Monday, May 24, 2010

There are some things MasterCard can't buy - keep cash handy!

Take the Nilgiris heritage Mountain Railway for instance. A second class one way  ticket, from Coonoor to Ooty, costs Rs. 3/- for the 60 minutes trip. A first class ticket costs 35  times this - Rs.101/-. Try flashing your MasterCard!
This is the Coonoor Railway Station

This is the queue to board the heritage Nilgiris Mountain Railway at the Coonoor Station

This is just not done in India - except, perhaps, in Coonoor. Queuing-up to board the train. Unless, ofcourse, you are travelling first.

This was the most sought after photo op spot - where the guard stands at the head of the train

Take your seat before the guard decides to signal the commencement of the one hour trip from Coonoor to Ooty (Udhagamandalam for those who can manage this tongue twister). The guard stands here waving a red or green flag to the locomotive driver - the locomotive  pushes the train up from behind. The locomotive driver has to be alert for any red flags from the guard. The locomotive driver cannot see the track and what's ahead. He is completely dependant on the guard to navigate the train.

The Coonoor signal cabin. No different from the signal cabin of  any other railway station

First, the push back to change the track.  The train then moves forward after being put on the right track

The toy train moves through a quaint and green topography 

Approaching Wellington station

The lonely Wellington station. The train picked up the lone family waiting to board

It chugs to Ooty through twist, turns and curves

Over an aqueduct...

... which the passengers hoped was strong enough...

  This one was destroyed by a mudslide a few months back. The train crawled over this under-repair structure

  Through a natural narrow passage...

.... and Eucalyptus plantations

The green tea gardens signifying that Ooty was close. Nearing the end of the trip

Passengers taking the return trip have 30 minutes to buy the ticket for the return trip. Only one way tickets are issued at Coonoor and Ooty. There's a long queue to buy the return ticket. 30 minutes is just about adequate for the job. And, of course, you cannot pay with MasterCard!

Friday, May 21, 2010

India - Getting Ready to Draw the Curtains

India is a very challenging market. For a new entrant in the luxury furnishing fabrics segment, the market holds special challenges. 

First, home textile retailing  itself is still in its nascent stage. Sustainable luxury retail evolves from the saturation of the market for premium products. The opportunity for a market for luxury products is perceived when the aspirations of consumers are not satisfied by premium brands. As many luxury brands, particularly in the apparel segment  have discovered, market dynamics are very different from markets statistics. They cannot  be the basis to enter and  build a sustaining market for luxury brands.

Second, the correlation between income and demand is much lower for luxury furnishing fabrics compared to apparel and accessories.   Only a small segment of Indian customers, who can afford luxury products,  are open  to spending   on luxury furnishing fabrics.  Luxury apparel, accessories and automobiles  offers them  a superior platform to display their  wealth.

Third, a study done by the Italian Trade Commission in  2009 estimates the size of Indian market for curtain fabrics  to   be about USD 340 million and that  for  upholstery  fabrics to be USD 373 million.  While this may be true from a macro perspective,  the actual market size available for a luxury brand is unlikely to be more  than USD 18 million which includes sales of  imported fabrics accounting for about USD 5 million.

Roadblocks to  Market Growth

Supply Issues
A dearth of Indian producers  of  the luxury furnishing fabrics  forces Indian retailers to depend significantly on imports. Import duties  are as high as 40 to 60 percent of the FOB value. Depending on the country of origin and the urgency of requirement, freight and allied charges could add upto 10% to FOB costs making these products even more expensive. Frequent and unexpected transit delays lead to customer dissatisfaction on account of non-adherence to committed deliveries

Demand Issues
The Indian consumer is very new to the idea of luxury furnishing fabics.  Even a well-to-do customer is  happy dabbling with low and medium priced products.  She invests in an Italian sofa set. However, when it comes to curtains, she is not always as discerning.  It’s only the very evolved consumer, with an income to match, who realizes the value of luxury furnishing fabrics and recognizes the difference it make to décor.   
 Luxury brands are bought by customers who can afford it and also by those who cannot.  For the evolved customer, luxury is not about flaunting the logo. The number of customers who intrinsically understand luxury is small.  For the nouveau rich, the logo is the  luxury.  This is the larger segment  for luxury products.  Luxury furnishing fabrics offers little scope for flaunting the brand thus cutting out a segment of the population which can afford the brand but trade cheaper in the absence of product branding.

Strategies for Market Growth

Centralized Store Locations
Luxury brands  realise that physical presence in multiple cities may not necessarily convert into a larger customer base. In fact,  infrastructure and operating costs could make a larger chain less profitable than a smaller retail chain. The best way to reach target markets  is to set up stores only in key cities.  The target audience for luxury products, from smaller cities,  travel frequently to these key cities  for several reasons.  It makes perfect sense to have an impactful central presence instead of spreading  resources thinly.

Educating  Consumers
 To generate greater demand in any luxury product segment, including furnishing fabrics,  retailers need to familiarize the consumer with their products. Effective means of spreading awareness in these times are websites and virtual stores.  While these cannot replace the touch and feel facility that physical stores offer and which is crucial for a luxury brand,  these mediums are especially useful for customers who may not have easy access to stores. However, these need to be backed  by efficient delivery and a customer complaint redressal system.

Avoiding Imports
Heavy duties imposed on imported fabrics do not add realizable value for the consumer. Therefore, it is very essential for the retailers to develop a vendor base of domestic manufacturers of luxury furnishing fabrics if they have to address the Indian market on a profitable  basis.

Joint Generic Marketing
It is beyond the scope of a single company to expand the market size.  Furniture and furnishing retailers should initiate   joint action to expand the overall market size. Such alliances would not only create a better market but would also make shopping a more fulfilling experience.  Both segments will equally benefit from the expanded market base.
Co-opetition*, not competition is required to address small market segments which have the potential to grow significantly.

* Cooperative competition as defined by Edward De Bono