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Jul, 01 2008

Industry focus - Bag it!

Branded entrants, innovative products, demand for quality and increase in consumerism are shaping the luggage (leather) accessories market substantial for investment than ever before. The market is looking greener as these luggage and accessories majors a

Trendy, smart, hip with lots of oomph and style handbags, luggage and accessories the market in India is seeing lots of varieties with the onset of a lot many players. The leather goods and accessories market consists of hand bags, bags, wallets, small leather items, pouches, folders, covers, portfolios, travelware, backpacks, and more. The Indian luggage market has seen a lot of transition thanks to our well known well placed brands like VIP and with the coming of a lot of international players like Samsonite. But the market for hand bags has just been kept under the tight clutches of the unorganized market which rules a large segment of society. Only now with the onset of better understanding of quality products and with more disposable income people have actually started going in for branded bags thanks to the coming of companies like Hidesign which have carved a niche for themselves in the market.

Still a lot of people consider high fashion bags in those branded stores are just for the upper strata of society. But now a lot of players are entering this domain to serve the lower segment to offer quality at a lower price.

Given the high level of consumerism, a lot of international brands have set up operations in India. International players have also started looking at the Indian market owing to the large consumer base to serve. Tumi, Piquadro, Louis Vuitton are some of the well known international labels which consider India on their priority list. Liberal imports have also made market more vulnerable to competition from foreign brands. Belgium based women`s bags brand Kipling also arrived in India in 2005 in partnership with VF Arvind Brands.

With the tremendous growth in travel and leisure spends , manufacturers, exporters and suppliers of luggage and travel accessories ensure that the product quality are of international benchmark complying with top of the line standards in safety features, theft-proof, strength , finishing, vibrant colours, latest fashion styling like reptile prints etc than staying with the usual standard greys, blacks and browns.

Luggage (leather) accessories market

India holds 4th position in world trade ranking in terms of leather exports but the retail trade in the luggage and accessories market is very much fragmented; many small retailers exist in the Indian market. Experts feel though the market for bags and accessories is quite huge but since most of the business is in unorganised sector it difficult to gauge it in terms of real value.

The total market size for luggage, soft as well as hard, is standing at around Rs 10 billion annually. The industry is highly disorganised and the organised sector accounts for 40 per cent of this volume. The fashion bags market in India stands at around Rs 800 crore and is expected to grow at more than 30 per cent in the next few years. Within this group the market for belts is estimated at Rs 840 crore a year. The leather accessories market has a share of 20.53 per cent in the leather industry and is marinating an average growth rate of 11 per cent since the last five years.

The product mix has also enhanced. Luggage and bag companies in India are following international trends and designs closely because they are aware that the buyer is becoming more conscious of design and exclusive patterns looking luggage/baggage. Increasing western influence (through foreign trips and greater exposure to Western media) has increased the fashion quotient of Indian customers and now they want contemporary international styles and designs along with `value for money` pricing. Previously customers would want designs which had been tried and tested for a long time and were not willing to experiment. The pricing issue has been the only consistent purchase criterion which has survived the tides of time. The Indian consumer is slowly catching with the world buyers in spending over luggage and accessories. Till now locally produced goods have been popular amongst the masses. The retailing scene in India for the luggage and accessories market comprises players like, Witco India Pvt Ltd. These companies are introducing newer product collections and newer exclusive stores day by day.

Talking about the changes witnessed over the years, Jayesh Mehta, CEO, Intouch Leather Pvt Ltd, says, "The last few years have seen the market being transformed from mere bags being made for use to bags being made as per users. The quality and the price factor have also undergone tremendous change."

The accessories market mainly caters to the young and fashionable. Professionals and corporates also act as the major target consumers for these. Leading to the increased buying habits of consumers and an increasing interest towards technology many consumers are buying elegant leather bags these days. Portfolios and accessories are key to show sophistication and style. The business community is a major target for these products.

Discussing the changes in the industry Sahil Malik, MD, Da Milano, feels, "The Indian luggage industry has made substantial inroad into global markets and has also seen increasing competition in the domestic market."

Indian leather manufacturers are already making a strong effort to make their presence felt not only in India but abroad as well. There are many Indian companies which have set up operations in the overseas market. Companies like Hidesign have set operations overseas and other companies are also following suit.

Owing to the large number of young population in India they are exposed to better quality leather products in the market. Even the single households in India comprise of a large market for classic and casual bags. In the path to the growing economy of India, we see more women at work who are always looking forward to stylish and classic handbags, laptop cases, travel accessories and more.

