MINOR PROJECT

ON

“SCOPE OF BRANDED LUGGAGE RETAIL IN PATNA”

By:
Manik arora
MASTER OF FASHION MANAGEMENT
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 Batch (2010-2012)
CERTIFICATE

This is to certify that the Minor Project document submitted to the

Department of Fashion Technology NIFT, Patna by Manik arora as
part of the academic requirements is a original work done by him.

Place: Patna
Date: 20/05/2010

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Jaya Mathew (mentor)
Associate Professor NIFT PATNA

DECLARATION

I, Manik arora, hereby declare that the Minor Project document

submitted to the department of fashion technology, NIFT, Patna as
part of our academic requirements is a original work done by me
under the supervision of Asst Prof : Jaya mathew (Mentor) NIFT,
Patna.

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 TABLE OF CONTENT

• EXECUTIVE
SUMMARY........................................................................5
• OBJECTIVES.....................................................................6
• RESEARCH METHODOLOGY........................................7
• INTERNATIONAL LUGGAGE INDUSTRY...................8-16
• INDIAN LUGGAGE INDUSTRY.....................................17-29
• STUDY ON VIP INDUSTRIES LTD.................................30-48
• STUDY ON SAMSONITE..................................................49-58
• BIBLIOGRAPHY................................................................59

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 EXECUTIVE SUMMARY

Luggage industry in India, much like furniture retail, has largely operated in
traditional domain. The buying behaviour however, changed with the way India
travelled .The air travel gave impetus to the growth of branded luggage, just as
being associated with a brand became a norm with the ‘I wish to express myself
with the brands I own’.

The luggage industry as a whole has increased over the years. With the recent
weight restrictions on luggage added by the Airline industry, sales should
continue to increase over the years to come. The industry (US) revenue for the
year 2006 was approximately $720,000,000. The gross profit was 34.14% at
$245,808,000. There were 193 establishments in this industry that year.
Samsonite is the biggest player in international luggage market.

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 The Indian luggage market is worth nearly two thousand crores. Brands
market of luggage stands at around Rs.1000 crore, with premium at around
at around Rs.250 crore, mid segment at Rs. 400 crore and economy at about
Rs. 350 crore. Brands market of luggage stands at around Rs.1000 crore,
with premium at around at around Rs.250 crore, mid segment at Rs. 400
crore and economy at about Rs. 350 crore. The industry is Oligopolistic in
nature moving towards Duopoly with two companies enjoying the market
share a bit over 80%. Vip industries ltd. And samsonite captures more then
80% of the organized luggage market.

TOPIC: “SCOPE OF BRANDED LUGGAGE RETAIL IN PATNA”

Objectives

• To study the luggage industry and its nuances in the

international scenario.

• To study and analyse Indian luggage industry in the retail

context.

• To study the feasibility of setting up of a branded retail

outlet for luggage in Patna.

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Research Methodology:

Secondary Research- The secondary data and theoretical

information regarding the luggage retailing and market would
be conducted using reports, trade journals and internet.

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Primary Research- Questionnaire survey to understand the
scope of opening a branded retail store for luggage would be
done with customers and retailers.

Sample size - 100

Sampling method – convenience & judgemental

Luggage industry as a whole

• The luggage industry as a whole has increased over the

years. With the recent weight restrictions on luggage added
by the Airline industry, sales should continue to increase
over the years to come.
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 • The industry (US) revenue for the year 2006 was approximately
$720,000,000. The gross profit was 34.14% at $245,808,000. There were
193 establishments in this industry that year.

• Total import export value for the year 2006 was $4,408,764,000. There
were 164 countries that conducted foreign trade with the US. In 2006, 10
more than 2005. The top trading Countries were: China, $3,268,770,000
(74.14%); Canada $135,944,000(3.08%); Italy, $125,378,000 (2.99%);
Vietnam, $122,227,000 (2.77%); and Mexico, $83,358,000 (1.89%).
Their combined total represents approximately 85% of all Imports and
exports.

