“There are some brands that are mass, like Levi’s and Pepsi, and then there are some brands that are class. Fabindia is a rarity that is both.”
Without much advertising, Fabindia has become a leading lifestyle retail brand in India. There is hardly any professional in India, who has not owned a Fabindia product at some point of time.This success story, is the product of a Harvard Business School’s case study.
What is fascinating about Fabindia’s growth model, is that it has pursued the conflicting goals of profitability and social mission together. True to its founding mission of creating sustainable employment for weavers and traditional handicraft artisans in rural India, William Bissell created a unique Community Owned Companies (COC) business model. It is the second big revulution in India after Amul. It empowered the suppliers, and enabled their growth, along with the growth of the company.
He formed the Artisans Micro Finance Private Limited (AMFPL) venture fund, which is a fully owned subsidiary of Fabindia. Through this fund, he set up Supply Region Companies (SRC) which is owned partly (49 percent) by Fabindia through AMFPL, and also partly, (26 percent) by the rural artisans (These artisans are the main suppliers of Fabindia).
This ownership structure is mutually beneficial for the artisans as well as the company. Fabindia gets assured supplies, while the artisans get a steady income. The value of their shares increase and they could earn dividends. Also it becomes easier for them to get loans due to steady employment. Fabindia has managed to create 17 SRCs .These companies are free to sell their products to other companies also, although Fabindia is the main buyer.
COC model links 80,000 craft-based rural artisans to the modern market. Although these SRCs are not listed on stock exchange, Fabindia provides an internal mechanism to trade in these shares, thus ensuring liquidity of shares for the artisans. This model empowers the stakeholders of the company.
William Bissel, who pioneered the concept says, “If one is very serious about CSR, you may have a vice-president heading it. I find a lot of people doing doublespeak. This creates dissonance both within the organisation and outside. This inclusive approach defines our brand and gives it great value. If you do what you believe in, it defines you.”