Objective of the study

Objective: -

The objective of the study is to the Retail Market and its constituents.
To evaluate the options of retailing in leather industry.

Research Methodology: -

Qualitative methodology: -

We have done qualitative research in which we have collected the data from the
tailor made sources.

Sources of the Data –

We have collected the data from the secondary sources that is, internet,
newspapers, magazines brochures and text books etc…

Characteristics under study –

The following characteristics were studied:

1) Consumer Behavior in Retailing
2) FDI in Retailing
3) Branding in Retail
4) Supply Chain Management in Retail
5) Merchandising in Retail
6) 7 P’s in Retail.

Conclusion & Recommendations –

It is clear from the figures that the retail sector will show stupendous growth in
the future. So it is the correct time to enter into the retail sector because the
retailing of leather has not taken a proper shape, i.e. , the retailing of leather is
dispersed in the form of shoes, apparels and accessories. But most of its usages
has not taken the proper form like professional leather bags, lap – top bags
etc…

Limitations of the study –

We have collected the whole data from the secondary (relevant) sources. So we
are totally relying on the data available from reliable sources. Data which we
have collected is not articulated. We have only presented it in a lucrative form.
RETAIL AS AN INDUSTRY

As in the rest of the world, consumerism is spreading like wildfire in India.

Lifestyle and fashion stores, supermarket chains, giant shopping malls and
hyper marts are testimony to post-liberalization India’s retail boom. Little
wonder that some of the hottest jobs are in the sunrise retail sector. The growth
of retail revenues in India is impressive by any yardstick — a steady 25 percent
per annum for the past decade with no signs of slowing down.

India’s estimated 33 million retail outlets, big and small, provide employment to
15 percent of employable Indians and are perhaps the largest contributor to
India’s gross domestic product after services. During the next decade, retailing
is expected to generate one million additional jobs in the newly-emergent
organized retail trade. Therefore there’s a premium on trained personnel,
urgently needed to sustain the growth of this sector.

"Retailing is one of the oldest business activities in India. But until the
liberalization and deregulation of the Indian economy in the 1990s, it was
dominated by small one-man retail units. However since the past five years, it
has become more structured and formalized and is moving towards
international standards. Today, the organized retail sector is an industry.
Retailers have started investing in large and quality spaces and shopping malls
have sprung up across the country, combining retailing with entertainment,
transforming shopping into a pleasurable experience. Currently India has over
300 large shopping malls and the number is multiplying at a phenomenal pace,"
says Chandru Chandiramani, deputy general manager (retail) of the textiles
division of Raymond Ltd. This textiles major is among the largest integrated
manufacturers of worsted fabrics with diversified operations including
engineering, steel files and specialty steels, toiletries and cosmetics, ring denim,
prophylactics and the recently launched national chain of stores retailing prêt
fashionwear under the brand name Be.

Retailing - World’s largest private industry (US$ 6.6

trillion sales annually)

 Indian retailing
- Largest employer after agriculture - 8%* of
population
- Highest outlet density in world
- Around 12 million outlets
- Still evolving as an industry
- Long way to go
 E vo
Historic/R
Reach
Evolution of Indian Retail
 Informal retailing Sector
- Typically small retailers.
- Evasion of taxes
- Difficulty in enforcing tax collection mechanisms
- No monitoring of labor laws.

 Formal Retailing Sector

- Typically large retailers
- Greater enforcement of taxation mechanisms
- High level of labor usage monitoring

 Modern Format retailers

 Supermarkets (Foodworld)
 Hypermarkets (Big Bazaar)
 Department Stores (S Stop)
 Specialty Chains (Ikea)
 Company Owned Company Operated

 Traditional Format Retailers

 Kiranas: Traditional Mom and Pop Stores
 Kiosks
 Street Markets
 Exclusive /Multiple Brand Outlets

 Hypermarket
 Big Bazaar
 Giants
 Shoprite
 Star

 Department store
 Lifestyle
 Pantaloons
 Piramyds
 Shoppers Stop
 Trent

 Entertainment
 Fame Adlabs
 Fun Republic
 Inox
 PVR
Industry Dynamics
 Low domestic competition
- Because of fragmented nature of industry

 Lack of exposure to global best practices

- Low entry barriers for unorganized retailing
- Moderate entry barriers for organized retailing

 Wholesale system under-invested leading to 20-40% wastage

 Non level playing field issues

- Wide differences in treatment of small and large retailers

 Three year compounded annual growth rate of 46.64 %

 Organized retail in India is only two per cent of the total US$ 215 billion
retail industry

 Fastest growing sector in Indian Economy

 Expected to grow 25 per cent annually

Growth Prospects
Organized trade in India is very underdeveloped when compared with other
emerging markets in Asia, Latin America and eastern Europe. Figures show
that developed markets like the US are far, far ahead. (Tables 1 and 2)

Table 1
China India
Parameter
1996 2003 2005
Per capita GDP (USD) 675 1,109 710
Size of retail market (USD billion) 225 400 215
Share of organised trade (per cent) 7-8 ~17 <4
Table 2
Country Share of organized trade (per cent) (2003)
India 4
China 17
Poland 20
Indonesia 30
Russia 33
Brazil 35
Thailand 40
Malaysia 55
USA 85

90
80 India
70 China
60 Poland
50 Indonesia
40 Russia
30 Brazil
20
Thailand
10
Malaysia
0
USA
Share of organised trade (per cent) (2003)
Organized retail

India v/s China

The Indian and Chinese markets are comparable in many aspects:

• Both countries are not homogeneous. They comprise many markets

within a single country, with significantly varying cultures and customer
preferences across regions.
• There is a significant rural population in both countries, which has much
lower purchasing power compared to the urban population.
• Both countries are geographically very large and unevenly developed,
adding a distribution and logistics dimension to the retail trade.
• Consumers in both countries are highly value conscious Research done
by the Tata Strategic Management Group (TSMG) indicates that over
the next 10 years, the total retail market in India is likely to grow at a
compounded annual growth rate (CAGR) of 5.5 per cent (at constant
prices) to USD374 billion (Rs 16,77,000 crore) in 2015. The organized
retail market is expected to grow much faster, at a CAGR of 21.8 per
cent to USD55 billion (Rs 246,000 crore) in the same time frame,
garnering around 15 per cent of overall retail sales. Based on our
projections, the top five organized retail categories by 2015 would be
food, grocery and general merchandise; apparel; durables; food service;
and home improvement.

Table 3: Organized retail market in India (Rs crore)

Table 4: Organized retail market in India
KEY TRENDS

Trend 1: Consolidation — The big get bigger

In the early stages of development in retail markets, there is a proliferation of
players. For example, in China in 2003, the top 100 players accounted for only 8
per cent of the total retail market with the top 10 accounting for 3.2 per cent of
the market. However, when retail markets develop, there is a consolidation of
players with fewer large players dominating the market. This trend is starkly
visible in the developed economies of the US and Europe.

Trend 2: Convenience stores and hypermarkets are gaining

prominence
These are driven by a consumer need for convenience and lower prices / higher
value in mass categories, while the big box category killer stores are gaining
importance in the specialty retail categories. While supermarkets may emerge
at the initial stages of retail market development, in the long term they are
unable to match the consumer value proposition of convenience stores and
hypermarkets.

Trend 3: Private label products become increasingly important

Private labels today account for 17 per cent of global retail sales, with the
highest share of 23 per cent in Europe and the lowest share of 4 per cent in Asia.
M+M Planet Retail data shows that private label penetration varies from 25 per
cent to 95 per cent among some of the largest retailers in the world.

Implications for Indian retailers

Global trends have important implications for Indian retailers. The Indian
consumer is very value conscious; willing to spend money in most cases, but
constantly cost conscious, evaluating every rupee spent. It is therefore
imperative for retailers to offer a price advantage through sourcing and
operational efficiency, as well as a strong private label programme to attract
customers. Existing and new entrants need to achieve scale quickly to drive
efficiencies in procurement, supply chain and marketing. Else, they risk being
marginalized by larger players.
Real estate and human resources will be the critical drivers to build scale. While
there are a few hundred malls under various stages of development across the
country at present, retailers will also need to think out of the box to ensure the
availability of real estate. This may include acquiring and developing the real
estate themselves, rather than wait for mall development. Given the rising
demand for retail real estate, retailers will need to take a long-term view on
rentals and look at alternative options like ownership or very long leases.
Retailers that invest in training will be able to ensure the availability of quality
manpower in a rapidly growing market.

In conclusion, the retail market in India offers an opportunity for a large player
to build a Rs 40,000-crore retail business spanning multiple categories by 2015
(at current prices). Compared to this, the revenue of the largest Indian retailer,
Pantaloon, grossed only Rs 1,085 crore in 2005. Little wonder that large
domestic business houses and international retailers have expressed a keen
interest to enter the retail sector in India. To capitalise on the opportunity,
however, players need to be aggressive in outlook and build scale quickly.
CHARACTERISTICS UNDER STUDY
i) FDI in retail
Current Indian FDI Regime

FDI not permitted in retail trade sector, except in:

- Private labels
- Hi-Tech items / items requiring specialized after sales
service
- Medical and diagnostic items
- Items sourced from the Indian small sector (manufactured
with technology provided by the foreign collaborator)
- For 2 year test marketing (simultaneous commencement
of investment in manufacturing facility required)

Metro Group of Germany

- Cash-and-carry wholesale trading

- Proposal faced strong opposition

Entities established prior to 1997

- Allowed to continue with their existing foreign equity

components.
- No FDI restrictions in the retail sector pre-1997

Food world

- 51:49 JV between RPG and Dairy Farm International,

- Leading food retailer in India now: - Mc Donalds

Why FDI
1) Improve competition
2) Develop the market
3) Greater level of exports due to increased sourcing by major players

- Sourcing by Wal-Mart from China improved multifold

after FDI permitted in China
- Similar increase in sourcing observed for Metro in India
- Provides access to global markets for Indian producers

4) Investment in technology

- Cold storage chains solve the perennial problem of

wastage
- Greater investment in the food processing sector
technology
- Better operations in production cycle and distribution

5) Better lifestyle

- Greater level of wages paid by international players

usually
- More product variety
- Newer product categories
- Economies of scale to help lower consumer price
- Increased purchasing capacity of consumers
 375

300
n
The 7 P’s of Marketing

As products, markets, customer and needs change dynamically at a rapid rate,

one need to analyze these 7 P’s for continuously revaluating the business
activities.

