CHAPTER IV

MARKETING STRATEGIES

4.1 Introduction

4.2 Channels of Distribution

4.3 Procurement and Marketing

4.4 Finance for Operation

4.5 Strategies

4.6 Regional Sales

4.7 Globalisation and its Impact

4.8 Conclusion

4.1 INTRODUCTION

Marketing is an important commercial function. Under marketing, the

customer becomes the fulcrum, the pivot about which the business moves.

Marketing begins and ends with customers. This basic fact is recognised in the

marketing of handloom products also.

Marketing is a social and managerial process by which individuals and

groups obtain what they need and want through creating and exchanging

products and value with others".'

Marketing does not mean selling what is produced. A product is

manufactured when it is presold in a marketing organisation. The task starts

with identifying what the consumer needs, and where it can be produced and

offer it at the time when the buyer needs it, by communicating its availability. In

what season at what price and from where to get can he answered only if

suitable information systems are built and maintained on a continuing basis. An

ideal marketing mix is an effective integration of the four factors, the product, the

price structure, promotional activities and the distribution system.2

1. Philip Kotler and Gary Armstrong Principles of Marketing (7th Edition)Prentice Hall of India, New Delhi, 1997, p.6.

2. William J. Stanton, Fundamentals of Marketing Mc Graw-Hill InternationalEditions, 1975, p.31.

110

ii

Handloom weavers can be grouped under two categories-self-employed

and those employed by master weavers or Co-operatives. In the second

category, weavers are supplied with raw material and other inputs and they have

to give them back as cloth, after receiving their wages.

The master weaver actually plays the role of an employer, financier and

marketer. He undertakes the responsibility of the marketing of cloth and to this

extent there would be no marketing problems for the weavers. The master

weavers have their own marketing channels.

4.2 CHANNELS OF DISTRIBUTION/

The channels of distribution for handloom products can be grouped as

given below:

1. Handloom Co-operatives - Wholesalers - Retailers - Consumers

2. Handloom Co-operatives - Co-optex - Cosumers

3. Handloom Co-operatives - Retailers - Consumers and

4. Handloom Co-operatives - Consumers.

Among the four channels, the main channel is Co-optex. Co-optex

functions both as a wholesaler and a retailer and acts as a link between the

producing society and the ultimate consumer.

112

As a wholesaler of handloom fabrics, Co-optex pursues the marketing

activities such as storing, grading and labelling of fabrics. The head office of

Co-optex at Madras does not make any direct sales. The head office acts only

as a co-ordinator for the procurement of handloom fabrics from primaries and

sells them through its 337 retail outlets. The fifteen Regional Offices of

Co-optex also do not make any direct sales to the consumers.

After the procurement of fabrics they are classified product-wise, as

sarees, dhoties, towels, bedsheets, pillow covers and the like. They are

classified according to their quality and yarn counts. Before the fabrics are sent

to the retail outlets, Co-optex affixes its emblem and the price details on the

fabrics.

The retail outlets of Co-optex occupy a key position in the channel of

marketing of handloom fabrics by virtue of their direct contact with the

consumers. The retail outlet is the last link or intermediary between Co-optex

and the u'timate consumers.

Chart 4.1 shows the channel through which the handloom fabrics of the

Primary Societies reach the consumers.

113

CHART 4.1

CHANNEL OF DISTRIBUTION FOR HANDLOOM FABRICS

HANDLOOM WEAVERS CO-OPERATIVE SOCIETY

REGIONAL OFFICE OF CO-OPTEX

CO-OPTEX RETAIL OUTLET

CONSUMER

Co-optex supplies yarn to the affiliated societies and receives the finished

goods and arranges for their sale. To find an outlet for the increased production

of Primary Weavers' Societies and to strengthen the arrangement for marketing,

Co-optex undertakes the work of both Internal and External marketing.

4.3 PROCUREMENT AND MARKETING

Co-optex has to procure handloom goods from the affiliated primary

societies and further it has to do the marketing job also and this prevents the

employment of weaver members of affiliated societies. Since the entire

114

handloom structure is based on providing continuous employment to weavers,

the procurement function has assumed great significance. To have a continuous

procurement process it is necessary to have efficient marketing also.

