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[MARKETING MANAGEMENT] December 15, 2007 Visit hrmba.blogspot.com for more project reports, presentations, notes etc. Travel Equipment Market IBS Page 1
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Marketing Project on Indian Luggage Industry

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Page 1: Marketing Project on Indian Luggage Industry

[MARKETING MANAGEMENT] December 15, 2007

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

Travel Equipment Market

1 Acknowledgement2 Executive Summary 073 Indian Luggage Market 094 Critical View of the Luggage Industry 115 Per 1997 126 Post 1997 137 Environmental Scanning 14

7.1 Technological Environment 14

7.2 Social Environment 14

7.3 Economic Environment14

7.4 Political Environment 158 Porters Model 169 Major Players in the Organized Sector 2210 V.I.P 23

10.1 Product Portfolio 24

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10.2 Objectives 28

10.3 Segmentation 29

10.4 Distribution Network 29

10.5 Product Differentiation 30

10.6 Positioning 30

10.7 Strategy 31

10.8 SWOT Analysis 3611 Competition from Samsonite & the Unorganized Sector 38

11.1 Critical Aspects 4212 Samsonite 43

12.1 Brand Portfolio 44

12.2 Products Lines and Width 45

12.3 Distribution Network 48

12.4 Positioning 49

12.5 Segmentation 49

12.6 Product Differentiation 49

12.7 Business Strategy of Samsonite 50

12.8 Swot Analysis of Samsonite 5013 SAFARI 5214 Products & Pricing 52

14.1 Packs 52

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14.2 Luggage 52

14.3 Business Gear 53

14.4 Shoulder Bags 54

14.5 Tote Bags 54

14.6 Places and Promotions 55

14.7 Push strategy 55

14.8 Pull Strategy 5515 References 56

Executive Summary

Brief Insight into Indian Luggage Industry

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

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are 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

Organized Sector 60%

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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 Market

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share

VIP 70%

Aristocrat 15%

Safari 14%

Others 1%

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

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somewhere in between. This then is the Indian moulded luggage industry in a

nutshell.

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,

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currently the world’s second largest luggage manufacturer was there on the scenes

but, had to retreat in 1985 due to poor sales.

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

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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

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:

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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 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

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features added on to cater the requirements of the customers. The luggage now is

developed for aesthetics, comfort & convenience in use. Technology is also

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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16 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:-

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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

Thus the returns may not be as soon as expected which itself may form a

barrier to enter into the industry.

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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 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

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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.

7) Intensity of rivalry among existing competitors :-

The moulded luggage industry can be divided into 3 segments:-

Standard

Popular

Premium

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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 8-10%, which is

relatively slow.

9) 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 competition especially during the season of

marriage & travelling which are considered periods of peak sales.

11) Exit Barriers :-

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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.

MAJOR PLAYERS IN THE ORGANIZED SECTOR

V.I.P.

Samsonite

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Aristocrat

Safari

Giordano

Delsey

American Tourister

Rimowa

Kipling

Jansport

Blue & Blues

Jang

Fiorelli

Others

V.I.P.

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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, VIP products are sold across 1300 retail

outlets in 27 countries. Currently, it exports its product to West Asia, Europe, the

USA, and select African and South East Asian countries.

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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 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,

hard upright, soft upright,

cabin luggage.

Polypropylene,

polycarbonate,

ABS nylon.

Travel Bags Totes, travel bag, trekking

bag, trolley tote.

Nylon, leather

Backpacks School bag, trekking bag,

laptop backpack.

Nylon

Executive

bag /

Portfolio

Briefcase, soft executive

bag,

laptop bag, Laptop trolley,

messenger bag

Nylon,

synthetic

(foam),

polyurethane,

leather.

Belts Pure Leather

Reversal belt with

reversible buckle &

regular buckle

Leather

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Regular belt with fancy

buckle & regular buckle

Casual belts

Wallets Pure 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 pockets

Leather

Travel

Accessories

Security leg wallet, hip

money belt, neck safe

pouch,

secret wallet, shoe bags,

passport control with 7

compartments, hands free

CD case, MP3 player case,

iPod case, eye glass

holder, cell pouch,

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foldable bag, key lock,

number lock, luggage tag,

travel pillow, toilet kit,

luggage strap, key pouch,

travel security with

number lock etc

Handbags Office / Everyday bag,

mess bag, shopping bag,

leather bag, leather

purses, leather wallets,

jewel bag, fancy, vanity

hard, vanity soft

Leather, Nylon

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

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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.

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

IBS Page 24

BRAND Contribution

to sales (%)

Growth Rate (%)

Skybags 10 35

Alfa 40 3

VIP range 35 10

Odyssey 15 30

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manufacturing long-term 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%.

