Backpacks seem to be the new battleground for luggage makers Samsonite and VIP, but their strategies are markedly different
Adamsel in distress, an unlikely hero in a commoner and a fight sequence with the goons — a scene straight out of a Bollywood flick. The only exception to this cliche: the hero’s choice of weapon or source of strength, if you will — a red backpack. And that my viewer is American Tourister’s latest and also its first ever communication promoting its ‘smart international backpack’ range.
The campaign is American Tourister’s first step towards its ambitious plan of ‘owning the category’, one that is as yet largely unorganised and not dominated by any single brand. Speaking of the company’s plans for 2012, Sudip Ghose, group marketing director, Samsonite South Asia, that owns American Tourister, says, “We plan to sell two backpacks per minute in 2012.” For the disbelievers, here’s Ghose’s math: a year has over 5.25 lakh minutes. His sales target is 10 lakh units, higher by more than 50 per cent from last year’s sales figure of 4.5 lakh backpacks. If the target is achieved, the aim will be met.
The math may seem straightforward, but reaching this target may prove to be an uphill task. Mainly on two counts — the challenges faced by the category as well as competition from players such as VIP and casual bags’ maker Fastrack, that are firming up plans to rule the space, besides sports brands like Adidas and Reebok that also target a similar consumer base.
The latter, that is sports brands, pose a bigger challenge on the back of their existing connect with the youth. “As a brand our focus is primarily on creating products that help athletes — everyday people like you and I who need gear for our daily fitness regime or top athletes to perform better — as well as sports fans,” says Tushar Goculdas, director, marketing and sales, Adidas India. Though the brand does not actively promote itself as a range for casual wear or use given the ‘aspirational’ value attached with the brand and the emotional connect thanks to its association with leading sports stars, the youth naturally identifies with the brand, feels Goculdas.
Building up a strong brand proposition may thus be key to attracting this rather tricky audience, high on their adulation for branded goods. For example, VIP, which is positioning as a stylish travel gear, is hoping to capture the attention of a younger audience with its new collection of backpacks and an ad campaign aimed slated to hit screens end of April.
In India, the overall luggage market stands at Rs 3,000-Rs 4,000 crore, according to market estimates. Of this, more than 50 per cent is controlled by organised players like American Tourister, Samsonite and VIP. The reverse is true for the backpack category. While the branded backpack market stands at Rs 400-Rs 600 crore, the share of non-branded, local players could be much larger, say analysts.
To estimate this total universe, Ghose offers another back of the envelope calculation. The total Indian population stands at 1.2 billion. Assuming that one third of this population falls in the 15-29 years age bracket, one is looking at a potential target group of over 0.4 billion or 40 crore. If even half of this audience spends a basic Rs 200 on a bag each year, the total bag market could stand at over Rs 4,000 crore, on par with the overall luggage market.
Branded backpacks start at a much higher price point. For instance, Fastrack starts its range at Rs 895 and goes up to Rs 2,000. American Tourister, too, is playing in a similar price band (Rs 790-Rs 2,100). The VIP brand, Skybags, too retails backpacks at a starting price of Rs 790. This starting price point is no longer an issue as usage and attitude studies conducted independently by players dictate that the target consumers are willing to spend Rs 750-Rs 800 for a good quality backpack.
As per Manish Vyas, VP, marketing, VIP Industries, the Rs 500-Rs 1,000 price band is most popular with consumers and efforts are concentrated on an upgradation of usage patterns — a sentiment echoed by players across the board. To this end, players are wooing consumers with stylish designs and sturdy, good quality products.
Given the typical target group for this category is 15-29-year-old young adults, the focus is a blend of design, functionality and of course comfort as pointed out by Simeran Bhasin, marketing head, Fastrack. “Ergonomics is a key aspect. As the load you carry increases, comfort becomes very important. The other thing is how the bag helps you organise your stuff — consumers are always looking for easy access,” explains Bhasin.
Once this basic criteria are met, the products can be further enhanced by adding features for usage by a specific group. For instance, most backpacks available in the market are treated as unisex products. To do away with this anomaly, Fastrack has a range that caters specifically to girls, one with bright colours as preferred by women. In terms of functionality, there may be additions like a built-in cosmetic pouch and so on.
American Tou- rister, too, commissioned an in-house study to gauge the expectations and needs of the consumers, gaining some interesting insights in the process. For instance, students in classes six to twelve want a ‘secret pouch’ in the backpack. College students, high on the fashion quotient, want the branding to be prominent on the bag. And lastly, it was found that young executives mostly travel by bikes and hence during monsoons need a cover for their bags.
A backpack, by nature, is a very personal item and every user will have his/her own quirks. While the product cannot be custom made for each user, it can surely be sub-segmented as per broad categories. “Even if you look at college students as a broad category, close up there will be differences. So within this universe, there may be a student who carries a bag to college as just a fashion accessory, while there may be others who need sturdy laptop cases,” says VIP’s Vyas.
VIP, therefore, has a focused backpack brand, Footloose, for college students and laptop backpacks from Skybags for young executives and college students. American Tourister too has adopted a similar approach with different brands targeting different categories: Buzz (for school kids), Code (for college students) and Citi Pro (for young professionals).
Backpacks for school kids too provide players with a big opportunity but there are mixed reactions to the space. Ghose feels that cartoon character bags mean big business; Vyas feels it is a dynamic space, as there is a separate flavour-of-the-season cartoon character, posing a challenge with regard to building brand longevity. Someone like Fastrack though wouldn’t even venture close to the territory as it holds fast to its uber cool, youth image.
This category is plagued by an issue faced by many categories in India — that of cheap knock-offs. “This is a very cluttered category, the biggest challenge being fakes. The entry barriers into this category are low and it takes less than a month for the unorganised market to replicate products and launch them at a quarter of the price, as they are able to do so after completely ignoring quality. Therefore we need to be ahead of the curve all the time,” says Bhasin. Some observers feel this may actually be a blessing in disguise: a lower price point for a fake could only increase the snob value of the original product.
A bigger challenge though would be ensuring reach. Currently most of these players have a distribution footprint hovering between 2,500 (Fastrack) to 7,000 (American Tourister) across channels like company-owned stores, franchisees, departmental stores, distributors and so on. Says Purnendu Kumar, associate VP, Technopak, globally, such products are mostly retailed through large retailers. But in India, like fast moving consumers goods, backpacks are retailed largely through smaller traditional retail outlets. “Each store means a new customer and each new customer means new negotiations, new arrangements, newer challenges. But, this can work both ways. A daunting task at first, once established, it can be your biggest advantage over your competitor,” adds Kumar.
Once the distribution network is in place, one must deal with space constraints. Most mom and pop stores have an area of just about 200 square feet on average. Within this limited space, brands must jostle with each other besides taking on non-branded, locally made backpacks, knapsacks, other casual bags and so on. Despite the many challenges, all the players are only speaking of scaling up their business in this space. From the looks of it, the luggage industry has found its sunrise segment.
Who said this and when “We don’t think that televisions and personal computers are going to merge.