• Total import value for the year 2006 was $3,703,527,000. This represents
a 15.9% increase for the year 2005. The US. had imported industry
related merchandise from 122 countries in 2006. The top importing
Countries were: China, $2,955,195,000 (79.79%) Italy,
$125,378,000(3.39%); Vietnam, $111,638,000(3.01%); France,
$54,475,000 (1.47%); and the Philippines, $53,597,000 (1.45%) Their
combined total represents approximately 89% of import from all
Countries.

• The total export value for the year 2006 was $351,283,000. This
represents a 26.5% increase from the year 2005. The US had exported
industry related merchandises to 140 countries in 2006. The top
exporting countries were Canada, $102,421,000 (29.16%); Japan,

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 $63,621,000 (18.11 %); Mexico $43,314,000 (12.33%); United
Kingdom, $14,295,000 (4.07%); and Spain, $10,664,000 (3.04%).
Their combined total representing approximately 67% of all export to
all Countries
(Source: www.researchmarkets.com)

US luggage retailing scenario

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 • Facing increasing price pressures and lengthy consumer purchase cycles,
makers of luggage, bags and continually update their products and selling
strategies stay at the top of the game.

• The U.S. luggage and leather goods market, like the apparel market, is
growing at about 3 percent to 4 percent annually at retail, where the
sector accounts for about $7 billion, including sales of five major product
groups -- luggage, casual bags, backpacks/daypacks, business and
computer cases and men's and women's accessories.

• Also reflecting trends in the apparel industry, makers of luggage, bags

and cases continue to send more production offshore. Whereas
international sourcing accounted for an estimated 60 percent to 65
percent of their production two years ago, it now makes up closer to 65
percent to 70 percent of the overall manufacturing picture.

• In fact, the industry's leading trade group, the Luggage & Leather Goods
Manufacturers Association (LLGMA), changed its rules several years ago
and no longer requires potential members to have U.S. production
facilities. Now mandating only that members have an office in the United
States.

• There's no doubt that the industry is operating in a rough-and-tumble

environment. Its modest retail sales growth has come, in great part,
because of large increases in the number of units sold, say observers,
even as the market becomes more price competitive

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 • The luggage, leather and accessories industry is fragmented. There are
many small firms -- although there has been consolidation -- sharing the
$3.5 billion wholesale pie. The LLGMA alone has more than 300
members, some of which are expanding into allied travel products, i.e.
luggage makers entering the briefcase business. And there are scads of
other suppliers that aren't even on the radar screen.

• By all accounts, the 90-year-old, $700 million, publicly held Samsonite

Corp. is the big fish, with an estimated 30 percent of U.S. market share.
Insiders point to JCPenney's Jaguar line as having the second-largest
market share, with 7 percent of overall sales, followed closely by Atlantic
Luggage Co., which captures approximately 6 percent of the dollars.

• After that, the remaining players account for smaller, single-digit

percentages of the pie. Still, name recognition is high for those at the top
of the list, including Hartmann, Tumi, Boyt, Trayelpro and others.

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Major players: World wide

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PREMIUM SEGMENT

• It’s a division of the holding company LVMH.

• It was founded in 1854 by Louis vuitton.
• Headquartered in Paris, Louis Vuitton is an international
trendsetting enterprise that employs more than 9,500 people in
more than 300 locations in 44 countries around the world.

PRODUCTS AND PRICE RANGE

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Men’s bags Messenger bags Rs.30000-60000
and totes
Briefcases and Rs.50000-90000
work bags
Clutches Rs.32000-40000
Hand bags Shoulder bags and Rs.45000-75000
totes
Top handles Rs.30000-60000
Clutches Rs.32000-40000
Travels Softsided luggage Rs.45000-75000
Rolling luggage Rs.70000-150000

Hardsided luggage Rs.175000-285000

Accessories Rs.10000-15000

MID SEGMENT

• The Kipling story is one of great passion, creativity and

entrepreneurial spirit. In 1987, three friends in the fashion capital of the
world (Antwerp rules!) decided that women needed high-quality bags that

