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Fabindia’s
Fabulous March
Fabindia, which has popularised handwoven fabrics among Indians while
supporting rural artisans, is expanding—at back-end and front-end. KAPIL BAJAJ
RAVELLING FROM DELHI TO SEDDA VILLAGE IN
T Bijnaur (UP) on a warm September morning,
one gets a feel of the inconvenient distance
that separates India from Bharat. There,
one gets to see how Fabindia Overseas—the
47-year-old Delhi-based retail chain that sells handloom
garments, linen and other handicrafts—manages its
relationships with its rural suppliers.
The journey is illuminating. Fabindia is recasting
its supply chain, setting up dozens of “supply-re-
gion companies” that will gradually take over its
entire supply chain in a particular region; these com-
panies will also offer shareholding to Fabindia’s sup-
pliers in line with the vision plan articulated by
Managing Director William Bissell (40), who sees
himself as a champion of free market in the NGO- and
000 BUSINESS TODAY OCTOBER 7 2007
government-dominated handicrafts sector.
For a company that owns India’s most successful and
chic brand of handloom garments and handicrafts,
that’s only one of many exciting developments taking
place—Fabindia has opened 37 stores in the last 18
months; sales have been growing at a CAGR of 40-50 per
cent over the last three years; and margins are so
attractive that investors are queuing up with their
cheque books.
Aqueel Ahmed, who owns one of the two dozen
home-based handloom units in Sedda that weave cotton
fabrics for Fabindia, has applied for shares worth Rs 1.5
lakh in Bijnaur Artisans, the newly set up supply-region
company that will deal with all artisans and suppliers in
the Bijnaur region. “I have worked with Fabindia for the
last eight years and supply exclusively to the com-
PORTRAIT OF A
SUCCESSFUL BRAND BUILDER
All you wanted to know about Fabindia, the
Delhi-headquartered private limited retail-chain
● Number of stores: 68 in India (as of September
2007) and 3 abroad
● Storeformats: 4 (5,000 sq. ft, 2000-3,000 sq. ft,
2,000 sq. ft and 500-1,000 sq. ft
● Products: Handloom garments,
accessories, home linen, home
furnishings, floor coverings; pottery,
PHOTOGRAPHS BY AMIT KUMAR
lamps; stationery and other home
products, furniture; organic food and
body care products
● Sources from: 21 states, 22,000 artisans
● Will source from (by 2010-end): 100,000 artisans
● Workforce: 700
● Sales
(year ended March 2007):
Rs 200 crore
● Projected
2007-08 sales:
Rs 300 crore
● Sales
Growth: 40-50 per cent
William Bissell, Managing Director, Fabindia CAGR in last three years
● Gross margin: Over 40 per cent (in
pany. It’s a relationship that’s based on mutual trust, last three years)
which is why I have invested in Bijnaur Artisans. I am
sure it will be to my benefit,” he says. ● Domestic sales: 95 per cent of total sales
Nabeel Ahmed, Mohammad Rizwan and Gauhar
Ali, all Aqueel’s neighbours, are also Fabindia suppliers ● Retail presence: 20 states (no presence yet in J&K,
Bihar, Chhattisgarh, North-eastern states, and
and shareholders-in-waiting in Bijnaur Artisans. All of
UTs except Chandigarh and Puducherry)
them say they are “happy” with the orders they get
from the company and the payments they receive. ● Share of regions in revenue: North+East: 50
Nabeel “outsources” part of his work to a house-
hold unit where Tarannum and her sister Yasmine
weave colourful cotton khadi table mats for him.
Each of them makes Rs 5 per mat, does about 30
mats, thus, earning about Rs 150 per day.
