Mumbai: Samsonite global chief executive Kyle Gendreau said discounting levels in India are unsustainable and impacting profitability even as the US-based company toppled VIP Industries to become India’s biggest luggage maker by revenue last fiscal.
“It is not sustainable what’s happening in the marketplaces, this level of discounting deteriorating profitability. We have taken a road very carefully to manage it but won’t allow our profit profile to diminish. And so, we clearly are a little lower than what we were running, but we’re not just chasing it down the hole,” Gendreau told investors in an earnings call.
Post pandemic, the Indian travel market ballooned after consumers vacationed frequently, but the trend has now tapered off. New entrants in the luggage industry such as Mokobara, Assembly and Uppercase have since turned to offering discounts to lure buyers, impacting industry profits or widening losses, according to latest registrar of companies filings.
For instance, Nasher Miles plunged to a net loss of ₹6.3 crore in FY24 from a year earlier net profit of ₹5.5 crore. Revenue grew 17% to ₹165 crore in FY24, slowing from a 32% growth rate in the year before. Mokobara’s sales surged 120% to ₹117 crore while net loss nearly halved to ₹4.2 crore in FY24 from ₹8.2 crore a year ago.
In comparison, VIP Industries clocked a 10% sales growth at ₹2,215 crore but profit fell sharply to ₹28 crore in FY24, from ₹161 crore a year ago. Samsonite posted a 22% growth in sales at ₹2,298 crore while net profit rose 24% during its financial year ended December 2023.
“It is not really sustainable, not only for competitors, but even for the distributors that are selling the product because as that continues to slide down, the profitability there is not a win for anybody, including the third-party sellers. So all of a sudden, our strategy has a better feel to it because it’s more sustainable,” said Gendreau. During the second quarter investor call, VIP Industries managing director Neetu Kashiramka too said there is a pricing pressure in hard luggage.
“There are a lot of D2C players which are coming into the market, and starting to sell, now all these players have enough money to burn, which we don’t have, so that’s where we are little bit playing on the pricing,” she said. India’s organised luggage industry will see revenue growth reduce to 8-10% in the current fiscal year from 18% last year, primarily due to a high base, as industry size almost doubled between fiscal 2022 and 2024, Crisil said in a report last quarter.
Luggage demand remains stable, backed by continued penetration of hard luggage, steady tourism and corporate travel. However, realisations have reduced due to two factors. Firstly, increasing competition among manufacturers with the entry of new brands and, secondly, increased inventory levels due to moderation in volume growth leading to aggressive pricing, impacting average selling prices, mainly in the economy segment, Crisil said.
