Facing Low Cost Competition?

What do you do when a business that you have built over decades is threatened by low cost competition from across the border? What do you do when you find your customers, even those who you thought were your most loyal, desert you at the hint of a lower cost impersonator? While businesses around the world grapple with these questions, the answers, surprisingly, come from an umbrella manufacturer in Mumbai who has withstood, and even grown, in the face of competition from low cost ‘Made in China’ umbrellas.

Ebrahim Currim & Sons started manufacturing umbrellas in Bombay (as it was known then) in the year 1860. It was a period of huge transition in India. The mutiny of 1857 had been crushed, the British East India Company’s rule had ended, and Queen Victoria had become the Empress of India. For several centuries, Maharajahs, Nawabs, Sultans and Noblemen were the only ones privileged to walk under an umbrella, a sign of social status in medieval India. But by 1860, social structures in India had begun to change and the common man was ready to step up and claim his spot in the cool shade of the umbrella. In the midst of this social and political upheaval, Ebrahim Currim & Sons started manufacturing Stag umbrellas. And much like Ford automobiles of half-a-century later, these umbrellas were strong, affordable and of any color, as long as it is black.

Monsoon in the city of Mumbai (previously known as Bombay), is characterized by four months of near non-stop rain. During these months, every Mumbaikar worth his salt carries a black umbrella on him. Watching from a higher floor, a sea of black umbrellas with smatterings of color here and there is one of the most endearing sights of the Mumbai monsoons. For 140 years, Stag umbrellas protected Mumbai from the fury of the monsoon. Stag umbrellas were handed down from one generation to the next, with the oath to protect the umbrella as a family honor. But, by the end of the 20th century, umbrellas made in China had invaded Mumbai. For once, the spirit of Mumbai gave way and adopted the cheaper, although less durable, option. Old-timers mourned the imminent demise of Stag umbrellas, obituaries were being written and it was believed that the Stag name is destined to remain only in folklore.

But the Currims had other ideas. Refusing to succumb to lower cost Chinese competition, they decided to take the battle straight to the enemy. What followed was a close study of consumer needs and market conditions. The problems were diagnosed, and recovery of the lost ground began.

1.Consumers want value for money: In order to survive Stag had to sell at the same price as the competition. Yet, there was no way to match Chinese production costs. The solution lay in an innovative business model - branded umbrellas. Currims approached brands to advertise on their umbrellas. Leading brands such as Nestle, Castrol, CNN printed their logos and messages on Stag umbrellas, thereby subsidizing the cost to the consumer. Promotional and advertising umbrellas proved effective for viral marketing during new product launches.
2.Personalize and differentiate: While several women had started opting for bright colorful umbrellas, the metro sexual man had no alternative to the black, masculine umbrella. Stag launched colorful designer umbrellas for men catering to the growing tribe of Mumbaikars wanting to stand out. Each color and design was meant to make a personal statement, and became very popular with the young.
3.One size does not fit all: Buoyed by the success, further segmentation of the market led to the launch of a range for kids, and choices between multi-colored and single-colored umbrellas.
4.Build a product range: Noticing need gaps in several other segments, Stag extended the product range and launched garden umbrellas, beach umbrellas, commercial outdoor umbrellas and parasols.

Stag, having survived the Chinese onslaught, continues to remain the umbrella of choice in Mumbai. The lessons from Stag are fairly simple and yet, ironically, often ignored in the world of business. Always deliver value for money, especially when catering to the masses. Be flexible and adapt your traditional business to survive the demands of the global world. Differentiate in order to create a pull for your brand. And finally, respect (as opposed to challenge) the customer and her choices.

Anupam Mukerji • Mumbai, India • anupam@mmi-india.com

Add New Comment

4 Comments

  • Anindya Dasgupta

    Very interesting and a great read. Mohendra Dutta and Sons from West Bengal is a similar case study in the umbrella category - well, atleast of survival in the face of competition - though am not sure whether they have really innovated a lot.
    The thing about China though, is that people have started seeing through the issues of quality. Though I must add, that people like me are still considering buying their first golf club set (Callaway or Nike - no less) from Shanghai - for the equivalent of Rs. 5000.

  • Jason

    Great piece. It's all to easy for those in the west to assume they're the only ones affected by low-cost competition.