a) Product –

One need to see his own product from the consultant point of view.
As though you are an outside marketing consultant brought in by the
company to check whether this is the right business at this time. One
need to answer such questions like “Are these products are
frequently used by the customer?” because Frequent Buying is one of
the major driving force in the Retail Industry.

b) Prices –

In the countries like India, the economy is still price sensitive. The
price is the driver for the specialized retailers who had established
themselves in the market like Big Bazaar, Reliance Fresh. Also
relating to the price the customer perception come into the picture,
i.e., many of the people do not visit the retail outlets because they
perceive these as very costlier outlets. This ‘Myth’ about the price
was broken by Big Bazaar; Big Bazaar gives a full page advertise in
the leading news paper of local area highlighting individual prices of
the products in it. Thus, the people realize that the products in the
retail outlets are actually cheaper than their nearest grocery shops.

c) Place –

The mall has to be located at such a ‘strategic location’ that it must

be easily accessible from each part of the city. Today, according to
the trend, most of the retail outlets are situated in the malls so that
when a person approaches the retail outlet then he can also look for
other things in the mall.
d) Promotion –

Retail Outlets are not spending a huge amount in promotions as the

retail concept is newer in India and mouth – to – mouth publicity
which it gets is very difficult otherwise to get by any concept as such.

e) People –

The people are very important part in the retail sector as a whole
because the retail concept is taking its own shape and the trends are
not stable at all. (As it is very new concept in India). So, the retail
organization has to monitor those trends and the workforce has to
change its style of retailing. Within the time span of few weeks.

f) Process –

Today every organization in retailing is following a unique way and

even the strategies to be followed and products to be sold of one
organization does not intersect with other organizations. So, the
process of every organization is totally unique in retailing.

g) Physical Evidence –

A physical object is self defining, a service is not(in some cases). Thus

it is marketers task “define for the services what the services cannot
define for itself”. The three key elements of physical evidence are
ENVIRONMENT, COMMUNICATION & PRICE. The marketer
use homogeneous combination of these three things to lure consumer
into their retail outlet.

P H Y S I C A L
E N V I R O N M E N T

A M B I E N C I EN F R A S T R U CH OT US PR IE T A L I T Y

Consumer Behavior
 CUSTOMER EXPERIENCE OPTIMIZATION

Your customers have conscious and unconscious experiences each and every
time they walk into your store, open your catalogue or visit you online. Good,
bad or indifferent, these experiences create multiple impressions, some rational
and some emotional. The purposeful management of the customer experience
builds deep emotional connections leading to strong brand preference,
increased loyalty, repeat business and ultimately, profitable growth.

Most retail organizations don’t understand how to manage the customer

experience for maximum value or use the experience as a way to differentiate
their business.

Customer Experience Optimization™ is a cutting-edge process for designing

retail experiences that emotionally engage and bond customers to your brand.

Customer Experience Optimization™ gives retailers a competitive advantage

through a prescribed approach to designing and implementing customer
experiences that build relationships. By leveraging in-store and online
assessment and audit tools, we develop a comprehensive evaluation of the
current customer experience and help our clients design, execute and manage
an experience that impacts customer value, loyalty and the bottom line.

Customer Experience Optimization™ has proven to be a profitable brand

positioning methodology for leading retailers, consumer goods companies and
related businesses around the world including Office Depot, Blockbuster,
Capital One, IBM, GE, Penske Truck Leasing, and Taco Bell. Customer
Experience Optimization™:
 Improves financial performance
 Drive profitable growth
 Strengthens competitive advantage
 Builds brand loyalty
(Myths related to Consumer Behavior in Retailing)
Myth 1: Consumers behave the same in all markets
The problem: The whole process of creating and introducing a new technology
product is littered with guesswork that leaves the product designers in a
revolutionary frame of mind—even after the product starts shipping and the
information starts to flow. Designers believe that consumers will flock to their
new technology product, service, or web site because it provides a similar value
or copies a concept provided in an established market. In the end, consumers
don’t understand the offering and don’t use it.

The reality:

Consumers behave differently in new markets than in established

markets.

The Consumer Adoption S-Curve demonstrates how consumers change their

behavior as they progress through a product’s growth phases. It shows why new
products in Phase I require a different focus than a similar product that has
already progressed to Phase III.

The solution: New products are more successful when designers analyze usage
patterns earlier to determine the product’s key success factors. Once identified,
these key success factors should be optimized and streamlined to create a
consumer-grade experience that will attract mass consumer success.
Myth 2: The more consumers see it, the more successful it will
be
The problem: Many companies believe in their product so much that they can’t
understand why it isn’t successful. They assume that the problem is that others
don’t know about the product, so they increase their marketing budget.
However, they soon spend themselves out of business because consumers
attracted to the product don’t stay to become long-term, loyal users.

Consumer Adoption Funnel

The reality:

If the offering isn’t attractive, there is no point in getting more users to see it.
The Consumer Adoption Funnel demonstrates how users progress through their
experience with a new product or service.

The solution: Using marketing to attract more users won’t change how these
users behave once they arrive—marketing is only the first gate of four in the
Consumer Adoption Funnel. You can coax users into trying your product or
service, but you can’t compel them to use it long term. Stickiness (value versus
cost) must be optimized before users will increase their usage.

Myth 3: If I’ll use it, my users will

The problem: It is often hard for designers of a new technology product or
service to differentiate themselves from their users. They think that new users
will fall in love with the product just as they have. They find it very difficult to
understand why users reject their offerings.

Consumer Bell Curve

The reality:

Consumers don’t have your knowledge or your motivation when trying your
product.

The Consumer Bell Curve demonstrates where the bulk of users are relative to
their skill levels and willingness to proactively find value in a product.

The solution: Study your average consumer behavior and accept that it won’t
match yours. Understand that you are a power user, while most of your
consumers are not. Look for unnecessary complexities and customization
requirements or long installation processes that are probably hurting your
product’s success. Don’t add settings or preferences to your product as a way to
solve design disputes. Design for your users’ skill levels, not your skill level.
Myth 4: Consumers will find a product’s value
The problem: Most companies feel that it is best to have lots of features so that
users can navigate to and use whichever features fit their needs. These
companies are usually disappointed, as users don’t look for the features they
want. Instead, users struggle to find value and give up.

Consumer Churn Graph

The reality:

The value must find the user.

The Consumer Churn Graph demonstrates how focusing on improving a user’s

ability to find value in a product will increase a user’s success with the product.

The solution: Instead of focusing on how to get more users to your product or
trying to design more features for more segments of users, focus on removing or
hiding rarely used features and highlighting your key features and value.

Myth 5: Consumers want more features

The problem: As an idea turns into a product and starts shipping, its designers
and engineers seem to have an unlimited number of new ideas for new features
to include in the next version, each feature designed to make the product “more
complete.” However, in the eyes of the consumer, the exact opposite is
happening. The early users are wondering why the key feature is so hard to use,
buggy, or incomplete.
Consumer Behavior Bubble Chart

The reality:
Consumers only want a few key features, and they want them to work well.

The Consumer Behavior Bubble Chart enables comparisons of different features

or services to determine how many consumers use each feature (Attraction), how
much time consumers spend with each feature (Usage), and how often they
return to use the feature again in the future (Stickiness).

The solution: Before shipping a product, all you have is your professional
training and experience to aid you in designing a product. But once you have
built and shipped the product, you have access to a wealth of consumer usage
information that can help drive future design decisions. Use this data to tell you
where your value really is and focus on continuously improving that value.
Supply Chain Management in Retail
Supply chain and retail: The means to the end
A retail revolution is happening in the country. For global giants looking at
newer markets, India presents exciting opportunities on account of its vast
middle-class and a virtually untapped retail industry.

The Indian retail sector has seen unprecedented growth in the last few years.
The KPMG report, `Consumer Markets in India: the next big thing?, has
predicted that the organized retail sector is expected to grow at rate higher than
GDP growth in the next five years. The AT Kearney's 2006 Global Retail
Development Index positions India as a leading destination for retail
investment.

The success in this competitive and dynamic sector depends on achieving an

efficient logistics and supply chain, which can be provided by professionals, as
they combine the best systems and expertise to manage a ready flow of goods
and services

The retail boom promises to give an impetus to a host of allied sectors and the
logistics industry, as the backbone of the retail sector, stands to gain the
maximum.

In India, the logistics market is mainly thought to mean transportation. But the
major elements of logistics cost for industries include transportation,
warehousing, inventory management, courier and other valued-added services
such as packaging.

The logistics costs account for 13 per cent of GDP. The industry is currently on
an upswing and is poised for a growth of 20 per cent in the coming years.

With the expansion of retail, supply chain will take on an increasingly

important role. With the end consumer becoming more demanding and time
conscious, the need for just-in-time services is increasing. In retail, where
competition is intense and stakes are high, customer satisfaction is paramount.

Network critical
Industry experts opine that in India too the large retail chains will follow the
global model of outsourcing their logistics so as to better manage complex
supply chains and focus on their core business.
For the retail chains in agri-produce, efficiency of logistics is critical and can
indeed leverage the brand to a great extent.
The main asset
Retailers realize that knowing what is selling and what is not can improve the
inventory processes. Inventory is the biggest cost factor, and if not managed
well, it can also be the biggest drain. That's why retailers and their trading
partners today set store by the inventory process and its impact. Effective SCM
enables:

Realistic ordering lead-times:

Suppliers are not surprised by the next order. Retailers respond better to
demand spikes, minimize forced markdowns and avoid obsolete-inventory costs.

Averting problems:
Stores easily identify potential stock-outs and request replenishment before the
inventory drops to zero. Deciding to de-list or replace a product is easier.

Facilitating resource planning and allocation:

Product forecasts and supply schedules are easily converted to perform space
planning, establish staffing needs and organize inbound/outbound shipments.
Financial experts can plan cash flow and analyze margins into the future.

Four R’s
Follow the 4 `R's of SCM — Right time, Right place, Right price, Right quantity
— to reap the advantages of:

Sustained inventory reduction by as much as 60 per cent for both the buyer
and seller.

Improved forecast accuracy by as much as 30 per cent.

Enhanced store shelf stock rates by as much as 8 per cent.

Increased sales by as much as 20 per cent.

Reduced logistics costs by as much as 4 per cent.

The key players in the logistics industry are gearing up to meet the challenges
by initiating both organic and inorganic growth to leverage the retail
opportunity. Logistics firms have also started focusing on related services such
as Customs clearing and forwarding, inbound warehousing, labeling and
packaging, fleet management, order picking and inventory management.