Marketing is a vital aspect of the handloom sector. The growth of the

handloom sector largely depends on an effective marketing system. Co-optex

makes a systematic approach to cover the market.

In the beginningCoOPteX opened selling units of its own and also

subsidised sales depots, opened by big Weavers' Co-operative Societies for the

marketing of handloom products. Formerly goods were sent directly from Primary

Societies to sales depot. But now it is not so. Co-optex has established its

warehouses in different regions and they act as distribution centres between

Primary Societies and the sales units.

At present nearly 1400 Primary Weavers' Co-operative Societies are

affiliated to Co-optex. Co-optex has 337 showrooms within and outside

Tamiln Nadu3. Co-optex provides marketing support to its Primary Societies to

the extent of fifty per cent of the total production on an average.

The remaining fifty per cent of the production of Primary Societies is

marketed by Primaries themselves. Co-optex has made an impressive sale worth

3. Administrative Reports of Co-optex, 1997-'98.

115

Rs. 327.33 crores as on 1997-'98 by selling as many as 400 varieties of

handloom products.4

Co-optex has 17 warehouses located in different parts of the State. After

procurement, the handloom goods are sent to these warehouses depending

upon their requirement in the relevant region From these warehouses, the

goods are sent to the retail outlets for sales.

4.4 FINANCE FOR OPERATION

NABARD provides financial assistance for the procurement and marketing

of handloom cloth, powerloom cloth and yam. The cash credit limit sanctioned

by NABARD for the financial year 1999-2000 is given in Table 4.1.

TABLE 41

Cash Credit by NABARD(Rs. in Lakhs)

SLNo. Particulars of ladeCash Credit Rate of InterestSanctioned

1. Handloom Cloth 12,400.00 8.5%

2. Powerloom Cloth 1,500.00 9.0%

3. Yarn 1,000.00 8.5%

Source: Records of Co-optex.

4. Annual Reports of Co-optex, 1997-'98.

116

The Government of Tamil Nadu and Government of India provide

financial assistance in the form of share capital, Loans, grants, subsidies, rebate

and the like for the sale of handloom cloth.

4.5 STRATEGIES

The word strategy means Tactics'. 5 Tactics relates to decisions that are

taken during the execution of plans. Co-optex in marketing its handloom

products adopts certain strategies. Every strategy has one key idea or a few

that c1Dnstitute the main basis for its success. The strategy may be a novel

scheme, or an idea or a method through which the marketing of the products can

be improved.

Co-optex has taken up the challenging task of marketing the handloom

products by adopting its own strategies.

4.5.1 Pricing Policy of Co-optex

Price is the most important factor among the various elements of

marketing mix. The elements, product, place and promotion, represent the cost,

and price is the only element in the mix that produces revenue. Price affects

other factors like sales, revenue, profit, demand and perception of quality.

Revenue of Co-optex depends only on price and it fixes the tone of competition.

5. David J. Luck and O.C. Ferrel, Marketing Strategy and Plans forSystematic Marketing Management, Prentice Hall of India, New Delhi,1982, p.8.

117

The handloom co-operatives are organised for providing continuous

employment and a fair rate of wages to weavers. Basically, handloom

co-operatives are non-profit organisations. However, in a competitive market

economy, they have to earn a reasonable rate of return for their investment and

for their survival.

The important factors that are considered by Co-optex in fixing the prices

are:

a) Cost of Procurement

b) Sales Target

C) Competition

d) Government Policy

e) Growth Rate

1) Maintaining the Goodwill and

g) Stability in Price.6

The Base price of the products of Co-optex is fixed by following 'Cost-plus

Pricing Method'. The factors of this policy strategy are:

1. Pricing various fabrics quickly

2. Being fair both to the buyers and the sellers and

6. B. Subburaj, "Pricing Strategies of Weavers Co-operatives' The

CooperatorVol.XXX Il No. 1, July 1994, p.17.

