Marketing Project on Indian Luggage Industry

[MARKETING MANAGEMENT] December 15, 2007

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Travel Equipment Market

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Acknowledgement Executive Summary Indian Luggage Market Critical View of the Luggage Industry Per 1997 Post 1997 Environmental Scanning

07 09 11 12 13 14

1.1 Technological Environment 14 1.2 Social Environment 14 1.3 Economic Environment 14 1.4 Political Environment 15

Porters Model Major Players in the Organized Sector V.I.P 1.5 Product Portfolio

16 22 23 24

1.6 Objectives 28 1.7 Segmentation 29 1.8 Distribution Network 29 1.9 Product Differentiation

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1.10

Positioning 30

1.11

Strategy 31

1.12

SWOT Analysis 36

30

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Competition from Samsonite & the Unorganized Sector 1.13

Critical Aspects 42

Samsonite

43

1.14

Brand Portfolio 44

1.15

Products Lines and Width 45

1.16

Distribution Network 48

1.17

Positioning 49

1.18

Segmentation 49

1.19

Product Differentiation 49

1.20

Business Strategy of Samsonite 50

1.21

Swot Analysis of Samsonite 50

SAFARI Products & Pricing

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38

1.22

Packs 52

1.23

Luggage 52

1.24

Business Gear 53

1.25

Shoulder Bags 54

52 52

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1.26

Tote Bags 54

1.27

Places and Promotions 55

1.28

Push strategy 55

1.29

Pull Strategy 55

References

56

Executive Summary rief Insight into Indian Luggage Industry

B

The luggage industry in India is currently undergoing a consolidation phase. Competition in the sector is expected to intensify with the entry of foreign players like Delsey of France. Companies with good research and development facilities are IBS

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expected to survive while others may end up as contract manufacturers for the bigger players. The luggage market comprises of three segments namely the premium segment with 15% of total market share, the popular segment and the standard segment. Samsonite (International) and VIP are the dominant players in the premium segment with a market share of 52% in the popular segment. V.I.P. industries and Universal dominate the low-end standard segment. The luggage market is dominated by the unorganized sector with 50% market share. Northern and western India are the biggest markets in the country. V.I.P. and Samsonite are focusing on developing their distribution networks. Both players are also into exports. V.I.P.’s export touched Rs.134 million in 1997-98 and is mainly targeted at Gulf and West European Markets. Samsonite posted an export turnover of Rs.150 million for the year ended December ’98. Luggage manufacturers, particularly V.I.P. have slashed prices following decline in prices of raw materials. The organized sector (8%) is growing at a lesser pace when compared to the unorganized sector (25%). The organized sector will have to face the reality that players in this sector may become organized and come out with branded products emerging as competitors to the existing players in the organized sector. The organized sector has to be cautious of the developing grey market.

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Indian Luggage Market The Indian luggage market is worth nearly one thousand crores. A considerable portion of the market is unorganized. The table below gives the distribution of the market between the branded sector and the unbranded sector. Market Size: Rs. 900 crores IBS

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Organized Sector

60%

Unorganized Sector

40%

The market for luggage in India can be subdivided into three segments, comprising of the premium, regular and economy segment. The current growth rate of each of these segments shows that the premium segment is the fastest growing one - five times as fast as the economy segment, and two and a half times as fast as the regular segment. Growth Rates (Organized Sector) Premium

25%

Regular

10%

Economy

5%

The organized sector is dominated at present by the Piramal fleet of companies VIP Industries and Aristocrat. Between them, they account for 85% of the organized sector market. Their chief competitor is the Rs.41 crore Safari Industries, whose share in the branded market is nearly 14%. The rest of the market is comprised of other brands like Encore, Unilite, Genius, Club and Novex. But the entry of Samsonite India, the 60:40 joint venture between Samsonite and the Bombay-based Rs.28 crore Tainwala Chemicals, would change the whole scenario. Organized Sector Company

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share VIP

70%

Aristocrat

15%

Safari

14%

Others

1%

MARKET DISTRIBUTION

SAFARI OTHERS ARISTOCRAT 1% 8% 9%

VIP 42%

UNORGANISED SECTOR UNORGANISE D SECTOR 40%

VIP ARISTOCRAT SAFARI OTHERS

Critical View of the Luggage Industry The luggage Industry can be traced into a triangle with the MNC giant Samsonite International trying to steal the limelight, the $50 million Indian giant VIP Industries at one of the vertices and the triangle completed with the $120 million unorganized sector at the third end. The other small companies find place somewhere in between. This then is the Indian moulded luggage industry in a nutshell. IBS

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Going back in time, the history of Rs. 10 billion Indian moulded luggage industry can be observed in two phase’s viz., the pre-1997 phase and the post-1997.

Pre-1997 During this period, the companies were more interested in volume sales rather than satisfaction. The Indian market was dominated by both the small and big players. It had still to witness the onslaught of the multinationals. American Tourister, currently the world’s second largest luggage manufacturer was there on the scenes but, had to retreat in 1985 due to poor sales.