Cold Chain
The booming retail sector has set off growth in the cold chain segment as well. It
is a highly specialized service and caters to time sensitive and perishable items.
The cold chain industry is growing at 20-25 per cent. However, there is an
urgent need to establish the necessary infrastructure for an effective cold chain.

FICCI presents an overview of the increasing

importance of Supply Chain Management which
helps retailers cope with growing competition
Supply Chain Management (SCM) is an important aspect of the retail
industry and aims at reducing inventory costs. SCM can be defined as,
'controlling and coordinating the operations of manufacturers, suppliers,
distributors and retailers so as to minimize the overall cost that reduces
the delivery time and services the customer more efficiently.' The supply
chain constitutes a different reality for the SME (Small to Medium
Enterprise) as compared to the Fortune 500 companies. For the former,
it may represent a few suppliers, a couple of delivery people, and a
handful of customers. For the latter, however, it may also include
distributors, outsource contact center, and customers as well. Retail
industry experts generally categories the SCM technology into six
categories:

Planning – This includes forecasting demand and the amount of

resources, which is necessary to meet demand and sale forecasts

Sourcing - This category is about procuring goods from suppliers that

may involve online auctions and collaboration through the Internet.

Manufacturing - This is the step where raw materials are turned into
finished goods. Tools for determining which involves machines,
processes, and personnel should perform these tasks may be used to
provide more efficiency
Producing - Goods producing industries are primarily associated with
the production of goods. However, these sectors may also produce some
services
Delivery - It is also known as supply chain fulfillment, this step entails
getting the finished products to the dealers or end users. It takes into
account how the products will be shipped, including the means of
transportation and how products may be consolidated to cut down on
shipping expenses

Returns - No one wants to think about products coming back due to

defects, damage, or some other problems. However, automating the
return process and capturing data on why products are returned is
essential for cutting expenses.

Supply chain is a complex network of relationships that organizations

maintain with trading partners to source, manufacture and deliver
products. There are huge pressures on a business customer with demand
for greater variety of products and services, investors demanding growth
and competitors forcing more frequent product changes. It is time
Indian corporate start thinking about SCM from a strategic perspective
rather than just as an operational issue.

SCM is the top management priority for

retailers in today's business scenario. Fierce competition is forcing
retailers to respond to changes in the market quickly. This highlights the
growing importance of SCM in managing stock availability, supplier
relationships, new value added services and cost cutting. We are now
moving in an era where supply chains will prefer competing with each
other, than with products and marketing techniques. First class products
and brand power no longer guarantees success in the aggressive battle
for market share. Thus, it is important to get closer to customers by
understanding what they want, when they want, where they want and at
what price they want it.
MULTI-CHANNEL STRATEGY FOR RETAIL

A successful multi-channel strategy must reflect shopper's desire to interact

with retailers anytime and anywhere.

Retail multi-channel strategy assesses retailer’s efforts through a consumer

lens. This process helps Retailers create strategies, processes, services and offers
that align consumer activities and needs with the retailer’s capabilities.
 Retail Merchandising

MERCHANDISING OPTIMIZATION

Interested in developing the best store-level merchandise mix tailored to local

customers while optimizing revenue opportunity and inventory productivity?

Retailers everywhere face a common merchandising challenge: how to provide

the right merchandise mix at each store location to optimally satisfy projected
consumer demand and achieve high levels of productivity. With increased
emphasis on profitability and unprecedented competitive pressures, resolving
this dilemma has become significantly more important and promises to unleash
untapped productivity for retailers.

Retail merchandising optimization, or assortment optimization, combines data

about customers, products and markets to produce improved assortments that
are scientifically derived using predictive business analytics. This solution
correlates information about a retailer’s customers, enhanced with a marketing
intelligence data asset that includes population characteristics surrounding each
store market and predicted purchasing behavior derived from historical sales
performance. Because it considers all the dynamics of the retail demand chain
using a fact-based and quantitative approach, merchandising optimization
delivers increased revenue generation, higher margins and optimized
relationships with key customers.
PROCESS FOR IMPLEMENTING MERCHANDISE
PLANS:
1. Information is gathered about target market needs and prospective suppliers.

2. The retailer chooses firm-owned, outside, regularly used and/or new supply
sources of merchandise.
3. The merchandise under consideration is evaluated through inspection,
sampling and/or description.
4. Purchase terms are set. They may have to be negotiated in their entirety or
through uniform contracts.
5. The purchase conclusion is made-manually or automatically.
6. Merchandise handling decisions are taken relating to receiving & storing,
price & inventory marking, displays, pilferage control etc.
7. Reordering decisions are made.
8. Re-evaluation of merchandising plans takes place.

Merchandising Optimization enables quantified, information-based

answers to common questions, such as:

• What is the appropriate merchandise assortment in each store?

• Which stores have a greater potential for sales growth in this
merchandise category?
• How can I implement store-specific assortments without creating supply
chain disruptions?
• How can I forecast inventory based on the optimal store-level
assortments?
• How can I maximize the return on my inventory investments?
• What do customers within individual store markets look like and how
does this information tie to assortment?
• What is the best way to gain insight from and leverage a limited amount
of available Transactional and customer information?

MERCHANDISING ALSO TAKES CARE OF:-

• Operational assessment
• Implementation of customized Best Practices
• Customer service measurement and improvement
• Conversion rate assessment and improvement
• Analytics/metrics/benchmarking
• Labor management and scheduling solutions
• Workload / task balancing
• Functional schedules
 • Procedural documentation
• Chain-wide rollout programs

BRANDING IN RETAIL

Building Successful Indian Retail Brands

The Global Retail Scenario Large format retail businesses dominate the retail
landscape in the United States and across Europe, in terms of retail space,
categories, range, brands, and volumes. Indian retail industry cannot hope to
learn much by merely looking at the Western success stories in retail. Their
scales of operations are very huge, the profit margins that they earn are also
much higher and they operate in multiple formats like discount stores,
warehouses, supermarkets, departmental stores, hyper-markets, convenience
stores and specialty stores.. The economy and lifestyle of the West is not in line
with that of India and hence the retailing scene in India has not evolved in the
same format as the West nor can we learn valuable lessons from their style of
operations.

In retailing, the conventional wisdom used to be, that, the critical success factor
was location. But precise location no longer matters and geo-demographics is
increasingly becoming irrelevant. The leading multiple chain retailers,
superstores and malls create their own centers of gravity, attracting customers
by car, bus, train or even by plane to wherever they are located.

The growth of multiple chain retailers has been relentless for many years in the
west and this has been accompanied by the development of retail names as
brands in their own right. Discount retailer Walmart has catapulted to the top
of the Fortune 500 rankings in the U.S. with a turnover of $258 billions (2003
revenues – the basis for 2004 rankings), ahead even of oil major Exxon Mobil
and the mammoth manufacturing giant General Electric. A ruthless policy, of,
‘Always Low prices. Always.’ has brought Walmart to the top. On the day after
Thanksgiving in November 2002, Wal-Mart sales hit $1.43 billion in one single
day.

Walmart and Nordstrom in the U.S. and Sainsbury’s and Marks & Spencer in
the U.K. have grown by rapid geographic expansion in their own countries.
Specialists like Benetton of Italy and IKEA of Sweden and The Body Shop of
the UK are international and the fast food chains like McDonald’s and Pizza
Hut are everywhere. The same products are increasingly available from the
same names on every continent. Retailers worldwide have immensely benefited
from the sustained growth of the disposable income of their global consumers.
Geographic saturation

The end of the nineties has signified a turning tide of retailer power. The limit
to retail ambition is geographic saturation. There is already a fear that the U.S
is ‘over-malled’, that available shopping space exceeds customer demand for
products. The retailer logic that ‘if we build new stores they will come’, is being
belied. Many retailers have started postponing their store expansion plans. The
track record of some of their international store expansions is also not
promising.

Category killer competition

The threat of saturation is accompanied by a new competition from the low cost
category killers. Specialist competition is eating away at the market share and
forcing down the prices and gross margins of the multiple chains. The success of
the giant killers in the toys segment – Toys R Us and in home furnishings –
Home Depot, in the are a case in point.

Alternative shopping channels.

The newest retail format that is showing growth in the U.S., and is more
frightening for retailers than for consumers, is the Internet. The potential for
on-line shopping which is growing in the U.S. questions retailers’ investments in
more physical sites and stores and makes it imperative that they too explore the
new agenda of ‘E-retailing’ or ‘e-tailing’.
THE INDIAN RETAIL SCENE

India is the country having the most unorganized retail market. Traditionally it
is a family’s livelihood, with their shop in the front and house at the back, while
they run the retail business. More than 99% retailers function in less than 500
square feet of shopping space. Global retail consultants KSA Technopak, have
estimated that organized retailing in India is expected to touch Rs 35,000 crore
in the year 2005-06. The Indian retail sector is estimated at around Rs 900,000
crore, of which the organized sector accounts for a mere 2 per cent indicating a
huge potential market opportunity that is lying in the waiting for the consumer-
savvy organized retailer.

Purchasing power of Indian urban consumer is growing and branded

merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages,
Food and even Jewellery, are slowly becoming lifestyle products that are widely
accepted by the urban Indian consumer. Indian retailers need to advantage of
this growth and aiming to grow, diversify and introduce new formats have to
pay more attention to the brand building process. The emphasis here is on retail
as a brand rather than retailers selling brands. The focus should be on branding
the retail business itself. In their preparation to face fierce competitive pressure,
Indian retailers must come to recognize the value of building their own stores as
brands to reinforce their marketing positioning, to communicate quality as well
as value for money. Sustainable competitive advantage will be dependent on
translating core values combining products, image and reputation into a
coherent retail brand strategy.

There is no doubt that the Indian retail scene is booming. A number of large
corporate houses — Tata’s, Raheja’s, Piramals’s, Goenka’s — have already
made their foray into this arena, with beauty and health stores, supermarkets,
self-service music stores, new- age book stores, every-day-low-price stores,
computers and peripherals stores, office equipment stores and home/building
construction stores. Every retail category has been attacked, by the organized
players today. The Indian retail scene has witnessed too many players in too
short a time, crowding several categories without looking at their core
competencies, or having a well thought out branding strategy. To illustrate, the
Indian lifestyle/fashion retail scene is already exhibiting the following
characteristics, which do not augur well for its future:

Lack of store differentiation:

Leading retail stores like Shoppers Stop, Lifestyle, Ebony, Globus, and
Piramyd, offer common brands, similar ambience, and a commitment to
improved service. Where is the scope for differentiation and brand building?
Can these retailers hope that location and ambience alone will do the trick?

