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Nov, 20 2009

Growth gifted industry

Not restricted to family and friends alone, gifts have made their way into the corporate world. Corporate and promotional gift items form a sizable bulk of an already brimming market. And by adopting franchising as the medium of expansion, there is no loo

Growth story

Gifts, toys and parcels always find a ready and eager audience, in children and adults alike. Gifts can be a medium of motivation, recognition and appreciation. People buy and give gifts to build and intensify their association with the recipient. It is not possible to estimate this industry, as the range of items that fall into this category is endless. But the growing industry is all set to witness a phenomenal growth in the near future, expanding mainly through the franchising route.

Archies and Hallmark rule the Indian market in greeting cards and gifts along with other manufacturers and suppliers. And if the gifts are for small children, toys are the most suitable. The toy market is flourishing with various educational toys, which open a child's mind and serve the purpose of playing too. Players like Hanung, a renowned exporter of soft toys, have embarked on a major retail expansion of its toy division in the name of Play and Pets mostly through the franchise route.

Mattel Toys, Funskool, Disney and Lego are some of the major international manufactures, who work through different retail models like distribution and licensing in the Indian toy industry.

Hamleys, London's world famous toy store, is also preparing to enter the Indian market through a joint venture with Reliance Industries, the conglomerate, to bring the 248-year-old retailer to the subcontinent.

Unique franchise models

Archies’ franchise model offers a set percentage of profit margin across its franchise outlets. Without disclosing what percentage of profit margin, Vajayant Chabbra , Executive Director, Archies, said, “The product belongs to the franchisee once it is brought from us, thus, profit also belongs to the franchisee.”

Hanung, says Ashok Kumar Bansal, CMD, is open to the idea of opening up franchise stores of Play n Pets in malls and high streets though the preference is given to those who own the retail space.

“The company operates on a franchise model that offers a flat 25 per cent profit margin to the franchisees and another model that offers minimum guarantee with some share in profits. Our preference is, however, for the MG model as it motivates the franchisees to perform better," said Bansal.

Archies doesn’t look for any specific quality in franchisee but the company requires the best location in the city wherever the potential franchisee is willing to open the outlet. The store area required is at least 300 sq.ft. and above (carpet area) and should be on ground floor with a minimum 15 feet frontage. The investment involved to acquire the franchise of the company is between Rs 10-Rs 12 lakh, which includes the non-refundable franchise fee of Rs 1 lakh. The investment also includes the security deposit of Rs 1 lakh (interest-free), which is refundable, cost of interior designing of Rs 1,000 per sq.ft (including architect’s fee, material and labour cost, etc), cost of accessories like AC, music system, computer etc, ranging between Rs 75,000 – Rs 1 lakh plus the first consignment of approximately Rs 5-6 lakh.

“The variations in prices are totally based on the size of the store and the product mix, which does vary from location to location,” says Chabbra.

For Play n Pets franchise, a total investment of Rs 10-12 lakh is required that includes a franchise fee of Rs 2 lakh, fit-out cost and stock. Hanung goes for a standardised 600-1,000 sq.ft size stores. The company promises breakeven in one-year’s time though it largely depends on the potential of the location and the franchisee.

Go in for expansion

The Rs 650-crore Hanung Toys and Textiles have been banking on its strong distribution network and tie-ups with organised retail chains like Shoppers Stop, Lifestyle, Ebony to retail its products in the domestic market that contributes to 20 per cent of the company's turnover.

Bansal states that his company has planned to open 100 outlets of Play n Pets over the next two years, out of which 80 per cent of the outlets will be franchised stores. The toy division has signaled its entry into franchising by recently opening its first Play n Pet franchised store in Gurgaon.

Archies, which presently has 136 company-owned stores and 350 plus franchisees pan India, plans to open 200 company-owned outlets in the next two years.

“We continue to look for and open company stores in locations, wherever available, while franchising continues as well. As Indian cities continue to grow outward, there are newer areas opening up on a daily basis. We are currently open to having franchisees in all parts of the country, subject to the stores meeting our location and other criteria,” says Chabbra.

Great mix of products, prices

Archies gift shop product segment consists of greeting cards, perfumes, stationery, mugs, photo frames, soft toys and other gifts, which range between Rs 50 – Rs 11,000. On the other hand, Hanung’s products consist of soft toys, cushions and kids furnishing. The range of products varies between Rs 80 – Rs 12,000.

Training and support

If brand is the heart of any great franchise, training is the physical conditioning that keeps that heart strong and consistent. And it is well understood by franchisors like Archies and Hanung.