118

3. Being non-exploitative, as it allows only a reasonable profit margin to

the seller.7

In handloom co-operatives, the cost of production of each unit of

handloom fabrics is computed by taking into account the direct material cost and

the direct labour cost incurred in producing the fabrics. The societies do not

take into account overheads, inventory-carrying cost and such other indirect

costs.8

Co-optex procures the fabrics produced by the primaries. The primaries

are allowed to have a profit margin of 10 to 29 per cent over and above their

cost of production. 9 Since the same variety of cloth is produced by different

societies it results in different production costs. This is due to the policy of

purchase of raw materials, facilities available and the like. In order to ensure

uniform price for a single variety of fabric produced by different societies, the

Directorate of Handloom has fixed an upper price limit for each variety of fabric.

Co-optex pays either the price administered by the Directorate of Handlooms or

the price quoted by the Primaries which ever is less.

7. Ibid., p.17.

8. Ibid., p.17.

9. Ibid., p.18.

119

Differential Margins

The primaries have adopted differential margins. The margin varies

considerably for different varieties of fabrics among the primaries due to the

differences in quality, the estimated operation costs and profit targets. The

marginal percentage among silk weaving societies is the highest and it ranges

between 25 and 29 per cent 1 ° The marginal percentage is relatively lower in the

case of societies producing bedsheets, towels, sarees and the like. The

higher margin in the silk weaving societies has been due to their high unit cost,

costly input and a long time engagement of skilled labour needed for their

production. Another reason for this high margin for handloom silk varieties has

been due to their soundness in colour, texture, design and finish against the

powerloom silk fabrics.

The margin among the non-silk weaving societies is low because of their

low cost of production, low advertisement and low marketing cost.

Co-optex fixes its selling price by adding 15 to 40 per cent margin to its

procurement price. For silk and polyester fabrics, the margin is 35 to 40 per

cent. It is 15 to 20 per cent for Janatha cloth and 20 to 25 per cent for cotton

fabrics.' 1 Co-optex adopts a differential margins to fix the selling price for

10. Ibid., p.18.

11. Ibid., p.18.

120

its products. The selling price of Co-optex has two profit margins. The first

profit margin is allowed to producing societies and the second profit margin is

added to the sale price by Co-optex. Hence, there is a higher price for the

fabrics sold by Co-optex than those in the showrooms of Primaries.

The Primaries follow a uniform pricing policy. They sell their products to

buyers at the same price whether they sell the products at the production

centre or at the retail showroom. The buyers bear all the freight charges.

However, the Primaries have to bear the packing and loading charges in the

case of bulk purchases. In this regard, Co-optex has a different policy.

The selling price of Co-optex fabrics is uniform in all the retail outlets

within the State of Tamil Nadu. But it is three per cent more for sales made

outside Tamil Nadu. This has been due to additional freight cost. Co-optex

adopts "Place Price Discriminiation Policy" towards the consumers in Tamil

Nadu and those in other States of India.

4.5.2 Retail Outlets

The sales of Co-optex to the people are effected through the retail outlets.

Each outlet is controlled by a manager appointed by Co-optex. He is assisted by

sales persons and assistant sales persons. The number of sales persons in a

retail outlet depends on its volume of sales. During deepavali seasons,

sometimes additional sales persons are appointed on a temporary basis.

1')L A..

The simple organisational structure of Co-optex is given in Chart 4.2.

CHART 4.2

ORGANISATIONAL STRUCTURE OF CO-OPTEX

RETAIL OUTLET

MANAGER

SALESMAN

ASSISTANT SALESMAN

Procedure

The Manager of the retail outlet prepares a list of fabrics required based

on the local demand. He sends it to the Regional Manager. The Regional

Manager visits the regional warehouse and makes arrangements for the

despatch of fabrics from the warehouse. The fabrics are sent to the retail outlets

along with the documents and invoices. Then they are displayed in the

showrooms for sale. When there is a short supply, the Regional Manager is

infornied and necessary book adjustments are made. The fabrics received are

entered in the stock register. The fabrics issued for sales are also posted in the

stock register periodically. The balance of fabrics shown in the stock register

122

equals the physical stock in the shop. The manager and the sales person are

responsible for the stock.