Merchandising muddle:

Mumbai’s original retailers of Mumbai —, Amarsons, Akbarallys, Benzer,

Premsons — have experienced no decrease in traffic in their stores, even after
Piramyd and Westside opened shop. These retailers exploit what they know best
— what the customer wants with regard to product, selection and price — and
ensure their customers do not go back disappointed. Consumer insights built
over their years of experience in business is helping them to hold the fort
against the onslaught of the new players on the horizon.

The organized new generation Indian retailers (Shoppers Stop and Westside)
have recruited senior retail persons from abroad, who have the expertise in
setting up systems and procedures, but they are going to take a long while to
tune into the psyche of the Indian consumer.

With the permutations and combinations of seasons, fashions and regional

preferences, merchandising is at the best of times a complex task. India’s
cultural diversity poses additional challenges to the merchandisers requiring
them to be aware of local tastes and to be able to compete with the local retailer
in terms of market knowledge and speed of response. While technology and
systems are no doubt enablers, there can be little substitute for experience and
insight.

Lack of labels/suppliers:

Organized Indian retailing has to face the situation of lack of professional

suppliers who are accustomed to deadlines, systematic in their production and
consistent with their quality. Often, the local suppliers do not have financial
strength or production infrastructure or discipline. Indian merchandisers are
forced to compromise due to a true lack of choice — which leads to huge unsold
stocks and reduced profitability to the retailers.

Discounting:

Given widespread availability of the same brands, large retailers have to cope
with the phenomenon of discounts offered by the smaller retailers. Large stores
are able wrangle larger margins from most suppliers, but these margins are
retained to meet the higher operating cost. Small retailers are tempted to pass
on the lower overhead in the form of a discount to the customer to get them to
their stores. In a middle class- dominated, price-sensitive market like India,
price manipulation is a strong weapon in the arsenal of the small independent
retailer.
The large retailers themselves further dilute the strength of the retail market.
With promotions becoming the order of the day, they too have entered into
price wars against each other. ‘Up to 50% off’ sales and ‘Two for one’ price
offers have now become commonplace even at the top retail outlets across our
country. Deep price cuts may not be the answer to maintain their relevance
against the small retailers nor does it auger well for the brand building of the
store.

Limited margins and high real estate costs:

It is well accepted that Indian retailers work on low margins compared to

international chains. The retail margins in India are a meager 30 to 35 per cent
for fashion brands (as, say, compared to 50 to 100 per cent across Europe).
With overheads and allowance for dead stock, the Indian retailer is not left with
much scope for error. Cost of prime land for the retail store is prohibitive. Land
prices in prime localities across the metros have themselves become a major
deterrent to sustaining a profitable retailing model for organized players. A
number of the new chains have therefore preferred to spread in smaller metros,
hoping to offset lower revenue potential with lower real estate costs.

‘Time abundant’ consumers?:

In recent years, it would seem that the consumer has thrown the adage ‘time is
money’ to the winds. The customer is willing to spend more time if he/she is
getting a better deal. Scarcity of time seems to be the prerogative only of a few
consumers. The crowds inside Sarvana Stores or Jayachandran textiles in
Pondy Bazaar in Chennai, drive home the point that consumers are prepared to
travel to reach stores that promise best prices. The Indian model of organized
retailing is still in a stage of evolution, and retailers need to understand the
value of retail as a brand rather than remaining as retailers selling brands.
However, the characteristics of the branding process, which are of interest to
the retailers, are still the characteristics of the traditional product brands – they
are simply extended to the intangible part of the business. Thus, the
characteristics of a branded product, are simply applied in a different space.
What are the fundamental characteristics of a brand? While a myriad of
characteristics have been catalogued by several researchers on this subject, five
characteristics deserve mention:

(1) Recognizability:
A true brand is instantly recognized and identified. The brand name passes into
every day use (Nike’s ‘Just do it’) or becomes satirized (‘Don’t be such a
Duracell’) or appropriated (‘Make a Xerox of this document’). Indian retailers
like Shoppers Stop, the RPG Group’s Food World and Music World have
already earned national recognition. Subiksha in Tamilnadu and ‘Margin Free’
supermarkets in Kerala are household names in the two states.

(2) Meaning, story, value:

This is the second characteristic of a brand. The brand must have a value
proposition. It must stand for something and one of the most effective ways is to
have a story to transmit those values. Examples abound of effective leaderships
that have helped to build corporate brand values in other sectors, but few
retailers have succeeded in building a story to carry brand meaning. When they
do so, their power will increase.

(3) Legitimacy:
The meaning of the brand should be obviously appropriated by the target
customer group. Legitimacy rests on authority, earned by the brand and
granted by the customers. Lessons can be learned from social organizations like
Greenpeace, Medicins sans frontiers, CRY and Helpage India. In this case,
legitimacy rests on moral authority. In retail businesses it may rest on an
emotional authority (a unique shopping experience, a store filled with warmth
and friendliness.)

(4) Consistency, alignment:

A brand story should contain no internal contradictions and should be appear
to be consistent over time. It should be applicable across the business and
attempt at total brand integration.

(5) Proximity:
The brand building process should culminate with assuring the brand’s
proximity to the consumer. The brand’s definition gets expanded by opening
stores in a number of locations to make it convenient to the consumer.
Retail brand building

Product brands make life easier. They make it possible to recognize products,
which simplifies the decision making process. Furthermore, product brands
make the consumer a part of a group, they create a sense of belonging. But
retail brands do even more than that. These brands are visible platforms for
kindred spirits: the physical shop is a container for the entire retail formula and
therefore constitutes a large part of the retail brand. The tangible nature of
retail makes the familiar slogan ‘experiencing the brand’ most logical of all, in a
physical store.

Retail brands have gained in popularity in the past few years. Indeed, they have
a number of advantages above product brands. In the first place, they are closer
to the consumer. The physical store space offers the possibility of literally and
figuratively communicating with consumers at the moment of purchase (one-to-
one marketing). Retailers can show who they are and what they stand for
through the store formula. Moreover, in principle, retailers are neutral, because
the choice of product brand (or store brand, if present) is left to the consumers.
Retailers help consumers because they make a shrewd pre-selection and present
their product assortment in a specific manner. Once a consumer knows and
trusts a retailer and has good experiences and memories about a store, the
foundation has been laid for a long-lasting relationship that will ultimately lead
to customer loyalty.

Retail branding creates a brand preference, which goes beyond the

product or service in itself.
Retail Branding versus Product Branding

A great difference between product branding and retail branding is that in

many cases products have an anonymous or even fictitious presenter, whereas
in retail, consumers come in direct contact with the company and/or product. A
Cadbury’s Dairy Milk chocolate bar, for example, is a product made according
to a set recipe in a factory that is not open to the public. In addition, the people
who work there never come into contact with the consumers because the retail
channel lies in between. And those who do sell the ‘CDM’ to the end-consumer
(the retailers) do not have very much to do with it by virtue of their function.
Therefore it is possible to conceive a brand identity for the product, establish it
for a specific target group and then fix it in the minds of consumers. Compare
the identities of ‘Five Star’ ‘Perk’, ‘Gems’ and ‘Temptations’: all very different,
yet they come from the same manufacturer.

Contrast this with a store like Food World, for example. Because of its direct
contact with the end-user, it must effectively live up to its brand reputation in
every aspect, every day. It is impossible for retailers to escape the need to
continually sustain the store brand. In a store, the entire retail organization is
revealed and the true nature of a company can be experienced. A retail store, as
said earlier, is the container that holds the entire formula. All the elements of
the formula (including the elements of the marketing mix) come together in-
store. The formula should be deliberately shaped from the standpoint of
identity (the ‘brand’ of the retail organization) with mutual coordination of the
elements being important. What might it then mean, when branding is applied
to retailing? The issue is not of retailers selling brands but branding the retail
business itself, like the grocery supermarket chain or the fashion store. A
hypermarket or department store, may offer several well-known brands, but in
today’s competitive world cannot afford to rest on its strategic product
assortment and pricing initiatives to bring in the customers. The retailer must
attempt to brand himself differently, especially when today’s product brands
are being launched through their product brand’s own shops. (Examples in the
shoe segment – Nike, Adidas and Reebok. Jeans segment – Lee and Wrangler,
Perfumes –Hugo Boss. )

A retail organization, like any other corporate company, will have to ensure
that its own brand includes the characteristics of product brands detailed
above.
Retailers need to work on three dimensions to achieve this:

( 1 ) Brand value:
The retail brand has to embody and transmit clear values to the customer. (Like
‘value for money’, ‘Luxury shopping redefined’). Some companies have
attempted to define this in their mission statements but they are often too vague
and not actionable. For example the U.K. Virgin brand has the value of
challenging conventions and the U.S. retailer Nordstrom has a built a value of
customer service. While many Indian product brands have successfully weaved
values around their brands (Hamam on ‘trust’, Godrej on ‘quality’ and TVS on
‘service’) retailers are yet to develop a consistent value across their businesses.

(2) Brand strategy:

It is imperative that retailers have a systematic strategy on issues like whether
to develop the retail brand or corporate brand and decisions on one
product/one brand that they may be selling in their shop. Retailers can also
decide to launch high quality retailer brands (‘own labels’) backed by
promotional campaigns, reinforcing clear personalities. Pricing policies, today
position retailer brands as good value lines or premium lines (Nilgiris
department stores prices its grocery lines above manufacturer brand prices).

The view that retailer brands offer a cheaper alternative to manufacturer brand
is no longer valid. There is even scope for retailers to develop alternative types
of ‘own labels’ targeted at different consumer groups in their outlets. An
essential ingredient for success, in such cases, must be consumer-relevant added
values – not just lower prices. It is only a minority of consumers, today, who are
prepared to trade off added values for lower prices. Experienced consumers are
no longer primarily motivated by low prices.

There is scope to attempt a retail segmentation strategy. For example, DCM

Benetton India redesigned its stores as per its international format and also
repositioned the brand from a casual wear brand to a wardrobe option. The
company is now attempting to target a niche audience through its concept
stores. It launched a ‘Baby-on-Board' store, which targets mothers-to-be and
kids, an `Accessories' stores that sells luggage, bags, sunglasses and vanity cases
and an ‘Adults Only’ store that showcases Benetton's apparel collection for men
and women.

( 3) Brand structure :
Operational levels of the retail business have to be held together to integrate the
whole brand proposal. At this level, marketing, human resources, distribution,
logistics, administration and sales have to work towards a common brand value
that has to be communicated to the consumer. The retail brand’s messages must
be weaved into the every day experiences that the consumer has with the retail
brand.
Brand building constitutes a way in which the main value of the retail store
shifts to what has been traditionally called an intangible.