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Quality of the Indian luggage at that time was suited mostly for the low end mass market and not for the premium end quality conscious customer. Innovations were very few. People had got used to the old type of luggage which had a top, a bottom and a lock to keep it intact. The manufacturing process concentrated more on volumes than on quality. And surprisingly, nobody was complaining. The reason: lack of quality awareness among the customers. Then came the discounts war in the 90’s. Customers were availing 50-60% discount on the maximum retail prices. Even as the sales soared companies started to bleed. At this juncture, the aggressive Piramal group took over Universal luggage and its brand Aristocrat. This gave a body blow to all competition. The battlefield now comprised VIP Industries, Universal as part of the Piramal group) and Safari to name a few until the entry of world number one the $737 million Samsonite International, in late 1996. Till then competition was restricted to sales. Service and customer satisfaction didn’t assume importance. In short, it was more of selling than marketing.

Post-1997 This was the period when the industry witnessed a paradigm shift in terms of quality and service. Liberalized baggage rules, presence of multinational and freer import of luggage helped the Indian consumer to access international quality luggage. In fact it ushered in a phase where even the domestic companies showed the keenness to compete with the foreigners instead of following them. Sanjeev IBS

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Aga, former CEO, VIP Industries says. “A few years back we were not aware of our own strengths. We assumed that the best was Samsonite or Delsey and we tried to come close to their standards. But now, we feel that we must do better to outsmart them in the market.’ The company already seems to have moved in that direction. While between 1990 and 1996 VIP had registered only eight new designs in the next two years (1997 and 1998) the company registered 16 design patents. The Indian consumer today has more choice than before.

Environmental Scanning Political Environment: Government has placed the raw materials required for the industry under OGL (Open general license). Raw materials can be freely imported. There is no

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restriction on the export of finished product and very little barriers were there for foreign firms to enter into Indian market. Excise duty, Import duty, Custom duty, Sales tax have a substantial bearing on the cost structure of the final product. International prices of raw materials are highly flexible. There is no policy to control the burgeoning grey market.

Social Environment: Luggage sales show a peak during the marriage season. This season witnesses a spate of purchases of luggage. Brands are promoted as status for consumers & tourists.

Economic Environment: The luggage industry’s growth rate is dependent on the level of business & leisure activity in the country. The positive signal in the growth of the economy works well for the luggage industry. The growth in the tourism industry affects the performances of the luggage industry which shows peak sales during the months of September-January. The potential market growth @ 8-10% is making India a base for the Multinational Companies.

Technological Environment: The luggage industry has graduated from the tin trunks; plywood suitcases to the newly developed technologically superior plastic moulded suitcases with a lot of features added on to cater the requirements of the customers. The luggage now is developed for aesthetics, comfort & convenience in use. Technology is also IBS

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developed in the manufacturing of the luggage with specialized moulding materials used to mould the plastic material. The features like the locks, wheels, handle etc. have been developed over the years. The industry has about 300 models in various segments. Technology has made it possible for companies to go for a large production (VIP is 12000 per/day (286 models) & Samsonite is 1500 per/day (85 models)). The amount of Research & Development investment being done by the companies is also on the rise. This is more prominent in the organized sector with VIP spending @ 7% of its turnover & Samsonite spending @ 9% on Research & Development Internationally. The unorganized sector spends very little amount on Research & Development spending is towards product development, capacity utilization, distribution network & communication.

PORTERS MODEL

Threat of Entry:

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The industry is Oligopolistic in nature moving towards Duopoly with two companies enjoying the market share a bit over 80%.

1) Barriers To Entry:a) Economies of Scale: Existing distribution channels.  Brand awareness of existing players.

b) Product Differentiation:The existing players in the industry have managed to differentiate their product from each other depending on the segments they are in.

c) Capital Requirements: Total project cost=25 cr.  Payback period is 3-5 yr.  Access to Distribution Channel:Existing competitors have tie ups with wholesalers & retailers for marketing their products based on the long term relationship, high quality services or exclusive relationship. A new entrant will have to invest heavily to develop a distribution channel.

d) Cost disadvantages independent of scale:IBS

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No demographic survey to demarcate buyer profile & helps to focus marketing efforts. This translates into greater costs in product development & selling & distribution. e) Possibilities of a new entrant getting into a Joint Venture with the players in the market are less. [Given an Oligopolistic nature of the market, this is becoming duopoly in nature]. This would mean that the new entrant would not be able to take advantage of the existing player’s strengths (production or distribution) & will have to start fresh. f)

Favorable access to Raw Material.

2) Expected Retaliation: Expanding of the distribution network by the existing player.  Accessibility of product.  Price cuts & discount.

3)

Entry determining price :Given the strong brand & market presence of the existing players & their well established distribution network the new entrant will have to plan for heavy initial investment in order to make his presence felt. This will have to be done under the prevailing price structure taking into account retaliation from the existing players

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Thus the returns may not be as soon as expected which itself may form a barrier to enter into the industry.

4)

Bargaining Power Of Suppliers:-

 Dominance of few suppliers & lack of substitute products.  Although there is an additional capacity of the raw materials required for the moulded luggage, there is limited to the quality of the available material. There is no substitute raw material to the material used at present i.e. Polypropylene & ABS. This shifts the bargaining power towards the suppliers of the raw materials. Raw materials make up for 50% of the cost. Although Reliance has the process to supply quality raw material the volumes of the luggage industry do not justify their production & supply.