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 were iconic and chic and feminine and fashionable and… not boring! So
they created a line of casual and colourful bags that were affordable,
sporty and functional, packed with attitude but never serious or stuffy or
stuck-up. In a word… FUN! They named the brand Kipling, after the
well-known and well-travelled author Rudyard Kipling.
• Today, Kipling mascot monkeys, by far the world’s best-travelled
primates, dangle from a full range of handbags, luggage and carry-alls.
Trendy yet practical, upscale yet reasonably priced, durable yet daring,
Kipling bags are the must-have accessories of over 35 million women in
more than 60 countries.
• Since taking over as artistic director and Vice-President in 2006, Isabelle
Chéron has transformed Kipling into a cutting-edge brand with ultra
fashion-forward collections.
• Under her watch, Kipling has launched special capsule collections with
exciting young designers and labels like Cathy Pill (Belgium), El
Delgado Buil (Spain), Gloria Coelho (Brazil), Girls from Omsk
(Belgium) and Peter Pilotto (UK).
• Every year, 6 million Kipling bags are purchased from Kipling’s 215
stores and 450 corners and shop-in-shops, or from 4,000 multi-brand
stores.
• Kipling is part of VF Corporation, a global leader in branded apparel and
accessories.

PRODUCTS AND PRICE RANGE

Hand bags Shoulder and hobo Rs.1500-4500

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 Satchels Rs.2500-4500
Totes Rs.4500-7500
Cross body Rs.2400-4500
Clutch/wristlet Rs.1500-4500
Backpack All purpose Rs.5000-10000
Laptop backpack Rs.9000-10000
Wheeled Rs.9000-10000
Luggage Wheeled Rs.10000-17500
Carry on acceptable Rs.5000-18000
Duffles and Rs.4000-7500
weekenders
Travel and totes Rs.3000-12500

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 ECONOMY SEGMENT

Immigrant Sol Koffler founded American Luggage Works in

Providence, Rhode Island in either 1932 or 1933 with his life savings.
He was determined to produce luggage priced at $1 in the midst of the
Great Depression. The company's breakthrough came soon after when
Koffler devised a new line that was significantly better than that of
the competition; he named it American Tourister.
In 1970, American Tourister launched a memorable ad campaign,
highlighting the durability of its product by unleashing a "gorilla"
(actually a man in a costume on it. The commercial ran for fifteen
years. It was also shown briefly in the 1995 movie, Apollo 13.
In 1993, American Tourister was acquired by Astrum International,
which also made Samsonite luggage. Astrum was renamed the
Samsonite Corporation two years later.
American Tourister has now become a lower-end version of its
Samsonite sister brand.
PRODUCTS AND PRICE RANGE
Travel Cabin bags Rs.1200-5000
Suitcases Rs.1000-2000
Duffles and small Rs.1200-2000
bags
Business Laptop cases Rs.2500-4000

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 Attaché/briefcases Rs.2200-2400
Casual Backpacks Rs.600-1000
Laptop backpacks Rs.1000-1600

INDIAN LUGGAGE MARKET

The Indian luggage market is worth nearly two 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. 2000 crores

Organized Sector 50%

Unorganized Sector 50%

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%

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 Economy 5%

Brands market of luggage stands at around Rs.1000 crore, with premium at

around at around Rs.250 crore, mid segment at Rs. 400 crore and economy at
about Rs. 350
BRANDED SEGMENT
crore. SHARE
LUGGAGE IN RS. CRORE
CATEGORY
ECONOMY 250
MID-RANGE 400
PREMIUM 350

Brands market of luggage stands at around Rs.1000 crore, with premium at

around at around Rs.250 crore, mid segment at Rs. 400 crore and economy at
about Rs. 350 crore.

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 Critical View of the Luggage Industry

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.

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.
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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 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.

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 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
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.

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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 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

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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:

1 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:-

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 Existing distribution channels.
 Brand awareness of existing players.

