Fabindia: Crafting Success

The Indian craft-focused retail chain implements a stock ownership plan to allow suppliers to share in the benefits of its growing business

By Sameera Anand

Mention FabIndia to most of India's urban, upmarket shoppers and chances are they will have at least visited one of its stores, if not shopped there. Now William Bissell is on a mission to ensure his suppliers reap the benefits of the brand that he has nurtured.

Bissell took over as managing director of FabIndia in 1999 and today heads a network of 87 stores in 39 cities in India as well as branches in Rome, Dubai and Guangzhou with a turnover in excess of Rs3 billion ($68 million). Plans are afoot to grow the network to 250 stores in the foreseeable future. FabIndia's profits are not public (the company is closely held) but Bissell does say that an investment of Rs5,000 in 1978 would be worth Rs2 million today.

His father John, who had worked in India as a consultant for the Ford Foundation, founded FabIndia in 1960 to showcase Indian handloom textiles to the world. He opened the flagship Greater Kailash, New Delhi, store in 1975 to retail home furnishings, and subsequently expanded into garments. At the time, the business largely catered to overseas buyers.

"We wanted to be in control of our own merchandise," says Bissell, explaining the decision to shift focus from the export market to the domestic market in the mid-nineties.

Today FabIndia has expanded beyond textiles into furniture, stationery, pottery, organic foods and bodycare products. All merchandise is sold under the single FabIndia brand and the company owns all its stores as Bissell feels this helps the brand to maintain its identity.

FabIndia works closely with artisans and villagers to develop designs and colour palettes and to optimise production techniques and raw material inputs. For the textiles, mostly natural fabrics and vegetable dyes are used.

"We attract a specific type of customer and decided we want to give that customer the spectrum of products," Bissell says of the product diversification strategy, adding that FabIndia's customers do not fit an age or demographic profile, but are a loyal base of people who want to support craft.

But Bissell is also candid in admitting that some of the diversifications have had unexpected problems. For example, FabIndia's range of organic foods, which it launched in 2004, has a limited audience and as it is perishable has a shorter shelf life than other FabIndia products.

FabIndia sources its products from around 22,000 craftsmen and artisans across India and has a plan to increase its supplier base to 100,000 in the next few years.

Last year Bissell went one step further in trying to ensure he is sharing the wealth FabIndia creates with those who are helping him to create it. FabIndia floated a wholly-owned subsidiary, Artisans Micro Finance, which will create community-owned companies. For each company, a calculation is done of how much working capital it needs, then this is financed two-thirds through debt and one-third through equity. FabIndia is working with Indian private sector bank, Axis Bank (the erstwhile UTI Bank), to provide the debt.

The craftsmen will own 26% of the equity in the company and will buy in at a price cheaper than external investors. Of the balance, 49% will be owned by Artisans Micro Finance and the rest by financial investors and FabIndia employees.

Bissell had already tried something similar in the past. When he returned from studying in the US in 1988, he set up the Bhadrajun Artisans Trust in Jodhpur, which is in Rajasthan. It was conceived as an artisans' cooperative for leather workers and weavers based in the state.

"I was an idealist, I had strong left leanings and wanted to change the world," reflects Bissell. But the cooperative model, based on collective ownership and decision-making (each member has one vote regardless of investment), did not turn out as Bissell expected.

"Decision-making paralysis set in with the community ownership," explains Bissell. He learnt from the BAT experience and spent the nineties researching forms of community ownership and working with banks to see how liquidity for the companies could be provided before he launched the current scheme.