5)

Suppliers:Raw

materials

used

for

moulded

luggage

are

mainly

Polypropylene & HDPE Acrylonitrile Butadine Styrene (ABS). These are by products of petroleum. There are plenty of suppliers. Moreover the materials can be imported as PP is under the OGL because of which companies like Samsonite & VIP imports their raw material. There has been no shortage in the supply of the material. Due to the excessive capacity & the South East Asian Crisis the IBS

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prices of the raw material have dropped by about 46% in the last two years. Thus in the scenario of enhanced competition in the moulded luggage industry the diversity of suppliers & over capacity without the scope of forward integration has limited the bargaining power of the suppliers. The unorganized sector sources its raw materials (recycled plastic) from a number of local sellers.

6)

Bargaining Power Of Buyers:The organized sector has few buyers compared to the suppliers of raw material, which is available in plenty. The raw material forms 50% of the total cost of the product. There is no restrictive sale policy by the government as regards to the raw materials. Hence buyers can have resource to the international market. The raw materials are under the open general license which can import freely. In the unorganized sector the suppliers of the raw material (recycled plastic) are many & this shifts the bargaining power to the buyers. There is no scope of backward integration by the buyer because of the number of suppliers & the free import policy. There is no product differentiation of the raw materials.

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[MARKETING MANAGEMENT] December 15, 2007 7)

Intensity of rivalry among existing competitors :The

moulded

luggage

industry

can

be

divided

into

3

segments: Standard  Popular  Premium In each segment there are 2-3 competitors. VIP is the leader overall but in each segment there is intense competition as each company tries to maximize its market share. 8)

Slow Industry Growth:The growth in the moulded luggage industry has been sluggish & the competition is getting intense. Compared to the growth rate of soft luggage market or 25% the growth rate of moulded luggage is about

9)

8-10%, which is relatively slow.

Differentiation & Switching Cost:There is a lack of switching costs in this industry leading to intense

competition

levels.

Product

differentiation

exists

amongst the players in the standard and popular segments.

10)

Diverse Competitors:-

Diversity in terms of strategy origins triggers off intense rivalry. In this industry the competitors are into the market with different means of capturing the market. This leads to intense IBS

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competition especially during the season of marriage & travelling which are considered periods of peak sales.

11)

Exit Barriers:-

Exit barriers may be economic strategic or emotional in nature. The specialized machinery used in the manufacture of luggage the investment companies make in terms of production human resource, building up distribution network are enormous & makes it difficult for the company to exit. This then intensifies the rivalry among competitors with each player trying to optimize utilization of assets.

12)

Substitute Products:-

The presence of substitutes which perform functions essentially similar to the existing one & offering price advantages put a capacity on the profits of the industry. The luggage industry can be divided into the hard moulded luggage & the soft luggage. The soft luggage is a perfect substitute for the moulded luggage. With a growth rate higher than the moulded luggage there is a capacity to the extent the hard luggage market growth. Also the flexibility of the soft luggage in terms of size design price etc. makes it a potential threat to the hard moulded luggage market. IBS

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MAJOR PLAYERS IN THE ORGANIZED SECTOR • V.I.P. • Samsonite • Aristocrat • Safari • Giordano • Delsey • American Tourister • Rimowa • Kipling • Jansport • Blue & Blues • Jang • Fiorelli • Others

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V.I.P. VIP Industries Ltd. is the flagship company of the DG Piramal Group. Established in 1971, it is a leading luggage manufacturing company, which manufactures strollys, suitcases, executive cases, backpacks and other hard and soft-sided luggage. It owns reputed brands such as VIP, Alfa, Footloose and Buddy. It has two manufacturing units in India and various subcontract operations in China and Indonesia. Currently, it has a workforce of nearly 2000 people. VIP is a well-known and reputed brand name in India.VIP has been increasing its presence in world markets in the luggage industry. The company has operations across the globe in five continents. It has offices in the USA, South Asia, Middle East, Africa and Europe, Worldwide, IBS

VIP products are sold across 1300 retail Page 21


outlets in 27 countries. Currently, it exports its product to West Asia, Europe, the USA, and select African and South East Asian countries.

Product Portfolio The product portfolio of VIP Industries Ltd. today includes a diverse range of hard-sided and soft-sided luggage. The range includes strollys, suitcases, duffles and overnight travel solutions, executive cases, backpacks, and even school bags. VIP Industries IBS

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Ltd. has renowned brands like VIP, Alfa, Footloose, and Buddy covering the entire spectrum of travel products. VIP Industries Ltd. has a license and markets Delsey products in India and SAARC

countries.

These products reach over 8000 retail outlets across the country. Outside India, we have a network of over 1300 retailers across 27 countries. Our range includes injection moulded PP cases; vacuum formed ABS cases as well as soft-side luggage in nylon, polyester and EVA material. Luggage Hard suitcase, soft suitcase,

ne,

hard upright, soft

polycarbon

upright, cabin

ate, ABS

Travel

luggage. Totes, travel bag,

nylon. Nylon,

Bags

trekking

leather

Backpac

bag, trolley tote. School bag,

Nylon

ks

trekking bag,

Executiv

laptop backpack. Briefcase, soft

Nylon,

e bag /

executive bag,

synthetic

Portfolio laptop bag, Laptop

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Polypropyle

(foam),

trolley,

polyurethan

messenger bag

e, leather.

