Fabindia: Download PDF

FabIndia

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Weaving Scale into Hand Made Products
FabIndia is a well-known retail brand that sells various hand made

products through its stores across India and overseas. They are probably
the best-known urban middle class brand in India. It would not be wrong
to say that they define the middle class look for Indians. Though they are
best known for home linen and garments, they have expanded into
organic food, personal care products, furniture and Jewellery. This 50-
year-old company started as an export house, exporting Indian hand
woven fabric to the developed markets in the west. In last 15-20 years
the company has completely transformed itself into a chain of retail stores
with more than 90% of its revenues coming from domestic markets. The
company has been able to turn around and achieve rapid growth due and
its innovations are worth
exploring. Founded in 1960
To understand how FabIndia 1975: First retail store in Delhi
operates, we need to 1993: Second retail store in Delhi
understand the community- 1996: Third retail store in Bangalore
based businesses. In this model 2000: Non-textile range started
companies source products 2004: Organic Food introduced
from communities that are 2006: Personal Care products, ~60
traditionally well versed in a Stores
craft and make products using 2008: Handcrafted Jewellery
this skill. They are not formally 2010: 120+ stores including 6
trained, but they inherit this overseas
knowledge from their families
and continue to pass it to the next generations. They usually operate in a
small geography and have very limited access to the broader markets.
Companies like FabIndia act as intermediary and take their products to
the urban markets worldwide. There are many examples of the successful
businesses built around communities like Amul that deals in dairy
products and Jaipur rugs that deals with handcrafted carpets.
John Bissel started FabIndia in
Vital Stats: 1960 in New Delhi as a
Revenue Rs 350 Crores company that worked with
200,000+ SKUs various weavers across the
40,000+ rural producers country and developed fabrics
95% revenue from domestic sales that were sold to retail stores in
Wholesale exports to 33 countries western markets. For almost 30
850 direct employees and 1000 years they kept growing at a
consultants
17 Supplier Region Companies
steady pace adding both the suppliers and customers to their kitty. They
started their first store in 1975 on an experimental basis which was a big
hit, but the focus of the business still remained exports and that is where
the maximum revenue came from. In early 90s when the Indian economy
was liberalized and India opened itself to the world, the scenario began to
change for FabIndia. Their customers now wanted to work directly with
their suppliers. This was because they had an easier access to these
suppliers, suppliers by now well versed to weave for the western tastes
and also the volumes needed made sense for them to set up their own
shops in India. On the other hand, Indians started making more money
and were willing on spend on the merchandise sold in FabIndia stores,
which till then was one of the few organized retail stores selling products
made out of Indian hand woven fabrics.
By this time FabIndia’s baton had also moved into the hands of John’s
son, William Bissell. It was more or less imperative that company has to
change its focus from exports to domestic market for the reasons
mentioned above. But the challenge was how to achieve scale in this
business. The brand was built on hand made products, which could not be
changed. For a large-scale supply of products, not only you need to work
with many more communities in rural areas, but also ensure a consistent
quality of products. Quality assurance in hand made products is a big
challenge as each item is unique and since it is not coming out of a
standard machine, there is no way to embed quality in the production
process.
Challenge was to have an orchestrated supply chain, which not only
caters to the need for large volume of supplies but the quality and type of
supply had to be market driven. There was a need for a central co-
ordination agency that can work with the suppliers to design new fabrics
and styles based on the market trends and also ensure the quality of
products reaching the retail stores. Now as the suppliers were based
across the length and breadth of the country and specialized in products
from their region, one central agency may not have been enough to deal
with them. At the same time FabIndia also wanted to keep its well
established partnership with the craftsmen and make them own a piece of
enterprise that they work for.
FabIndia came out with an Innovative re-organization of company. It
created 17 supplier region companies (SRC) that covered the entire
country, divided by geographies. A minimum of 26% stake in SRC was
reserved for artisans. FabIndia owns 49% stake and employees and
investors own the rest. Twice a year the shares of these companies can
be traded. Setup less than 5 years back, most of these companies are
already profitable and pay dividends. A separate microfinance company
was setup to provide funds to these SRCs.
SRCs provide artisans with inputs on designs and market trends. They
help them get access to funds and management skills and ensure the
quality of products supplied to FabIndia. For FabIndia the quality control
and sourcing has been decentralized and localized. As SRCs supply
directly to the stores, the time to market is considerably reduced.
Typical Order Flow between Stores, SRC and Artisans /

Producers
Key Innovations at FabIndia can be classified as:
Networking: Pioneering the concept of community-owned
Enabling Process: Decentralized Inventory management
Core Process: Decentralized quality assurance and mechanism for transmission of
market signals.
Customer Experience: Standardized and consistent quality, Wide Variety.
Questions
 Do we know why they have been successful?
 When do our processes function best?
 What are our net margins?

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FabIndia

Weaving Scale into Hand Made Products

FabIndia is a well-known retail brand that sells various hand made

Typical Order Flow between Stores, SRC and Artisans /

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