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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