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Belts

Pure Leather

Leather

Reversal belt with reversible buckle & regular buckle Regular belt with fancy buckle & regular buckle Wallets

Casual belts Pure Leather

Leather

3 to 10 credit card holder with pockets for coins and identity card Card holder with pockets for coins Zip pockets, 2 fold wallet with pockets for coins and cards 3 fold wallets with pockets for coins and cards Credit card holder with 10 to 20 Travel

pockets Security leg wallet,

Accessor hip money belt, ies IBS

neck safe pouch, Page 24


secret wallet, shoe bags, passport control with 7 compartments, hands free CD case, MP3 player case, iPod case, eye glass holder, cell pouch, foldable bag, key lock, number lock, luggage tag, travel pillow, toilet kit, luggage strap, key pouch, travel security with Handba

number lock etc Office / Everyday

Leather,

gs

bag, mess bag,

Nylon

shopping bag, leather bag, leather purses, leather wallets, jewel bag, fancy, vanity hard, vanity soft

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The

company

entered

the

nineties

with

four

sub-brands,

segmented on form and customer profile. Market Positioning : • Skybags - soft luggage range, for the business traveler. •

Alfa - economy range, for the first-time buyer or the up grader to the branded segment.

• VIP range - priced twice as much as Alfa, for the stereotypical Indian luggage customer. • Odyssey - for the exclusive, lifestyle buyer. VIP Industry is Asia’s largest luggage manufacturers & world’s second largest luggage manufacturer. It has some of the finest brands & has been ranked second in the recent brand awareness survey. The growth rate and sales in each of these brands in 1992 indicate the skewed growth towards the upper end of the market. BRAND

Contribution to sales (%)

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Growth Rate (%)

Skybags

10

35

Alfa

40

3

VIP range

35

10

Odyssey

15

30

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These all brands are found in the lower segment. It has manufacturing facilities in Nasik, Nagpur, Jalgaon

& Sinner. It

proposes to start manufacturing units in Sri Lanka & other SAARC countries. VIP manufactures 280 models. The manufacturing longterm objective capacity is 12000 units per day. VIP has a strong 4000 dealer network in place. Long Term Objectives:  To achieve 50% of the turn over from exports & become a major player in the International market by the year 2005.  To get a major chunk of the unorganized sector through their product ‘MANTRA’. Short Term Objectives:  To have a volume & value growth of 15%.

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Segmentation VIP is catering to income group of 5000-10000 for the standard & popular segment product & their premium product is targeted to an income group of 10000+. They are catering to all the four zones.

Distribution Network VIP has 21 branches & a strong dealer network of approximately 5000. Market Distribution – in India Sales Channel

Share (%)

Army canteens

30-40%

Luggage shops

60%

Market Distribution – World over

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Sales channel

Share (%)

Department Stores

41

Luggage shops

21

Catalogue stores

16

Variety stores

15

Mail order

2

Others

5

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Product Differentiation VIP has made a dent into the unorganized sector as the only branded product present in the standard segment.  Premium Segment :There is hardly any differentiation in the product offered by VIP. Product is almost same as to the product of their competitors Samsonite in features. The differentiation is only in terms of prices (VIP is @ 20% cheaper than Samsonite.)  Popular Segment:It is the segment where VIP makes money. This segment provides a better margin. The luggage is of the frameless type & the company has a large market share. The product is promoted as sturdy & enduring hard knocks of travel in India.  Standard Segment:Product has the bare minimum features & is differentiated on low prices. Product is promoted as value for money.

Positioning

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It positions itself as an A-Z luggage company without diffusion of the mother brand. V.I.P. is looking at tapping the lucrative European market where people are buying more luggage

Strategy VIP has established itself in the Indian market using product innovations, stress on quality and brand building. VIP was the first to introduce “non reversible multi safe lock”, soft grip handle, dual action lock and central locking system. These innovations together with brand building made VIP a market leader.

Then VIP faced the problem faced by most of the giants: the brand becoming generic to the category and local brands eating into

the

share

of

the

company.

In 1997 came a formidable threat to VIP – Samsonite. With in short time Samsonite established its presence in the luxury segment of the market. While VIP was very dominant in the midsegment, it had no presence in the luxury segment. Samsonite posed a major threat to VIP and garnered a market share of about 35% in the luggage market within a short period of time. This forced VIP to seriously reconsider its marketing strategy. To counter the threat of Samsonite, VIP launched Elanza range of premium luggages. Samsonite meanwhile also wanted to enter the popular segment (800- 2000 range). It launched the brand IBS

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“American Tourister “to enter this segment posing a major threat to the market leader. More over Samsonite had an international contemporary look and appealed to the new generation than VIP which

was

not

perceived

as

a

vibrant

brand.

In order to attract the new generation and create a new brand identity, VIP embarked on a rebranding exercise. The usual ads of VIP was appealing to the middle class and focusing more on emotion. The “Kal Bhi, Aaj Bhi” ads were very powerful and appealed to the middleclass. But since the consumers changed, in order to succeed, the brand had to have a contemporary look. The new strategy of VIP is focusing on capturing or owning the concept

of

“Travel”.

The

logo

was

changed

to

a

more

contemporary logo and the ads were changed to communicate the new positioning. The agency thought of the most appropriate moments of travel and decided that the “time of departure “are the most critical constituents of travel. The ads aimed to tie the brand to Travel. Thus originated the “Bye- Bye “campaign with a very youthful imagery that appealed more the new generation travelers. The baseline was changed to “Happy journey” thus attempting

to

own

the

concept

of

traveling.

