Archies: The Way Indians Greet

Case Details: Price:

Case Code : BSTR036 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 +
Case Length : 14 Pages
Rs. 25 for Shipping & Handling Charges
Period : 1979 - 2002
Themes
Organization : Archies Greetings & Gifts Ltd Retailing
Pub Date : 2002

Teaching Note : Available

Countries : India

Industry : Gifts and Greetings

Abstract:
The case examines the growth of Archies, leader
in the Indian social expression industry. It
explores the company's franchising and marketing
initiatives.

The case also discusses the measures the company

took to meet the threat of new technologies i.e., e-
greetings and SMS greetings. Finally, the case
discusses the problems faced by the company due
to a revamp of its distribution and retail
operations.

It also explores the future plans of the company in

the light of the above developments.

Issues:

» Identify the strategies that helped Archies emerge and remain the leader in the industry

It (Archies) is a phenomenon that touches your life from womb to tomb."

- An Archies Retail Outlet Owner, in December 2001.

A Company in Trouble!

In February 2002, the Delhi High Court dismissed an application for injunction filed by leading
Indian greeting card and gift company, Archies Greetings & Gifts Ltd. (Archies). The company
wanted a stop order to restrain Hindu fundamentalist groups - the Shiv Sena, the Vishwa Hindu
Parishad (VHP) and the Bajrang Dal - from 'interfering in the Valentine's Day celebrations and
sales promotions in its showrooms and outlets.'

Archies filed the application fearing that the

groups will vandalize their outlets as they had in
February 2001.1 The Court's decision shocked
Archies'management, for any disruption of
business on Valentine's Day would translate into
huge revenue losses for the company. Director
Vijayant Chhabra said, "Everyone knows what
happened last year. Our outlets were targeted in
Mumbai, Delhi and other parts of the country. Our
business has been affected severely." The
dismissal of the injunction appeal came at a time
when the company was facing a host of problems
on various other fronts that were taking a toll on
its performance. In the late-1990s, e-cards became
very popular. Archies was forced to launch its
own e-greetings website, archiesonline.com,
through its wholly owned subsidiary Archies
Online.com Ltd. in mid-2000.

However, by late 2001, the company made archiesonline.com a paid service. Youhan Darrab
Aria (Aria), Chief Officer (Logistics and Finance) of the portal commented, "E-commerce was
not happening from our site as expected and ads were also not forthcoming. We wanted to
increase our revenue and charging users was the solution." As expected, a large number of the
0.6 million registered users stopped using the service.

Aria admitted, "We have suffered massive drops

in our registered user base since we became a paid
site." In addition to these problems, Archies'
initiatives to convert its network of franchisee
outlets into company-owned outlets and its
distributor setup into a carrying and forwarding2
(C&F) setup were proving to be major burdens on
its finances. As a result, in 2000-01, for the first
time in it's over 20-year history, the company
experienced a negative growth. Turnover declined
from Rs 710 million in 1999-2000 to Rs 680
million in 2000-01, while net profits for the same
period declined by around 32% from Rs 130
million to Rs 91 million.3 Archies' marketshare
remained at 45% between 1998 and 2000.
Analysts remarked that the company's leadership
status in the Indian greeting card and gifts market
seemed to be doing it no good in increasing its
market share and sustaining profitability.

Archies was the brainchild of Delhi-based Anil

Moolchandani (Anil), whose family business was
selling saris. In the late 1970s, he decided to buy
and sell good-quality posters through mail-order
catalogs, advertised in one of the popular
magazines in those days, Sun.

When the demand

increased, he started
getting posters of film
stars, natural sceneries
and other subjects of
interest, printed by local
printers. An avid music
enthusiast, Anil decided
to sell books containing
lyrics of hit English songs
in addition to the posters.
He wrote down the lyrics
of songs himself while
playing them on a
gramophone. He began to
sell songbooks containing
the lyrics of hits from
groups such as ABBA,
Beatles and BoneyM.
Commenting on his
experiences, Anil said, "I
would spend hours
listening to a sound track,
meticulously translating
lyrics which were initially
incomprehensible, so
when we finally managed
to sell the entire lot to a
music shop in
Chanakyapuri, we were
so excited we could
barely contain our
emotions."
As customer awareness increased, he started
coming out with songbooks containing hits of a
particular year and he was soon selling over
10,000 copies per year. Anil then decided to enter
the greeting cards business.