Companies in luggage (leather) accessories

Calonge: The company is an exclusive Spanish brand of hand-woven leather accessories that has a unique distinction of being `handmade`. Calonge has been launched in the Middle East in April 2004 with its all new range of leather accessories like hand bags, shoes, belts and wallets of exclusive collections. Calonge has its own exclusive sales outlets numbering five in UAE and four in India. Recently, it won the award for Brand Promotion for Calonge. Presently, it has one franchise store at Sarajevo (Bosna). Calonge serves its customers through its manufacturing unit in Chennai, India.

Da Milano Leathers: The company was incorporated by a second generation entrepreneurial business family, nurtured to its present by the vision and experience of its Chairman, Surinder Malik. The brand targets very niche high end premium segment and endeavours to be the market leader. In the domestic market, Da Milano operates 10 company owned and self operated exclusive showrooms in seven cities. It also has presence in multi brand outlets (MBOs) which include large format stores and at the duty free shop at the IGI International Airport, Delhi. Da Milano will soon make its presence at the Chatrapati Shivaji International Airport at Mumbai. To have an international presence, talks are under process to open an outlet at the Hong Kong Airport Duty Free Shop. Da Milano has two company owned manufacturing units at Nalagarh in Himachal Pradesh.

Dandy Collections: Incorporated in the year 2004, the company is a leading supplier to most of the big retailers including Big Bazaar, Reliance Trends, Aditya Birla Retail Limited, Spencers Retail Limited, Salasar Retail Limited, V Mart Retail Limited and many more. The product range of Dandy includes men`s genuine leather wallets and belts, ladies wallets, belts and handbags, genuine leather accessories, gift articles etc.

Hidesign: The brand was born in Pondicherry in the year 1978 as a one man artisan workshop started by Dilip Kapur who began hand crafting leather bags, jackets and accessories for the export market. Today, Hidesign is the best-known player in the domestic leather market and has made steady inroads into carving a niche for itself across the world markets as well. As of now, Hidesign`s revenue structure is such that about 60 per cent of its business is generated through markets in UK, Russia, South Africa, Australia, USA and smaller operations in Hong Kong ,U.A.E., Denmark, Norway, Malaysia, Sri Lanka, Belgium. The operations in India started less than 10 years ago in 1998 with its first exclusive store launched in the country. The base for all production was Pondicherry (now Puducheri). The focus has been hand-crafted products staying away from mass machine-made goods. Hidesign has 33 exclusive stores and seven franchise stores in India.

Intouch Leather: The company was established in 2004 and its sole brand Esbeda was launched in 2006. It has 14 operational stores in Mumbai, Navi Mumbai, Pune and New Delhi with another six due to open in Bangalore, Hyderabad, Dubai and Canada. It sources all its products from China where it has two manufacturing units. Intouch is also a leading supplier to retail majors like Shoppers Stop, Lifestyle and Metro and to some of the leading boutiques in Delhi.

Om Leather Artdeco: The company, a Government of India recognized star export house with over two decades of experience in the global fashion industry supplies high fashion leather accessories to top international brands, department stores and retail chains world wide. Some of its recent clients are Zare, House Of Fraser, David Jones, Suzy Smith, Clark`s International, Coromode SL, Modalu, Enmon Accessories, LTD Commodities, Costco and Tandy Brands. Its product offerings constitute high fashion leather handbags, evening bags, purses, belts, folios, wallets and office accessories. Its products are moderately priced, aimed at the middle class and upper middle class customers. Artdeco Collection Pvt Ltd sells its products under the `Indostyle`, `Antonio Boscini` and `Jodie May` brand names. The company is also in talks for a tie up with an international brand to market their products in India. Presently, it has two manufacturing units in Kolkata. Two more units with more than four times the current capacity would be coming up by 2011. It also has an office in London, UK, where it has a team of designers closely monitoring international fashion trends and coming up with new designs for the fashion conscious Indian customer. Currently the company has two wholly owned exclusive outlets and one factory seconds` outlet. In addition, the company supplies its products through more than 30 point of sale locations in West Bengal and Assam.

VIP Industries Ltd: Established in 1971, VIP has its presence in more than 30 countries. VIP is considered the second largest moulded luggage manufacturer in the world. In the domestic market, the company holds 57 per cent of the market share. In 2004, VIP industries acquired UK`s no. 1 luggage brand and with it increased its global presence. To recongnise its contribution in the luggage market VIP was awarded the Golden Peacock Innovation award in 2004, Rajiv Gandhi National Quality Award in 2003, Golden Peacock National Quality Award in 2001 and the Lakshya – Outbound Supply chain management in 2000 and 2002.