The new campaigns were supported by new ranges of products. The sub brands of VIP include Delsey (international brand from France) to capture the premium segment, Footloose: the trendy IBS

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bags for the youth, Buddy: school bags and Alfa: value for money segment. VIP is a market leader that is trying hard to retain its leadership position. It had failed to create barriers for competition by keeping many categories open for competition to enter. Now also leather bag category is now seeing lot of action with big players like Hidesign taking the lead. VIP does not have a presence in this segment. But with its strong brand equity and ability to change with the consumer trends will help VIP in its future battles.

Advertising Strategy Their advertising strategy is to promote image of sturdiness, value for money & toughness. Plan to spend RS 20 cr. for the same. Its price ranges from RS 225 to Rs.8000. The company has also been in fresh talks with French company Delsey, for marketing the latter's premium luggage range. Pricing Strategy Market Segmentation Segme nt

Price range

Market share

(Rs)

(%)

Premiu 1500+ m

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Popula r

7001500

30

Standa 300-700 rd

55

The premium segment is at the top of the rung in India. It is followed by the popular segment which is slightly larger than the premium segment but smaller than the premium segment, the latter segment is the largest and contributes to maximum sales in developing countries. In contrast, the standard segment in the developed countries is very small. Such

constitution

of

the

customer

profile

is

aiding

the

unorganized sector in India which manufactures low cost goods. The high quality manufacturers are finding it difficult to penetrate the market due to high production costs. The target customers at the high end (premium segment) form just 15% of the total customers while the low end standard segment constitutes 55%. The premium segment is controlled by the Apollo group (US) company, Samsonite (I). The popular segment is dominated by the domestic giant, VIP Industries. The standard segment, the largest segment, is serviced by VIP Industries and Universal. The unorganized players price their products at around Rs 300 per piece. Apart from competition and undercutting by the unorganized sector, the moulded industry is facing a tough fight from the soft luggage segment as well. This segment has caught customer IBS

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fancy in the last few years. Even though the soft luggage segment forms just 15-20% of the total industry. It is growing at the rate of 25% which is much higher than the moulded luggage segment growth. The industry majors differ in opinion on the growth rate of hard luggage or moulded luggage. VIP Industries optimistically puts the growth rate at 10% while the multinational Samsonite says the hard luggage market has shrunk by 4%. But, both the companies are not ready to ignore the hard luggage market for soft luggage. Abroad, most of the luggage manufacturers are into both hard and soft luggages. In India too, VIP and Samsonite manufacture both soft and hard luggage. Universally, the luggage business is seasonal in nature. In India, luggage sales depends on two factors—tourism development and on the marriage season. The marriage season extends from March – June and from October – December. These months see good luggage sales. Also, the domestic tourists usually plan their yearly trips during the holiday season between April – June. During this period, there is fierce competition among the luggage manufacturers to grab the market share. However, socio-political turmoil in the last few years has affected the Indian tourism industry. Market sources say all such problems have retarded the cumulative annual growth rate of the moulded luggage industry to 5%. However the Kargil issue at Kashmir has worsened the chances of revival of the Indian tourism industry, IBS

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thereby reducing the chances of improvement in the growth rate of the luggage industry.

SWOT Analysis 1. Strengths:• Very high brand awareness (2nd in India). IBS

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• 52% market share in organized sector (largest in Asia). • 11% through Universal luggage. • Form 31 years it has been in this market. • It has 21 branches & a strong dealer network of about 5000 outlets. • Low raw materials cost. • Real Value for money. • Money power & aggressive management. • All plants are ISO Certified (government recognized R & D unit in Nasik). 2. Weakness:• Less Research & Development expenditure. 3. Opportunities:• Scope to increase exports. • Economy is reviving. • Untapped lower segment area. 4. Threats:• Worsening situation in Kashmir for tourism.

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• Unorganized sectors are cheaper by 25% due to less amount of excise duty. • Excess capacity in the South East Asian countries. • The players in the unorganized sector getting them organized and coming out with branded products.

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Competition from Samsonite & the Unorganized Sector The Indian moulded luggage industry at the present juncture is witnessing a bitter battle among the competitors. However, the unorganized sector is having an upper hand grabbing a larger share whenever the market grows. VIP has money power and an aggressive management. Samsonite has a reliable parentage, money power and R & D support. The unorganized sector relies on low cost products for their good sales. The sufferers are those lacking in money power which does not allow them to spend on advertisements and R & D. In the long run, companies with sound R & D are expected to sustain competition. While VIP spends 2-3% of its turnover on R & D, competitor Samsonite does not spend anything in India. The parent company spends 9% of its turnover in R& D. This will help Samsonite introduce new products periodically. In fact, Samsonite proposes to reduce its price range from the present Rs.1500-1700 range to the Rs.1000 + category. On the other hand, VIP plans to introduce products both in the premium and lower end segments. But both the companies are keeping their cards close to their chest. The fight is expected to become fiercer when the world number four Delsey (of France) also makes an appearance in India. Internationally, the companies are trying to enter fast growing areas because of very low growth in the developed markets. Take IBS

