Focusing on India

Dr Ramesh Tainwala, the President (Greater Asia) of Samsonite Corporation shares the company’s profile and aspiration in India and, moreover, his perception of Indian market in an interview to the Retailer.

Retailer: How is the progress of Samsonite’s business operation in India?

RT: Presently, we have three brands from Samsonite’s stable - Black Label (for the premium end), Samsonite and American Tourister. By the end of this year, we will introduce two more brands, Timberland and Lacoste, through license arrangement. We’ll be the master licensee of these two brands.

Samsonite in India generates six per cent of its global turnover. For Samsonite, India is the 5^th largest market and the second fastest growing market (next to China) in the world. 

As far as our manufacturing process is concerned, we’ve one unit at Nasik, Maharashtra. We also have partnership units run with local entrepreneurs. Presently, we have five such units. We’re planning to increase the number and also expand the manufacturing unit. From being simply a manufacturing base, India is gradually emerging as a commercial base. Presently, China is our major manufacturing hub. However, owing to recent appreciation of Renminbi (currency of China), and depreciation of Indian currency, we’re preferring India to China. Also, some rebates we used to enjoy earlier in China have been reduced or withdrawn. This has led us to focus more on India.

Our mid-segment brand American Tourister, priced at Rs 1,000 - 7,000, is the fastest growing brand in Asia. It is growing at 57 per cent and accounts for 50 per cent of our business in India. We prefer to retail this brand through multi-brand outlets. However, we have three operational exclusive outlets here and are planning to put up eight more outlets across all major cities. For our premium brand Samsonite Black Label, priced at Rs 5,000 - 50,000, we always go for exclusive outlets in order to give our customers total brand experience and proper ambience. Samsonite Black Label constitutes 76 per cent of our high-end segment.

Retailer: As retailer, what are the major challenges you’re facing and how will you tackle these?

RT: The major challenge in India is the extremely high rentals in contrast with low sales density per sq.ft. This cripples retailers. Also, indirect taxes are too high. These include sales tax, excise duty and constitute 40 - 50 per cent of the cost of good, whereas the figure stands at just 15 – 20 per cent worldwide. We expect a correction at real estate front and also some rationalisation of indirect taxes.

Retailer: Where do you source fashions accessories like footwear? Are you introducing luxury brand Lambertson Truex in India?

RT: From India, we outsource footwear, but not other products. Our footwear line will be introduced in India as spring/summer collection in 2009. As far as other items are concerned, these are sourced from Europe. Lambertson Truex is a super-premium brand whose price range starts at $ 10,000 and we feel that India is not yet ready to accept such high-end products. At least five years’ period is required for Indian market to live up to this level.

Retailer: How much do you employ franchise model for expansion?

RT:  Forty per cent of our stores are franchised. In tier II and III cities, we go for franchise because our control over the market is less there. Reason for this is our unfamiliarity with the market and lesser social network. Also, franchise offers us cost advantage in terms of owning a property and, amazingly, we’ve observed that store owners of tier II and III cities are reluctant to simply rent out their property. They want to retain ownership of the retail space and, in such situations, franchise works fine.

Retailer: What do you think about India’s manpower?

RT:  India’s managerial skill is excellent. Management talent pool in India is focused and intelligent. But, in terms of manufacturing labours, China always scores over India. At this level, they are more efficient, having higher productivity. Unlike in India, China’s labour law is more encouraging and accommodating. However, in recent years, there is a significant change in the attitude of the Indian workforce. They are now aware that, to sustain and grow, productivity has to be increased, and should work hard towards this end.

Retailer: What is your expansion plan in India?

RT: Presently, there are 223 retail outlets and we’re planning to add 50 retail stores more this financial year. In three years, we want to have 450 retail stores across India.  We want to carry out most of the expansion plan after a correction in the retail real estate takes place. There is a surplus of retail real estate. The supply has exceeded demand. In the last two years, growth of supply is 300 per cent. So, retail rent is under pressure.

Retailer: Being at the ace position, what are you achieving?

RT: In developing countries, especially in India, American Tourister is the most significant brand from Samsonite Corporation. The brand carries the prestige of the international brand at reasonable price. Also, in developing regions like Asia and Africa, we find a huge middle-class customer base, which has the aspiration of owning foreign brands. American Tourister caters to this segment. Samsonite Corporation is growing at 18 per cent globally and I have the plan to drive growth for American Tourister at over 60 per cent in the whole of Asia and make it as big as Samsonite in value in three years. Our aim is to make it contribute 40 per cent of the global turnover.