VIP's slice-and-dice strategy

The company is catering to different market segments with five brands

Leading luggage manufacturer VIP Industries has just unveiled a new identity for its brand Aristocrat, roping in cricketers Rohit Sharma and Ravichandran Ashwin as celebrity endorsers and introducing a new logo with the fresh tagline, “Unpack your dreams.” The rationale behind the repositioning of one of its “value for money” brands, with an aim to hold greater appeal to youths away from big cities, follows VIP Industries’ overall segmentation strategy that is focused on sharply defining target audiences in an industry that is largely unorganised.

According to Sudip Ghose, vice-president, sales and marketing, VIP Industries, the organised segment in the luggage industry in India is worth about Rs 2,500-3,000 crore, while the organised market is thrice as much in size. He explains that the demonetisation of old Rs 500 and Rs 1,000 currency notes last November has led to a situation where the price gap between branded and unbranded products has narrowed. The unorganised players are dependent on the parallel economy, whereas post-demonetisation cash flow has suffered which in turn has affected their business. “We have been thinking of relaunching Aristocrat. And we felt this is the right time to rebrand and get celebrities on board. It’s already been a great brand. It just needed a revamping to assure people that it’s still modern.”

Ghose adds that the company began its strategy of strict segmentation over three years ago, and the standalone brands — Carlton, VIP, Skybags, Aristocrat and Alfa — are like “five different kids of ours”. The communication channels for each are similarly distinct. For Carlton, the premium brand, the company communicates through English television channels, high-end magazines, news portals and digital and includes advertisements in airports, while for Skybags the focus is youth-centric and concentrated on sports events, college fests, etc. Communication for VIP, which is projected as a mass brand, features on general entertainment channels, magazines and hoardings. For Aristocrat, the advertising is mainly in on Tier-II cities as well as digital to a large extent. Alfa is not an advertised brand. As Ghose puts it, “The youth of India is with Skybags, and the youth of Bharat is with Aristocrat. That’s how we differentiate in our minds.”

With regard to retail distribution, Carlton products are available only in company stores and high-end malls, while Skybags — targeted at footloose urban youths — is available mainly in hypermarkets and through e-commerce. VIP, which is built as a family travel brand is available on general trade, while both Aristocrat and Alfa are sold by distributors as products that are both aspirational and affordable. The segmented approach, Ghose assures, helps the company to maintain differentiation among the different brands and prevent overlaps.

The company has a market share of 55 to 58 per cent. Although competition from foreign brands like American giant Samsonite has challenged the dominance of the decades-old company, VIP has managed to regain its toehold.

“One of the things segmentation does is that it reduces cannibalisation. That’s the biggest advantage we have had. We are able to give products to match most of the travellers’ needs. The sharper you define your target audience, the less chances there are of cannibalisation between brands especially if you are operating in the same category with multiple brands,” says Ghose. In the past three years Skybags has had a CAGR of close to 65 per cent, as against 20 per cent earlier, while Carlton has been growing at 45 per cent, he argues.

Although he refuses to reveal internal figures on contribution from each of the brands to the company’s growth numbers, Ghose says VIP has achieved strong positions in segments like backpack, which it entered three years ago, and business bags.

Harminder Sahni, founder and managing director of Wazir Advisors, argues segmentation translates into a better shot at gaining market share. “There is a large segment that companies are looking at. So rather than trying to cater to all by one brand, one would use two. Then it will have a larger share of the market. These two brands may not be supremely distinct from each other. Because in the consumer’s mind, when they buy VIP they buy VIP. Maybe they look at three other brands and then buy VIP. If there are five brands and two are yours, chances are that you will get 40 per cent share.”

He adds, “All segments or sub-categories are fairly large. It could be that one brand starts at Rs 1,000 and goes up to Rs 10,000. Another is maybe starting at Rs 800 and goes up to Rs 4,000. There is a big overlap. In any case, people who buy branded bags are a segment in itself.”

Creating distinct identities

• VIP follows distinct communication and retail strategies for its five brands

• The company says the biggest gain from segmentation is cut in cannibalisation among its different brands

• Its segmentation strategy has ensured better visibility in retail