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the case of Samsonite International. It has witnessed a growth rate less than 0.6% during 1998. Certainly, the international majors cannot ignore the Indian market. In the Budget ’99 however, the finance minister has allocated Rs.1.33 billion for tourism development as against last year’s figure of Rs.1.19 billion. This excess allocation is sure to benefit the tourism industry in turn benefiting the tourism dependent industries (moulded luggage and hospitality industries). Another

major

area

can

be looked

into

by

the luggage

manufacturers is making India a manufacturing base in the way Samsonite has cashed on the cheap and skilled manpower available in India. As stated earlier, due to poor product quality, except for VIP and Samsonite none of the local manufacturers are in a position in export. On the flip side there is excess soft luggage capacity in countries like China and Taiwan. Market sources say that these countries have 50% excess capacity which will find their way in the international market. Hence the local companies may have to encounter tough competition. As such any rise in domestic sales and export sales will definitely benefit the domestic industry. Thus, the present status of the industry is highly competitive and the final consumer will be benefiting. Today, he has more options, more designs, and better quality products to choose from. The consumer is the king.

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The Moves: Samsonite was considering launching Oyster (its highest volumes earner worldwide) in the range of Rs.2000, so that it would be priced above VIP, and its brand image would be strengthened. But, early this year, VIP Industries launched Elanza, a slick brand of premium moulded luggage targeted at the top end of the premium market. Elanza boasts of two patents, for its bumper and fabric lining. The 79-cm Elanza was priced at Rs. 3750, while the 69-cm one sells for Rs. 3250 in India. Moreover, Elanza has been made available through select dealers only, in order to maintain its premium image. At present, VIP plans to export 90% of its production of Elanzas. This caught Samsonite totally unawares. The branded luggage scores on perceived value pricing, and so at the moment Samsonite is keenly tracking Elanza’s performance in the market. VIP set the price so high to preempt Samsonite’s entry in the super-premium segment of the market. VIP plans to make this price permanent, subject to the successful sales of Elanza. This means that Samsonite would go ahead and launch Oyster at Rs. 2000. The market research study clearly indicates that Samsonite would lose heavily on its brand equity if its product is cheaper than the existing ones in the market.

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The options available to Samsonite are ♦

Reduce price and target lower segments - This again is not

possible.

The

high

brand

image

of

Samsonite

demands a correspondingly high price. It is only the premium segment that Samsonite can target, as it is unknown in the other segments. ♦

Increase price and raise perceived quality - If Samsonite is forced to enter at a higher price, it might take greater amount of time to gain a footing in the Indian market. This might give VIP Industries just enough time to strengthen itself. But this option would ensure that Samsonite retains its major strength - its brand equity.

VIP Industries is now concentrating on expanding its product portfolio to plug in any existing holes. It has launched six new products in 1995 in the higher end of the market (one of them was Elanza). Also, VIP is planning to launch more products in the super-premium category in order to counter Samsonite at all price points.

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The

Critical Aspects

to the success of the strategy

adopted by VIP Industries are: • Elanza

must be marketed

successfully

so

as to

establish itself in the market. The earlier premium product of VIP Industries, Amadeus, failed to take off in European market channels like Italy. But VIP officials state that Elanza, which is considered to be the most sophisticated and extensively developed product of VIP ever by insiders, is proving to be a success. •

VIP must introduce more products in the superpremium category and gain a foothold at all the price points. Unless this is accomplished soon, VIP will find Samsonite’s product range too formidable totackle.

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Through its premium pricing of Elanza, Blow Plast has forced Samsonite to hike up its entry price. By coming in at a higher price point, Oyster would find it difficult to garner desired volumes. By using such a competitive pricing, Blow Plast is hoping to gain time to plug every hole in the market, before Samsonite starts breathing down its neck. With Samsonite having invested heavily in the plant at Nasik (it is the third largest manufacturing plant of Samsonite), it would not give in a hurry. Whether VIP would be able to ward off Samsonite’s challenge will not be clear for a couple of years.

SAMSONITE The world's #1 luggage maker, Samsonite offers a broad range of luggage and luggage-related products, including suitcases, garment bags, casual bags, business cases and other travel bags. Samsonite also license their trademarks for use on products such as travel accessories, personal leather goods, handbags and furniture . Samonsite also makes travel gear for Timberland. Samsonite is the world leader in the luggage market, with an emerging presence in Asia. It has set up a manufacturing plant in Nasik, which has started operating. Samsonite products are produced around the world at 14 Samsonite-operated manufacturing facilities or by third-party suppliers. Samsonite benefit from their large size through IBS

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volume-driven purchasing and manufacturing economies. It sell their products in more than 100 countries at approximately 27,000 retail locations, including department stores, specialty stores, catalog showrooms, mass merchants and warehouse clubs. In the United States, they sell their products through 195 Samsonite-operated stores. Samsonite is the top seller of luggage in the United States, Europe, and Japan. In addition to its world-renowned Samsonite label, the company also markets the popular American Tourister and Lark brands. Under those names, Samsonite offers a full line of luggage, including softside and hardside suitcases, garment bags, casual bags, business cases, and other travel bags and accessories. Samsonite started its operation in Denver, Colorado, USA in 1910. It entered the Indian moulded luggage market only towards late 1996 with plant in Nashik in collaboration with the Tainwalas. Samsonite It has selected Denver, Belgium for manufacturing hard luggage & Hungary, the Slovak Republic for the manufacture of soft luggage.In Nasik, India both the hard and soft luggage is manufactured. BRAND PORTFOLIO The brands of Samsonite collectively,serve every segment of the market, reaching customers in all walks of life, all over the world. It meets the discerning needs of the luxury market through their Lambertson Truex and Samsonite Black Label brands, while the innovative, high-quality offering within our time-honored IBS

