VIP’s Vice Chairman (also Ex-MD) seems to have shifted back to London again. In my view unstable management and late recognition of industry trends are the key reasons for VIP to slowly and steadily loosing market share to the competition. I think VIP has been reactive to market changes rather than proactive.
1. Unstable management
2. Overlapping brands, inability to protect the flagship brand from loosing mojo (old article but useful)
3. Disproportionate efforts to set-up soft luggage facility in Bangladesh to take advantage of low labour cost. By the time it was ready to produce significant quantities, market shifted towards hard luggage, which is not labour intensive.
4. Late in understanding shift in trend from soft to hard luggage : International market was showing clear signs of shift, much earlier (before covid). While VIP has recognised the shift and started investing in new hard luggage capacities from FY22 end, but they were bit late. Competition had much ahead clarity that future is hard luggage.
If one goes back to few years ago when industry trend shifted from hard to soft, VIP was late in understating the trend and lost market share to Samsonite.
5. Late entry in e-commerce business: While competition already had significant presence pre-covid, VIP learnt only when no other option was left.
6. Late in recognizing potential of value segment : Post GST implementation and discontinuation of government incentives to luggage manufacturers in China, it was clear that unorganised players will loose ground and there is strong growth potential in value segment. Covid epidemic did accelerate the shift from unorganised the organised players; however, VIP was again late to understand this and started responding to this change only when it became too obvious.
While there is huge growth potential in luggage industry, VIP is still the leader with much higher market share compared to second player, has better financial profile than any of its competitors; unimpressive growth could be a factor of less proactive approach.
When I started reading about this industry during early FY21; threads on valuepickr forum and last few years annual reports gave me clear hint about existence of the issues. However, when I read many research reports on VIP in the last 2-3 years, I found that none of them have acknowledged or mentioned the issues.
Disclosure: Invested in VIP’s competitor and hence may be biased. I am not SEBI registered Advisor/Analyst. The information provided above is for education purpose only.
| Subscribe To Our Free Newsletter |
