Increase in travelling is also boosting the market. Challenges: This market is highly fragmented and is dominated by a few major players who face strong competition from the large unorganized sector. Another challenge faced by this industry is the rising cost of raw materials. The organized sector forms 42% and unorganized sector forms 58% of the total market. The organized sector is dominant by two players – VIP Industries and Samsonite. Organized Sector – 42% Company Market share Samsonite 16. 8% VIP 15. 8% Others
Segments: The market for luggage in India can be subdivided into three segments, comprising of the premium, regular and economy segment. The cu rrent 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 n,vo and a half times as fast as the regular segment. Growth Rates (Organized Sector) Premium Regular Economy 5% Trends: – The franchisee model for business is developing as the major tool for penetration and revenue generation in this market.
Assistance is provided by manufacturers to the franchisee – Companies are targeting the mid segment y offering value for money products and high end segment by tying up with global brands – Large pool of consumers is attracting foreign players – The preference of consumers is shifting to soft luggage – Luggage manufacturers are adding new product categories Pre- 1997 Period: During this period, the companies were more interested in volume sales rather than satisfaction. 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 was the lack of quality awareness among the customers. The battlefield comprised of VIP Industries and Safari to name a few until the entry of world number one, Samsonite International, in late 1996. Till then competition was restricted to sales. Service and customer satisfaction did not assume importance.
In short, it was more of selling than marketing. post – 1 997 Period: This was the period when the industry witnessed a paradigm shift in terms of quality and service. Liberalized baggage rules, presence of multinationals 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. While between 1990 and 1 996 VIP had registered only eight new designs, in the next years (1997 and 1998) the company registered 16 design patents.
The Indian consumer today has more choice than before. 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 restriction on the export of finished product and very little barriers are there for foreign firms to enter into Indian market. 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 industrys 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. Technological Environment Technology is also developed in manufacturing of the luggage with specialized moulding materials used to mould the plastic material.
Technology has made it possible for companies to go for a large production. VIP Industries has 286 models, whereas Samsonite has 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 ith VIP spending @ 7% of its turnover & Samsonite spending @ 9% on Research & Development Internationally. The unorgan ized sector spends very little amount on R&D. Keeping up with International Trend India, as a prime tourist spot of the world, experiences a large volume of travelers every year.
As a result all luggage and travel bags companies in India are closely following international trends and designs. Ample safety features, theft-proof locking system, combination locks and sturdy, strong and light weight material used to manufacture the bags and suitcases, attract the customers while giving them wide options to choose rom. Efficient compartmentalization is also given ample importance as customer’s desire organized interiors with separate compartments for carrying CDs, floppies, shaving bags, etc.
A break away from the usual trend of greys, blacks and browns is in the demand for more vibrant colors like bright reds, green, blues, burgundy & floral prints. Major Players in the Organized Sector 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 nd 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. Worldwide, VIP products are sold across 1300 retail outlets in 27 countries. Currently, it exports its product to West Asia, Europe, the LISA, and select African and South East Asian countries.
Brand Portfolio The company entered the nineties with four sub-brands, segmented on form and Customer profile. All these brands were positioned in the lower segment. Market Positioning C] Skybags – soft luggage range, for the business traveler C] Alfa – economy range, for the first-time buyer or the up grader to the branded segment VIP range – priced uice as much as Alfa, for the stereotypical Indian luggage customer 0 Odyssey – for the exclusive, lifestyle buyer It positions itself as an AZ luggage company without diffusion of the mother brand.
V. I. P. s looking at tapping the lucrative European market where people are buying more luggages. VIP has 21 branches & a strong dealer network of approximately 5000. Market Distribution – World over Market Distribution ” in India Sales chan nel Share (Oh) Sales Channel Share (%) Department Stores 41 Army canteens 30-40% Luggage shops 21 Catalogue stores 16 Variety stores 15 Mail order 2 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 ocking 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 company. In 1 997 came a formidable threat to VIP – Samsonite. Within a short time, Samsonite established its presence in the luxury segment of the market.
While VIP was very dominant in the mid- segment, 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 luggage. Samsonite meanwhile also wanted to enter the popular segment. It launched the brand “American Tourister “to enter this segment posing a major threat to the market leader.
Moreover 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 were appealing to he middle class and focused 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 focused 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-aye” campaign with a very youthful imagery that appealed more to 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 bags for the youth Buddy school bags 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 pen for competition to enter. Even now, leather bag category is seeing a lot of action with big players like Hidesign taking the lead. VIP does not have a presence in this segment.
But VIP’s strong brand equity and ability to change with the consumer trends, will help it In its future battles. Segment Analysis Market Segmentation Segment price range (Rs) Market share (%) 1 500+ Popular 700-1 500 Standard 300-700 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 standard segment. The tandard 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 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 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 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. 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.
