September 04, 2011

Inkfruit.com : Fashion Co-Creation in India

http://www.boardofinnovation.com/2011/06/20/inkfruit-com-fashion-co-creation-in-india/


Inkfruit.com has developed a co-creation model similar to Threadless.com, but within the specific dynamics of the Indian market with its rising middle class looking for affordable brands and design. An inspiring story by Yash Saxena about how Inkfruit set up their business model in India, overcoming essential obstacles, and successfully positioning themselves between big brands and low-cost competitors.

The apparel/clothing market in India runs into billions of dollar, nearly 30 billion annually. The big brands segment that accounts for just 5% share of this overall pie, attracts the most attention. Its share is likely to grow several times as more Indians move into urban areas and the middle class in India aspires for more. (Aspirations- as I had written in my last column and quite obviously so- is a defining force in Indian commerce). The premium apparel segment corners good margins of around 40%.

There are a number of players within this space with different price points and positioning. But the segment is still markedly different than the unorganized, non-premium segment which jostles for decent margins competing with the low cost imports from the Chinese and the South East Asian garment manufacturers. Sundry markets in India with rows and rows of garments shop selling garments at only a fraction of their branded counterparts are very popular. But the branded segment has the power of brand and design on its side. The consumers buying in this segment have graduated higher up on the Maslow’s hierarchy, and don’t see apparels as mere commodities anymore. They have come to experience their clothing as an expression of their individuality. Both brand and design address this need.

Brands are expensive to build though. Investing in brand advertising & communications, integrating the physical supply chain, renting & running stores at high rents are cash hungry operations suited for market players with deep pockets. Therefore brand ain’t something that small, new entrants could hope to build quickly unless they have some innovation hidden up their sleeves.

One emerging apparel and accessory firm in India – Inkfruit – has taken up the route of leveraging great designs in order to break into higher margins. Overtime good performance on design converts into brand. There are a number of t-shirt retailers in India who are experimenting with great contemporary designs to attract the young crowds. Inkfruit has gone ahead and adopted a co-creation model and democratized its design process. They’re crowdsourcing their design process, similar to the likes ofThreadless.

From the beginning their business model has been focused on getting their ‘designs’ right. In this process, Infkfruit’s business model has gradually evolved into a more intensive co-creation model. Inkfruit currently holds ‘always on’ design contests for the community. Designers and freelancers can submit their designs which are open for general voting. Designs that get the most votes in 90 days, are selected for production and retail sales. The designers get prize money and recognition as creators of the designs, and perhaps the satisfaction of watching their design being worn by people.

Inkfruit initially began by holding design contest in design schools and college campuses. However they quickly realised that such captive design contests restricted participation. A lot of good designers couldn’t participate in such a format. Also the format was not an ‘always on’ contest i.e. it was held at different places intermittently and neither it was easily scalable. Therefore Inkfruit moved towards an online around-the-clock contest format. This ensured that designers from far flung areas could also participate and bring in more designs. A centralised contest brings in more efficiency too. More participation in the voting process by a larger online community also helps Inkfruit in getting their ‘designs’ right. Holding online contests costs less than holding contests offline and the whole co-creation process is also integrated with the online shopping platform.

CLICK TO VIEW BELOW IMAGE IN NEW WINDOW

But beyond the online platform, it would be na├»ve to assume that physical back end – the supply chains- could be any less efficient than the digital front end in order to sustain. Inkfruit’s brick and mortar supply chain- the suppliers & retailers – plays an equally important role. Inkfruit had particular difficulties in sorting out their deals with the suppliers and retailers in the initial days due to their low volumes.

As Kashyap Dalal, founder-CEO of Inkfruit explained to me that during their interactions with the t-shirt printers, they realise that there is always a fixed cost and a variable cost of printing any design. The fixed cost consists of making the dyes used in printing the t-shirts. When the volumes are low, the fixed cost is a major component and therefore it is not profitable for suppliers to supply low volumes of t-shirts. In order to solve this situation, Inkfruit cut a deal wherein Inkfruit paid a fixed price, to cover the fixed costs of the manufacture, and a variable price. Overtime, with their volumes improving, they switched to the conventional system.

There were similar problems at the retailer’s end. Retailers were doubtful about how long Inkfruit would continue and if Inkfruit would be able to bring in sufficient sales. Inkfruit again provided the retailers a minimum sales guarantee deal wherein Inkfruit will compensate the retailers for any sales less than the agreed minimum target. However Inkfruit received warm response from customers and they never really had to compensate any retailer. Even in cases where they did not achieve targeted sales initially, the retailers were happy to continue their relationship and did not ask for compensation. The key as Navneet Rai, Cofounder Inkfruit explained lies in building trust with the retailers. In fact much more than the ‘minimum sales guarantee schemes’ it was the genuine commitment that Inkfruit brought to its relationship with suppliers that kept the Inkfruit’s boat steady with the retailers right through its journey. Since those early days with just two employees, today Inkfruit has grown into a team of 75 with revenues of two million dollars and growing.

Over and above the smart handling of their supply chain, the stage at which inkfruit creates most value in its business model is the co-creation stage itself. Getting the supply chain right is cool but getting the design right is essential; So much more when that’s the only moat between you and the low cost competitors.

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