Brand management

The Way Indians Greet

Case Introduction

1) Analyze the circumstances in which Anil Moolchandani stared Archies and highlight the reasons for the companys runaway success. Why do you think Archies could not sustain its profitability growth in 2000-2001?

Archies result of innovative mind of Anil Moolchandani.

His family business was selling saris but in 1970 he decided to buy & sell good quality posters

Later when demand increased he started getting posters of film stars, natural sceneries etc printed by local printers.

Later on he decided to enter the Greeting cards business.

In India cards were sold out of dusty shoeboxes.

In 1979, Anil & his brother Jagdish Moolchandani got Archies Gifts & Greetings registered as a patnership firm. On his visit to South East Asia, realized there were exclusive greeting cards shop with good ambience and soft backdrop music. He decided to try out the concept in India and launched Gift Gallery in 1984 in Delhi. Initially launched cards for Valentines Day, Mothers day, Fathers day, Friendship day - to catch the fancy of teenage shoppers.

In 1987, first exclusive Archies Gallery was set up in Kamal Nagar, Delhi University. It became an instant hit with sales touching Rs. 2.2 million in first year itself

In 1995, Archies was incorporated as a public limited company, with IPO of Rs. 74 million

By 1990s, Archies was operating in three businesses

Greeting cards
contributed 69% of the total revenue, with sales volume of 85.8 mn cards

Gift items

contributed 15% of total revenue. Includes items photo albums, frames, clock, stuffed toys, mementoes, sunglasses etc

Stationery products

contributed to 16% of cos revenue. Includes items such as autograph books, diaries, calenders, posters, gift wraps, designer & fancy sationery.

Its products were marketed through following channels:

Archies Gallery Archies-The Card Shop Paper Rose Shoppe Archies Feelings Vision 2000 stores
first exclusive store, 500-1000 sq ft in size

smaller in size than Archies galleries.

shops with an area of 100-150 sq ft with around 85% of Archies merchandise.

In april 2000, Archies took over the popular 25-store Feelings chain of greeting cards

They were premium Archies Galleries, exclusive Archies showrooms with lot more shelf space than other outlets.

Factors Responsible for its runaway success

1. 2. 3. 4. 5. 6. 7. 8. 9. Venturing into greetings Market segmentation & acculturation Operational economies Clientele base Wide range of products Dedicated retail formats Distribution Franchise Smart marketing

Decline of profitability post year 2000

1. e- Cards: To tackle the threat posed by e-greetings Archies came out with their dedicated portal- archiesonline.com. The number of registered users reached a phenomenal 0.6 mn and the number of e-cards sent through the site touched 54 mn. However this service was a drain to the companys finance since it made no profit. This was due to the fact that the online services hitherto were free and the margins were insufficient to cover the creating and hosting costs hence the company suffered a loss of Rs. 13.5 mn. To cover this as a measure archiesonline was converted to a paid up site. This resulted in loss of existing registered users and the tie up with yahoo was snapped

Decline of profitability post year 2000

2. Retail revamping: Archies was on a spree for exclusitivity drive. Most of the franchises were taken back and exclusive retail chains were established with stress on direct contact with customers. This called up for huge real estate expenses. Moreover company took back all the stocks lying with the distributors thereby increasing the working capital requirements. The ERP initiatives were taken back which contributed to the net decline of the business. To cover up these losses funds were outsourced which incurred a heavy interest burden.

Decline of profitability post year 2000

3. Catastrophic events: Companies revenue took a severe beating in 2000-01 due to a nationwide postal strike in end 2000 that affected the Christmas and new year cards in 2001 Valentines day celebrations were hit hard due to opposition from fundamentalists and earthquake in Gujarat which was a major market for Archies.

Decline of profitability post year 2000

4. New rivals : ITCs entry into the greeting card business was a challenge to Archies. It posed a threat to its market share and profitability due to its established brand equity in the market. The music segment was threatened by Saregama and Tips cassettes. Hindustan Lever and Cavin Care were a threat in the perfume segments

2)Critically comment on the Archies franchising and distribution strategies for expansion. DO you think the companys strategy in the initial years was right in the light of the rationalization exercises? Give reasons to support your stand.

3)Do you think the measures taken by Archies to meet the threat of e-greetings were adequate? Was the companys decision to make its website a aid one, a sound business move? Justify your answer.

4) Discuss if Archies will be able to maintain its market share and leadership in the future with the entry of players such as ITC? Will the companys current strategies help sustain its competitive position?