Indian Retailing is coming of age and needs to have a clear brand proposition to
offer the discerning Indian consumer. There is no doubt that the retail business
is gravitating from high street towards destination shopping (mall development)
with an estimated 10million square feet of mall space expected to hit the metros
and mini-metros across the country this year.

However, we need not assume that retailing at shopping-malls, is going to be

fundamentally different from shopping at the traditional shopping areas, except
that a mall has a more modern structure and in most cases brings multiple
brand outlets under a single roof. The local retailers moving into malls,
however, have to face the challenge of building brand recognition and loyalty
right from scratch.

Most mall developers have on offer, the same combination of shopping

(International/national brands), Entertainment (Theatre Multiplex) and food
(McDonald’s/Pizza Hut/Café Coffee Day) in their malls. It is therefore not
surprising to note, that many mall visitors come out having no shopping bags,
since they have been enticed to visit only for watching a movie and / or having a
burger or a pizza or even a cup of coffee. Malls are also fast becoming a place
that youth can ‘hang out’, but if the crowds do troop in, but the cash registers
are not ringing, it can harm the serious business of retailing and hurt this
nascent industry on the growth path.

The critical lesson for mall developers is, to invest some quality effort in
understanding the shopping-needs of customers in their targeted areas, and
then build a carefully planned portfolio of retail options that can meet the needs
of these targeted customers. Mall developers also have to create distinctive
(brand) identities for their specific malls.

It is equally important for the would-be retailer tenants, to realize that merely
moving into a mall does not build their brand or guarantee business for them.
They have to work as hard to draw consumers to their own stores once the
latter have entered the mall, and then have the right value proposition for them,
to get them converted into customers, and then to become repeat customers.
Building a differentiating brand identity would work for both the mall owner
and the mall retailer.
We are also seeing organized Indian retailing in several businesses that speaks
volumes of the staggering potential for the expansion of this sunrise sector in
our country. But here again, the early initiatives in the sectors illustrated below
seem to rely more on novelty and excitement of newer ambiences rather than
truly investing in brand building .

Gourmet coffee retailing:

The organized coffee retail business is estimated at Rs.250 crores and is showing
a growth rate of 40%. Apart from the Quickys, Café Coffee Day and Baristas
chains, the Tatas have aunched their Bean Coffee Junction chain in Chennai.
Coffee World an international gourmet coffee chain is set to launch its outlet in
Bangalore this year. Reliance is offering gourmet coffee at some of its Reliance
WebWorld outlets under the brand name ‘Java Green’. There are not more
than 350 outlets in the organised sector today but retail consultancy KSA
Technopak opines that India’s potential for coffee retail outlets could be around
two thousand. However the coffee retailers are already cloning each others’
strategies - by offering that “total experience” — right coffee, food and
ambience with Wi-fis and jukeboxes — to pull customers, across all their outlets
and consumers are finding it hard to identify themselves with any one outlet.

Lifestyle retailing :
Chennai has witnessed a manifold increase in the total retail space devoted to
non-grocery or lifestyle retail. The four major lifestyle retailers — LifeStyle,
Westside, Shoppers' Stop, and Globus — alone account for a little over 200,000
square feet of retail space. Add to that the retail space of the traditional apparel
retailers such as Nalli's and Kumarans and the recent entrants such as Pothy's,
R.M.K.V and Chennai Silks and that of the scores of multi-brand outlets, the
figure shoots up. The reasonable real estate prices, overall lower cost of
operations and accessibility to consumers vis-à-vis other metros, have spurned
the growth of organized retail at Chennai. But, on the brand building front, the
story is no different. A retail analyst has already observed that Chennai is over-
retailed in the lifestyle segment, with little differentiation among the players.

Petrol pump retailing :

As consumers, we have been noticing how India’s state-owned petroleum
companies are undertaking a massive image improvement, makeover and
differentiator exercise. From signage to logos to canopies, clean floors, channel
music, lighting, convenience stores, uniformed attendants, internet browsing
and promotion schemes, the public sector pumps are working hard at delivering
a new experience to the Indian motoring consumer. All this, of course, is being
done as part of a bigger game plan to cope with the coming private sector
competition from Reliance, Essar and Shell. Let’s wait and watch whether
public sector hindsight into branding pays off for them in the face of private
competition in the next few years.
Indian Retail Brand Building – the road map ahead

There is no doubt that the Indian retail shopping experience has been enhanced
by giant superstores and shopping malls across our country. They should
however learn quickly to build the retail brand directly and not look to factors
like prime location, value pricing or product assortment to build their
businesses. Indian retailers, to build a strong retail brand presence, can use the
following strategies.

Relationship management to enhance in-store shopping experience:

Competition will force retailers to think about their customers as individuals,
analyze their shares of customers and calculate their customer lifetime values.
Retailers need to build data bases using in-store data collection and launch
frequent shopper rewards, carry on an interactive communication with them,
make special offers, drive traffic and add value outside the in-store relationship.

Retail brands get built by developing personal relationships with consumers

rather than only through product and pricing. For example, staff should be
trained to recognize their V.I.P customers. ‘Soft’ rewards for V.I.P customers
include priority service, free gift wrapping, enhanced guarantees and sales pre-
notifications. ‘Hard’ benefits include privileged rewards and extra value offers
as well as straight discounts.

The quality of management of the customer is becoming an increasingly

important source towards building the retail brand. Education and training of
staff needs to be done to enhance customer service. Local store management can
be empowered to maximize the value of each customer visit. Analysis of
customer behavior can guide store merchandising to match the profile of their
customers and even the needs of the shoppers at different times of the day.

External communication to add value outside the store:

Retailers use advertising to build their brands and promotions to drive store
traffic. Retailers have, still not felt the concept of individual customer
communication outside the stores as a necessity. It is necessary that they seek to
add a new form of dialogue with their customers. Retail chain Subiksha, for
examples, mails a broadsheet to its customers giving them details of the
promotional offers available and price comparisons across brands that helps its
customers to take more informed decisions.
Motivating the staff to volunteer value :
The quality of in-store service is a key factor in differentiating the retailer and
winning a higher share of customer spend. In one survey, shoppers were asked,
would they ask for the same salesperson on their next purchase visit; the ‘yes’
respondents were found to more likely give the store a 8-10 rating. On the other
hand, shoppers unhappy with the salesperson gave the store a very low
performance on overall service and performance. Staff must be trained and
motivated to recognize their best customers and to offer them superior service.

Successful retailing has always been said to be, about getting the nitty-gritty
right of merchandising, forecasting, the supply chain, training and recruitment
of high quality personnel and category management. Building retail brands that
offer value will, in future, overshadow all these areas, and emerge as the
dominant reason for the success of the organized Indian retailer. Indian
retailers should also understand that the retail experience has become a popular
leisure activity and they are vulnerable to any new competition for customers’
entertainment. Indian retailers must build their brands with images that seek to
entertain and involve their customers. It is the quality and value of the retail
brands that they have sought to establish that will determine the loyalty of the
retail shopper in future.
 AN OVERVIEW OF INDIAN LEATHER INDUSTRY

India : Leather industry should focus on the US

February 2, 2007

Leather industry should change its focus to creation of

jobs, production for mass market, from Europe to the
U.S. and from Tamil Nadu to the rest of India, said
Minister of State for Commerce Jairam Ramesh at the
inauguration of India International Leather Fair 2007, at
Chennai Trade Centre on Wednesday.

Anti-dumping duties slammed on China and Vietnam recently has given India
an opportunity to enter high-volume, low-value footwear market, informed the
Minister.

To reach the U.S. market India would require to expand its capacity, said Union
Minister for Communications and Information Technology Dayanidhi Maran,
who inaugurated the fair.

State governments should encourage the industry as the U.K. market may
require 10,000 pairs of shoes per order the U.S. on the other hand would
require production of 100,000 to 200,000 pairs.

For India to compete with China in the U.S. footwear market, logistics needed
to be improved and Shipping Ministry would require to start a direct container
shipping link from Chennai port to the U.S. and Europe which presently gets
routed through Colombo or Singapore.

It was also important to generate half a million new jobs in leather sector while
attempting to reach leather exports target of $7 billion by 2011, Ramesh said.

Council for Leather Exports' (CLE) Rs 7 crore project being carried out in
Kancheepuram district was lauded by Ramesh.

The project will be expanded to six other districtsacross the country.

CLE should also establish such centres in Tamil Nadu, Uttar Pradesh, West
Bengal, Andhra Pradesh and Punjab, besides focusing on Bihar and Assam, he
said.
Indian leather industry poised to double its global share by
2010
Chennai, Feb.3 (ANI): Indian leather exports is poised to double its global
market share by 2010, an industry representative said during the 22nd India
International Leather Fair here on Saturday.
India currently has a share of 2.51 percent in the 97.606 dollars billion global
leather market.

"We have a big plan. Today, the industry has exports of about three billion
dollars and, we have a plan to increase it to seven billion dollars in the next four
to five years. Today the share of leather industry in the world leather trade is
about 2.5 percent, and when we will have seven billion dollars worth of export,
the share will go up to five percent," said, Mukhtar-ul Amin, the Chairman of
the Council of Leather Exporters.

According to projections made by Confederation of Indian industry (CII),

leather exports are going to increase to nine billion dollars by 2010 from six
billion dollars in 2005-06.

India however still has a long way to go to match its rival China, which
dominates the global leather market with over 20 per cent share.

Industry representatives however, say the country needs to boost its animal
husbandry to match China's capability.

"We do not have any organized farming in India, like we have in England,
Holland or ay European country we got to have animal farming. America and
Brazil are biggest meat exporters only because of animal farming. We have to
take care of animal husbandry the quality of animal has to be improved," said
Anil K Sodhi, a leather exporter.

They are hopeful of benefiting from India's growing retail sector to boost its
domestic market especially in footwear.

The four-day annual leather fair organized here, was an attempt to showcase
India's technological advancement in the field.

Over 300 exhibitors, including overseas participants, showcased their leather

goods and related technologies. Products exhibited in the fair include finished
leather of all kinds, shoes, shoe components, leather garments, handbags and
wallets.

"From the manufacturing point of view I think India has a very much advanced
skills and technology and is able to compete in the world market with its
finished goods," said, Christopher Breuninger, a German exporter showcasing
his products at the fair.
The United States, single largest buyer of Indian leather goods, accounts for 18
percent of the country's leather exports.
The huge size of the Indian market, the easy availability of skilled labour, the
abundance of high quality raw material and a strategic location have attracted
various international players in the leather industry.
Indian leather, which is among the top eight foreign exchange earners, employs
around 2.5 million people, 30 percent of whom are women. (ANI).