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

b) 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.

a) Cost disadvantages independent of scale:-

No demographic survey to demarcate buyer profile & helps to
focus marketing efforts. This translates into greater costs in product
development & selling & distribution.
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b) 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.
c) Favorable access to Raw Material.

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

1) 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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2) 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 ( HDPE
Acrylonitrile Butadine Styrene). 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.

1) Suppliers:-
Raw materials used for moulded luggage are mainly Polypropylene
& HDPE Acrylonitrile Butadiene 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.

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 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 sector sources its raw materials
(recycled plastic) from a number of local sellers.

2) 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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3) 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.

1) 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.

2) 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.

3) Diverse Competitors:-
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 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.

4) 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.

5) 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.

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 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: INDIA

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 • VIP
• SAMSONITE
• AMERICAN TOURISTER
• VICTORINOX
• SAFARI
• DA MILANO
• LOUIS VITTON

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.

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

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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 Ltd. has
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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, There is 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.

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.

PRODUCTS AND PRICE RANGE

Business Laptop stroll Rs.5000-7000

Business stroll Rs.5000-8000
Business satchel Rs.2000-5000
Business briefcase Rs.2000-5000
Business 4-wheel Rs.4000-7000

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 Business Rs.2500-3000
lap.backpack
Casual 4-wheel Rs.5000-7000
Vanity case Rs.3000
Duffle Rs.2500-5000
Laptop satchel Rs.2000
Suitcase Rs.1500-3500
Strolly Rs.5000-8000
Leisure Vanity case Rs.1000-1500
Duffle Rs.1500-2500
Suitcase Rs.2000-4000
4-wheel Rs.5500
Strolly Rs.3000-6000
Accessories Camera pouch Rs.800
Travel safe vallet Rs.1100
Toilet kit Rs.1800
Travel document case Rs.400
Business leisure Laptop satchel Rs.3000
Laptop backpack Rs.3500
Lap.strolly Rs.6000

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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 long-
term objective capacity is 12000 units per day. VIP has a strong 4000
dealer network in place.

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.

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Brands, positioning and selling & distribution network

Company operates under four major business segments:

Company caters across the consumer segment with its various brands
in Hard as well soft luggage:
• Delsey & VIP cater to high end segment
• Aristocrat caters to mid segment
• Alfa for lower end price segment
• SkyBags is a separate line catering to mid & sub mid via Hyper
stores.

For marketing and selling, Company opts various channels such

as:
• ORS – sale via departmental stores like Lifestyle, Shopper’s
Stop etc.
• Hyper Stores – Like Big Bazaar, Vishal etc. Co sells only
SkyBags via this channel. This segment has seen 100% growth
in last year.
• MBO – Multi brand Outlets which sells all brands
• Distributors – They sell Alfa & Aristocrat mainly to smaller
vendors

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 • Exclusive Shop- Here co has various formats depending on the
brands, price points and target customers. VIP has 450
exclusive outlets.

✔ VIP Lounge – These are the premium shops selling VIP

& Delsey brands. Have 150 outlets
✔ VIPIL – These 250 outlets sells all the brands of the
company except SkyBags.
✔ Travel Zone (TZ) – These are the economy shops selling
only Aristocrat and Alfa brands via these 50 outlets.

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

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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 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.

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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 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

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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.

Pricing Strategy

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 Market Segmentation
Segment Price range Market share
(Rs) (%)
Premium 1500+ 15
Popular 700-1500 30

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 standard
segment but smaller than the premium segment, the standard 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

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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 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

NIFT PATNA Page 46

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.

SWOT Analysis

1. Strengths:-

• 2nd largest manufacturer in the world. (after samsonite).

• 66% market share in organized sector (largest in Asia).

• Form 31 years it has been in this market.

• It has 21 branches & a strong dealer network of about 5000 outlets.

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• Low raw materials cost.

• Real Value for money.

• Money power & aggressive management.

• All plants are ISO Certified (government recognized R & D unit in

Nasik).

1. Weakness:-

• Less Research & Development expenditure.