When defects are pointed out, the return of goods is accepted by the

Co-optex retail outlets. But the replacement is made only when the fabrics are

returned in the original form.

Among the sales persons, one is in-charge of cash collections. He is

responsible for the custody of cash until it is handed over to the managers. The

ultimate responsibility of cash rests with the manager. The cash collected from

daily sales is remitted in the Co-optex's account in the District Central

Co-opertative Bank on the next working day. A petty cash balance is maintained

to meet the petty expenses like cleaning, purchase of stationery and the like.

The damaged and non-moving fabrics are kept aside. When the

production supervisor from the Regional Office visits the retail outlet, the rate of

discount on the damaged and non-moving fabrics is fixed for their clearance

sales. The rate of discount depends on the extent of damage in the fabric. In

addition to the rebate allowed on sales, the rate of discount offered for defective

fabrics varies between 30 to 50 per cent.

The monthly sales statement of the retail outlet is sent to the Regional

Senior Manager in the first week of the next month. The stock verification is

123

done once in six months, Every year, the accounts of Co-optex retail outlets are

audited by the auditors of the Directorate of Handlooms and Textiles and by the

auditors from Directorate of Co-operative Audit.

Retail Outlets

Retail outlets are the actual business units of Co-optex. Only when the

sales are effectively done by the retail showrooms, Co-optex can achieve its

prime object of serving its member societies by making higher procurement of

fabrics.

The sales performance of the retail outlets for 10 years from 1988-'89 to

1997-'98 is given in Table 4.2.

124

TABLE 4.2Sales Performance of Retail Outlets

Year No. of Showrooms SalesAverage Sales per

Showroom

1988-89 492 8591 17.46

1989-90 476 11109 23.34

1990-91 464 10356 22.32

1991-92 449 11379 25.34

1992-93 434 11905 27.43

1993-94 423 12247 28.95

1994-95 403 13942 34.60

1995-96 378 14754 39.03

1996-97 352 15414 43.79

1997-98 337 13291 39.44

Source: Records of Co-optex

From Table 4.2, it is obvious that the number of showrooms of Co-optex

had decreased, but the sales through retail outlets had increased. This is due to

the fact that Co-optex closes the unprofitable showrooms every year but at the

same time it takes effective measures to increase the sales in the existing

showrooms.

4.5.3 Promotion

The basic objective underlying promotion is to increase sales. A

well-designed promotion can help to solve certain specific marketing problems

125

together with the rest of the marketing objective. 12 The promotional measures

are highly essential to the handloom sector because it has poor marketing

infra-structure, limited geographical sales area, high cost of production and

limited potential consumers. The Primary Societies with their limited financial

resources cannot popularise their goods through sales promotional measures.

Hence, Co-opteX as the apex marketing agency for handloom fabrics in Tamil

Nadu, undertakes various sales promotional efforts.

4.5.4 Advertisement and Publicity

Advertising is the art of influencing human action, the awakening of the

desire to possess and possess ones product. "Advertising is a sales message,

directed at a mass audience, that seeks through persuasion to sell goods,

services or ideas on behalf of the paying sponser." 13 It is made effective through

mass media like Newspapers, magazines, periodicals, Radio, Television,

outdoor displays, direct mailings, monthlies, card, catalogues, handbills,

directories and circulars.

Publicity has been defined by the American Marketing Association as "the

non-personal stimulation of demand for a product, service or business unit

12. Micheal J. Baker, Marketing, The Macmillan Press Limited, 1979, p.338.

13. John D. Burke, Advertising in the Market Place, Mc Graw Hill International

Editions, 1980, p.9

126

by planting commercially significant news about it in a published medium or

obtaining favourable presentation of it upon radio, television or stage that is not

paid for by the sponsor. 04 In common use the terms publicity and advertising

are used synonymously.

The advertisements of Co-optex in daily newspapers, magazines, and

periodicals are frequent during festival seasons. In the magazines and

newspapers, photographs of film stars or beauty models wearing the handloom

clothes are found. The advertisements always carry the special mention about

the range of rebate. The photographs of film stars and models attract the

women folk. But for men and children there are no separate advertisements for

shirtings and children's ware. Advertisements normally mention about Handloom

silk varieties, cotton sarees and polyster sarees.

