In at present’s Finshots, we discover whether or not VIP Industries is in a candy spot to seize the tailwinds within the baggage trade
The Story
Two issues are occurring in a giant approach in India.
- Revenge journey is in full swing. On twenty fourth December, we witnessed the highest-ever home air passenger site visitors of 4.35 lakh folks flying on a single day. The earlier excessive was in December 2019 when 4.20 lakh passengers took to the air. Extra frequent quick holidays, group excursions, it’s all occurring.
- Marriage ceremony bells are ringing. Throughout November and December final yr, 32 lakh weddings have been scheduled to happen within the nation. That alone would have generated ₹3.75 lakh crore value of companies for the trade — 50% increased than in 2019.
And when these two industries see a progress spurt, there’s one other trade that grins ear to ear too. We’re speaking in regards to the baggage trade.
See, when folks journey, they want their suitcases, trolley baggage, and backpacks, proper? And in the event you’re a eager observer and traveller, you’ll’ve observed that the variety of items coming off the conveyor belt prior to now decade has risen tremendously. Gone are the times when a household of 4 travelled with 2 suitcases. Now everybody, together with the children, travels with particular person baggage.
And in the event you attended a type of 32 lakh weddings in December final yr, you might need observed at the least 5–6 trolleys or suitcases being hauled about. They’re stuffed full with the bride’s and groom’s wedding ceremony attires. And to not neglect that there’s the bags that the bride and groom normally take after they transfer into a brand new dwelling.
The tip outcome? The baggage trade in India is having certainly one of its finest years ever.
And there’s one firm specifically that’s poised to learn from these tailwinds. We’re speaking about VIP Industries, a reputation that’s synonymous with baggage in India. And a model that dominates the organised baggage market with a forty five% market share. In simply the primary 9 months of FY23, it has clocked the best internet earnings in at the least the previous decade.
However getting right here hasn’t actually been a simple journey for VIP.
All of it started within the Seventies. VIP began its journey with a capital of ₹1 crore and made briefcases priced at ₹50–100 for the workplace goer. This sturdy gray system was fairly the fad for businessmen and political aides again within the day. And clearly, the identify VIP gave it an aspirational high-status tag in younger post-independent India too.
However issues modified. The unorganized market mushroomed in a giant approach and began creating tender baggage with material. VIP specialised in arduous baggage again then and didn’t foresee buyer preferences altering. And whereas it launched a sub-brand known as Skybags for tender baggage within the Eighties, it didn’t pump in sufficient cash to construct a model and keep off competitors.
Its market share started to drop.
Then got here the liberalisation wave of the Nineties and it swept the rug from below VIP’s ft. Samsonite, a world model, stepped into the Indian market. A brand new India with increased disposable earnings most well-liked a international model over an ageing home one.
Its market share dropped additional.
In between all this, VIP missed the memo that baggage wasn’t utilitarian anymore. It was a life-style product and a mode assertion. Folks didn’t need to be seen wheeling a boring model. Baggage had turn out to be an extension of 1’s persona and other people didn’t thoughts shelling out the dough for what turned oddly a standing image.
And as its chairman, Dilip Piramal put it, “They [the shoppers’ need pleasure. In my very own circle, no one makes use of a VIP product. To start with, I was a bit upset, however now I realise that if I used to be not the proprietor of VIP I might additionally not use its merchandise.”
VIP’s market share tumbled from the 80% it as soon as used to command to under 50%.
So, in 2008, when Radhika Piramal, the daughter of VIP’s chairman lastly took the reins, she had her work lower out. She revamped the VIP picture and positioned every model distinctly. A model known as Carlton which VIP acquired in 2004 turned the premium providing. Aristocrat was slotted into the mass market. She even introduced again Skybags in 2011 however focused on design and vibrancy for the youth.
Additionally they pumped up promoting. It jumped from round 4.7% of gross sales in FY09 to over 6.4% in FY18. Bollywood actors (Saif Ali Khan, Kareena Kapoor, Varun Dhawan) and Cricket stars (Rohit Sharma and Ravichandran Ashwin) have been roped in for TV advertisements.
It additionally shifted its focus from promoting solely by its vendor channel to hypermarkets the place folks made impulse purchases. And shortly sufficient, an entity like BigBazaar (whereas it was nonetheless round) truly contributed to fifteen% of VIP’s revenues.