• Over employed organisation.

1. Opportunities:-

• Tie up with the French Co. Delsey and Acquired worlds 4’th
largest

co. Carlton for 20 Crores to cater upper segment.

• Economy is reviving.

• Untapped lower segment area.

1. Threats:-

• Unorganized sectors are cheaper by 25% due to less amount of

excise duty.

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• Excess capacity in the South East Asian countries.

• The players in the unorganized sector getting them organized and

coming out with branded products.

• Low demand Industry

• Competitions

• Price war

Competition from Samsonite & the Unorganized Sector

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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 has 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

NIFT PATNA Page 50

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, 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 pre-empt 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.

NIFT PATNA Page 52

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.

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

NIFT PATNA Page 54

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 stores, catalog
showrooms, mass merchants and warehouse clubs. In the United

NIFT PATNA Page 55

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 Samsonite’s brands has been

NIFT PATNA Page 56

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.

NIFT PATNA Page 57

 PRODUCTS LINES AND WIDTH
The products lines of Samsonite Includes:

• Suitcases
• Carry-ons
• Garment bags
• Backpacks/Duffels

NIFT PATNA Page 58

BASED ON SMALL MEDIUM LARGE
SIZE
(TOTAL 6 (TOTAL 20 (TOTAL 21
PRODUCTS) PRODUCTS) PRODUCTS)

Samsonite® Samsonite® Samsonite® Ascella

Elevation Elevation 22" Expandable
(SHOWN
21" Upright 25" Upright Upright
ASIDE IS
THE
MODEL
NO. OF
TWO 700 Series
PRODUCTS Samsonite®
WHICH Outline® 8
HAVE THE 22" Spinner Samsonite® Pro-
Sa
LOWEST DLX m
AND THE 24" Upright so
HIGHEST ni
PRICE te
RESPECTIV ®
ELY IN Pr
o-
EACH D
CATEGORY. L
) X
28
Kids Luggage "
U
• Business/Computer Bags pr
• Golf Travel Bags ig
ht
• Accessories
NIFT PATNA Page 59
 • SUITCASES

BASED ON
EXTERIORS

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

NIFT PATNA Page 60

 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
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PRODUCT
PRINCIPAL MAIN DISTRIBUTION
CATEGOR
PRODUCTS CHANNELS
Y
Hardside and softside Direct retail stores, specialty
Luggage luggage, garment stores and high–end
bags, carry on bags department stores
Mid–level department
stores, specialty stores,
national chains, warehouse
clubs, direct retail stores
National chains, mass
merchants, specialty stores,
direct retail stores
Duffel bags, tote
Specialty stores, department
Casual and bags, backpacks,
stores, national
Outdoor shoulder and hip
chains,warehouse clubs,
Bags bags,school bags,
sport and outdoor retailers
handbags
National chains, mass
merchants, specialty stores
Business and Briefcases, business Direct retail stores, specialty
Computer cases, computer stores and high–end
Cases cases department stores
Department and specialty
stores, office superstores,
OEMs, warehouse clubs

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 Mass merchants

1 Positioning:
High Quality / High Price

Samsonite positioned itself as Internationally acclaimed quality

product with visible benefits.

2 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.

3 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

1 Business Strategy Of Samsonite:

• Expand Channels of Distribution and Product Offering
• Strengthen Marketing and Product Innovation.

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 • Continue Worldwide Expansion.
• Improve Distribution Systems in the U.S.

1 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:-

• 80% of raw materials imported

• Low brand awareness
Opportunity:-

• Increase distribution network opportunity.

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

Threats:-

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 • Worsening situation in Kashmir
• Other MNC’s entering in the market.
• 4% decline in the market in 1997-98.

BIBLIOGRAPHY
• www.researchmarkets.com
• business.highbeam.com
• vipindustries.co.in

• www.samsonite.com

• en.wikipedia.org
• www.louisvuitton.com

• www.kipling-usa.com

• www.americantouristerindia.com

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 • Magazines : Images retail

NIFT PATNA Page 66