Inner-View

First of all, it is our belief that a company like Samsonite, which is a world leader, should be active in all countries of the world. Today we are representing over 150 countries worldwide. And we want to expand our base.

In order to be very competitive in the market, it is always better to have a local factory. We have a factory in India and it will run at full capacity in two years time. It is not our company strategy to have huge factories. We rather prefer to have more factories which are spread widely. Because we have to look for new locations, one of the idea is to look at Nepal as a location from where we could cater to both the local market and also the border parts of India. Now we are evaluating various options, specific needs, administration and all that is needed to set up the factory. The set-up plan is under serious consideration.

This is my very first visit to Nepal and I visited hundreds of shops. And I received a very warm welcome. People are glad that finally, a luggage company has entered this market seriously. There are many brands available in Nepal but I do not consider that their presence here is very serious. People buy a container of goods and then they sell it. We want to give service. Our lead theme is that we do not sell luggage, we sell service to people who are going to travel. And that is more than only a piece of luggage. It also consists of giving good advice at the time of purchase, we also want to give customers a good shopping ambience. We want to give them latest designs that are available in our factory, and last but not the least, we want to give service after sales. We are the first company that is doing that in Nepal. And we have really seen that our gestures are being appreciated.

It is really premature to give any figures. Because what we have done is built the foundation. We could have sold more products. But that is not our way of working. We want to go step by step and whatever we do, we want to be sure that it is the right way. Therefore, we are very satisfied with the quantities we have sold so far. And this is only the beginning, we are sure that next year we will do better.

It is very positive. We started our sales in India in 1997. And since then, our sales has grown enormously. And it was the same as what is happening in Nepal. We entered the market seriously and treated our partners on a similar level. In the beginning we were only in Bombay and now we cover the whole country. The market is also becoming more mature. And as a company we are very satisfied with what we are achieving today in India. In terms of volume, of all the countries we are active in Asia, India today is our seventh most important market – and that is only after a presence of three and a half years. That is something we are very proud of.

This a difficult question. Because you cannot compare one piece of luggage with another. There is a lot of imported, cheap products available in the market. We do not want to compare ourselves with these kinds of products. When you look at the products that we are bringing into this market, we have brought them here and tried them at such a level that they are for the local buying power of the people. They are priced very competitively.

Replace floor price by incentives

The situation cannot be termed as a satisfactory one. Nepal has found a permanent place as a leading manufacturer of hand-made carpets in the international market. In a short span of time we have achieved an excellent reputation. But we have stayed too long in one market, the German market, where we sell 70 percent of our product. We have also so far not been able to offer a second quality other than the Nepalese-Tibetan knots. We are currently experiencing a downward trend in sales. Now is the time to think of corrective measures so that we have the same hold as when we started. Now we are in a position from where we can further go down, so down that it will be difficult for us to come up. We need to develop new products, new system of technique itself. We may have to go beyond the Nepalese-Tibetan knots and be able to produce other internationally-known knotting techniques presently unknown in our country. We will have to put in extra efforts to diversify our markets at the same time.

Let us first see how the word ‘Indo-Nepal’ came into existence. Nepal made a big noise in the European market in the early 80s. The volume was very big - at present we capture 18 percent of the German market, which is the world leader in carpet importing. That is enormous for a small country like ours. In the mid 1980s Indian carpet exporters from the Bhadoi belt imported Nepali carpet weavers and copied our products and sold them as Indo-Nepal carpets. These carpets were made of cheaper machine-spun yarns and quickly found a stable market thereby hampering our growth.

A timely wide-scale publicity differentiating the two products during the time the Indo-Nepal was introduced could have somehow derailed the massive growth this product enjoyed. Instead, importers also took the product as an alternative to the more expensive Nepali carpets. During my recent visit to Europe I had an opportunity to talk to some major buying houses. And the feedback I got was that there is an important section of consumers who prefer Nepali-style carpets and given the similarity between the two products a growing number of these people are opting for Indo-Nepal because of price advantage.

If we have to do something from our side, we have an option: Can we do a similar product? Yes. But can we make it cheaper? No. We cannot compete India in price. That means, our only chance to compete with India is to make a far superior product and to publicize and market it differently.

At present, our carpets are being put in the same piles in the shelves together with Indo-Nepal carpets at department stores. To a lay man, the feel and look of the two carpets are the same. In large furnishing houses consumers simply go through the heavy carpet piles and pick one that suits their budget. In a typical case a salesman is not around to explain the difference between our product and the Indo-Nepal. Times (W1),Times New

The main reason is the state of the Deutsche Mark. The German currency has depreciated by more than 20 percent in the past two years. That means our German importers have to pay twenty percent more to buy dollars to pay Nepal. The second reason is definitely the Indo-Nepal carpets. Another reason could be that Nepal has only one product. We have not been able to diversify our products. That is why we at CCIA are strongly emphasizing on a training house so that we can come out with new products. We have already been assured of a fund from the Ministry of Industry and within a few weeks’ time we will be opening a training school where we intend to introduce other knotting techniques.

