The company also plans to open up to five new stores each month and is targeting global expansion online through Amazon, Baggit Founder Nina Lekhi revealed in an exclusive interview
Bengaluru:Â Mumbai-based bags and accessories brand Baggit is targeting category expansion and plans to enter the jewellery segment, with the launch anticipated within the next quarter, founder Nina Lekhi told IndiaRetailing.
The company is also aiming to expand its retail footprint and operate more than 500 stores over the next five years, opening five new stores each month on average.
By the end of fiscal year (FY) 2025, the retailer targets to open an additional 60 stores, all operating on a franchisee basis. It also anticipates achieving a volume growth target of 25-30% annually.
Baggit was founded in 1989 by Lekhi when she was just 18 years old with a store in Mumbai at Atria The Millennium Mall in 2000.
What began as an out-of-home, small-scale business, has grown into a company, which manufactures approximately two lakh pieces each month. It is now worth over Rs 100 crores. Less than a month ago, Baggit celebrated reaching a milestone of 100 stores with the opening of its latest store in Vijayawada, Andhra Pradesh.
Apart from its exclusive outlets and direct-to-consumer (D2C) platform, the brand operates through shop-in-shops across multi-brand large format stores such as Lifestyle, Shoppers Stop, Reliance Central, Pantaloons and multiple regional stores. It also retails through traditional mom-and-pop stores with the help of over 30 distributors.
In an exclusive interaction with IndiaRetailing, Lekhi shares insights on her approach to consumer engagement, marketing plans, category expansion, and much more.
Edited Excerpts…
How do you communicate with consumers?
The key to success is listening to customers. Every weekend, I spend around two hours in a store, engaging with customers and directly understanding their needs and preferences.
There was a time when we relied on desktops and printers to print cash memos for customers. Now, we are embracing technology where everything is done on a handheld device that can accept payments and wirelessly send invoices to customers. In the next three to six months, we will implement a comprehensive customer retention and loyalty management program. This will allow us to seamlessly communicate with both online and offline customers through social media messaging platforms like WhatsApp.
What is your current stock-keeping unit (SKU) count?
Every season, Baggit produces about 400-500 SKUs across various categories such as handbags, laptop bags, slings, wallets, and luggage. We also carry forward approximately 200-300 core products at any given time. This gives us a total of about 700-800 SKUs for customers to choose from.
We have initiated an automated replenishment program that analyses the location profile, customer preferences, and historical buying patterns. Based on this data, we send approximately 200 to 250 SKUs to each of our stores.
Any plans for category expansion?
We have launched luggage recently, and it is becoming a key part of our product lineup. It is available online and will soon be stocked in exclusive outlets and large format stores as well.
In the future, we are planning to expand into jewellery, with the launch expected within the next quarter, and maybe footwear later.
What is your current consumer base?
We have a three-pronged strategy that targets three generations: saas (mother-in-law), bahu (daughter-in-law), and beti (daughter), essentially equivalent to Gen X, Gen Y, and Gen Z.
Gen Z primarily shops through social media platforms like Instagram, while Gen Y is more likely to visit malls for their purchases. Traditional women of Gen X, who are accustomed to shopping on main streets, would still prefer to do so.
If we exclude repeat customers, we might acquire around one lakh new customers in a month while 70,000 to 80,000 will be returning customers. Therefore, in total, we could see about a million new customers purchasing luggage from us each year for the first time.
Which market do you see high demand coming from?
Since the brand started in Mumbai, the Western region remains our strongest base. The second biggest market is the North, followed by the South, and lastly the East.
Surprisingly, Hyderabad has the highest number of exclusive brand outlets (EBOs) and the highest sales, surpassing even Bengaluru and Chennai. Approximately, 50-60 out of our 100 stores are located in the top eight tier 1 cities.
What is your average expenditure on marketing?
We plan to run numerous social media campaigns and influencer collaborations for the new localities we are opening. These localised influencer pieces will help raise awareness and communicate in regional languages about what our stores offer. To maintain visibility online, we need to allocate upwards of 10% of our sales to marketing and promotional initiatives.
In terms of brand awareness, Baggit is around 98%, with a strong affinity and an inclination to buy upwards of 30%. Therefore, we do not need to invest heavily in offline marketing. Instead, we will focus more on online marketing for the 15-25 age group, who are primarily engaged with digital media.
Which do you favour more, franchising or owned stores?
Out of our 100 stores, 55 are owned by us, and 45 operate under franchise agreements. Our plan includes opening four to five new franchise stores every month.
We find it relatively easy to secure franchises because many new store openings are initiated by existing franchisees who find the business profitable. Franchisees are not expected to take on inventory risk; instead, they provide a security deposit. We determine the inventory selection for each store based on location profiles and customer preferences.
Malls or high streets?
We secure locations in premium malls because malls attract significant foot traffic, ranging from 5,000 to 10,000 visitors daily. However, in many towns where we plan to expand, malls may not exist yet or are still emerging. Thus, our approach will be a balanced mix, ensuring our presence in both mall and non-mall locations as we expand.
Any plans to go global?
We have entered the UAE market through the online marketplace Noon.com and now we are expanding into offline locations through a tie-up. So far, our exports targeted Gulf countries and in these markets, our operations include managing online business through partnerships that handle operations within each respective territory.
We are also exploring market entry through Amazon, which has shown strong interest in promoting Indian brands internationally. We are currently in the final stages of negotiations.
In markets such as the USA, Canada, UK, and Australia, our strategy involves reaching customers digitally through e-commerce platforms. As our brand becomes well-established in these markets over the next few years, we plan to expand our presence to include offline locations as well.
What are your growth expectations for this fiscal?
FY 2024 was challenging due to inventory built up in FY23 that we have cleared out. However, for fiscal year 2025, we anticipate substantial growth, aiming for a 30% increase compared to FY23 levels.
Top strategic priorities…
About 40% of our sales come from online channels, with the majority of that coming from e-commerce marketplaces. We are actively working to achieve at least 10% of our sales through our website, Baggit.com. We are investing in redesigning the website and strategies to attract more traffic, aiming to achieve this goal over the next three years.
We also anticipate that exports will grow to account for 10% of our business over the next three to four years. This reflects our strategy to expand our presence in international markets during this period.
Challenges the bag industry is facing right now?
Today, consumers are not queuing up and rushing to the trial rooms as they used to, even during sales when malls would be packed. This slower traction is also noticeable on online platforms.
Also, consumer debt as a percentage of GDP exceeds 10%. This indicates that people are purchasing cars, houses, and iPhones on EMIs, which strains their disposable income for categories like apparel and accessories.
