The Stencil for Success... And Failure!

Destiny can work in strange ways. It was an unpleasant shopping experience, back in the mid-eighties, that led to the founding of what became, for a while at least, one of the most meteoric and successful clothing brand stories of the time.

A garment exporter had spent a pretty packet to purchase a few shirts, but when they didn’t fit, he took them back to the retailer. Clearly the retailer had never heard of the adage ‘The customer is always right’, and turned extremely rude and unrelenting. Incensed by the blatant display of customer apathy, for what was then an expensive purchase, the customer decided to do something about it. Being from the garments industry, even if indirectly, helped. He decided to launch a brand of shirts that would have a certain quality, but would be priced at a real deal. Basically, a mass market product.

Economies of Scale

And so was launched Stencil. A line of readymade shirts that scored high on utility and pricing, but could also hold up its hand for quality and universal acceptance. At a time when premium shirts vended for upwards of Rs. 300-, Stencil shirts were shrewdly priced at Rs. 99-. It was a time-tested psychological sleight of hand. Effectively, the price in triple digits, it just felt like a double-digit tag – and hence a solid deal for the customer. Though, even by absolute value, it was a real deal.

The company wagered on sacrificing margins for economies of scale. It was a bit of a gamble indeed. It was a time when most people got their shirts tailored, and not readymade. But the brand figured that, at the price point, conversion and shift in habit could easily be achieved. And it was!

Marketing Tricks

The other side of the gamble was market realities. Working on such fine margins, the brand could not afford to have retailers sit on credit, waiting for the shirts to sell organically. So the brand tried some unorthodox tricks, like having retailers stock the product on a trial basis, and have pseudo customers make enquiries – thus creating a perception of growing demand. It worked, and as more retailers started to stock the brand, its visibility grew which, coupled with the price point, stating bringing the customers in.

The company could now afford to insist on a cash-down arrangement with its retailers, who gave in as the demand started to rise. Another smart move, because it meant that to aid their own cash flow, retailers were now actively pushing the brand.

Gradually customer perception of Stencil changed. Once considered cheap, it now stood for value for money, and before long started attracting customers across the socio-economic landscape. That started to sprout a few issues. Being a mass brand, working around fine margins, the company could not afford to create several styles and sizes. But the more discerning customers were now demanding this.

Exponential Growth

Still, in a short time, Stencil’s sales numbers rose geometrically. What started at just 50 pieces a day, soon surged to 300. Then it got a real fillip when Bata approached them to craft shirts under its Ambassador line. In one stroke, that opened up some 1,300 outlets around the country, and boosted sales by a further 4,000 pieces per month. Within a year, total sales had zoomed to 30,000 every month.

Stencil was now a pan-India brand, available in big cities and small towns alike. And the fairytale of demand continued unabated. Four years from launching, it scaled the magic figure of 60,000 shirts a month. The owners were salivating at the success and the future potential – they now set their sights on 3.5 lakh.

Meanwhile, the owners hit upon the idea of leveraging Stencil’s success by launching products in other apparel categories. They also worked out strategic tie-ups – with Mafatlal, under the brand Stanrose; with Binny Fabrics; and in a real coup, convinced a French clothing major to manufacture Lacoste T-shirts in India. New factories were set up, the company went public, and started exporting too… Stencil stood out as a paradigm for success.

The Price of Success

But then it all came unstuck. Maybe they grew too ambitious too soon. Perhaps success came too quickly and they lost sight of their original market promise of ‘Quality at an affordable price’. It could even be a case of biting off more than they could chew – an inability to keep up with demand. Or maybe a combination of all that, plus a bit more.

But keeping up with demand was a prominent issue. The existing infrastructure couldn’t keep pace. Nor the personnel. To fix that, the company recruited indiscriminately, and mostly inaccurately. Issues with suppliers opened up another front. Quality was the first casualty.

Then, the customer itself! Upmarket customers, expecting a premium product at mass prices, slowly started to drift away. Unfairly, they were rating Stencil against other premium brands. The Stencil legacy started to work against it with the company’s premium brands too. Customers expected those to sell at the lower-end as well.

To keep up its export commitments, the company had taken foreign currency loans to commission new plants. That coincided with India’s foreign exchange crisis of the early nineties; the rupee got badly devalued and as a result servicing their foreign currency loans became almost suicidal in terms of interest rates. To make it all viable, Stencil had to meet at least 75% of its export obligation. But the Rs 99- selling proposition was now making that impossible to sustain.

Export or Bust

The export stakes being too high for failure, the brand shifted focus there, and expectedly its domestic fortunes suffered. The founder, a ‘serial entrepreneur’ also had his fingers in too many other pies, to mentor the brand back to viability. Domestic production stuttered and gradually limped to a mere trickle. Retailers grew angry. After all, many of them had built their own mini-fortunes on the Stencil success.

The me-toos were also snipping at the brand’s heels. A slew of low-priced clones hit the market and that double whammy all but wiped out Stencil’s presence in the very market it had created. Its numbers sank from 60,000 a month to as many across an entire year. Before long there was nothing left for the domestic market, apart from export surplus.

Fortunately, the export-or-bust gamble paid off. The Lacoste line (and others) kept the company in the black, even if its original market promise was now a thing of the past. And despite all its abrasive moves in the local market, the Stencil legacy still survived and in fact retained its equity. When the company withdrew from the market, it went around reclaiming its shop-front glow signs. However, retailers stridently refused. Apparently, even when they weren’t selling the brand any more, the mere Stencil brand association was something that elevated their market status and was something to be proud off.

The strange case of Stencil has many marketing lessons to take home. Perhaps ironically, the biggest is that sometimes success can be your biggest failure. Or again, Stencil may only be an outlier. Whatever… the marketplace and marketing in general hold unexpected lessons for all those who pay heed. That’s one of the raisons d’etre of this Marketing Folklore Series. Keep reading… and learning!