Fab India’s Innovative Social Business Experiment

Walk into any of Fab India‘s high end retail outlets in major cities across India, and around the world – you would be tempted by their unique clothing and furnishing collection, surprised by the store’s relentless focus on the customer and would probably walk out with a big bag in your hands. However, you would never guess that the profits made from that store and many others across the country are partly distributed among the weavers, about 20,000 of who are ‘shareholders’ of subsidiary companies floated by Fab India.

So, how does this work? Below is the excerpt from a recent Economic Times article on Fab India’s new model:

The weavers, who will hold 51% stake in about 35 companies formed in different states, will have annual general meetings (AGMs) and also receive dividends. Already, they get to trade their shares once in six months through a limited window opened by the Fab India management.

“Since ours is a closely-held public limited company, we create our own share trading system. We open a trading window among the local weavers’ community. We provide the liquidity to ensure a fair price is discovered. We also create a benchmark price on the basis of the book value and future earnings potential and so on,” said Fab India MD William Bissell.

It is unclear what is the relationship between Fab India, the parent company and the subsidiaries – If the subsidiaries have a claim on Fab India’s profits or just act as a supplier unit. This is an important question, because it determines what percentage of the value-chain profits are shared with the weavers, who traditionally have not been given a fair-share. The ET article hints to this a little, without providing a clear answer:

The company is looking at organising and aggregating the handloom weaving community into a corporatised, as opposed to a cooperative, structure. Mr Bissel thinks these communities are responding far better to an inclusive capitalist framework where profits are shared by all

‘Profits shared by all’, ‘Inclusive capitalist’ – there is quite a bit of jargon there. Given Fab India’s track record and good intentions (they make really good Kurtas), I’m a little less skeptical of the company. If the company can pull-off this unique structure and the business model, it would present a whole new template for social businesses, especially in the clothing sector (read: HBS Case Studies).

Well, even if you don’t really care about the company’s social business model, you should step into one of their stores. They got some good stuff!

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11 Responses

  1. I wouldn’t agree with the “good stuff” part though.. every time I have bought a kurti from Fabindia, I find the color runs..

  2. Lekhni,

    I was talking for more in the standpoint of having very few options for fashionable and affordable ethnic wear options for men and Fab India has a refreshing diverse collection. Probably true on the color running problem.

    Santhosh

  3. The kurta’s that I have got from Fab India nearly a year ago are still in great condition and I wear them quite lot. I think its great how Fab India has created a brand name for itself, yet is fro the masses for the prices are extremely cheap. The designs are pretty good too.

  4. […] His post on FabIndia’s business model […]

  5. […] Times article on Fab India??s new model:. The weavers, who will hold 51% stake in about 35 …https://thinkchangeindia.wordpress.com/2008/05/19/fab-indias-innovative-social-business-experiment/Indian Society – India Society … the complexities of Indian social structure has … differences […]

  6. The relevant HBS case study is available for purchase @
    http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=807113

  7. […] about this venture Posted on June 17, 2008 by Aishwarya In mid-March, we had posted about FabIndia and their innovative business model. This time, Business Standard has reported about the same venture, in more detail, in their weekly […]

  8. […] Posted on October 15, 2008 by Badhri ThinkChange India had earlier covered Fab India’s innovative business model for bringing the riches right at the doorsteps of the skilled and isolated rural weavers. A similar […]

  9. I like the simplicity and ethnic collection of fab India products

  10. Interesting that many of the reader comments are reviews of Fabindia products, although the story is trying to say something about Fabindia’s workers. I think it says something about the middle-class Indian consumer. To the original poster – “if the company can pull it off”?? Since it started in 1960, Fabindia has pulled off quite a lot 🙂

  11. It’s truly a nice and helpful piece of info. I am satisfied that you just shared this helpful info with us. Please keep us up to date like this. Thanks for sharing.

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