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Hidesign: to expand the brand

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Bally, Bottega Veneta, Coach, Fendi, Gucci, Lancel, Longchamp—one famous name after another swept into Dilip Kapur’s view as he strolled through the Hong Kong International Airport’s SkyMart. Kapur could already see in his mind’s eye what would soon be the newest addition to this shopper’s paradise—the exclusive fashion store that his leather goods firm Hidesign planned to open in mid-2006.

Sixteen years earlier when he went into the business full time, Kapur did not dream that his company would one day bid to become one of the first brands from India to succeed in the global fashion marketplace. Now Hidesign’s international expansion was picking up momentum, and its president and founder Kapur wondered how best to move forward in building a truly scalable brand with global reach.

The growth of Hidesign
Dilip Kapur was born in New Delhi, where his Hindu parents had fled from what would become Pakistan in the mass movement of people following the end of the British Raj in 1947. From the age of five he lived in Pondicherry, a former French colony on India’s southeast coast, before moving to the United States at the age of fifteen. After graduating from the elite Phillips Academy in Andover, Massachusetts, one of America’s top private secondary schools, he attended Princeton University. Majoring in international affairs and economics at Princeton’s Woodrow Wilson School of Public and International Affairs, he earned a bachelor’s and master’s degree, then went on to pursue a Ph.D. at the Social Science Foundation, part of Denver University in the US state of Colorado.

After four years in Denver, Kapur’s fellowship money ran out, and he spent a year working for an American company that made and sold hand bags. Meanwhile, however, his thoughts returned to India, specifically to the experiment in international living at Auroville , not far from Pondicherry. Mirra Alfassa, born in Paris in 1878 to an Egyptian mother and a Turkish father, was deeply influenced by Sri Aurobindo, a prominent Indian nationalist who became a spiritual leader in Pondicherry in the early twentieth century. Alfassa joined him there in 1920, organized his followers into an ashram in 1926, and in 1968 founded an international township project at Auroville. Set up as a collective dedicated to human unity and international understanding, Auroville was established as a city where people from all over the world would live and work together to foster peace and harmony. Kapur, who had grown up near the ashram, returned to India in 1978 to live in and help build Auroville, serving on its development and planning council.

Auroville’s atmosphere was meant to encourage culture and the arts, and Kapur began making leather bags as a hobby, drawing upon what he had learned in the United States. However, Kapur did not like the look of normal leather, which seemed to slick to him. He saw some samples of leather that had been tanned using traditional methods of soaking the hides in vegetable extracts, and liked the different look this gave the material. Kapur visited East India Tanning, a center for vegetable tanning about 300 kilometers from Auroville, learned the art, and began producing a line of leather bags with a distinctive look that people liked. By 1986, several hundred people in Auroville were working with him to make and sell bags using vegetable-tanned leather.

The activity expanded gradually to the point where in 1990 Kapur established a bag factory in Pondicherry and became a full-time businessman. “It slowly grew up from a hobby, and when it became a serious thing, it was a total surprise to me, because I was completely anti-business,” he recalls. “When I started, I had to learn what a bag was; I had no business background and knew nothing about them. I talked to people and learned from them, and it became a more interesting business. Originally, I designed and produced bags. Once I started Hidesign in 1990, I had to conceptualize who I am producing for, why they are buying bags, and how to communicate that to people.”

Most of Hidesign’s initial customers were foreigners who spotted the bags while traveling in India. Says Kapur, “The first order I got from from a German organization in India that had a catalog; their manager saw my product, loved it, and bought it. Smaller buyers kept coming through, amateurs who liked the product, began buying it, and sold it in their countries. The story was always the same; someone liked the bags, bought them, and sold them to stores in their territory.”

Kapur chose to emphasize workmanship and design, making beautiful, affordable bags. 70% of the manufacturing was done by hand; craftsmen carried out labor-intensive steps such as double-stitching of pressure points that had been abandoned our automated in the West. Hidesign set up two wholly-owned tanning establishments near Chennai to maintain control over the quality of its leather. Where most other bags used plated-metal fittings, Kapur insisted on solid brass. Low Indian labor costs meant that in foreign markets, the bags could be sold in the upper-middle price range despite their emphasis on fine, hand-made details. Hidesign bags were typically sold overseas in a price range between $125 and $200 (in 2006 prices). This represented a markup of 550-600% over factory cost. Typically, the wholesale price for a bag was 85% over the landed costs in a foreign country, and a standard retail markup was in the vicinity of 240-250%.

Hidesign was viewed as a product out of the mainstream in its export markets, carried by exclusive distributors who built something of a cult following within each of their geographies. Leather and luggage shops were wary of carrying an Indian brand, so Hidesign products were typically sold in stores with more of a fashion emphasis. A Hidesign bag won the ‘Accessory of the Year” award from a British magazine, which gained the firm much visibility, and department stores began picking Hidesign as a supplier. Such famous merchants as Selfridge’s, the House of Fraser, and John Lewis started carrying a range of Hidesign bags, which significantly increased the Indian manufacturer’s sales while building much more awareness overseas of its style and quality. During the 1990s, the product mix changed from 45% of sales from branded goods to 95% of sales.

In 2000, Kapur decided to begin opening its own chain of exclusive boutiques across India. Says Kapur, “We looked for a distributor but we couldn’t find one that was appropriate. Modern retailing was just starting in India, so we decided to open our own store in Pondicherry. It was successful, so we opened stores in Bangalore and Mumbai and kept growing.” Hidesign bags were also offered at premium Indian retailers such as Shoppers Stop, The Bombay Store, and Westside, though the highest-volume outlet was a national chain of book stores. “In India, we are the most expensive leather bags in the country,” Kapur says, even though the average markup from the factory gate was about 220% and prices were about half of those for the same bags sold outside India. “If foreigners come in, however, we will become an upper middle class brand, instead of an upper-upper class brand as we are now.”

Comments (3)Add Comment
Disappointment in using Hidesign bag
written by Arpana Anand, March 03, 2011
Dear Sir,
I have purchased Hidesign bag of red colour in Noida, Great India Place on 12.12.2010. I used it only for 10 days and there were black patches all over. When I showed to the shopkeeper on 12.2.2011, the person said that this can neither be repaired nor exchanged.........inspite of the guarantee card of 1 year, they declined to comply. Later, I forced them to get it repaired. This was my first purchase of Hidesign bag of 4000.00 cost and I had to undergo so much of trauma. May pls do the needful and reply vide mail ananda@iocl.co.in.
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nice bags
written by Bag Manufacturer, August 20, 2010
very nice bags, thanks a lot
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