ORGANISATIONAL STUDY

OF FABINDIA


FABINDIA
FabIndia (or FabIndia Overseas Pvt. Ltd.) is an Indian chain store retailing garments,
furnishings, fabrics and ethnic products handmade by craftspeople across rural India.
FabIndia was founded as an export house that dealt exclusively in hand-woven soft home
furnishing. Has gradually expanded its retail presence to serve the Indian markets. Over the
years, its product mix changed considerably to include ready to wear clothes and furniture,
and home furnishing now accounted for only 30% of their revenue.
FabIndia sources its product from across India through 17 community-owned-companies; a
certain percentage of the shares of which are held by artisans and craft persons. The products
of FabIndia are mainly sourced from villages helping to provide and sustain rural
employment in India. They are currently produced by over 40,000 artisans and craftspeople
across India. The hand-crafted products also encourage good craftsmanship.
Several of the suppliers have grown with the firm and considered it a business partner and
well-wisher, some of the suppliers are shareholders in the company as well.
FabIndia believed that its customers appreciated the philosophy of exclusive handloom
clothes, understood and accepted the nature of the fabric, and incorporated these factors into
their consumption experience.

History
FabIndia was founded by John Bissell when he came to India in 1958 on a Ford Foundation
sponsored programme to advice the government run Central Cottage Industries Corporation.
He understood the demand for high quality cotton fabric in the U.S. market.
FabIndia Inc. was incorporated in 1960 as an export house in Delhi. The company dealt
exclusively with upholstery fabric and mostly restricted to selling in overseas markets.
In 1976, FabIndia opened its first retail store in Greater Kailash, an upscale neighbourhood in
Delhi. The firm decided to expand its offerings to include ready to wear garments in early
1980, even though its focus was more on export business at that period.
But when the economy opened up in 1991, FabIndia capitalised on this by opening up more
stores and adding to its product lines. They knew that the Indian consumers were willing to
open up their wallets for consumer as well as lifestyle products. In 2003, Vision Plan 1 was
formulated by the management, which called for the company to grow from Rs. 360 million
to Rs 1 billion in four years. But the company was able to achieve its plan target in 2 years
time.


Store types
FabIndia has 3 different kinds of stores: premium, regular and concept stores. Additionally
their products are available to customers in 33 countries via an online store launched in 2004.
The premium stores stocked a wide range of products, and a significant portion of their
inventory consisted of high end items.
Regular stores were like premium stores in the range of products they carried but not in the
proportion of high end products stocked.
Concept stores were opened as test stores which carried fewer stock keeping units
With the exception of a joint venture in Rome and a franchisee in China, all other stores were
owned or leased by FabIndia. FabIndia has also started their store in Kathmandu, Nepal.

Mode of operation
When considering the operations of the stores with regards to product mix and stock keeping
units, the company allowed the store managers to be entrepreneurial. Each store manager was
allotted a budget that could be used to order goods and meet operational expenses. Store
budgets were decided on the basis of store location, previous years sales, and other
macroeconomic indicators. Store managers and zonal managers also interacted continuously
with the merchandisers at the head office to keep track of new styles and other developments
in the supply chain. FabIndia maintained a comprehensive central online catalogue with the
details and prices of all FabIndia products, through which, store managers could order the
products.


Store layout and design
Store layout and design are important factors which FabIndia takes into consideration while
deciding on new stores. FabIndia stores maintain a distinct ambience. The store locations and
buildings are carefully chosen to create a unique customer experience.
FabIndia doesnt use any external market research agencies for deciding on new stores. Their
internal analysis starts with estimating sales based on the size of the catchment,
demographics, sales of other brands, and sales in other FabIndia stores.
The stores aesthetics highlights a connection to all things natural. The store personnel were
encouraged to wear clothes that fit with the firms ideology.

Product mix
Although FabIndia was founded as a furnishing exporter, it has gained popularity as a retailer
of ready to wear garments with a signature style. The recent growth also saw the company
adding product lines by way of organics and body care. The firm was organised under four
product categories.
Garments
FabIndia started its garment line small, just one shelf in a store full of upholstery, with mens
shirts in four sizes and 20 pieces in each size. Then, they started the female clothing line.
From there, they grew in size. Garments accounted for 70% of FabIndia revenues. The
apparel market was expanded by segmentation into finer categories such as maternity war
and clothes for new-born babies, children and teens. In 2004, the firm also introduced a
premium line, priced at Rs. 2500 which became a huge success.
Home
FabIndia was one of the first retailer in India that offered a complete home solution. It
offered a western model of standardised off the shelf home furnishing. The companys home
business covered upholstery, curtains and bed linens, floor covers, furniture, lighting, and
home accessories. The firm has 3500 SKUs in bed linens and 10000 SKUs in home goods.
FabIndia also introduced furniture in its stores in the firm insisted on using only wood and
metal in its furniture, and the designs conformed to the FabIndia aesthetics, i.e., being simple,
functional, and style conscious.
Organics
FabIndia introduced this segment in 2004, with 60 products, which gave a monthly revenue
of Rs. 20000. In 2006, it sold nearly 200 different organic products at a huge premium, and
this brought in a Rs. 2 million in monthly revenues.
FabIndia believes that their brand and existing retail network is the reason why customers are
comfortable about the genuinity of its organic food range.

