With a century of experience in travel luggage, Samsonite has traditionally worn the badge of functionality and durability. Today, as the purpose of luggage extends beyond function into status, Samsonite is looking to be a premium travel solutions company with a tilt towards youth and fashion. Samsonite’s new RED collection is a move in that direction. While Samsonite claims to lead the luggage market in value share — it has 48 per cent — home grown VIP remains the volume leader with 60 per cent. Ramesh Tainwala, president, Samsonite Asia Pacific and Middle East, who was recently inducted into the Samsonite Global Board as executive director, spoke to Preeti Khicha about the shifts in the luggage market in India and how Samsonite plans to keep pace. Edited excerpts.
What makes India, to use your words, “one of the top five markets for Samsonite”?
If you look at the macroeconomic picture, GDP growth is 8-10 per cent, saving rates have dropped by 10 per cent, disposable income for affluent people is increasing by 20-25 per cent. Once the basic necessities are met, the next level of needs comprises good housing and education for children and then travel. The travel market is growing 20-25 per cent year-on-year and the number of people taking flights is also increasing. This, in turn, is helping the luggage market. The second part of our business is business products, day bags and so on. As consumption pattern changes, these products are not only used to carry things from place to place but are becoming an integral part of the personality of a consumer. We feel Samsonite is well geared to ride the buoyancy of the Indian market.
What is your turnover from India? Last year you said you wanted to double the India turnover…
Our net sales in India is Rs 600 crore, with equal contribution from both our brands — Samsonite and American Tourister. In 2010, we grew by over 52 per cent in revenue and the 2011 growth continues in the same range. Our mantra for success is to be close to the consumer and manufacture what consumers want to buy. Don’t prejudge the consumer. Bring new products into the market and if they don’t like it, withdraw it in two months. It is expensive but worth it. Over the last two years, we have been pursuing this mantra globally. For example, we launched the Starwalker range but consumers did not like it saying it was too bland. We removed it. We have close to 6,000 manned outlets worldwide and we have linked them electronically. The moment we launch a product, we get live feedback on sales from each store.
What are the key trends in this market? Are you worried about the competition from the unorganised players? A large part of the market is still with them…
The total size of the luggage market is estimated at Rs 2,000 crore and is growing at 25 per cent. Within this, the mid to premium segment, which is Rs 3,000 plus, holds 60 per cent of the market. The price segment below Rs 2,000 makes up the balance 40 per cent. While, the overall market is growing, there is also enormous migration from the entry price point to mid to the premium. When we came to India in 1998, the mid to premium segment was not more than 15 per cent of the total market.
The unorganised sector plays at the bottom end of the market and is very small; in value terms it will not be more than 15 per cent. This segment is largely left to a few areas like railway stations and is slowly dying. Consumers are not willing to buy just any product — they are ready to wait till they can afford a brand.
So who is your real competition — the unorganised segment or VIP?
In India, luggage is a polarised market — it is divided between Samsonite and VIP. Samsonite operates with two brands — Samsonite and American Tourister — while VIP has a host of brands. Together they have cornered 85 per cent of the market. The rest comes from the unorganised and peripheral players. This polarisation is seen in other parts of the world as well. In other countries too, there are two or three players that have a stranglehold (90 per cent share) on the market and the balance 10 per cent is divided between 20-30 players.
Why is that?
One reason has to do with the manufacturing process. A luggage has more than 700 components. The complexity of the manufacturing creates an entry barrier. The second issue is scale. Unless you have scale, you cannot invest in research and development (R&D) which is very important.
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Will you be looking to make India the manufacturing hub for Samsonite products?
We don’t use India as the main manufacturing hub; we use India more as a knowledge hub. The factory in Nashik is more an engineering centre. You cannot do R&D without manufacturing as it will become completely theoretical. The manufacturing in India is an insignificant part of our total production. We run it in India because you can get the best engineering talent here. About 70 per cent of the luggage made in India is exported.
You said in the beginning that luggage is becoming an integral part of the personality of a consumer and that the luggage you carry today is as much a style statement as the clothes you wear. What kind of opportunity do you see in that?
With the effect of globalisation, any product will move from being a commodity to something more discerning. Part of this is an outcome of how brands push their products; it is also happening because of the element of individuality that is apparent among consumers themselves.