Franchise forward

A lot of companies consider that to showcase there presence in the market the right way is to have exclusive stores at high streets or malls. Most of them are using or are considering the franchise business model to expand.

Talking about the company`s business model to penetrate the market, Malik says, "Initially, Da Milano believed on its own co-operated EBOs. This was a conscious business strategy keeping in mind the uncompromising product quality and service level benchmark which the brand had to deliver upon."

Selective franchising will be the future model for Da Milano`s market expansion, especially for its pan India EBO penetration, informs Malik. For the coming two fiscals from 2008 till 2010, Da Milano has a committed expansion plan of adding 28 exclusive outlets in addition to its 10 exclusive stores across India. This will encompass all Tier I cities, key capitals, mini metros and potential satellite townships. Eventually, Da Milano will migrate to a franchisee model for its geographical penetration pan India.

Being positive about growth through franchising model Sudhir Jatia, Managing Director, VIP Industries Ltd. Says, "Franchising has always been and is a key driver of our sales and brand presence. In fact 45 per cent of our top end formats sale accrues from franchisees."

At present VIP has more than 50 franchisees in its system. It has 115 stores in India in the premium format and is planning to add 100 stores in the current year. The company also has Carlton Stores outside India.

Talking about taking franchising as a business route to expand, Mehta says, "To expand in today`s time franchising is the right model provided done in right manner."

Om Leather is also exploring franchising as one of the modes for expanding its footprint across India. It plans are to have one or two franchise outlets in each of the top eight Indian cities in the next three years. Two more company owned exclusive stores are under way and would be open to the customers by early 2009. In addition 11 other company owned stores and 12 franchise outlets would be rolled out by 2011-12.

Franchise proposal

Da Milano offers complete structured and ongoing soft skill training for the staff of the franchisee and most importantly product training is a specific focus area of the top management. A Executive Management Committee (HODs) supported by their respective well qualified team members (IT & Systems , Sales & Marketing , Finance /Accounts , Supply Chain Management overseen by a CEO & MD) is directly associated with the franchise service partners.

To become a VIP franchisee a person must be having 450-1000 sq.ft of prime space in a prime high street or mall. The investment in stock and interiors is approx Rs 12-25 lakh. Depending on the merit and cost considerations, VIP offers a margin on sales which is in range of 25 per cent. The company is open to handholding and protecting the franchisees cost structure in the gestation period.

The franchisee gets store design and execution support from the company. The franchisee and his representatives are given training on the product category, the products, visual merchandising, commercial aspects, store upkeep, service and selling techniques. It is usual for a trained manpower to support the franchisee in the early days of operations.

Esbeda doesn`t have any franchisees at present but is considering proposals from various quarters. It is planning to come up 20-25 franchise stores and is looking at people who understand the value of its product and have knowledge about this industry.

Talking about the franchisee requirements, Mehta informs the area requirement ranges from a minimum of 400 sq ft to a maximum of 1,000 sq ft with location being on high streets or a reputed mall. The investment for Esbeda franchise ranges from Rs 15-18 lakh – 100 lakh.

The business proposal for Indostyle franchisees is quite similar to those of branded apparel chains. All the stock would be company owned (and issued against a security deposit) such that the franchise doesn`t have to deal with issues of dead stock etc. Om Leather franchisees get product training as well as time to time trainings on retail IT, customer relations, inventory control, accounting practices and marketing. Om Leather also provides minimum guarantee to its franchisees.

The future

The leather industry offers good potential for entrepreneurs to exploit as the market is poised for growth. Excited about the future of the industry Malik believes, "The future of this industry is most exciting with current export standing at 12 per cent of the industry volume and likely to go up to 20 per cent. This will certainly have a cascading effect on the domestic market, so much so that reputed international brands as well as existing ones are already looking at India as a hub for servicing the huge Asia Pacific markets and the ever increasing domestic one."

Owing to the travel habits increasing amongst Indians luggage manufacturers can think of a bright future ahead. With the introduction of low cost airlines Indian traveller has increased his number of travels every year. People are opting for these kinds of products to make their travel easier and light. Accessories are an integral part of fashion world-wide. However, the fashion accessories industry has so far been neglected in India. This, along with the lack of many organized competitors, presents a wonderful opportunity.

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