The philosophy behind Harrogate was to try to improve our sales to the UK where we barely have 2 percent of our total sales. Similarly the British Wool Marketing Board ( BWMB) is keen to supply Nepal with the British wool for our carpet productions where their sales is also negligible. In the process we received a consignment of free British wool and the BWMB provided a free space at the fair to display the 20 carpets we had prepared for the event.

The British Embassy in Kathmandu together with Nepal Britain Chamber of Commerce and Industry and CCIA jointly organized the delegation to Harrogate. This I believe is a first of its kind effort towards market development in the UK.

Although there was no direct response as far as spot orders were concerned we met potential buyers and designers who were impressed with our products, and expressed their interest to visit Nepal in near future. As the booth belonged to the BWMB we met British wool exporters who expressed interest to supply the wool. Wool exporters also invited our delegation to visit wool scouring and grading plants. The Fair also provided an opportunity to examine the trend in the UK which is different than other European countries. Harrogate Fair is a national fair and the premier flooring event in the UK. Nepalese carpets are also not yet well-known in the UK and we may have to put in extra efforts to demonstrate our potential in this market.

Except manpower, every thing else used in carpet making is imported. Why is it that no effort seems to have been made for backward integration of this industry with the national economy?

When you run a factory and the raw material is available next door, you will first go for that raw material. Nepal is not known as a country of sheep breeding. In New Zealand the sheep outnumber the human population by five or six times. So we will be competing with a country which has a tradition of wool production and export. And we will have to first raise the sheep and even import the breed of sheep. This is going to take time but we will have to start sooner. I have heard that the British Embassy is trying to help us in it by providing expertise. As far as chemicals go, we need to explore the use of plants and herbs available in our mountains for our dyes requirements. (W1),Times New

The main reason behind our success is that the knotting technique here is different from any other available in the world. Our carpets are knotted on rods as opposed to all the other handmade carpets that are knotted on straight warps. That is the main difference. The second reason why people buy our carpets is that we spin our yarn by hand which gives our carpets a different but natural look. Thirdly, we are very flexible. That is to say that we can do any design, and shape, any colour according to a customer’s wish. That is not something the Iranians (Persian) can do. They have some 20 or 25 designs and these have been around for centuries.

Today I would say more than 70 percent of the designs that Nepal sells is done by local designers. Our designers have been so good, that they can produce better designs than their European counterparts.

Keeping in line with the ever-changing business trends, recently we were able to convince the Government to reduce the floor price. We are not totally against the floor price. We understand that this is necessary in Nepal’s context specially when a good portion (app. 25%) of what we earn is being spent on the import of wool. And when the floor price is eradicated, there is some chance that the dollar is diverted to other places. Keeping this in mind and the hassle that exporters face as a result of an excessive floor price, we will need an alternative solution. We would like to see a cash incentive program which could boost sales and more dollars coming in. This could also help in phasing out the floor price.

Carpet production is a cottage industry where there are cases of employers who may not be aware of existing laws. Some factories are not even members of our association. Hence communication becomes difficult. Today, I don’t think that Nepal needs child labour to survive. We have enough adult force to take care of our production. The argument that children are employed because they can weave finer carpets is not true. Our carpets need force as they are knotted on rods and children cannot do the hard work. In order to keep children away from the factories we have begun opening up day-care centers with support from GTZ where parents going to work can leave their children. There are carpet related organizations such as Care & Fair and Rug Mark who are also monitoring and assisting the industry towards total eradication of child labor.

We have a massive freight problem. It takes too long for our goods to reach their destination. Because of the landlocked nature of our country, everything has to go through the Calcutta port. And there are frequent strikes or some other kind of delays. We are suggesting that our clearing point should be in Kathmandu. We would want to see our goods put in containers at our warehouse or nearby and custom-cleared at the airport (or somewhere at Kathmandu) and then taken directly to the ship waiting at Calcutta. Obviously the customs authority have the right to check the goods at Birgunj or at any other point if need be. This will save time in transportation and it will reduce pilferage.

As a concerned citizen of the country I don’t think I can differ with the fact that Kathmandu needs to be cleaned-up. There are more than 150,000 people involved in this sector and majority work and live in Kathmandu.

What should also be noted is that over the past twenty years the carpet sector has developed a certain base of infrastructure, which is not going to be possible to be created in another place overnight. As long as those facilities are available in the new areas, the plot is a very good one.

But I wonder if the government is ready to provide those facilities as of now or in the near future.

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"More than a piece of luggage"

Paul Melkebeke (Director Operations, Asia) of Samsonite Europe NV was in Kathmandu for the formal launching of Samsonite range of products in Nepal. At the sidelines of the launching ceremony, he talked to Business Age about his company’s plans for Nepal. Excerpts:

Replace floor price by incentives