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Samsonite brand serves both middle- and upper-market customer segments. Its American Tourister brand provides affordable, quality products to value-conscious consumers. Each of our Samsonites brands has been carefully developed to meet the precise quality, value and pricing needs of the consumers within its market. Despite their diversity, all of the brands share a common philosophy: to deliver durable, high-quality products that reflect Samsonite’s commitment to excellent craftsmanship, innovative design and exceptional functionality. The brands of Samsonite are: • SAMSONITE • SAMSONITE BLACK LABEL • AMERICAN TOURISTER • LAMBERTSON TRUEX • LARK Samsonite complement their owned brands through their global licensing program, through which they leverage Samsonite’s luggage expertise to partner with market-leading lifestyle brands, such as Lacoste, with whom they develop handbags and casual bags, and Timberland, with whom they offer travel gear, accessories, backpacks and outdoor items. PRODUCTS LINES AND WIDTH The products lines of Samsonite Includes:

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• Suitcases • Carry-ons • Garment bags • Backpacks/Duffels • Kids Luggage • Business/Computer Bags BASED ON SMALL MEDIUM SIZE (TOTAL 6 (TOTAL 20 PRODUCTS) PRODUCTS)

(SHOWN ASIDE IS THE MODEL NO. OF TWO PRODUCTS WHICH HAVE THE LOWEST AND THE HIGHEST PRICE RESPECTIVE LY IN EACH CATEGORY.)

Samsonite® Elevation 21" Upright

700 Series Samsonite® Outline® 8 22" Spinner

Samsonite® Elevation 25" Upright

LARGE (TOTAL 21 PRODUCTS) Samsonite® Ascella 22" Expandable Upright

Samsonite® Pro-DLX 28" Upright Samsonite® ProDLX 24" Upright

• Golf Travel Bags IBS

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• Accessories

SUITCASES

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BASED ON SOFTSIDE EXTERIORS (TOTAL 25

HARDSIDE

PRODUCTS)

PRODUCTS)

(TOTAL 13

HARD AND SOFT (TOTAL 8 PRODUCTS)

(SHOWN ASIDE IS THE MODEL NO. OF TWO PRODUCTS WHICH HAVE THE LOWEST AND THE HIGHEST PRICE RESPECTIVE LY IN EACH CATEGORY.)

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American Tourister® D'Lite 25" Exp Upright

Samsonite® Pro-DLX 29" Spinner Upright

325 Series Samsonite ® F'Lite 28" Upright

700 Series Samsonite ® Outline® 8 29" Spinner

450 Series Samsonite® Sahora Spinners Hybrid 24" Upright

600 Series Samsonite® Carbon EXP™ 29" Hybrid Upright Suiter

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DISTRIBUTION NETWORK Samsonite is present in 150 items with 450 outlets. They are not interested in mass appeal & would like to concentrate on the top 23 cities. Samsonite is distributed primarily through: • Samsonite Outlet Stores • Samsonite Black Label Stores (Boston, New York, Short Hills, San Francisco, Chicago, Dallas) • Samsonite Classic Stores (King of Prussia,PA ; Detroit,MI ; Arlington,TX ; Tampa,FL ; Concord,CA ; Nashua,NH • Department Stores like Macys in the USA and John Lewis Partnership in the UK • Online retailers like Ebags.com and KJ Beckett • Warehouse Clubs like Costco • Military Stores like AAFES

PRODUCT CATEGORY

PRINCIPAL PRODUCTS

MAIN DISTRIBUTION CHANNELS

Luggage

Hardside and softside luggage, garment bags, carry on bags

Direct retail stores, specialty stores and high–end department stores Mid–level department stores, specialty stores, national chains, warehouse clubs, direct retail stores National chains, mass merchants, specialty stores,

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direct retail stores Casual and Outdoor Bags

Duffel bags, tote bags, backpacks, shoulder and hip bags,school bags, handbags

Specialty stores, department stores, national chains,warehouse clubs, sport and outdoor retailers National chains, mass merchants, specialty stores

Business and Computer Cases

Briefcases, business cases, computer cases

Direct retail stores, specialty stores and high–end department stores Department and specialty stores, office superstores, OEMs, warehouse clubs Mass merchants

Positioning: High Quality / High Price Samsonite positioned itself as Internationally acclaimed quality product with visible benefits. Segmentation: The top premium segment i.e. Rs. 1500-7500 is the main area of attention of Samsonite where it already has 60% of the market share.

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Product Differentiation: The main differentiation factors based on the target consumer that wish to cherish exclusivity are: • Reliability • Perceived Value of the Product • International Quality

Business Strategy Of Samsonite: • Expand Channels of Distribution and Product Offering • Strengthen Marketing and Product Innovation. •

Continue Worldwide Expansion.

•

Improve Distribution Systems in the U.S.

SWOT ANALYSIS OF SAMSONITE: Strengths:• Reliable parentage & money power. • Research

&

Development

support

(9%

worldwide). • High Quality. • 25% market shares in world (50% in the organized sector). IBS

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Weakness:• 80% of raw materials imported • Low brand awareness Opportunity:• Increase

distribution

network

opportunity. • Use it as a base for exports. • Economy is reviving

Threats:• Worsening situation in Kashmir • Other

MNC’s

entering

in

the

market. • 4% decline in the market in 1997-98.