Co-optex' advertisements are found in the magazines and dailies

published in other States also. In Kerala, Co-optex advertisements are found in

'MathruboOmi' and 'Kerala Karnudini'. In Bombay, Delhi and other metropolitan

cities 'Times of India' carries Co-optex advertisements. Besides 'Na y Bharat', in

Delhi, 'Times', in West Bengal and 'The Statesman' in Calcutta, 'Amirtha Bazar

Pathrika', 'Telegraph' and 'Business Standard' display Co-optex advertisements.

14. Marketing Definitions, A Glossary of Marketing Terms, American

Marketing Association, 1960, p.19.

[27

In Orissa 'Samay' and in Kannada 'Deccan Herald' and 'Kannada Prabha'

publish the advertisements of Co-optex. In Goa 'Nay Hind Times', in Punjab,

'Punjab Kesari' and in Chandigarh 'Tribune' carry the advertisements of Co-

optex.

In Tamil Nadu also all leading newspapers like 'Dinamani', 'Dinamalar'

and magazines and periodicals like 'Anantha Vikatan', Kalki', and 'Kungumam'

carry Co-optex advertisements.

The commercial broadcasts of All India Radio from Chennai,

Tiruchirapalli, Madurai, Tiruneveli, Tuticorin present Co-optex advertisements in

an attractive manner. Documentaries and plays are also telecast by

Doordharshan.

45.4.1 Advertising Budget

Every year Co-optex is preparing a budget for advertising expenses. The

prepared budget is revised if need arises. In the budget, fund is allotted for

advertising in different media. Creating advertising messages and selecting

advertisement media mainly depend upon the fund allotted in the budget.

128

TABLE 4.3

Advertisement Budget Allocation for 1997-'98

(In Lakhs)

Type of Advertisement Media Budget Amount Percentage to To/al

News Papers & Magazines 57.00 34

TV 43.66 26

All India Radio 14.05 8

Regional Office Budget 29.16 17

Production of Film 11.49 7

Miscellaneous 14.26 8

Total 169.62 100

Source: Records of Co-optex.

The advertising policy of Co-optex clearly indicates the fact that Co-optex

gives great importance to news papers and magazines (34%).Next to

Newspapers, Television occupies a dominant place (26%).

Instead of spending more on Newspapers, it is better to concentrate on

T.V advertising. The survey conducted clearly indicates the fact that majority of

the customers are attracted by T.V advertisements.

The amount allotted to Regional offices can be utilised by Co-optex, as

per need. Usually the advertisement amount allotted to Regional offices are

used for the following purposes.

129

1. For distributing bit notices.

2. Construction of Pandhal and arches in front of the showrooms during the

festival seasons like Deepavali, Pongal, Tamil New Year and the like.

3. For having serial bulb sets and other illuminations.

4. For making attractive announcements about the varieties of cloth, rebate and

discounts through autos throughout the cities.

5. Through circuit T.V. in important places, like bus-stands and railway stations.

Also through cable T.V. advertisements are made.

The following table gives the advertisement and publicity expenses

incurred by Co-optex from 1989- 1 90 to 1997-'98.

TABLE 4.4

Advertisement Expenses on Sales(Rs. in Lakhs)

Advertisement ExpensesAdverisemefli

Year

Sales On Sales OnExpenses percentage)

1988-89

104 .60

10060 1.04

1989-90 130 18420 0.71

1990-91 92.06 13772 0.67

1991-92 117.92 17222 0.69

1992-93 97.61 19527 0.50

1993-94 95.37 23300 0.41

1994-95 191.17 22754 0.84

1995-96 281.21 25755 1.09

1996-97 236.82 26470 0.90

1997-98 168.91 32733 0.52

Source: Records of Co-optex.

There is a positive relationship between sales and advertisement

expenses. This fact is indicated by the calculated correlation co-efficient (.710).