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.

IBS Page 25

Market Distribution – in India

Sales Channel Share (%)

Army canteens 30-40%

Luggage shops 60%

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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.

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Market Distribution – World over

Sales channel Share (%)

Department Stores 41

Luggage shops 21

Catalogue stores 16

Variety stores 15

Mail order 2

Others 5

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Standard Segment:-

Product has the bare minimum features & is differentiated on low prices. Product

is promoted as value for money.

Positioning

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 mid- segment, it had no presence in the luxury

segment. Samsonite posed a major threat to VIP and garnered a market share of

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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

“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

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of VIP include Delsey (international brand from France) to capture the premium

segment, Footloose: the trendy 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

Segment Price range

(Rs)

Market share

(%)

Premium 1500+ 15

Popular 700-1500 30

Standard 300-700 55

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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 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

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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, thereby reducing the chances of improvement in the growth

rate of the luggage industry.

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SWOT Analysis

1. Strengths:-

Very high brand awareness (2nd in India).

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.

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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.

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

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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 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.

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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.

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

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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.

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 super-premium 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 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

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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

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

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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:

Suitcases

Carry-ons

Garment bags

Backpacks/Duffels

Kids Luggage

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BASED ON SIZE SMALL

(TOTAL 6 PRODUCTS)

MEDIUM

(TOTAL 20 PRODUCTS)

LARGE

(TOTAL 21 PRODUCTS)

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

Samsonite® Elevation 21" Upright

700 Series Samsonite® Outline® 8 22" Spinner

Samsonite® Elevation 25" Upright

S amsonite® Pro-DLX 24" Upright

Samsonite® Ascella 22" Expandable Upright

Samsonite® Pro-DLX

Business/Computer Bags

Golf Travel Bags

Accessories

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SUITCASES

BASED ON EXTERIORS

SOFTSIDE

(TOTAL 25 PRODUCTS)

HARDSIDE

(TOTAL 13 PRODUCTS)

HARD AND SOFT

(TOTAL 8 PRODUCTS)

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

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" Spinne r

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

LuggageHardside and softside

luggage, garment bags, carry on bags

Direct retail stores, specialty stores and high–end department stores

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Mid–level department stores, specialty stores, national chains,

warehouse clubs, direct retail stores

National chains, mass merchants, specialty stores, 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

17 Positioning:

High Quality / High Price

Samsonite positioned itself as Internationally acclaimed quality product with

visible benefits.

18 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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19 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

20 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.

21 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).

Weakness:-

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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 portagesPrices: Rs.1950-3150

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

Heavy Duty: A heavy duty durable versionPrices: Rs. 1100-1900

Rambler: A versatile gear hauling pack with three outside pocketsPrices: 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 strapPrices: Rs. 1450-2150

3. Child packs A miniature Pack that makes a great kids pack. Lots of bright colors

Prices: Rs. 990 onwards

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Luggage

1. Utility Luggage Bags Premium Bags

Prices: Rs. 1600 onwards Standard bags

Prices: Rs. 600 onwards Trolley Bags

Prices: Rs.13002. Sportsman Luggage

Sportsman garment bags : Hang your suits or skirts in this classy garment bag.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 itemsPrices: 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 securityRs. 3000 onwards

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

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

Business Gear

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1. Briefcases Executive Briefcases: These bags are made out of our new velvety

soft, full-grain, waterproofed leather.Rs. 3500 onwards

Leather Briefcase: An elegant leather briefcasePrices: 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 laptopPrices: Rs.1400 onwards

Canvas Leather Laptop Pouch: A non-bulky padded pouch for your laptopPrices: Rs. 1200 onwards

Leather Laptop Pouch: A non-bulky padded pouch for your laptopPrices: Rs. 900-2000

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

Shoulder Bags

1. Leather Bags Serengeti Book Bag: These book bags are made out of our new

velvety soft, full-grain, waterproofed leatherRs. 1500 onwards

Pebbled Leather Mini-Haversack: Our Leather Mini-Haversack available for a limited time in a soft pebbled leatherRs. 1450 onwards

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Lady Slipper Bag: A handcrafted all leather backpack handbagRs. 900 onwards

2. Shell Bags Deluxe Bags Standard Bags Classic Bags

Tote Bags

1. Sportsman Tote Bags2. Zip Top Tote Bags3. Mini Tote Bags

Other Products include

Key Fob Leather Document Brief Leather Fold up Hat Wallet- Trifold wallet Notepad holder PDA case

Places and Promotions

The company should adopt two strategies for allocating its products.

PUSH Strategy:

Manufacturers Wholesalers Retailers Customers

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.

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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, railway-stations, 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

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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