Abstract
Ms Sunayna, while talking to her cousin, who had visited her outlet Indian Crafts (IC) for the first time, was sharing her concerns about low sales in recent months. Rupee sales per invoice from repeat customers were going down. Sales from new customers were high but new customer generation was very low. She was very much concerned about declining sales and profits over the previous two years and was looking for ways to revive sales of IC. She also had an inventory which was not moving, especially some costly paintings and large artefacts. Now that her brother Mr Jatin Kumar was not interested in this business, the entire responsibility was on her shoulders. With more than five years in business, she understood it well and was in a position to take on all responsibilities. During this period, she had mostly handled sales but recently she dealt with vendors, organized theme events, and was confident of operating the stores herself. She had to do something in a short time to turn around declining sales or otherwise may be the business would have to be closed down. She was sure that Mr Jatin Kumar will be always available if she wanted to discuss anything or needed guidance in any matter.
Idea and Start of Venture
Mr Jatin Kumar loved traditional Indian paintings. During his travel to various places across India, he collected (bought from artisans, painters, outlets, etc.) around 30 paintings. These included Madhubani, Pattachitra, Thangka, palm leaf paintings, etc. His friends were aware of his collection and asked him to showcase them at home. Some friends liked a few paintings a lot and were keen on buying similar work. They also suggested that he display his collection in an art gallery. One of his friends, CEO of the Beta Mall in a suburb of Delhi, who had interest in art offered wall to display collection for three months in the Beta Mall free of cost. Mall at that time was the biggest mall in the suburb. It had good footfalls of urban educated elites. Looking at the business opportunity, Mr Jatin Kumar put on display his collection in September 2010. Many appreciated his collection and there were sales during these three months. This led Mr Jatin Kumar to start dealing in paintings and other Indian Crafts under the name of Indian Crafts.
On completion of three months, Mr Jatin Kumar took on rent a corner in the Beta Mall at ₹20,000 a month. He did not advertise since the mall had good footfall. In addition to paintings, Mr Jatin Kumar also dealt in Indian traditional arts and crafts. Brass items (Dhokra arts) and small ethnic furniture such as mirrors, bookends, restored pieces, and so on found space in the stores. Most of the items were bought from craftsmen and artisans from rural India. In this way, he could also financially support artisans most of whom were poor. Sales were exceptionally good. Mr Jatin Kumar looked after purchases while the operations were handled by a team of employees. Mr Jatin Kumar, however, did not give up his full-time job and so he could devote weekends and only whatever spare time he could find for the business.
Growth of Indian Crafts
Good profits in the business and lack of space in the mall, led Mr Jatin Kumar to the idea of opening a second outlet. He convinced his sister Ms Sunayna to take charge of the second store. She was a graduate of Delhi University. Initially, she had been associated with direct marketing companies such as Tupperware India Pvt. Ltd and Amway India Enterprise Pvt. Ltd. Later she did the business of life and health insurance. Ms Sunayna had a large clientele and had been into direct sales also, from which IC could benefit. To Ms Sunayna, visitors at the shop could provide a lead for her insurance business and so she readily agreed to the proposal. The second outlet was opened in April 2011 on rented premises at Krishna Dham Road, in the same suburb of Delhi. The location was thought appropriate for the store as upper-middle and upper-class households lived in nearby residential areas. Hoardings, advertisements, and pamphlets in English were used to advertise about the new store.
In new outlet more space was available. Items such as ethnic lamps, ethnic and colonial furniture, rustic furniture, and Kalighat paintings were introduced. In April 2012, more space was acquired by taking two adjoining shops on rent at ₹40,000 a month. With more available space, ethnic furniture such as Parsi sofa sets, corner pieces, shelf stand, and so on were introduced. In 2013, gifts items such as cloth corrugated jewellery boxes, wooden candle stands, ceramic drawers, and so on were added to the collection. In 2014. a textile section was introduced which included dupattas such as hand painted Madhubani, Chanderi, and Kalamkari designs. Other items introduced were marble pieces like plates. IC opened a third outlet at Zaveri Bazar (in another suburb of Delhi) 30 KM far from current location, in April 2014. The location was appealing as this was a marketplace with good restaurants and a famous college was nearby.
Certain customers of Indian Crafts were price sensitive. To tap these customers, it was decided in 2012 to organize an annual sale for 10 days just before Dussehra. In April 2013, an anniversary sale was organized on completion of one year of IC at the Krishna Dham outlet. In 2014, it started a scheme called Friends of Indian Crafts (FoIC). People were enrolled in this scheme if they had good knowledge of paintings and other Indian Crafts in which IC dealt, were repeat customers to the outlet and were happy with IC, and who had purchased goods worth ₹20,000 from IC (in single or multiple billings) was also enrolled. FoIC was given a loyalty bonus of 10 per cent cashback and were invited on zero day of the annual sale period. These schemes worked well.