India : Italy to assist Bengal leather industry

February 14, 2007
The state’s leather industry will get a boost with
technical assistance from Italy along with the setting up of
a training centre in leather technology and a regional
office for trade in the city.

The project will be undertaken by Italian Trade

Commission spending € 1 million in the process,
informed Massimo Mamberti, CEO and Managing
Director, Italian Institute for Foreign Trade.

Chief Minister Buddhadeb Bhattacharjee welcomed

Italian assistance in areas of joint interest, including leather, while addressing
the “Indo-Italian Synergy: Destination West Bengal” forum here on Tuesday.

Bhattacharjee, sharing the dais with the visiting Italian Prime Minister,
Romano Prodi, said The regional leather industry is a major partner for Indian
leather goods production and the leather complex (at Bantola) can benefit
greatly through Italian expertise.

Besides leather and food processing, Italian businesses are exploring sectors of
mutual interest too.

“Textile industry, fashion technology are also sectors of interest. Italy is

spending € 10 million in India within one year for promoting trade,” Mamberti
said.
India : Council for Leather Exports - Vision 2010 - 2011
February 15, 2007

Leather Exports' vision map for 2010-2011 by Council for Leather Exports
(CLE) chairman Mukhtarhul Amin.

1. The road map of CLE for increasing the exports from $ 3bn to $ 7bn

Council has developed a prospective plan for increasing exports to US $ 7

Billion by 2010-11. The plan envisages major interventions in the areas like
capacity building, increasing the scale of production, diversifying in to non-
leather footwear manufacturing, Design improvements to Indian products etc…
It is estimated that about Rs.7,300 Crores would be required in the form of
investments in the next five to six years.

According to the road map, footwear would continue to be the

largest segment of exports constituting about 56% of the total exports and to a
value of US $ 4.3 Billion out of the total US $ 7 billion. This would be followed
by Leather articles and finished leather. Percentage of Finished leather would
decrease from the present 24% to about 18% and the leather articles would
increase from 26% to about 28%.

2. Increase in tanning and production capacity to meet the 1 m. footwear

The present tanning capacity of 2 Billion Sq. ft would be doubled to 4 Billion

Sq.ft. In the case of footwear, the present capacity of 2, 50,000 pairs a day would
increase to 1 million pairs a day. This means an increase of 7, 50,000 pairs a
day. This increase comprises of both leather and non-leather footwear. Non-
leather footwear would increase in large numbers as compared to the leather
footwear. In the case of Leather garment the capacity would be additional 45,
000 pieces a month and in Leather articles, about 6 million pieces would be
added every month to the existing capacity.

3. Developing tanning clusters

Two Tanning clusters are planned for increasing the tanning capacity. One to
be implemented by the Government of Andhra Pradesh near Nellore is yet to
take off. Once the issues concerning the water sources is sorted out, a tanning
park in about 300 acres of land would be developed by ILFS for the government
of Andhra Pradesh. With regard to the another park, we would discuss and
decide the location.
4. Special economic zones for production

There is one SEZ footwear park being developed by Government of Tamil

Nadu in Sriperambattur near Chennai. This park would have a salable area of
105 Acres and could house about 20 units. The total capacity of the park could
be about 1, 00,000 pairs a day. However, in the perspective planning, five SEZ
were envisaged all over the country.

5. The countries been targeted

The Council for Leather Exports has identified USA as a focus market for
Footwear. CLE has also identified Scandinavian countries as other focus
countries.

6. Targeting big global brands and top companies and aggressively going after
them to make an investment in India Council is planning to attract investments
from some of the major producers in the east and west. Some of the major
footwear manufacturers from China are already planning to invest in India. We
would in the next two or three years would like to have investments from some
of the western European countries as the leather industry there is increasingly
facing problems due to labor cost. In this regard, Council would formulate
strategy for presenting the country’s credentials as an investing destination.

7. Countries planning to enter India A Taiwanese company APACHE has

invested in TADA, near Nellore in Andhra Pradesh and another Taiwanese
company FENG TAE is proposing to invest in Cheyyar, near Chennai for
producing Non-leather footwear. There are other major companies planning to
invest in India. However, these are in the initial stages only.

8. Shift of focus from men's shoes to women and children Of late there is
considerable shift towards ladies shoes from the traditional way of making more
men’s shoes. In the year 1998-99, men: ladies used to be 71 : 29 and the same in
the year 2005-06 was 56 : 44. This clearly indicated the shift in favor of ladies
shoes to men’s shoes.

9. Change in technology in leather processing There is no major change in the

tanning technology as such but there are number of improvements in the
leather processing either in terms of using lesser water and chemicals than in
the past or in terms of getting wide range of finishes for the leather.

10. Changes in fashion requirements for export market Fashion keeps changing
every season. For ladies wears the fashion changes every season and for men’s
wears the fashion changes a bit slower. Therefore, for the makers of the ladies
fashions, they need to keep in tune with the changing fashions more frequently
than the others.
Europeans turn to Indian leather as China gets tough

RATNA GANGULI & RAKHI MAZUMDAR

TIMES NEWS NETWORK [ TUESDAY, FEBRUARY 20, 2007 ]

KOLKATA: The recent clampdown by China on polluting tanneries has come

as a boon to Indian leather goods exporters. Several tanneries in China have
closed down owing to strict implementation of environment laws. The Chinese
industry has also been hit by the 30% rise in prices of raw hides and skins
globally.

Against this backdrop, India’s acknowledged status as a high-quality leather

processing centre and availability of skilled labour compared to China seems to
have turned the focus of leading European buyers of leather goods on India.

Interest about Indian leather goods is increasingly been shown by Italy, which
as the world leader in leather products is becoming more active in stitching up
joint manufacturing and sourcing ties with India.

Reflecting Italy’s interest in India as one of the sourcing hubs for leather goods,
a 10-member consortium of buyers from Italian Leather Goods Manufacturing
Association (ILGMA) is coming to Kolkata, a key leather processing centre,
between February 23-25, to participate in a leather fair.

The consortium represents around 100 retail outlets in Italy. The exhibition is
part of an annual event organised by Indian Leather Products Association
(ILPA), in association with Indian Trade Promotion Organisation (ITPO) and
Council of Leather Exports (CLE).

Apart from Italy, 35 buyers from Spain, Germany, the UK, the US and a couple
of Latin American countries will also participate in the fair. Incidentally, a
separate team of Italian buyers also visited another leather hub, Chennai,
between January 31 and February 2 to forge similar alliances.

“These Italian companies control about 100 retail leather goods outlets in their
country, their participation in the fair is expected to generate export orders for
West Bengal based leather goods units,” said Yogesh Gupta, chairman of trade
development subcommittee under ILPA.

Buyers are essentially looking at sourcing high quality but low volume leather
accessories like bags, wallets and laptop cases, mobile phone covers. “China
specialises in low cost, high volume output, which is completely reverse in case
of India. This is yet another factor that seems to be working in our favour,” he
added.
ILPA is counting heavily on ILGMA participation in the fair because Italy as
the largest manufacturing hub of leather goods in Europe is more interested to
source leather goods from India in the wake of uncertainties of getting steady
supply of such goods from China owing to the recent shut-down of several
tanneries in that country, said Paresh Rajda, former president of ILPA.

Apart from facilitating a buyers-sellers meet in the fair, ILPA is also organising
a series of workshops to make Indian producers aware about country-specific
environmental laws, security measures in packaging and social auditing.

Since it wants to make members aware about latest trends in international

fashion in leather goods and accessories, it has invited leading Italian design
studio, Arpel, to set up a stall at the fair.

West Bengal, with exports of Rs 1,800 crore, is the largest exporter of leather
goods in the country. With this, the state contributes more than 60% of the
country’s leather exports.

Indian leather goods as a whole for its better quality and designs are fast
improving acceptability in the global market. Price-wise, goods are positioned
in the middle-segment of the market, which is higher than low quality Chinese
goods, but lower than internationally acclaimed global brands.

ratna.ganguli@timesgroup.com
The Indian leather industry comprises the following key sub-sectors - tanning
and finishing, footwear, footwear components, leather garments and leather
goods and accessories. A large part (nearly 60-65 per cent) of the production is
done by the small/cottage sector.

Leather and leather products production is

centred in southern, northern and eastern India. Key production units are
located in Tamil Nadu, West Bengal, Uttar Pradesh, Punjab, Karnataka,
Andhra Pradesh, Haryana and Delhi. Tamil Nadu is the biggest leather
exporter in the country with the south accounting for 43 per cent of the
country’s share. The industry uses primarily indigenous natural resources with
little dependence on imported resources.

The Government of India has announced

various initiatives to make the leather industry more competitive. A few
initiatives are:

• Concessional duty on imported machinery and chemicals.

• Free export of raw hides & skins, semi-finished and finished leather and
leather products.
• Policies to facilitate modernisation / upgradation: In June 2005 the
government initiated a US$ 64 million ‘modernising scheme’ called the
‘Integrated Leather Development Programme’, whereby all leather
tanning and product units will be eligible for modernisation assistance.
The assistance will be to the extent of 30 per cent of project cost for SSI
units and 20 per cent for non-SSI units, subject to a ceiling of US$ 110
thousand per unit.
• Setting up of leather parks: An outlay of US$ 24.5 million for setting up
five leather parks — two in Chennai and one each in Nellore, Agra and
Kolkata. 12 The Council for Leather Exports has estimated that this
scheme will generate a total investment of US$ 267 million in about three
years.
• Establishment of ‘design centres’ at individual manufacturing units, to
facilitate improvement in design capabilities: Under this scheme, 25 per
cent of the project cost is provided to the units under the market access
initiative scheme of the Ministry of Commerce and Industry. Several
individual units have come forward to establish their own design centres.
 Indian Leather Industry: Perspective and
Export Potential

World Livestock Population

Hides and skins are the basic raw materials for the leather industry, which
originate from the source of livestock. There was an upsurge in the number of
bovine animals and goats and kids during 1990-2005, while population of sheep
and lambs was on a decline. Developing countries accounted for around 78% of
the total population of bovine animals and 93% of world population of goats
and kids in 2005. World bovine animals population stood at 1,529 million heads
in 2005. India had the largest number of bovine animals (283 million heads)
with a share of 19% followed by Brazil (13%), China (9%) and USA (6%).
World sheep and lambs population stood at 1,079 million heads in 2005. With a
total population of 170 million heads, China had a share of 16% in the world
sheep and lambs population. India (6%) lagged behind at third position, with a
population of 62 million heads. World goats and kids population stood at 807
million heads in 2005. China has the highest population of goats and kids, which
stood at 195 million heads in 2005. Although in 1990, India had the highest
population of goats and kids (21% of the total), it was overtaken by China in
1995 and the gap between the two countries has been widening.
World Raw Hides and Skins Production
World production of raw hides and skins was nearly 7 million metric tonnes, of
which production of bovine hides and skins alone accounted for 90% in 2004.
Developing countries are the major producers of raw hides and skins. China
played a significant role in turning developing countries as the major source of
global imports of raw hides and skins.
World Leather Exports
World leather exports grew moderately, by a CAGR of 7.3%, from US$ 46
billion in 2000 to US$ 61 billion in 2004. World leather exports can be
categorised in to raw hides and skins (40%), leather articles (49%) and furskins
(11%).China, Hong Kong, Italy, USA and France are major exporters of leather
in the world. World leather articles exports increased by a CAGR of 8.06%,
from US$ 22 billion in 2000 to US$ 30 billion in 2004. China constitutes 34% of
the total leather articles exports. Hong Kong (17%), Italy (11%) and France
(9%) are other major exporters. India’s exports of leather articles have
stabilized around US$ 1,033 million in 2004.