Co-optex is spending less than one per cent on sales as advertisement

expenses.

More over Co-optex is concentrating more on advertisements only during

130

festival seasons like Pongal, Deepavali and Hand Loom Festivals. It is

131

suggested instead of concentrating only on certain festival periods, it is better to

advertise throughout the year.

4.5.5 Co-optex Bulletins and Literature

Co-optex publishes a number of leaflets, handbills, handouts, describing

the products they deal with, credit facilities available and discounts offered. The

Government of Tamil Nadu magazine 'Tamil Arasi' and the publications of Go-

operative Union like the Journal of Co-operation and Co-optex's own publication

'Poonthukil' emphasise the services and functions of Co-optex.

4.5.6 Outdoor or Traffic Advertisements

The town buses within the city limits and mofussil buses carry panel

advertisements and display boards of Co-optex, in important cities. They have

educational value among the public.

Hoardings of co-optex have been placed in important places in the cities

and towns, where there is high public mobility. In places like milk booths,

telephone booths, junctions, market places and important government offices,

hoardings are placed.

4.5.7 Posters, Stickers, Illuminated Sky Writings

Posters of Co-optex are displayed in railway stations, bus-stations,

marketing places and in important public places. A special feature of this type of

132

advertisement is issuing stickers. During exhibitions the illuminated sky writing

is a common sight.

The butterfly emblem is extensively used in all the advertisements and

publicity materials both in season and out of season.

4.5.8 Wall Paintings

The walls of houses and other buildings are hired and the rebate rate,

pictures and the name 'Co-optex' are painted in a prominent and attractive

manner. Bright colours are used for paintings and this type of advertisements

are found very common in all places.

4.5.9 Packing Material

All the packing material, receipts, bills, envelopes and application forms

used by Co-optex carry the trade mark emblem, 'Butterfly'. The survey

conducted by the researcher also reveals that almost all the people are aware of

the trade mark of Co-optex namely the Butterfly emblem.

Films and Documentary Slides

In theatres, film slides are projected, publishing the products offered by

Co-optex and also rate of discounts and rebate offered. The trade mark emblem

'Butterfly' attracts the attention of the public.

133

In the exhibitions also documentary films are screened. The dramatisation

of co-operative endeavor in handloom industry has mass appeal and it is an

effective medium of publicity.

4.5.10 Fashion Parades

Occasionally fashion parades are conducted by Co-optex. Beauty

Queens and children participate in fashion parades. Such parades are

conducted twice in a year. They are conducted in Madras, during the Pongal

festival. One such contest was organised at the World University Centre in

Madras on February 28, 1988 and another show at Madras was also conducted

in 1995. Trade Fairs are conducted in Ooty during the flower show and in

Kodikanal during the summer festival. But they are conducted only in select

places. So, the customers in general are not aware of them. The survey

conducted clearly reveals the fact that fashion parades conducted by Co-optex

are not popular among the public.

4.5.11 Exhibitions

Co-optex conducts exhibitions-cum-sales in specified places during the

festival seasons and on special occasions. The attractive exhibitions are the

basis for future selling. They are conducted in places where there are active

134

public movements. Usually, they are conducted in cross roads, bus stands,

public halls, shopping complexes and the like.

The people who visit the exhibitions come to know about the new ideas

and new products of Co-optex. And also publicity is gained for Co-optex through

attractive audio-visual display boards and illuminations.

In the exhibitions fresh and novel Co-optex products are offered for sale

without discount. For example suitcases, hand bags, school bags are exhibited.

Exhibitions are inaugurated by important personalities. They are conducted

nearly for three months during the festival season.

New varieties and designs of handloom cloth are introduced in

exhibitions, like National Integration sarees, Temple Car Sarees, Chetti Nadu

Sarees, Chithirai sarees, Valli sarees, Vaigai sarees, Kanya sarees, Surya

sarees, Eswara silk sarees, Pudu Pavu, Vannam and Kovil collections,

Computer designs were introduced in exhibitions. Some times special discounts

are also given for cloth material.

The following Table 4.5 gives the expenditure incurred by Co-optex on

exhibitions for the ten years from 1989-'90 to 1997-'98.