To further increase sales, IC started theme events. The first event was on Kalighat paintings, organized in 2012. It received good response. IC charged a mark-up on the price quoted by painter and earned good returns on this event. In 2013, a wildlife photography event was organized which was also very successful. In August 2013, Lord Ganesha event was organized. In this event, Lord Ganesha idols in brass and wood were displayed for sale. The event met with very good response. In July 2014, Roop Rang, a textile event, was organized. The event generated a sale of close to ₹0.1 million. In August 2014, Lord Ganesha event was organized again but the response was not so good. Apart from advertisements in newspapers, these events were promoted by making personal calls to customers, and by sending bulk SMS to the visitors at the outlet and invites to people in nearby residential areas.
U-Turn at Indian Crafts
In October 2014, the Beta Mall outlet had to be closed as the rent agreement could not be worked out with the mall owner. IC thought of opening an outlet at Gamma Mall which had recently come up in this suburb and was attracting more footfalls than Beta Mall. Owing to high rent, this plan had to be dropped. Because of operational issues and low sales, the Zaveri bazar outlet was also closed in July 2015. Even the Krishna Dham outlet was reduced to earlier size in October 2015 due to reduced sales and slow moving inventory. Repeat events at the Krishna Dham outlet also did not do well. Kalighat Painting event of 2014 and Lord Ganesha event organized in 2015 completely flopped. IC had a stall at Times exhibition held in April 2014 at Azad Maidan, Delhi. Sales were poor because manufacturers and artisans quoted lower prices than IC. Annual Sales of IC are shown in Exhibit 1.
Current Issues
The store had two sales assistants who had been with the store since the beginning. Both were loyal and hard working. But they were not efficient in English. They communicated with customers in either Punjabi or Hindi. Their knowledge about paintings and other products had developed over the period by listening to Mr Jatin Kumar and Ms Sunayna but they lacked the motivation to learn on their own. They were not open to shoulder other responsibilities. Ms Sunayna felt that the way Mr Jatin Kumar explained and handled customers was awesome and none could match him.
Bulk SMS facility which was used earlier for promoting events, etc., was not yielding results now, owing to “do not disturb” facility. There were moves to bring out a brochure with product description but since their product range was evolving and designs kept changing, the stores prepared write-ups for certain products. To promote IC, a Facebook page was created. This was a very cost-effective move to create awareness about IC and promote events in and around Delhi. Even with all these efforts, sales did not revive.
Although IC had extended its product range over the years, it did not deal with anything which was not related to Indian tradition. Many times customers asked for items like Laughing Buddha but they were politely refused with comments like “we deal in Indian Crafts items only.” Though IC sold tortoise, the people were not advised where to keep it in the house. As per Indian mythology, tortoise symbolizes Goddess Laxmi, the deity of wealth and prosperity. It stocked Lord Ganesha idols both with left and right trunks in their shop. IC was very clear about their philosophy of dealing in Indian Crafts and arts items only. But decreasing sales was a concern which had to be addressed immediately. This had happened in spite of no similar shop in the region.
Thinking about how to revive the profitability, Ms Sunayna looked at expenses for the month of August 2016 (Exhibit 2). Most of the expenses were fixed and rent accounted for the biggest share. She started reviewing Excel sheets which had data relating to purchases, sales, and expenses since the beginning of IC (Exhibit 3). It was possible to draw pivot tables and prepare various MIS reports. To help her understand and plan better, she prepared summary tables of sales for the period from September to March for last two years (Exhibit 4). She also prepared a summary according to product categories and margins (Exhibit 5) from September 2015 to March 2016. Maximum sales were from brass items and a few categories accounted for 90 per cent of sales.
In the initial years of IC, real estate in the suburb was booming but now the growth has slowed down. She would have to carve out a new plan to generate sales. But first, she wanted to know how much sales she would have to generate to break even at current margins. She was also wondering what sales she would require to meet out the fixed cost if she reduced the prices by 20 per cent for all product varieties. She was not sure whether this would really increase sales.
Questions
Do a SWOT Analysis. Critically evaluate the causes for the decline in sales. Calculate sales Indian Crafts should make to achieve (a) Cash BEP, 9b) Operating BEP, and (c) Economic BEP. What level of sales Indian Crafts will require for achieving break even if prices are reduced by 20 per cent?
Annual Sales of Indian Crafts
**—Estimated based on sales of 2011–2012 and 2013–2014.
Cost Structure (August 2016)
Excel Sheet Record
Sales During Last Two Years
Pricing and Sales Mix: September 2015 to March 2016