Supply chain
FabIndia suppliers are predominantly from rural India. There are 2 levels of suppliers:
artisans comprising of weavers or printers, and fabricators. Designers worked closely with the
wearers and specified the fabric weave, colour and print, combining their knowledge of urban
trends and tastes, aesthetics, and the capability of the individual weaver. Occasionally,
artisans also suggested designs, which, if approved by the designers, were produced on a
large scale.
Because most of the suppliers were rural uneducated, there were very less written contracts
between the company and the artisans.
FabIndia always tried to maintain their social purpose in their business at different occasions.
FabIndia negotiated with Indias largest private sector banks to provide capital loans to
artisans against a guaranteed buying commitment from FabIndia.
Upon receiving fabric, tailors were issued the fabric depending on the design and quality of
garments ordered by the warehouse person in charge.
Considering the organic product suppliers, they had 2 kinds of suppliers small scale
corporations and individual farmers, or not for profit organisations. This was a challenge for
FabIndia as suppliers were spread across the country and produced inconsistent quality. Also,
the supply chain also had to go through issues of transport, storage, and shelf life issues etc.,
which were major concern for food products. Therefore, FabIndia made sure that they work
with only those suppliers who are reliable and proven.




Current developments
FabIndia has introduced Fabels, FabIndias new western wear line and the design philosophy
for the jackets, shirts, trousers (for men and women) and tops and dresses (for women).
This is because Ethnic wear is becoming limited to special occasions and to an older
generation of moneyed customers. The company believes that Young Indians with purchasing
power are flocking to other brands like Zara, Marks and Spencer, Mango etc.
The company had introduced a fusion line in 2006, ie., ethnic wear cut to, sometimes
literally, fit western dress sensibilities. And this line has found many takers among its
customers.

Challenges
FabIndia has been a successful retail chain in these many years. But the current times propose
various challenges for them. The competitive landscape is changing rapidly. These is an
estimated 12 million retail stores in India but organised retail accounts for just 3% of the total
retail sector. Also, the high annual growth rate of retail sector has invited many
conglomerates and business houses to enter the market. FabIndia is already facing stiff
competition in the apparel segment, which has a net worth of $16 billion. Some of these
competitors were backed by powerful Indian conglomerates like Tata group, ITC, Reliance
etc.
The khadi stores run by the government and the Anokhi retail outlets are the major
competitors for them. These 2 competitors also provide products similar to FabIndia.
The domestic furniture sector will also become highly competitive with companies like
IKEA, which is soon expected to launch in the Indian market.
Some of the artisans who used to source materials to FabIndia, has entered the marketplace
with their products. They have started selling direct to customers at prices much lower than
FabIndias. Other retail outlets have also been selling cheaper ethnic wear. This has affected
the sales of FabIndia to a good extend.

Suggestions to improve functioning
FabIndia should adopt measures to counter these challenges. It is true that the company
cannot do much against the competitors who are entering into the marketplace.
The company should focus on maintaining or improving upon its offerings at a more
affordable price. The prices of its offerings have doubled over the years. Also, because other
stores are also offering similar products at half the price, it is necessary for FabIndia to
control its costs and provide clothings and other products at a much more affordable price.
Designer wears are also becoming popular among Indian customers with many brands
providing exclusive designer and party wear. FabIndia can introduce designer wears which
can be premium priced and still attract customers.
Some of the artisans have entered the market and this will definitely chip off a market share
of FabIndia, therefore, FabIndia should enter into contractual agreements stipulating the sale
of their products only to FabIndia and maintain a restriction on the right of the artisans on
entering the marketplace on their own.
Furnishing and home dcor are of good demand these days. The Indian consumers are
spending lots of money in these areas. These areas should also be focussed by providing
customers with complete home care solutions.
FabIndia should bring advertisement and promotional activities to introduce their new
products in the market. Till now, they have not brought any advertisements in televisions
while many of their competitors have.
Currently, FabIndia online store is available in 33 countries. The company should launch
their products in other countries also. The visibility of the website should also be increased.
This is because online purchase has become a major part for Indian as well as global
customers. FabIndia products are already available in online stores like Myntra and Jabong.