All this meant their product combine additionally modified. At present, the VIP model contributes to 24% of the revenues, Aristocrat has a 32% share, and Skybags grabs the lion’s share with 33%
And you could possibly argue that the runway is lengthy for the corporate. Regardless of the introduction of GST, the unorganized market nonetheless holds a 60% share of the market. As India’s financial system formalises even additional, you could possibly see unorganised distributors shrink and VIP shall be in a candy spot to pounce on their enterprise.
The opposite factor is that the unorganised sector is thought for churning out tender baggage variants. And there appears to be an growing choice for arduous baggage nowadays. Its market share is predicted to rise from simply 30% at present to over 55% within the subsequent few years. So even when GST isn’t the loss of life knell, buyer preferences can alter the panorama in favour of VIP fairly rapidly.
VIP appears to have gotten every part going for it.
However…there’s danger lurking within the shadows too. And that’s primarily within the type of competitors.
We’re not simply speaking about Samsonite which has a 90% share within the premium phase. Or its sub-brand American Tourister which has captured folks’s creativeness within the mid-segment. The mass market options Safari Industries which has been round for the reason that Eighties. Whereas it doesn’t most likely have as a lot model recall as VIP, it doesn’t appear to matter within the mass market class. Safari appears to hit the candy spot for India’s model affinity and worth pricing. And prior to now couple of years, its market share within the mass market phase has risen from 19% to 26%.
Traders appear enthusiastic about Safari too. So prior to now yr, whereas VIP’s inventory has risen solely by 30%, Safari has returned a whopping 100%.
The opposite factor is that VIP’s bets on growth haven’t performed out as anticipated.
For starters, there’s the ladies’s purse model known as Caprese. It was launched practically a decade in the past and it even roped in Bollywood star Alia Bhatt as its model ambassador. Nevertheless it contributes a measly 4% to VIP’s revenues. And whereas the administration is definite that it’s a phase that they’re going to place all their efforts into over the following 5 years, the previous expertise doesn’t encourage quite a lot of confidence.
VIP’s worldwide plans have additionally fallen flat. Again in 2017, it mentioned that it deliberate to extend its exports to make up 25% of revenues, it’s nonetheless caught at a measly 5%. And whereas VIP is making noise about its intention to provide white-label baggage for retailers within the US and UK (which they’ll stamp with their very own model identify), it’s too early to say how it will play out.
So yeah, whereas there are tailwinds in VIP’s favour, it might not be easy crusing for the 50-year-old baggage model.
Till then…
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Ditto Insights: Why Millennials can purchase a time period plan
In keeping with a survey, solely 17% of Indian millennials (25–35 yrs) have purchased time period insurance coverage. The precise numbers are seemingly even decrease.
And the extra worrying truth is that 55% hadn’t even heard of time period insurance coverage!
So why is that this occurring?
One frequent false impression is the dependent conundrum. Most millennials we spoke to need to purchase a time period coverage as a result of they need to cowl their partner and children. And this makes good sense. In any case, in your absence you need your time period coverage to pay out a big sum of cash to cowl your loved ones’s wants for the long run. However these exact same folks don’t consider their mother and father as dependents although they help them extensively. I bear in mind the second it hit me. I routinely ship a refund dwelling, however I had by no means thought-about my mother and father as my dependents. And when a colleague spoke about his expertise, I instantly put two and two collectively. They have been depending on my earnings and my absence would most actually have an effect on them financially. So a time period plan was a no brainer for me.
There’s another excuse why millennials ought to most likely contemplate a time period plan — Debt. Most individuals we spoke to have dwelling loans, training loans and different private loans with a substantial curiosity burden. Of their absence, this burden would shift to their dependents. It’s not one thing most individuals consider, nevertheless it occurs on a regular basis.
Lastly, you truly get a fairly good cut price on time period insurance coverage costs once you’re youthful. The concept is to pay a nominal sum yearly (one thing that gained’t burn your pocket) to guard your dependents within the occasion of your premature demise. And this price is lowest once you’re younger.
So in the event you’re a millennial and also you’re studying this, possibly it is best to rethink shopping for a time period plan. And don’t neglect to speak to us at Ditto whilst you’re at it.
1. Simply head to our web site by clicking on the hyperlink right here
2. Click on on “E book a FREE name”
3. Choose Time period Insurance coverage
4. Select the date & time as per your comfort and RELAX!