Marketing Finesse
per cent, South: 25 per cent, West: 25 per cent
● Share of product categories in
revenues: Apparel: 65 per cent,
Home linen/furnishings/furniture:
32-35 per cent, Organic food: 2
per cent, Personal care:
The successful adaptation of handloom fabrics to ur- 2 per cent
ban tastes in a purely commercial manner has been ● Product-wise sales growth:
the strength of Fabindia. Government-owned play- Apparel: 60-62 per cent, Home
ers like Khadi & Village Industries Commission linen/ furnishings/ furniture:
(KVIC) and state emporiums have fared miserably on 40 per cent, Organic food: 100
this front despite large subsidies and grants. per cent, Body care: 200 per cent
Interestingly, the company has woven its hand-
loom magic without ever spending anything signif- ● Exports: 5 per cent of revenue
Fab - Oct 21.qxd 9/28/2007 10:57 PM Page 2
bt corporate
Fabindia’s
Fabulous March
Fabindia, which has popularised handwoven fabrics among Indians while
supporting rural artisans, is expanding—at back-end and front-end. KAPIL BAJAJ
RAVELLING FROM DELHI TO SEDDA VILLAGE IN
T Bijnaur (UP) on a warm September morning,
one gets a feel of the inconvenient distance
that separates India from Bharat. There,
one gets to see how Fabindia Overseas—the
47-year-old Delhi-based retail chain that sells handloom
garments, linen and other handicrafts—manages its
relationships with its rural suppliers.
The journey is illuminating. Fabindia is recasting
its supply chain, setting up dozens of “supply-re-
gion companies” that will gradually take over its
entire supply chain in a particular region; these com-
panies will also offer shareholding to Fabindia’s sup-
pliers in line with the vision plan articulated by
Managing Director William Bissell (40), who sees
himself as a champion of free market in the NGO- and
000 BUSINESS TODAY OCTOBER 7 2007
government-dominated handicrafts sector.
For a company that owns India’s most successful and
chic brand of handloom garments and handicrafts,
that’s only one of many exciting developments taking
place—Fabindia has opened 37 stores in the last 18
months; sales have been growing at a CAGR of 40-50 per
cent over the last three years; and margins are so
attractive that investors are queuing up with their
cheque books.
Aqueel Ahmed, who owns one of the two dozen
home-based handloom units in Sedda that weave cotton
fabrics for Fabindia, has applied for shares worth Rs 1.5
lakh in Bijnaur Artisans, the newly set up supply-region
company that will deal with all artisans and suppliers in
the Bijnaur region. “I have worked with Fabindia for the
last eight years and supply exclusively to the com-
PORTRAIT OF A
SUCCESSFUL BRAND BUILDER
All you wanted to know about Fabindia, the
Delhi-headquartered private limited retail-chain
● Number of stores: 68 in India (as of September
2007) and 3 abroad
● Storeformats: 4 (5,000 sq. ft, 2000-3,000 sq. ft,
2,000 sq. ft and 500-1,000 sq. ft
● Products: Handloom garments,
accessories, home linen, home
furnishings, floor coverings; pottery,
PHOTOGRAPHS BY AMIT KUMAR
lamps; stationery and other home
products, furniture; organic food and
body care products
● Sources from: 21 states, 22,000 artisans
● Will source from (by 2010-end): 100,000 artisans
● Workforce: 700
● Sales
(year ended March 2007):
Rs 200 crore
● Projected
2007-08 sales:
Rs 300 crore
● Sales
Growth: 40-50 per cent
William Bissell, Managing Director, Fabindia CAGR in last three years
● Gross margin: Over 40 per cent (in
pany. It’s a relationship that’s based on mutual trust, last three years)
which is why I have invested in Bijnaur Artisans. I am
sure it will be to my benefit,” he says. ● Domestic sales: 95 per cent of total sales
Nabeel Ahmed, Mohammad Rizwan and Gauhar
Ali, all Aqueel’s neighbours, are also Fabindia suppliers ● Retail presence: 20 states (no presence yet in J&K,
Bihar, Chhattisgarh, North-eastern states, and
and shareholders-in-waiting in Bijnaur Artisans. All of
UTs except Chandigarh and Puducherry)
them say they are “happy” with the orders they get
from the company and the payments they receive. ● Share of regions in revenue: North+East: 50
Nabeel “outsources” part of his work to a house-
hold unit where Tarannum and her sister Yasmine
weave colourful cotton khadi table mats for him.
