NEW DELHI, India — Fabindia, one of India’s fastest-growing retailers, has launched its first new concept store — the Fabindia Experience Center in Vasant Kunj here. The 10,000-square-foot unit is the first of 60 stores expected to be opened over the next few years, with an unusual location plan.
“These will open mostly in India’s micro markets,” said William Bissell, managing director of Fabindia Overseas Pvt Ltd.
There are currently more than 230 Fabindia stores in India, many of which feature women’s wear, men’s wear, home furnishings, food and beauty. The retailer also has 10 stores internationally, including in Singapore, Dubai, Italy, Nepal, Malaysia, Mauritius and the U.S.
The new store represents the first step by Fabindia into a department store-like concept. “With this, we will offer all 280,000 stockkeeping units in the same location,” Bissell said in an exclusive interview. Although the retailer already stocks these sku’s across its different stores, “we don’t offer them in any one place,” he explained. “So you have to travel to all our stores to see all of them. We have a slightly different product in Trivandrum, Goa, Kolkata. Now all those sku’s are under one roof.
“We are investing in experience. This is going to be India’s first fully omnichannel neighborhood store, with click and collect as well. It has things that Western companies don’t do — we’re going to offer full customization, if you want a different kind of shirt with button-down collars, or whatever is needed,” he added.
The new store includes the entire range of clothing — women’s, men’s, kids’, as well as occasionwear, plus a home section; an interior design studio; an organic wellness center based on organic products where a doctor offers advice, head massages are offered in a wellness room and a special chair can give a customer’s body mass index; a children’s play area, and a café on the top floor, based on the same concept that Fabindia has always followed for clothes — ethnic, fresh and organic. The offering includes unusual health options such as sugarcane juice and quinoa parathas (Indian bread).
Although the company’s sales may not be the final indicator of strength — Fabindia plays a role in connecting more than 50,000 rural artisans to markets — it has grown steadily. The consolidated turnover, including its interests in U.K.-based East Ltd., and an interest in Organic India, crossed the 10 billion rupees, or $153.9 million, mark in the year ended March 31, 2016. Fabindia alone is expected to have sales greater than that for the financial year just ended.
Fabindia was valued at about 45 billion rupees, or $675 million, in March 2016, after L Capital, the then-venture capital arm of LVMH Moët Hennessy Louis Vuitton, exited its investment in the company after three years, according to analysts. That compares to a valuation of about 18.75 billion rupees, or $281.3 million, in 2012 when L Capital invested. Fabindia currently has a customer base of three million and is looking to grow that to 10 million in three to four years.
Venture capital firm Premji Invest, which was already an investor in the company, took over L Capital’s 8 percent stake in Fabindia last year to become a large minority shareholder in the retailer. Premji Invest is one of the largest investors in the Indian retail market with holdings in Future Lifestyle fashions, department store chain Shoppers Stop and online retailer Myntra, among others.
Rahul Garg, partner at Premji Invest, described how Fabindia’s new store format adds to the future outlook for the brand. “Five years back nobody would have believed Fabindia would do a store like this…it is audacious. Not audacious as in-your-face, but in its sheer thought — virtually bringing together a department store of our own. If you compare it to a Bloomingdale’s we are almost there, in a sense.
“I don’t think many brands in India are able to command that true connotation of the family, whether it is the husband, wife, kids and parents,” he added. “The true genesis of the brand was: ‘How do I engage the customer in a much deeper way than just buying a shirt, or buying a pant, or buying a kurta?’ The mall environment does not allow you to engage truly. So the idea that William had, and it has turned out very beautifully, is how do we engage with the consumer at a deeper level, which becomes the defining brand statement,” he said.
Part of the new thinking is the planned locations of the new stores. While most brands head for the malls that have been popping up in India over the last few years, Bissell sees it differently. “Local markets are dying,” he observed. “Because all the serious retail has moved into malls. Connaught Place [New Delhi] is still holding its own, Kala Ghoda [Mumbai], some others have good restaurants but have more dry cleaners and similar shops. If you actually look at it, there are just a handful of traditional areas that are still left. So we’re going to go into these retail areas, negotiate good prices — there are fantastic deals available — and build into it.”
As Garg observed, the market in India is changing fast as well, with branded retail expected to grow at 10 to 15 percent overall. “But companies that have more powerful brands should aim for mid- to early 20s [in percentage of growth]. If you have the bandwidth you can grow 5 to 7 percent faster than the market,” he said.
India’s retail sector is expected to double from $630 billion in 2015 to $1.1 trillion to $1.2 trillion by 2020, according to a report by the Confederation of Indian Industry and consulting firm The Boston Consulting Group. Less than 8 percent is currently in the organized segment, while the vast majority of the market continues to be dominated by small, independent retailers.
“There’s massive depth in the so-called ethnic market,” Garg observed. “Ten years back, the ethnic market was much more unorganized than the Western fashion brands, which have really come into the organized segment. Ethnic brands were a lot of smaller and local chains and boutique shops who are now getting themselves organized and branded. In this, a few brands like Fabindia are getting disproportionate market share because there is now a preference for branded, high-quality ethnicwear. People no longer go to your neighborhood boutique store or your mom’s tailor to get things made.”
However, Bissell has taken pulse of the need for customization — which will be on offer at the new store. Meanwhile, he has taken his father John Bissell’s journey — begun in 1960 — two years after he came to India from the U.S., and is continuing to drive it in different ways, with what analysts describe as “an accurate pulse on the consumers’ needs.”
Bissell has faith in the model as well. “We expect this to be highly profitable in the first month. We invest from our balance sheet and we believe that every business must be profitable from a stand-alone basis,” he said. “We’ve become very good at launching franchises. We now need to become good at scaling. So that’s our next challenge.”
As many investors in bricks-and-mortar retail concepts pull back, Garg believes that is the wrong kind of choice. “I think people are making a slight mistake comparing brick-and-mortar to e-commerce. We are shareholders in both kinds of companies — Flipkart, Snapdeal, Fabindia, the Future group. I think the challenge I see is — if you have a fantastic product, people will come and buy it — online if that’s where you sell it, offline, if that’s where it is. The problem is with a me-too product, either you go online and compete on price, or you get killed. I think the beauty for us is that 75 to 80 products you see on the shop floor are not available with any other brand. And because it is unique, and proud of the product heritage, online is not a threat for us, but it is an opportunity, using both online and the store. So this means a great change in the way Fabindia is going about it.”
After some thought, he added, “It is also a part of the India story.”