Kanchi Silks case study

Kanchi Silks is a well-known Fashion saree retailer in Kanchipuram that provides one-stop shopping for all sarees. The breadth of product variety is truly amazing, covering a wide range including Arani, Bangalore, Dharmavaram, Kanchipuram, Kumbhakonam, Pochampalli, Salem, Tanjavur, Venkatagiri etc. Kanchi Silks was established in 1981 at Vilakadi Kovil street, its original site of 500 square feet, it has now grown to more than 1,00,000 square feet in two three floors in adjacent locations, with over 1,00,000 SKUs. The store sales revenue in 2007 was more than 20 Cr. The founder, Mr. Murugan, can often be seen serving customers, unrecognized by those whom he serves.
On normal weekdays, 15-25 customers visit the store with the number increasing to 100 plus customer on weekdays as well as weekends. His early memories begin with the time he joined the family profession of manufacture of Silk Saree Boxes, which is made in paper boards and he was supplying to leading silk saree manufactuers. He started his first store with the area of 500 square feet at his residence in kanchipuram.
Kancheepuram town is known as Silk City since the main profession of the people is weaving silk sarees. Its economy is entirely dependent on tourism and the well-established handloom industry. Approximately 70 percent of kanchi silks customers were tourists, and the rest were locals. The tourists were mainly from the neighboring states especially from Karnataka, Andhra Pradesh, and Kerala.

In terms of competition, kanchi silks unique positioning is its location, this area is closer to market area were all leading silks manufactures having their stores. This store is actually located at residential area having some great advantages like ample parking facility and easy accessibility from the main road. Even local retailers find difficult to compete with Kanchi silks on pricing due to higher overheads.

Kanchi silks practices discounted pricing and providing fair value to its customers. Although it does not necessarily have the lowest prices in town, it is often perceived to be competitive by its customers. The gross margin on products is more than 40 percent on average, with the range at 25 to 30 percent.

In order to achieve, Kanchi Silks is very careful in its sourcing practices. They buy products on consignment basis from the weaver from in and around of the town. Where it previously used only a few suppliers, it has now widened its purchasing network and buys sarees from different places like Bangalore, Arani, Dharmavaram, selam and thanjavour. Kumaran himself do sourcing from the cheapest suppliers, bypassing all intermediaries.
कुमारन mainly employs the local people and weavers। The silk weavers of Kanchi settled more than 400 years ago and have given it an enviable reputation as the producer of the best silk sarees in the country। Kancheepuram has thousands of handlooms and skilled weavers that make its silk sarees one of the best in the entire world. About 75% of the city's populations are associated with the handloom industry in some way. About 75% of Kanchipuram's population is dependent on the Silk Saree industry, either directly or indirectly.





The market for South Indian silk sarees, popularly known in North India as `Kanchipuram silks' irrespective of the place of production -- Arni, Bhuvanagiri Thanjavur or elsewhere -- is growing briskly. Conjeevaram is the English name of the ancient Kancheepuram. Like all ancient cities, The city was the capital of the Early Cholas as far back as the 2nd century BC and a Pallava capital between the 6th and 8th centuries. Kanchi silks communication efforts are limited because of the Brand Name. It leverages the city name and believes on the word of mouth concept and the past customer referrals. Although it does buy airtime on local TV (mainly Tamil-speaking) and advertises in the local newspapers, it believes positive word-of-mouth communication is a more effective means of promotion.
The Indian women apparel market has undergone a transformational phase over the past few years - growing number of working women, changing fashion trends, rising level of information and media exposure, and entry of large number of brands have given the industry a new dimension. Women wear in order to exploit the highly lucrative market that was estimated at more than Rs. 37,000 Crore in 2007. The market, in the past five years, posted a growth rate of good 14%. And with the growing presence of organized retail and rapidly spreading mall culture, the industry is all set to grow further in future, according to "Women Wear Market Forecast to 2010”
Founder Kuamran is now expanded his store operations in different parts of the country. He started his outlet in Hyderabad in late 90’s,kanchi silks set up its own website, http://www.kanchisilks.com. The website is meant to replace its catalogs. The website receiving almost 5- 8 sarees in day worth of Rs 30,000 worth of orders, with the orders coming mainly from across the world especially from out side countries like Singapore, Malyasia, Srilanka and United States. Today, they also get order different states like Maharashtra, Kerala, UP, MP, and from North East. Online store uses the technology to allow for the user’s name and address as well as critically sensitive information such as the credit card number. But on an average he sells very limited sarees through internet. He also finds difficult to deliver the products across the country because of different states will have different taxing procedures.
However, the US slowdown has resulted in low values of NRI purchases, although the volume has grown. “They usually come down on business and won’t mind spending a huge amount on silk sarees because they earn in dollars. But because of the job loss there and uncertainty over future there has been a 5% dip in NRI purchases.
Kumar laments the unavoidable loss in excellence as zari is today made from copper which is electroplated with silver and given a gold coating. In commercial terms, this is called `tested zari'. The gaudy shine is produced by treating the zari chemic ally and the `gold' borders become lack-lustre within five years. He says, ``To those who look at price we give tested zari and the pure zari to the ones particular about quality''. The price of zari also doubles tremendously in recent years.
The maximum length possible on a traditional loom is a 18-yard warp which meant that no more than three silk sarees could look exactly alike. In the new millennium, as the `Kanchipuram' silk route traverses continents, hundreds of sarees designed to standardized tastes, are produced on the power looms.
The race in silk production became competitive with the emergence of new silk houses in TamilNadu. Today, perhaps Kanchi silk are better known than Kanchi cottons. Kumaran nowadays also owns power looms to cater into cotton sarees business which is targeting office going womens.

Discussion Questions
1. What do you think Mr. Kumaran should do in order to increase local store patronage?
2. What are all the problems in etailing? What are all the challenges and opportunities in etailing?