Each of them makes Rs 5 per mat, does about 30
mats, thus, earning about Rs 150 per day.
Marketing Finesse
per cent, South: 25 per cent, West: 25 per cent
● Share of product categories in
revenues: Apparel: 65 per cent,
Home linen/furnishings/furniture:
32-35 per cent, Organic food: 2
per cent, Personal care:
The successful adaptation of handloom fabrics to ur- 2 per cent
ban tastes in a purely commercial manner has been ● Product-wise sales growth:
the strength of Fabindia. Government-owned play- Apparel: 60-62 per cent, Home
ers like Khadi & Village Industries Commission linen/ furnishings/ furniture:
(KVIC) and state emporiums have fared miserably on 40 per cent, Organic food: 100
this front despite large subsidies and grants. per cent, Body care: 200 per cent
Interestingly, the company has woven its hand-
loom magic without ever spending anything signif- ● Exports: 5 per cent of revenue
Fab - Oct 21.qxd 9/28/2007 10:57 PM Page 4
bt corporate
icant on advertising. “I’ll credit Fabindia with bringing
traditional and heritage products into the mainstream.
Today, it’s the only commercially successful and widely
available brand associated with handloom apparel,” says
a Bangalore-based marketer of handicraft products
and a former Fabindia supplier.
The growing acceptance of handlooms and crafts by
urban Indian consumers also explains the shift in
Fabindia’s focus, in the early 1990s, from exports to the
domestic market, and the rapid expansion from 13
stores in 2003-04 to 68 at present. “The 1992-93 period
was difficult—we suddenly lost our largest overseas
buyer and (founder) John (Bissell) suffered a severe
stroke. By the time we opened our second store in
Delhi, William (John’s son and successor) had decided the
company’s future lay in domestic retail expansion,”
says Charu Sharma, Working Director, Fabindia. In
the years that followed, Fabindia became increasingly
surefooted. “We started work on our first Vision Plan in
2002, which laid stress on creating and sustaining the de-
mand for handmade goods and generating fast growth in
sales. Since then, the company has done a lot to stream-
line its back-end,” says Anita Kathpalia, CFO, Fabindia.
More Stores, More Products
The retail expansion gathered pace from 2004 on-
wards; revenues grew in tandem from Rs 89 crore in
2004-05 to Rs 129 crore in 2005-06 and then to Rs
200 crore last year. Riding on over 35 store openings
this year, the company hopes to close 2007-08 with
sales of Rs 300 crore. “While we have been opening
stores in Tier-II cities like Vadodara, Dehradun and
DEEPAK G. PAWAR
Fabindia’s Chainani: Eyeing the overseas markets too
000 BUSINESS TODAY OCTOBER 21 2007
Bhubaneswar, we also want to add more outlets in
Tier-I cities like Mumbai and Bangalore,” says Sunil
Chainani, Working Director, Fabindia. The company
is also looking at retail expansion overseas, particularly
in West Asia, which “has the scope for multiple
Fabindia stores”. The existing store in Dubai is doing
“extremely well” and the ones in Rome (Italy) and
Guangzhou (China) are picking up. The company
wants each of its stores to be a profit centre, adds
Chainani.
Bissell, who is married to an Indian, says Fabindia’s
emphasis on utility and contemporariness, rather than
beauty and quaintness, have created “sustainable de-
mand”. Result: customers buy a product because they
need it, not because they think it’s beautiful. “Fabindia’s
regular customers tend to be Indians who are not inse-
cure about their identity; who appreciate the fact that
they have an extraordinary culture and that a handmade
product has an intrinsic value, not an externally imposed
price of a big brand, inflated manifold by advertising and
packaging,” says Bissell. Then, given that its “basic” line
of garments starts at a price point of Rs 150, Fabindia
has become synonymous with “affordable chic”.