There is a vested interest on the part of the company as well. If you place a product close to fashion, it follows a cycle and in the process the lifecycle of the product gets shortened. But then we do not want to make our products less durable. You push consumers to follow the cycle of fashion. That is the way to grow the market.
How is your brand Samsonite distinct from American Tourister? Which is doing better in India?
Samsonite is luggage positioned for a business traveller, whereas American Tourister is luggage meant for family and leisure travel. American Tourister straddles a price point which is lower than Samsonite. Both brands are doing equally well in India and have their place in the market. There are many consumers who are looking for serious business products which offer extreme functionality, and for that they are willing to pay that extra price. However, leisure travel is also growing and that is a customer who would look for an American Tourister.
How is the new RED range different from your other offerings?
The RED range is designed to be functional as well as fashionable. Right now it only has close-to-body products. The ratio of functionality to fashion in luggage is still 80:20 — you want light weight, strength, durability, but for close-to-body products, fashion is more important. In a year or so, we will extend this range to luggage as well. The RED collection has products that are unisex in nature.
Are you exploring the ladies handbag space? There were some newspaper reports about Samsonite getting into eyewear and watches to become a complete lifestyle brand?
No, Samsonite is not planning to enter the ladies handbag segment. We will offer day bags for women, but we don’t want to get into fashion bags for women like the Guccis and the Pradas as it is not in line with our core values. We want to be a travel solutions company. For us, travel could be between home and work, or home and gym. We want to launch products within that space. If we launch eyewear, it will be eyewear for travel. If we get into watches, it will be a watch that adjusts automatically to time zones.
How does footwear fit into your overall scheme of things?
In the footwear space, we want to be in travel comfort shoes. It is designed for people who travel a lot. The basic DNA is that it should be lightweight, functional and comfortable.
Currently, the shoe business in India is like keeping the seat warm.We are in the process of studying what the customer is looking for. In the first two seasons we realised that the global fit will not work in India. This is because Indian feet are different from Asian and Caucasian feet. For the next two years we will continue at the same pace and by 2015, we will learn enough to put the footwear business into high gear.
Since you are increasing your accent on fashion, where do you get inspiration for new designs?
Worldwide we work with eight design teams, five of which are in Asia (Japan, Korea, Hong Kong, Shanghai and India). Sometimes, we also engage freelancers or guest designers. These could be both famous names like Alexander McQueen, but also upcoming designers from design institutes. The RED range of Samsonite was inspired by young designers in design schools. Designers often get ideas from categories different from ours — such as apparel and accessories.
The design team in India mostly works on the hard luggage range, while the other four in Asia work on close-to-body products. We also have design teams working out of Italy, Belgium and Boston. We allow each design team to work independently and don’t force them to collaborate, as they end up cannibalising each other.
Can you discuss any interesting consumer insights that you have incorporated into your product design?
One of the key innovations which we have invested in is the weight of the luggage. Post 9/11 and the economic recession, airlines have become strict on weight. Second, our airports are becoming bigger so wheels have become important in luggage. Our new range has wheeling comfort where you can drag the luggage for about 32 km. Durability still remains a priority.
Any insights specifically from Indian consumers?
One learning from India was that wheels that were built for global usage conditions do not work in India. This is because you don’t have smooth surfaces everywhere in India. Hence, luggage wheels have been adapted. Our wheels undergo a test called bump test. Previously the conveyors used to be smooth, but now we have put artificial bumps. Secondly, Indian consumers have the habit of dragging their luggage on steps and don’t lift it. To avoid damage we have given added protection behind the bag. Also, whatever the size of the bag, Indians always run short of space. So we have designed bags with expandability. In countries like Japan, people find this clumsy.
How do you zero-in on the location for a Samsonite store? Samsonite stores in India have among the highest conversion rates…
In India, we follow the belief that 10 per cent of the stores will die; so to make the other 90 per cent profitable, you have to take some risk. The science of opening in other countries is different. Malls abroad will give you data on mall traffic. There is syndicated research available which provides traffic count, from which we can estimate walk-ins and conversion rates.
In India, the conversion rate is around 75 per cent, compared to 30 per cent globally. Our experience has been that if the consumer feels a Samsonite product is expensive but she still wants to buy, she will walk into the store. If she has interest but doesn't want to buy, she will walk around the store and see it from outside.