essential to gain the trust of the village artisans and fabricators. To gain this trust, the Fabindia management has to be sensitive to the socioeconomic context in which the suppliers operate. Sometimes it will have to take decisions that seem uneconomical, like accepting delayed delivery. By building the brand image around social commitment, the management will increase their sensitivity to the suppliers’ problems. This will also empower the rural suppliers economically, which is also Fabindia’s ideology.

Not only this, Fabindia’s growth is directly linked with the economic empowerment of their suppliers. One major issue that the management faces is the supply side bottleneck. This is due to the fact that most of its suppliers are fragmented rural artisans who work on individual basis and produce in small quantities. As they grow economically, they will become more organised and increase their efficiency. Thus the problem of supply side bottleneck will also be resolved in the long term.

Fabindia also faces an indirect challenge from the opening of foreign single- brand stores in the apparel segment. In 2006, garments accounted for seventy percent of Fabindia’s revenue. The major consumers of Fabindia’s products are upscale middle class people who enjoy the Fabindia experience. The Western brands entering the Indian market will also target the growing upscale middle class population. Thus it needs to differentiate from the other products. This it can do by building a brand image that generates pride in consumers from using its products. Thus Fabindia should increase awareness in the consumers about its social mission. It has to take steps to become attractive to the customers so that the demand increases. The projected revenues can be achieved only if the demand increases.

DECISION ESSAY

To make the customers aware of its social mission, Fabindia should start to invest in advertising and brand building around its social commitment. To increase the customer base, it has to create awareness about its products. It should create a brand image that finds resonance with the upwardly mobile middle class youth, who are fashionable and will appreciate the social cause directing Fabindia’s ideology.

Uptill now, Fabindia has been a small company that could do with a word-of-mouth publicity. As a result, Fabindia has never advertised its products. This is also proved by its organization chart as it does not have any marketing department. Its customers enjoy the Fabindia experience and become repeat buyers of its products. It is able to differentiate itself from other similar Government funded khadi outlets by giving the customers a different buying experience. Nevertheless, majority of the public have dealt with the government funded khadi outlets and may wrongly associate Fabindia as another such khadi outlet. Fabindia is looking forward to increasing its revenue by around seven times in the next six years. Therefore it has to create awareness about the different buying experience at its outlets. For this it needs to advertise its products and the different buying experience it offers.

The major competition to Fabindia comes from the opening of organised retail shops in the apparel and home furnishing sector. These retail shops are funded by foreign brands or large Indian business conglomerates and have deep pockets. Their target customers are also the trendy middle class, primarily the youth. Therefore to attract customers it will have to stimulate interest in the Fabindia products. This is possible by advertising its products and differentiating from its competitors. The product of Fabindia is such that it generates employment in the rural India and also helps to sustain the traditional Indian crafts-art. By creating awareness about this in general public, it will generate a sense of pride in using its products. This will increase the customer base which is essential to meet the projected growth rate.

Another reason to build its brand image around the social commitment is that, it will help resolve the dichotomy that the management is facing. The senior management feels that a high growth rate will dilute their founding commitment to rural development. By building a brand image which leverages on their commitment to social cause, the senior management will be able to find means of sustaining the growth rate in a more focussed way. After all, the differentiating factor from its competitors and substitute products would be the message of social inclusiveness that their product conveys. This will also make it clear to the management that their growth is directly related to the growth of their suppliers i.e. the rural artisans and fabricators.

Finally to sustain the growth, it may need outside funding in the future. Up-till now being a small company, it was self sufficient. But now to expand substantially it will have to invite outside investors. A positive brand image will prove helpful to attract the investors. The investors would know that unique selling proposition of Fabindia is its commitment to rural development, and therefore will support the Fabindia mission.

ACTION PLAN

From the above discussion, it is clear that Fabindia should start advertising and build a brand image that portrays:

Their commitment to bring about rural development. The fact that Fabindia is working to revive the waning interest in the traditional

Indian crafts-art. The buying experience at a Fabindia outlet is enjoyable and customer friendly.

For this the first step that it needs to take is to hire marketing managers. The current organisational chart of Fabindia is devoid of any marketing management post. The marketing managers should have an exposure of the retail sector. Some of the marketing posts should be filled by the current staff from other departments who know the culture and the working of Fabindia. They will give the direction to the marketing department.

The marketing managers should develop a brand building plan that fulfils the above stated goals. This can be done by publishing the success stories of the rural artisans who have done well because of Fabindia in the print media. They can also hold trade fairs with some of the artisans directly selling the products there. Thus people would become aware of the good cause inherent in the Fabindia’s products.

It should hire an advertising firm that would advertise the Fabindia products while keeping the enjoyable buying experience in a Fabindia outlet in focus. These advertisements can be made both for the print as well as the tele-media. The advertisements should also bring out the social commitment of rural development Fabindia.

Submitted by:

Ravi Pandey

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