We’ve been working on a post about IPL advertising for coming Monday. While doing some random research I came across a loosely related fact about franchisee revenues. Considering they claim to have adopted all good things from a number of international sporting leagues the near absence of merchandising revenues in their P&Ls came as a bit of surprise. I was like, this smells of corporate India.
Thankfully, I did not have to look very far to get some education about how the merchandising business really works in India. Upkar Sharma (U) a close friend and the founder of Crea India (a brand merchandising business) was extremely forthcoming in having a rather elaborate discussion. Here’s how it went:
R. The other day I was at Bacardi’s David Guetta show in Gugaon (don’t tell anyone:P). Noticed a number of young folks sporting dated afros and funky led glasses. Did you have anything to do with it?
U. In fact, we did. Bacardi approached us for party merchandise ideas, we researched (read googled), made a snappy ppt and shot out our findings. They were concerned about price & timelines (always the case) , then we opted for the best possible route of finding , what was ready to ship in China. So a bit of merchandise being dated and a bit being funky is not by design 🙂 . Given a choice we would like to do something a lot more edgy and make a lot more money on it.
R. I understand that you have been in the merchandising business for a while now? Take us through the evolution if there has been any.
U. Brand Merchandising is not a new business in India. Its been around for 30 odd years or so. By no means its not growing, it is. Evolution, however is at a snails pace.
So what are the first things that come to your mind when you talk about Brand Merchandise? – T-shirt, Pen, Clock, Diary
Sadly enough, it was the same state 30 years back.
To answer your question clearly ,we can talk in terms of revenue & innovation.
Revenue wise the industry is growing at a rapid clip. About 20-22 % year on year. The turnover is well in excess of 5000 crores a year. The sad part is
1. Being an extremely low entry barrier business its highly fragmented. 90+ percent players are below 2 crores in turnover.
2. The presence of players in excess of 50 crores + turnover is almost negligible.
3.,Being in brand merchandise is not a function of expertise but if your uncle/aunt/girlfriend or best friends niece is in a company in a position to give you business.
4.Inspite of the industry size being in excess of businesses like ice-cream, confectionary, coffee chains retail, there is no FDI, government recognition, financial institution support or a clear policy fostering the growth and maturity of organizations dealing in the same.
5.We are all traders, importers or manufacturers. There is virtually no national body to integrate the operators, have a operational guideline or a code of conduct. Its a free for all.
In terms of innovation
Nothing can be said about the first 25 years of the industry, but in the last decade with the influx of foreign brands in various spheres of business,the awareness and the perception towards merchandise is rapidly changing. Brands are a lot more serious about merchandising. Brands in sectors like media, liquor & automobile have started looking at innovative merchandise. They are trying to make the process of procuring more organic, starting with ideation and focussing on relevance of merchandise to Brand ethos. This is refreshing and demanding on us at the same time. I would like to mention Discovery Channel here ( yes they are a client). Although extremely demanding, its fun pushing our boundaries in terms of conceptualization, sourcing, quality control and packaging.
So if I had to give you a ball park ratio of prostituted merchandise vis-a-vis innovative merchandise, it stands at 90:10. We can see its changing, we just hope that it changes faster than it is.
R. How many of your clients are youth brands and what is the typical nature of their requirement?
U. A significant tg of most brands is youth. How well they talk to youth is a different issue. Most of the merchandise, if it is not general trade merchandise ( table tops, calenders, wall clocks etc) is targeted towards the youth. Problem is, the decision makers are not young, hence 95% plus merchandise that we do is bland and black.
But if we talk in terms of brands which know what they want and know how to talk to the youth, Tuborg would be one.
Tuborg has a strong music association. They sponsor shows on VH1 and parties etc. Their merchandise too is in line with the theme. When the brand was being launched we were given a clear brief and hence we could devote our energies towards providing a solution and not a product alone.
- Glow in the dark t-shirts with equalizers print that would glow in a dark night club environment.
- Small portable speakers
- Hoodies , much in vogue with the young.
- Beer bottle shaped flash drives & mp3 players.
R. “Give aways” is how corporate India treats its merchandise, an expendable part of the marketing budget. Why isn’t there more value attached to merchandising?
U.Right said there. Merchandising in Indiais . “ Yaarthodatshirtkarletehai, event me baantdenge”. See the fact is that industry is growing in revenues, so its not the lack of opportunity.
Currently, you can approach merchandising from different lenses:
- Trade & media gifting
- Employee motivations & incentivizing
- On pack promotions
The problem is for most part the Brand Managers fail to see any value in putting any effort behind it. So much of focus is on other elements of BTL like events etc that merchandising almost always is an after thought. Perhaps, this attitude stems from what they have learnt in their MBA. I’m yet to come across a chapter or a book devoted on merchandising. There is ATL, BTL, Events, PR everything, merchandising has not been talked about. Its not a thought they have been trained to think.
In India merchandising is done to convey or augment a brand story. Its done because there is a budget defined for it.
R. There are so many merchandising vendors in the market but we haven’t heard of roaring marketing success stories based around merchandising. Are we less updated or there just arent many?
U. What are the chances of that? We get majority of the business on referrals. It is a relationship dependent industry. As long as you know me, like me, as long as I don’t completely fuck you over in quality or pricing, I will get your business.
Its not all mediocre and dark though, there are nimble companies like e-yantra , loyaltygifts.in, Consortium Gifts which do decent turnovers with pan India approach, slowly appearing on the horizon. We ourselves are in 3 countries now. In process of implementing our own sap system. Every year there are more companies breaking the 5 crore mark in turnover, we can see new websites which are not standard template monster variety.
So yeah, its changing. How fast, would be merely a guess.
R. Do client’s (and you can choose to not name them) request you for an ROI on there merchandising spend? Considering you are solution partners, does this aspect feature in your proposals?
U. Don’t you think this interview would sound more like an interview and less like a rant if that happened? It happens internationally for big brands in liquor & FMCG, Hotels even tech. But then there the merchandise vendors are like agencies. They are involved from the word M.
They are responsible for Idea, innovation , mix, logistics till last mile. Everything. Now that’s where accountability comes in. That’s where the onus is on the merchandiser to deliver. You have been assigned a budget, go on make the most of it and show. There , companies utilize their manpower for more relevant pursuits inline with the organizations over all strategy. “Hire the expert” is the mantra.
R. Do you believe that marketing managers and purchasing folks are simply thriving in the ambiguity and lack of tangible metrics on merchandise, or is there a concerted effortto innovate and push boundaries? How do you keep up?
U. One Word for the First part of your question “ YES”.We keep up by trying to push them to push us.
R. Go on give us something random, startle us:
U. I’d give you an interesting anecdote on the power of merchandising:
We all know about the super successful star wars series of movies. Operating on a set budget by the studio, George Lucas was finding it difficult to realize his vision in the given budget.So he negotiated with the studio bosses to increase the budget, he did so by writing off his own fee as director of the movie, instead taking up rights for merchandising. Now call it a stroke of genius or luck.
Movie receipts as on date a whopping 4 Billion USD.
Merchandise Sales, and here is the story 23 Billion USD.
That’s the power of merchandising. And guess what..you don’t need George Lucas to tell you that!