The potential franchisees will get training, product and brand support, unrestricted access to the very best in merchandise, across all the categories by Archies.

“Franchise division of the company helps the franchisee in maintaining inventory and records, pertaining to the purchase and sales, doing up the store to make it look attractive and increasing the customer inflow. The franchisee will also be given all kind of advertising support to create the awareness, thereby promoting the store.

To have a better understanding of the brand, Hanung helps the franchisees by visiting them during peak hours and providing two or three days of orientation classes. There is a team lending a hand in doing up the interiors of the stores to keep the uniformity across all of them. The company provides the stocks to franchisees once or twice a week, depending upon the volume of sales.

Hanung prefers to work with those, who have their own space and at least have a graduate degree with a business background. They ought to be industrious, have good communication skills with the caliber to attract prospective buyers.

Roping in retail models

Other than franchising, there are different retail models which are giving a hard push to the gift industry, especially when it comes to toys. Manufacturing players like Funskool, Disney and Mattel are expanding their reach through licensing and distribution. The toy retailers have 90 per cent of their merchandise compressed with the licensed stock and make 60-70 per cent of the sales through the licensed products. It has been observed that the demand has increased because of kids’ exposure to cartoon channels.

“This business is not like any other business since our toys are moulded and it becomes our responsibility to ensure the required standard of quality other than the look and the feel of the product,” says Roshini Bakshi, Regional Director, Disney Consumer Products, Asia and India.

“We deal with global companies and also have local licencees giving way to local distributors. The names comprise Mattel, Hasbro, Funskool, Jakks Pacific, LeapFrog and Simba,” she adds.

To ensure a special standard of quality required for manufacturing the toys’ range in comparison to other toys, the company checks out the factories where the licencee manufactures the product to make sure that the licencee fits the required standards.

Disney has few large markets like North America followed by Europe and Japan and look forward to countries like India, China and Russia as the promising and upcoming market.

The other major in toy industry, Funskool India Ltd, has worldwide licences for important brands like Marvel, Spiderman, Hulk, IronMan, Disney board games and several other properties, for which the company has access to India. They also have tie-ups with other licensors like Disney, Warner Bros, etc.

“Funskool toys are purchased because of the goodwill that we possess in terms of high quality/ content which are real value for money products and the licensed toys that we manufacture expose the Indian child to various international brands. It is a known fact that licensed toys automatically draw the attention of children and customers are always keen to purchase the latest brands,” says R. Jeswant, Vice- President, Sales and Marketing, Funskool India Ltd.

On the other hand, Mattel, who is a licensor for leading brands like Barbie, Hot Wheels and Fisher-Price, conforms to the safety and quality norms applicable to the specific categories in the respective countries, where they are being distributed and marketed.

Gifted industry

The world of gift industry is complex and varied. It provides for a huge marketplace and majestic sourcing opportunity under one roof for all sorts of buyers. Buyers with novel ideas, creative products and productive business opportunities stand a chance in this market.

Today, exclusive stores like Archies and Hallmark are an ideal place to shop for gifts, whether personalised or corporate. There are hundreds of ideas in different stores as per your taste and budget. With the growing demand, lifestyle companies like silverware manufacturers and importers of glassware and porcelain have also entered the gift market, giving an extra boost to it.

What's more amazing is that along with the old sparkling silverware religious idol retailers in the market, new players like leather goods supplier are also ready to make an entry in the corporate gift market with a wide range of leather goods items like bags, wallets, purses, etc.

The ups and downs in the gift industry have also been seen because of the particular state’s capacity to spend. Industry estimate indicates that the agreeable retail price for mass market toys is between Rs 100 to Rs 200. At this price, toys find a readymade gift market and easy acceptance by parents to purchase for their children. The gift industry, as per experts, sees a huge turnout of imported products too. Many foreign places like Honk Kong, Japan, Korea, etc have entered the Indian gift market. The Taiwan Gifts and Novelty Industry has made a mark in the world competition. Their products have a fine reputation in overseas markets as well. Their concept of making innovative products at less expensive prices has proved to be a threat to many developing countries. Hong Kong is also an important sourcing centre for gifts and houseware products. But despite the competition from neighbouring market and constant changing trends, the Indian gift industry continues to strive ahead with unfailing efforts.

Also the outlook of Indian buyers has begun to change. Price no longer is the major issue and nor it is given of greater importance except in some parts. A product quality, design and its outstanding and useful features have instead become the centre of attraction today. Because of this changing attitude today the value and standard of the gifts and its industry has been elevated. Therefore capturing a greater share of the gifting marketplace has now become a significant marketing opportunity for product marketers and retailers.

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