World Leather Imports

World leather imports can be classified in to raw hides and skins, leather
articles and furskins, with a share of 38%, 55% and 7% of the total world
leather imports, respectively. Leather articles is predominantly imported by
USA, Spain, UK and Belgium; whereas China, Mexico, Turkey and Romania
are mainly into imports of raw hides and skins. Hong Kong, USA and Italy are
chief importers of furskins. World imports of leather articles is estimated to
have grown marginally from US$ 27 billion in 2000 to nearly US$ 34 billion in
2004. USA, the largest importer of this product, is predominantly captured by
China. China’s share in USA’s import of leather articles has increased
gradually, from 54% in 2000 to 70% in 2004.
Indian Scenario
With about 15% of the world livestock population, India accounted for only 8%
of the leather production in 2002. The Indian leather industry consists of 42,000
small-scale industry (SSI) units, which account for 75% of the total production.
Nearly, 2.5 million people earn their livelihood from this sector. A survey by
Central Leather Research Institute (CLRI) estimated that about 1,600 tanneries
were present in India in 2000. The concentration of tanning industries is mainly
in Tamil Nadu, with a share of 52%. Other states where tanning industry is
concentrated include West Bengal and Uttar Pradesh. Small scale sector
accounts for large processing capacity ranging from 70-87% for different
leather products.

Exim Bank of India’s Role in Promoting Indian Leather

Sector
Export Import Bank of India (Exim Bank) has helped the leather exporting
units to modernize and upgrade their production facilities, install pollution
control and environmental safety systems of internationally accepted standards
and develop export market for value added products through strategic export
market development plans. Exim Bank implemented Agency Line of Credit and
Export Development Project, joining hands respectively with International
Finance Corporation (IFC), Washington and the World Bank to support small
and medium enterprises in the leather sector.

Composition of Indian Leather Exports

Composition of Indian leather
exports has undergone a radical
change, from being a mere
exporter of raw hides and skins,
to a status of an exporter of
value added leather products.
From 1991-92, India has been
exporting only finished leather
because of export restriction on
semifinished leather. Total
leather and leather
manufactures exports stood at
Rs.10,286 crores in 2004-05.
Leather footwear is the largest
component of leather exports,
with a share of 26%.
Indian Leather Exports
In 2004-05, the industry recorded a
satisfactory 5.8% export growth to
reach a level of US$ 2.3 billion.
Although, leather exports have
increased in absolute terms, its share in
total exports have declined in
percentage terms from a high of 7.99%
in 1990-91 to 2.89% in 2004-05.

Major Export Markets

The main export markets for India
are Germany, USA, Italy, UK and
France. Due to the two bans
imposed by Germany on imports
from India, there was a lull in
India’s exports in 2002-03. Slowly
and steadily, it picked up pace and
stood at US$ 326 million in 2004-
05. Exports to USA, which was
US$ 343 million in 2000- 01,
dropped to US$ 243 million in
2002-03 and was at US$ 266
million in 2004-05.
 Analysis of India’s Export Potential

India’s major export markets for leather handbags are USA, Germany, UK and
Spain. In UK and Spain, Italy is the top exporting country of leather handbags.
However, China has overtaken Italy and emerged as major exporter in markets
like USA, Canada, Hong Kong and Russia. India has lot of potential in these
markets, as it has unique advantage of economies of scale and capability of
producing niche products. Footwear is a critical segment for the Indian leather
industry as this is expected to be the engine of growth for the Indian leather
sector. Currently, the trend in export of Indian footwear has been encouraging;
however the trend for footwear components exports has been declining. India’s
exports of footwear components have dropped from US$ 238 million in 2000-01
to US$ 164 million in 2004-05. Top importers of leather footwear uppers in the
world are China, United Kingdom and Canada. World leather garments
exports have increased over the years. USA, Germany and Japan were the
largest importers of leather garments in the world in 2004. India was placed
among the top three exporting countries of leather garments in these markets.
Further, India is the largest sourcing partner of leather garments to Spain and
Italy, which are the major markets for Indian leather
garments. India’s other major export markets are Germany, USA and France.
But, India must be cautious of China, as its unit price of leather garments is
cheaper than that of India.
Major Issues Affecting the Sector
The issues that are hindering the export growth of the Indian leather industry
are as follows:

Environmental Issues
The leather industry is traditionally considered as a polluting industry in the
tanning and finishing stages of the production chain. Global standards set by
importing countries affect the entry and increase the cost of market access to
products of developing countries. Usage of many chemicals has been banned by
various countries. The product specifications for leather are constantly under
review, leading to greater stringency.

Impact of PETA
Campaigns by NGOs, such as People for Ethical Treatment of Animals (PETA),
related to cruelty against animals have led to boycott of Indian leather products
by many foreign companies.

WTO Related Matters

With the advent of WTO, the average and bound tariffs for manufactured
products have fallen in the developed countries. However, the average and
bound tariffs for leather products remain relatively high. Many developed
countries are implementing Technical Barriers to Trade (TBT) as Non-Tariff
Barriers to restrict leather exports from developing countries like India.

Cost Escalation
Leather exporters have to meet domestic as well international environmental
norms. Testing and certification requirements add to the costs of leather
manufacturers. However, it is observed that small supplier firms may not be
able to comply with stringent environmental standards. High costs of
compliance impose real economic costs on firms.

Chinese Competition
Chinese leather industry ranks top on the raw material resources, product yield
and import and export trade in the world. China is one of the major
competitors to India’s leather sector as it has the capability to produce large
volume at low price. Chinese leather exports have increased by three-fold after
its entry into WTO.
 Competitive Advantages
The leather industry can benefit from several characteristics of the Indian
market and the corresponding advantages they offer.
Some of these advantages are:

1) Supply side advantages

• Availability of low cost skilled labour
• Abundance of raw material
• Availability of supporting institutions to develop the industry

2) Demand side advantages

• Large and growing domestic market

3) Regulatory / Policy related advantages

Supply side advantages

• Availability of low cost, skilled labour

India’s advantage as a source of low cost, skilled labour is quite relevant to

industries such as manufacturing of leather goods and footwear that are
relatively labour intensive. India has among the lowest cost of labour among key
footwear producing countries. In addition to low costs, India also has the
world’s largest technically trained manpower in leather craft. The twin
advantages of low cost and technical skills offer India a distinct competitive
advantage in this industry.

• Availability of Raw Materials

India is the largest livestock holding country with 21 per cent of the large
animals and 11 per cent of small animals in the world. The large population of
cattle, buffaloes, goat and sheep that the country possesses ensures that India
has ten per cent of the world’s raw material base. In addition, some of the
leather available in India is premium quality and much sought after.

• Availability of supporting institutions

India has institutions that support the leather industry in specific areas such as
product development, design and R&D. These institutions enable capability
building in the industry and help it become globally competitive.
 • Product development/ design

A design development centre for leather garments and leather accessories is

underway under the joint efforts of the Council for Leather Exports and the
National Institute of Fashion Technology (NIFT). The design development
centre functions from the NIFT campus in New Delhi.

Research and Development capabilities The Central Leather Research Institute

(CLRI) (is the world’s largest leather research institute. CLRI today, is a
central hub in Indian leather sector with direct roles in education, research,
training, testing, designing, forecasting, planning, social empowerment and
leading in science and technology relating to leather. State-of-art facilities in
CLRI support innovation in leather processing, creative designing of leather
products and development of novel environmental technologies for the leather
sector.

Demand side advantages

• Large domestic market

India has a large and growing consuming class (with an annual income of US$
449 or above), that constitutes the largest segment of the population today. This
segment is estimated to constitute nearly 90 million households by 2006-07, up
from just 32.5 million households in 1997-98 – a CAGR of over 12 per cent.
Coupled with relatively lower penetration levels - penetration levels for
footwear has been estimated to be about 60 per cent – this represents a large
and growing market for leather goods.
 Government Regulation & Support
The Government of India has announced various initiatives to make the leather
industry more competitive. Key policy initiatives include:

