Bag The Right Franchise Opportunity With ‘Baggit’

• Tell us about your entrepreneurial journey. How has the experience been in so many years?

I started Baggit in 1984 to distract my mind from failure in the 1st year of college and to prove to myself and the world that I am capable of succeeding in anything that I choose, if I put my mind to it.  The journey over the 40 years has many ups and downs and I would say that “Making in India” when every competitor had been importing from China has been the most satisfying aspect of the journey.  Also, mastering selling in Large Format stores; in exclusive Brand outlets in Malls & high streets and now in online channels have been the other key highlights. Today Baggit is a leading brand in the Ladies Handbags category with millions of loyal customers inclined to recommend the brand to their friends and relatives.

• How do you view Baggit’s journey over these years?

The market has evolved greatly from a functional market to a lifestyle market. When we started, the market comprised labels with poor quality products at low prices. Baggit distinguished itself with launching good quality products with high durability at reasonable prices. Also, Baggit understood different customers’ needs and offered products that addressed those distinct needs. Today’s customers are looking for Fast Fashion products that they can use and dispose off every season. Also, their loyalty is shifting to trendier products / brands that are far more visible in the digital / social media. Online platforms & Quick commerce platforms accentuate this trend even further.

• What is the brand’s vision for the next 5 years.

Baggit is more of a Classical fashion brand that is relevant over many seasons rather than being trendy and relevant for a specific season. Attracting young women in the 16 to 25 years category through fashionable products at reasonable prices and educating them on pursuing an environmentally sustainable and responsible choices through durable and classic designs is the clear-cut task for Baggit in the next 5 years to continue to maintain our market leadership.

• How has the Indian bags and accessories market evolved over the last 5-10 years?

Multiple ownership of handbags for different occasions and different attire is a key change that we have observed in the last 5 to 10 years. The purchase cycle has come down from 1 to 2 years in the past to 6 to 8 months currently.  Also, the average purchase price has moved from less than Rs 1500 per bag to around Rs 3000 per bag (with some international brands selling in excess of Rs 10,000 per bag). Premiumization can be seen with a significant up-gradation from low-priced unbranded products in unorganized markets to premium brands from organized retail markets (both online & offline). Innovative Silhouettes and colours differentiate brands from one another and the choice of brands / labels today is in excess of 100 compared to less than 10 a decade ago.

• How do you envision this market 5 years from now?

In advanced economies the Designer handbags; bridge to luxury and Luxury handbags are the dominant segments of the market. These are still nascent in India, but likely to grow the fastest over the next 5 years. The shift will be from functional benefits of ownership to more emotional values (prestige value for example). Also, consciousness about sustainability in fashion consumption will increase allowing brands to offer sustainable products at profitable prices.

• When and why did you choose franchising as your mode of expansion?

The first Company owned – Company operated store came around 20 years back in Mumbai.  The nascent development of the Malls in early 2000s gave a fillip to our EBO journey.  Seeing the success of our early stores, potential franchisees started approaching us for the opportunity.  It was easier for us to say yes initially to a suitable franchise partner especially outside the 4 metros, where we had our offices.  During Covid outbreak, we stopped all our COCO store expansion and focussed on getting our retail concept scalable; profitable and franchisable.  All our EBOs after Covid pandemic have been franchised stores and this has helped the company to expand better without the constraints of its own capital and at the same time providing profitable opportunities for potential franchisees ( some of them are women ).  The Company has developed merchandizing skill-sets that help in choosing the right assortment for each location with the Franchisee bringing in the understanding of the right location in different cities in addition to the capital needed for opening EBOs.

• What are the challenges that Baggit is facing right now and how do you plan to overcome them?

The handbags market is getting polarised between premium segment (approx. 30 % - 40% of the market size) and mass market (or value for money segment) accounting for the balance. It is increasingly getting difficult to serve these 2 distinct market segments unless the channels are differentiated based on their target audiences. Baggit is focusing on premium products for its premium offline Channels (EBOs and “A” category Large-Format stores) and a core range for other Retail including Distribution. An online focussed sub-brand “gg” will cater to the young customers, who will graduate to premium offerings from Baggit over a period of time.

• Three prevalent trends in the bags and accessories’ industry at present.
• Preference for Structured Bags amongst younger audience (continuing trend)
• Bucket shape (adoption of traditional beach bag using natural materials and providing hand-crafted look)
• Preference for recycled or environmentally sustainable materials amongst socially conscious and evolved customers

• How has franchising brought about a change in the business scenario?

We understood that there are 2 BIG risks in a fashion retail business – location risk and merchandize risk. Being at the right location with right rental costs is very important for the profitability of any retail business. If we select the right Franchisee with a good understanding of which are the right retail locations for the brand, based on its target profile, half the battle is won. Baggit has built a sophisticated assortment and merchandise planning model based on the location profile and data analysis of historical product sales trends for other outlets in a similar store category in a similar town. All merchandizing decisions are taken by Baggit using this model and all mark-down costs arising out of this decision is fully taken care of by the company with no costs going to the Franchisee. This risk mitigation has helped franchisees to set up multiple stores in a contagious area without having to expend time and energy on choosing the right merchandize assortment for each outlet every single day.

• How does Baggit support its franchise partners?

In addition to absorbing 100% of the mark-down costs, Baggit also identifies stock that needs to be exchanged at the end of the season from each outlet so that merchandize is always right and saleable at each location. The brand building initiatives especially in the digital / social media help strengthen the customer’s affinity for the brand and help in building traffic to the outlet, which are usually located in prominent high-traffic malls or high street locations.

• What does Baggit look for, while selecting its franchise partners?

Baggit has optimized its retail concept in terms of size; interiors and fixtures; merchandize selection; recruitment and training & promotions. A typical store may cost between Rs 12 lakhs to Rs 20 lakhs to set up (all investments including advance rent; interiors; equipment and stock). Potential franchisees should believe in the brand potential; be operationally efficient and provide excellent customer service. She should be able to spend a couple of hours daily to be able to interact with customers and provide their feedback on products; pricing and gaps.

• How has technology contributed in the franchise management and administration?

We use Microsoft Ax as our ERP as well as our front-end POS so that we have seamless flow of transaction information on real-time or daily basis. Our Merchandize Planning & Auto-replenishment system continuously tracks product-wise movement at each location and triggers automated replenishments once or twice a week based on the size of the business.  This helps in minimising lost opportunities for sales as well as to minimizing mark-down costs.

• What role does AI play in the retail industry?

Baggit currently uses AI for creating catalogues and photo-shoots (with AI generated models). We are also currently engaged in using AI for demand forecasting to ensure that the order fulfilment ratio improves significantly. More use cases will be pursued in a phased manner.

• What are the three key elements necessary in a franchise biz model from a long-term perspective?

For successful deployment of franchising in the Fashion retail business, the following pre-requisites are essential:

• Evolving appropriate Retail concepts that can optimize the Return on investment for a potential Franchisee based on the profile of the location & the expected sales potential
• Personal involvement of the Franchisee ( at least 2 hours / day in the initial stages ) to ensure faultless execution of the Brand strategy including exemplary customer service.
• Commitment from the Brand to keep the Franchisee’s profitability at the centre of all its policies and decisions.

• Tips for beginners in the bags and accessories industry.
• Bags & accessories is currently fragmented with the largest brand having less than 10% market share
• Understanding local customer needs and serving those cost-effectively is key to success
• The shift to online shopping dictates that any newcomer has to be proficient in digital / social media marketing.
• You need to have sufficient runway to absorb losses in the initial period.