Bissell and his team have expanded their product
line to include organic foods and body care products,
reinforcing Fabindia’s association with the rural econ-
omy. The company has also introduced furniture,
which represents a compromise on the time-honoured
Fabindia principle of every product receiving some
hand treatment (the company produces its furniture at
a mechanised factory in Haryana, but ensures that it uses
no plywood or glossy polishes.)
Profits and Jobs
Prakash Tripathy, Director in Artisans Micro Finance,
a Fabindia arm and main promoter of supply-region
companies, says these companies are “our way of
streamlining and strengthening our supply chain, elim-
inating middlemen, providing jobs to rural artisans, and
giving our suppliers ownership in this business”.
According to Bissell’s plan, 200 supply-region com-
panies, manned by local people, to be set up by 2010
Fab - Oct 21.qxd 9/28/2007 10:57 PM Page 5
bt corporate
across India’s handloom- and craft-rich regions, will grad-
ually take over design, distribution, quality control,
warehousing, and some processes like dying from the
parent company. Sixteen companies have so far been set
up in various states, of which eight are already functional
thanks to a financing arrangement with ICICI Bank.
“Fabindia’s evolving supply chain is responding to the
need for large investments in enhancing product qual-
ity and sophistication. So, we’ll provide better quality and
designs to our customers,” says Bissel, whose American
father John Bissell, a buyer for Macy’s, New York,
visited India in 1958, fell in love with Indian crafts, and
established Fabindia in 1960 as an export house.
The company hopes to expand its sourcing from
over 22,000 artisans in 21 states to about 100,000
by 2010—the “back-to-the-grassroots” approach it
decided to take a couple of years ago after agonising
over whether or not it should move away from hand-
looms in order to grow faster. “Fabindia’s success lies
in getting small handloom and craft units scattered
across remote villages to develop products that ap-
peal to urban consumers. We’ll continue to develop our
supply chain the hard way rather than take the easy way
of using mill-made fabrics,” says Chainani.
Growth and Constraints
The company’s expansion this year has been helped in
part by WCP Mauritius Holdings; the private equity firm
has reportedly invested $11 million (Rs 44 crore) for a
6 per cent stake. This values the company at about $183
million (Rs 732 crore). Chainani says the company’s
healthy internal accruals and balance sheet gives it the
ability to raise debt without overleveraging the company.
“We have been ploughing back profits into expan-
sion on an ongoing basis. We’ll invest several hun-
dred crores over the next few years. Options like IPO
000 BUSINESS TODAY OCTOBER 21 2007
Fabindia’s Kathpalia: Stresses on creating
demand for handmade goods
and private placements will be considered
only when an extraordinary need arises,” he
adds.
Spiralling real estate prices are, however,
slowing down retail expansion, admits Shilpa
Sharma, Fabindia’s Marketing Head, who’s
scouting for new store sites. The company’s
strategy has been to lease property rather
than own it (it owns only 6 stores; the rest are
leased) and is trying to be the first mover in
new markets to get cheaper prices, says
Kathpalia. “Fabindia has decided not to ex-
pand through the franchisee route in the domestic
market because we do not want to dilute our brand,”
adds Shilpa Sharma.
Bissell says his wage costs are rising fast—like in
the case of other organised retailers. He is also aware that
retailers like Westside and Pantaloon now stock hand-
loom apparel, furnishings, and crafts, but points out
that Fabindia’s painstakingly built supply chain gives it a
clear advantage over its rivals. “Crafts make up a niche
market in the sense that our customers know what a
handcrafted product is. The larger market, on the other
hand, could become increasingly full of fake handloom
products. So, players like Fabindia need to constantly ed-
ucate customers,” says Charu Sharma, noting that all
Fabindia products bear “Craftmark”, which is the craft
industry’s certification for original handmade products.
Bissell says he hopes more Indians will wise up to the
“genius” of modern marketing that sells them big
brands at outrageous prices. He also hopes that more
Indians will become secure about their identities and
stop being dazzled by western lifestyles and brands.
Whether that happens or not, Bissell and Fabindia
have little reason to be insecure. ■