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SAFARI Products & Pricing Packs:1. Original Packs •

Deluxe: We took our traditional Pack and added soft padded leather shoulder straps and a waist belt for comfort on those long portages Prices: Rs.1950-3150

•

Utility: These less expensive packs allow occasional campers to have their own rugged gear Prices: Rs. 1350-2150

• Heavy Duty: A heavy duty durable version Prices: Rs. 1100-1900

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[MARKETING MANAGEMENT] December 15, 2007 •

Rambler: A versatile gear hauling pack with three outside pockets Prices: Rs. 990-1750

2. Heavy Packs • Heavy Duty: A heavy duty durable version Prices: Rs. 1450-2100 • Monarch: Made of more functionality features and with waist belt and sternum strap Prices: Rs. 1450-2150 3. Child packs • A miniature Pack that makes a great kids pack. Lots of bright colors Prices: Rs. 990 onwards Luggage 1. Utility Luggage Bags • Premium Bags Prices: Rs. 1600 onwards • Standard bags Prices: Rs. 600 onwards • Trolley Bags Prices: Rs.1300 2. Sportsman Luggage •

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Sportsman garment bags : Hang your suits or skirts in this classy garment bag. Page 54


Rs. 2000-3500 • Sportman Duffel: Meticulously crafted and thoughtfully designed, we know you'll love this duffel! Prices: Rs. 1900 onwards • Extended Sportsman Duffel: Zippered end pockets make it simple to find those frequently retrieved items Prices: Rs. 2000 onwards •

Boot Duffel: The large top compartment is sealed with a full length zipper, and hidden beneath it is a lined compartment. Rs. 2100 onwards

3. Leather Luggage •

Leather Duffel: A real value, our leather duffel is an honest investment in your personal travel comfort and security Rs. 3000 onwards

• Pebbled Leather Duffel: Our Leather Duffel available for a limited time in a soft pebbled leather Prices: Rs. 3600 onwards •

Leather Bookbag: A stylish messenger bag style bag that will last for generations. Rs. 1500 onwards

Business Gear 1. Briefcases

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• Executive Briefcases: These bags are made out of our new velvety soft, full-grain, waterproofed leather. Rs. 3500 onwards • Leather Briefcase: An elegant leather briefcase Prices: Rs. 2300 onwards • Pebbled Leather Bags: Our Leather bags available for a limited time in a soft pebbled leather. Prices: Rs. 2750 onwards 2. Laptop Cases •

Laptop Backpack: A very popular Large Standard Daypack, and added a padded protective sleeve for your laptop Prices: Rs.1400 onwards

• Canvas Leather Laptop Pouch: A non-bulky padded pouch for your laptop Prices: Rs. 1200 onwards • Leather Laptop Pouch: A non-bulky padded pouch for your laptop Prices: Rs. 900-2000

Visit hrmba.blogspot.com for more project reports, presentations, notes etc. Shoulder Bags IBS

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1. Leather Bags •

Serengeti Book Bag: These book bags are made out of our new velvety soft, full-grain, waterproofed leather Rs. 1500 onwards

• Pebbled Leather Mini-Haversack: Our Leather MiniHaversack available for a limited time in a soft pebbled leather Rs. 1450 onwards • Lady Slipper Bag: A handcrafted all leather backpack handbag Rs. 900 onwards 2. Shell Bags • Deluxe Bags • Standard Bags • Classic Bags Tote Bags 1. Sportsman Tote Bags 2. Zip Top Tote Bags 3. Mini Tote Bags Other Products include • Key Fob • Leather Document Brief • Leather Fold up Hat

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• Wallet- Trifold wallet • Notepad holder • PDA case

Places and Promotions The company should adopt two strategies for allocating its products. PUSH Strategy: Manufacturers Customers

Wholesalers

Retailers

Push strategy under which the products can be sold at different wholesalers, retailers, franchisee shops, etc Pull Strategy under which manufacturers promote their products using advertising and promotions. In this strategy the consumers are persuaded to buy the products directly through the intermediaries. The consumers may also buy their products online. They should have their wholesaler at a particular place and the retailers or franchisee shops should be located at public places, malls, etc. Also, retail shop should be near airports, railwaystations, bus stations, public places, etc. This would contribute in impulse buying too. The promotional activities may include electronic hoardings in airports, railway stations, etc. Conventional methods of advertising can also be used such as print media, television, etc.

References IBS

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[MARKETING MANAGEMENT] December 15, 2007 •

http://www.la411.com/company-V.I.P.%20Travel %20Values&lid-3600517.htm

•

www.vipbags.com

•

www.vipmoderna.com

•

www.bags-luggage.com

•

www.google.co.in

•

www.yahoosearch.com

•

www.wikipedia.com

•

www.travelequipments.com

• Philip Kotler, Principles Of Marketing (2nd European Edition), Prentice Hall, 1999 • Prof. Karpagam, ICFAI Business School • Prof. Harshita Shrimali, Pacific Institute of Commerce and Management •

Visit hrmba.blogspot.com for more project reports, presentations, notes etc.

•

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Marketing Project on Indian Luggage Industry

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