He observed that in India,

cards were typically sold
out of dusty shoeboxes
marked 'Birthday' and
'Anniversary' kept in the
corners of stationery
shops. In 1979, Anil and
his brother Jagdish
Moolchandani (Jagdish)
got 'Archies Gifts &
Greetings' registered as a
partnership concern for
starting the greeting cards
business. The name
Archies was chosen after
Anil took a fancy to a
neighbor's dog named
Archie. During a visit to
South East Asia, Anil was
impressed with the
exclusive greeting card
shops offering good
ambience and soft
backdrop music. He said,
"The card shops there
were like a Raymond or
Bata showroom here. If
we had to retail, we had
to have a proper shop."
He decided to try out this
concept in India as well,
which led to the launch of
the first Archies' outlet in
Delhi in 1984, named
'Gift Gallery...'
he Story Behind the Success

According to analysts, Archies' franchisee model contributed a great deal to its success. Bharat
Shah, Chief Investment Officer, Birla Capital the mutual fund company, said, "The key to
understanding Archies is to realize that it is not in the business of cards or gifts, but in franchisee
management."

Anil agreed, "We made our own model suitable

for Indian conditions. We created a branded
franchise. Now the scenario has changed in India
and everybody talks about franchising. But we
were the first to do that kind of stuff. We then
went in for tie-ups so as to get a greater range to
support these stores because these were exclusive
stores." Commenting on the decision to opt for the
franchising route from the very beginning, Anil
said, "You don't have malls in India so we have to
manage in limited area." By franchising, Archies
was not only able to save on real estate costs, but
share the advertising and promotion expenditures
with franchisees. Archies franchisees made their
own investment in the business and paid royalty to
Archies for the turnover generated from the sale
of Archies products...

Tackling the E-Greetings Threat

Archiesonline.com had three major sections - meet, greet and gift. Under 'meet,' Archies offered
services such as free e-mail, chat, reminder services, and a greetings scheduler. The 'greet'
section was a consumer interaction area where registered customers could send and receive a
variety of animated e-cards/greetings online for free.

Over 700 programmed e-cards available, which

were quite different from the usual cards available
on the Internet - these cards had an average eight
second long storyline with animation and sound
effects incorporated into them. In the 'gift' section,
consumers could purchase gifts and get them
delivered at their doorstep.

While residents of Delhi got free delivery of their

purchases, customers in other parts of the country
had to pay Rs 25 as delivery charges. The
minimum value of each purchase was Rs 250.
Archies tied up with courier companies - Elbee
and Blue Dart to deliver the gifts and cards
 purchased by customers. The company tied up
with Easy Net Com for the payment gateway...

THE DISTRIBUTION REVAMP

During the financial year 1999-00, Archies decided to revamp its distribution network and
replace existing distributors by a C&F agent network. According to the new distribution system,
in place of 68 distributors in 21 states, Archies appointed 10 C&F agents in 10 states who catered
to distributors who in turn reached out to the retailers.

Manish Jain, Company Secretary, Archies, said,

"The biggest advantage of this model is that the
company owns the inventory, so the consumer is
ensured of seeing the entire products range that is
available." In the earlier setup, Archies had to
accept the distributors' decision when they picked
up only those products, which they believed
would do well. As a result, Archies could not push
its entire range of products into the retail channel.
Rajesh Syal, Marketing Manager (Western
Region), Archies, said, "Distribution could not
match the pace with which we introduced
products and with their limited resources it was
difficult. Now with the C&F agents and exclusive
outlets we can at least continue to revamp our
product portfolio..."

The Retail Revamp

In 2001, Archies began an 'exclusivity drive,' by way of which all existing Archies Gallery
franchisees were asked to keep only Archies range of products. If they did not want to be an
exclusive outlet, they were given the option of converting into an Archies Paper Rose Shoppe on
a 'non-exclusive' basis.

The idea was to have only Archies Gallery and

Archies Paper Rose Shoppe as the completely
franchised outlets. As a part of this exercise, many
shops were revamped and some even had to be
shut down. Archies believed that being in direct
contact with the customer will help assess the
detailed requirements of various product lines,
and have better inventory management and
product mix systems. In addition, the company
was also planning to increase the number of
Vision 2000 stores on a large scale. The Vision
2000 stores were much bigger than any other
Archies retail outlets and according to company
sources, brought in 40% more revenues as well.
These stores had world-class interiors and stocked
all the products marketed by the company...

The Future - Shifting Focus

The Moolchandanis believed that the distribution and retail revamp exercises will yield positive
results after the transition phase. Archies decided to focus more on the gifts segment, as it
believed the segment was under-exploited. The company planned to develop and introduce new
lines in the gift segment including higher end items, which were lacking in the present setup. The
idea was to make an Archies gallery a 'one stop gift shop' for people from all walks of life. The
company had already begun importing high-end gift articles such as crystal, soft toys and Feng
Shui items from China, Hong Kong and Korea in addition to outsourcing from local vendors...