Why the $15-B sari industry still has no single large player
Saris have been worn by women from the Indian subcontinent for ages. Its following may have reduced in the last few decades with the adoption of more Western-style clothing, but it still remains a $5–15 billion business. One can buy saris for as little as Rs 100 or as much as Rs 1,00,000 and more, depending on one’s budget. More than 100 draping styles have been documented for the saree and the range of colours, designs and types of fabric can leave a first-time sari shopper bewildered.
There are probably hundreds of brands and companies manufacturing and selling saris. Some of them are more known than others. For example, Prafull saris invested heavily in brand building and became well-known, while Satya Paul has become the place to go for designer-chic saris. Nalli/Kumaran/Pothys/Kalyan Silks have large stores across South Indian cities and Indian designers spend a lot of effort to project saris as the most important part of the bridal trousseau.
All this said, India does not have a single large brand in the sari business. Nothing that will do justice to the overall size of the industry.
This may sound a little surprising. But the sari business has characteristics that may never allow a business to scale up and consolidate despite the seemingly large untapped opportunity. We should be wary of these characteristics while evaluating investment opportunities.
- Indian saris are available in near infinite variety. Indeed, the permutations and combinations may run into a few billions. Indian women are spoilt for choice. Proliferation of stock keeping units (SKU) to this extent in an industry makes it very difficult for the organised sector to manage. An average sari shop may have about 1,000-2,000 SKUs at any point of time, which means the power tussle between the trader and manufacturer intensifies.
Observation# 1: The number of SKUs in an industry make it difficult to scale up and hence the investment to multiply on a large scale.
- There is no assurance of quality except the the shop owner's word. The buyers look at the product and make their assumptions about the quality, and hence the pricing. This was exactly the situation with the Indian jewellery industry about two decades ago. Our grandparents would buy jewellery only from their trusted jewellery shop. It was difficult for them to trust more than a couple of jewellers. Similarly, it was difficult for a jeweller to win the trust of the masses. The seller and the buyer limited mutual growth. The moment some corporate players started demystifying issues around quality of gold and diamonds, trust was replaced by an assurance of quality. This has resulted in the emergence of multiple large jewellery chains. Why has this not happened with the sari industry? Well, the large number of SKUs may not make it worthwhile for a lot of people to spend time and effort on demystification. Indeed, the people who face the customer and would demystify are not the same people who would manufacture saris – making it all the more very difficult.
Observation#2: An industry that does not parameterise the quality of end-service or product limits the emergence of large players.
- A typical store selling saris caters to customers at a very wide range of price points and design sensibilities. Typically, you would not find sari stores targeting a certain price segment or positioning. Some of them do try to position themselves as a store for 'marriage saris'. That said, different sections of the society go beyond their normal spends during weddings and therefore these 'marriage stores' are visited by a set of customers with varied actual spending powers. The sales channel is not focussed on a segment of the target market and, therefore, finds it difficult to develop a positioning and a consumer brand. When a product sells through such a channel, it loses a chance to face its right buyer. And the company loses its chance to scale up without the focus.
Observation#3:An industry where the sales channel makes it difficult to segment and target the right customer makes scaling up a difficult proposition.
A lot of these observations cannot be applied independently. But the presence of a combination of these observations multiplies the risks that we should recognise in industries while investing.
More importantly, entrepreneurs need to think if their business models and industries have these risks and figure out ways to circumvent them.
Note: The views presented are entirely personal and do not represent that of the employer of the author. This article has been published earlier on LinkedIn.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)