• De-licensing of integrated tanneries that convert raw hides and skins into
finished leather.
• Several leather goods have been de-reserved from the Small Scale sector.
• Free import of raw hides & skins, semi-finished and finished leather.
• Concessional duty on imported machinery and chemicals.
• Free export of raw hides & skins, semi-finished and finished leather and
leather products.
• Policies to facilitate modernisation / upgradation: In June 2005 the
government initiated a US$ 64 million ‘modernising scheme’ called the
‘Integrated Leather Development Programme’, whereby all leather
tanning and product units will be eligible for modernisation assistance.
The assistance will be to the extent of 30 per cent of project cost for SSI
units and 20 per cent for non-SSI units, subject to a ceiling of US$ 110
thousand per unit.
• Setting up of leather parks: An outlay of US$ 24.5 million for setting up
five leather parks — two in Chennai and one each in Nellore, Agra and
Kolkata. 12 The Council for Leather Exports has estimated that this
scheme will generate a total investment of US$ 267 million in about three
years.
• Establishment of ‘design centres’ at individual manufacturing units, to
facilitate improvement in design capabilities: Under this scheme, 25 per
cent of the project cost is provided to the units under the market access
initiative scheme of the Ministry of Commerce and Industry. Several
individual units have come forward to establish their own design centres.
Licensing policy
After the dereservation of 11 items in the leather sector, which include semi-
finished hides and skins, leather shoes, leather washers and laces, moulded
rubber soles and heels for footwear, flexible polyurethane foam, polyurethane
shoe soles, shoe-tacks & eyelets and leather pickers and other leather
accessories for textile industry, vide Notification No. SO 603(E) dated 29 June,
2001; no Industrial Licence is required to manufacture of most of the items of
the leather industry. The location of industrial projects will, however, be subject
to central or state environmental laws or regulations including local zoning and
land use laws and regulations. Industrial undertakings desiring to set up
industrial undertakings for manufacture of these items have to only file an
Industrial Entrepreneurs’ Memorandum (IEM), in the prescribed format, with
requisite fees to Secretariat for Industrial Assistance in the Department of
Industrial Policy & Promotion, Government of India, Udyog Bhawan, New
Delhi-110011. Some of the items of the leather industry, viz. leather shoe uppers
(closed), leather sandals and chappals, leather garments, industrial leather
gloves, leather suitcase and travel goods, leather purses and hand bag, fancy
leather goods and novelty items, watch straps and leather straps of all types are
still reserved for exclusive manufacture by the small scale sector. Small scale
sector units are defined in terms of investment in plant and machinery. Non-
small scale units can manufacture these items after obtaining industrial licence,
which is granted subject to an export obligation of 50 per cent of the production
each year.
 Key Domestic & Foreign Players

Superhouse Leathers
Superhouse Leathers Ltd. was incorporated in 1980 by a private Indian party to
produce shoe uppers. The company has plants at Jaimau (Kanpur Dehat, Uttar
Pradesh) producing leather goods, at Kanpur (Uttar Pradesh); shoe uppers, at
Noida (Ghaziabad, Uttar Pradesh); leather and textile garments, at Sikandra
(Agra, Uttar Pradesh); shoes at Unnao (Uttar Pradesh) shoes and sole leather,
at Unnao (2 plants; in Uttar Pradesh) producing chrome leather and chrome
leather (skins). Revenue for the year 2004-05 was US$ 45 million. Mirza
International Mirza Tanners Ltd. was incorporated in 1979 by the Mirza
Tanners Group to produce leather shoes. The company has plants at Juhi,
Kanpur Nagar (in Uttar Pradesh), for manufacturing shoe uppers and shoes; at
Magarwara, Unnao (Uttar Pradesh) for bags, finished leather, shoe uppers and
shoes; at Noida, Ghaziabad, in Uttar Pradesh, which produces shoe uppers and
shoes and another at Shahjani, Unnao (Uttar Pradesh) which produces bags,
finished leather, shoe uppers and shoes. Its revenue for the year 2004-05 stood
at US$ 57 million.

Bata India Ltd.

Bata India Ltd. was incorporated in 1931 by a private Indian party and mainly
produces leather shoes. The company has plants at Bangalore (Karnataka),
Bataganj (Patna, Bihar), Hosur, (Dharmapuri, Tamilnadu) and at Batanagar
(North 24 Parganas, West Bengal) producing leather footwear; at Faridabad in
Haryana producing rubber & canvas footwear and at Mokamehghat (Patna,
Bihar), which produces finished leather from hides. Bata India Ltd. is an
affiliate of the Toronto based Bata Shoe organisation. Bata India had revenues
of US$ 158 million in the year 2003-04. Liberty Shoes Ltd. Liberty Shoes Ltd.
was incorporated in 1996 by a private Indian party and produces shoes. The
company has plants at Kutail, (Karnal, Haryana) producing Eva co-polymer
compound, lshoe uppers, leather shoes, non leather shoes and rubber chappals
(slippers). The revenue for the year 2004-05 was US$ 44.5 million and the profit
stood at US$ 2.2 million.

Bhartiya International Ltd.

Bhartiya International Ltd. was incorporated in the year 1987 by a private
Indian party. The company mainly produces leather apparel and clothing
accessories. The company has a plant at Bangalore, Karnataka, producing
leather garments. The revenue and profit for the year 2004-05 was US$ 21
million and US$ 1 million respectively. Lakhani India Ltd. Lakhani India Ltd.
was incorporated in 1981 by the Lakhani group and produces leather shoes.
The company has plants at Faridabad in Haryana for producing leather shoes.
The revenue and profit for the year 2004-05 was US$ 28 million and US$ 0.6
million respectively. Forward Group
The company generated revenues of US$ 25 million in 2003. Nearly 90 per cent
of its revenue comes from the UK market. The Forward group has entered into
a first-of-its-kind joint venture with Conceria Virginia Italy (CVI), a 10-year-
old Italian tannery, specialising in leathers for shoes and leather goods, and has
set up a six million sq. ft state of- the-art leather manufacturing facility in
Chennai. This is the first FDI in the tanning sector in India with investments by
both partners, ‘raw material resourcing expertise’ & ‘technology transfer’ from
Italy and marketing by the joint venture partner.

Future outlook
India has distinct advantages in the leather industry. These are primarily low
costs, widely available raw material and well-developed quality and research
and development facilities. These have enabled India to ecome a significant
player in the world leather market, with exports growing at 8 per cent CAGR.
Multinational companies in this sector are increasingly looking at India and
many of them have also entered India in different ways. For example:

• International fashion chain Fossil has already picked up a minority stake

of 2.5 per cent in domestic fashion accessories major Crew B.O.S.
Products, while a Spain-based fashion chain is in talks with Worldwide
Leather for a joint venture.

• The Forward group has entered into a joint venture with Conceria
Virginia Italy (CVI), a 10-year-old Italian tannery specialising in
leathers for shoes and leather goods; the joint venture has set up a six
million sq. ft state of- theart leather manufacturing facility in Chennai.

With the government keen to support the industry to modernise and grow and
double exports by 2010, the outlook for the leather industry in India is quite
positive.
Strategies for Indian Leather Sector

The Indian leather industry is targeting over US$ 5 billion exports by 2010 and
is expected to add about additional 1 million direct and indirect jobs during this
period. At present, the industry employs 2.5 million people directly and
indirectly.

Shifting of Manufacturing Base

Major world tanning firms are in the process of shifting their manufacturing
base to developing countries due to high wage levels and strict environmental
norms in developed countries. Factors such as availability of leather, production
know-how, processing of shoes work in India’s favour. India could effectively
use these advantages to augment its share in global production and exports.

Government Support
Technology upgradation and modernization of the entire leather value chain
should be given priority. Recently, the Government has approved Rs. 290 crores
for modernisation and technology upgradation programme.

Strong Production Base

The industry should lay emphasis on design and technology, quality and
innovation and economies of scale. Skill development for the manpower
engaged in the sector is vital for enhancing the export potential of this sector.

Investment by Large Corporate

Indian leather industry is dominated by household and small scale sectors.
Corporate presence would enhance the capability of producing quality leather
products. The large capacity would also bring down the unit cost and increase the
competitiveness in international markets.

New Markets
Diversification of export markets is another important strategy for Indian
leather industry. Consolidation in new markets such as Croatia, Slovakia and
Serbia would sustain the export growth momentum for the Indian leather
industry. Imports of leather articles by these countries have increased in the
range of 20-30% in a period of five years.
New Trends
The industry needs to keep itself abreast with latest fashion trends in the sector.
It is observed that Italian buyers pay attention not only to the quality of the
leather products but also to the accessories used in the garments. It is
imperative that adequate care is taken about the packing material.

Diverse Marketing Techniques

India needs to adopt aggressive marketing techniques in order to endure global
competition. The industry could undertake business delegation to secure
overseas investments and technology partnerships, besides building brand
image. Developing countries like India should have two pronged marketing
strategy of simultaneously targeting both low price and high quality markets,
rather than the traditional strategy of being a low price-low quality supplier.

Enabling Infrastructure
The development of the Calcutta Leather Complex is a positive sign as all
amenities are available at one place. Such exclusive leather complexes could be
developed in other major production centers. Improvements in efficiency of
ports, internal transport, customs procedures and supply chain management
are necessary for augmenting the productivity and exports in this sector.

Fairs and Exhibitions

It is imperative that Indian exporters participate in fairs and exhibitions
organized in the international market. It could serve as a good platform to
showcase our products. Lack of information about Indian leather
manufacturers also acts as a hurdle for international buyers.

Training Facilities
Training programmes should enable the industry to foresee and adapt to
changing trends and technology. It is imperative that the staff is skilled and well
qualified to train the students. Further, programmes need to be conducted to
make Indian exporters aware of different standards and requirements in the
global market to ensure that Indian exports do not get rejected due to
environmental norms.

The contents of the census are based on information available with Export-Import Bank of
India and primary desk research through published information of various agencies. Due
care has been taken to ensure that the information provided in the publication is correct.
CONTRIBUTION OF INDIAN STATES IN
INDIAN LEATHER INDUSTRY
 BUSINESS OPPORTUNITIES in TAMIL NADU

KARNATAKA
Karnataka is keen to promote itself as the destination for domestic and foreign
investment to catalyse industrial growth. The State Policy aims to achieve a
consistent economic growth rate of 8-9 per cent over the next decade. Policy
makers propose to create employment opportunities through industrial growth
in the state and several sectors have been identified as thrust areas. The state
offers incentives such as tax exemptions for investment in these sectors. These
sectors are electronics, telecommunication, informatics, precision tooling and
tool room industries, readymade garments including leather garments
(excluding leather tanning), units manufacturing pollution control and effluent
treatment plants, equipment and appliances and biotechnology.
MADHYA PRADESH
UTTAR PRADESH
Kanpur, Ghaziabad and Lucknow have an established traditional industry. The
large livestock population allowed the leather industry to flourish in the state.
Kanpur and Agra emerged as the hubs for leather goods in the country. Uttar
Pradesh has a well-developed leather industry. The state has one of the largest
livestock populations in the country, which provides a strong raw material base
required for the industry. The number of leather and leather products
industries in the state are to the tune of 11,500, of which Kanpur and Agra are
the two famous
production centres. Agra is the biggest centre for shoe manufacturing in the
country. Kanpur is the sole producer of saddlery products. It is a prominent
centre for leather processing. Kanpur tanneries specialise in processing hides
into heavy leather (sole, harness and industrial leather). Uttar Pradesh plans to
develop a special economic zone at Kanpur to cater to the leather goods
industry. In addition to traditional centres for leather and leather products in
the state, Noida has emerged as a major centre especially for leather footwear
and leather garments.

BUSINESS OPPORTUNITIES
REFERENCES
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•