TABLE 4.5

Exhibition Expenses of Co-optex(Rs. in Lakhs)

Year Exhibition Expenses Total Sales Percentage to Total

1988-89 14.80 10060 0.15

1989-90 15.08 18420 0.08

1990-91 10.00 13772 0.07

1991-92 10.08 17222 0.06

1992-93 8.82 19527 0.05

1993-94 8.19 23300 0.04

1994-95 11.58 22754 0.05

1995-96 20.87 25755 0.08

1996-97 11.04 26470 0.04

1997-98 12.84 32733 0.04

Source: Records of Co-optex, Chennai.

From Table 4.5 it is clear that the amount spent by Co-optex exhibitions is

less than 1.0 per cent.

Trend and Growth Rate

The compound results of trend and growth rate of Advertisement

expenses and Exhibition expenses are shown in Table 4.6.

135

B0.0938 *(2.8031)Advertisement

9.8344.4287

0.340.0034 **(0.1O28

2.4556Exhibition

TABLE 4.6

Trend and Growth Rate of Advertisement Expenses andExhibition Expenses During the Period 1989-1998

Particulars Trend Co - effick'nls Growth Rate in Percentage

36

* Significant at 5% level.

Not Significant level.

Table 4.6 shows that the Trend co-efficient of advertisement expenses is

significant at five per cent level It shows a positive compound growth rate of

9.834 per cent per unit per annum.

But the trend co-efficient of exhibition expenses is not significant at 5 per

cent level. The compound growth rate of exhibition expenses is 0.34 per cent per

unit per annum.

4.5.12 Exclusive Silk Show Rooms

Co-optex has opened exclusive silk show rooms in important cities with

wide range of silk products like silk sarees, silk dhoties, silk pavadies, silk upper

cloth, printed silk sarees and silk ready made garments. These exclusive silk

show rooms are fully modernised, air conditioned, and spacious.

137

Exclusive silk show rooms are given attractive names and they deal only

with silk varieties. Thangam Pattumaligai, Salem, Thilliyadi Valliammai, Chennai,

Malligai and Angayarkanni in Madurai, Pavalam in Erode, Amutha Surabi in

Trichi, Maharani Silks and Thamarai at Coimbatore, Tanjore silk palace at

Kumbakonam, and Pashamdhara at Bangalore are the exclusive silk show

rooms opened by Co-optex

The sales made by the exclusive silk showrooms for four years from

1994-'95 to 1997-'98 are given in Table 4.7.

TABLE 4.7Sales of Exclusive Silk Showrooms

(Rs. in Lakhs)

Sl.No. Exclusive Silk Showroom 1994-'95 1995-96 1996-97 1997-'98

1. Thangam Pattu Maligai - 897.55 991.11 1008.11 834.55

Salem

2. Thillaiyadi Valliammai - 583.87 524.06 716.22 434.56

Chennai

3. Malligai - Madurai 110.70 111.63 127.60 110.29

4. Angayarkanni - Madurai 277.47 289.74 284.55 256.10

5. Pavalam - Erode 219.81 186.94 160.43 148.69

6. Amutha Surabi - Trichy 194.64 182.86 146.91 139.28

7. Maharani Silks - 139.70 121.26 120.91 84.00

Coimbatore

8. Thamarai - Coimbatore 69.85 69.79 73.81 54.13

9. Tanjore Silk Palace - 138.27 135.58 140.04 112.78

Kumbakonam

10. Pashamadhara - 57.24 49.30 36.39 36.20

Bangalore

Source: Offical Records of Co-optex, utiennat.

138

The sale of silk through exclusive silk showrooms shows a fluctuating

trend. This shows people's preferences have not been steady through the

years.

The following Table gives the percentage of silk sales by exclusive silk

showrooms in the total silk sale of Co-optex.

TABLE 4.8

Percentage of Silk Sales by Exclusive Silk Showrooms

(Rs. in Lakhs)

YearSales Effected by Exclusive Silk iota! Silk Sales

Percentage on

Showrooms Total

1994-95 2689 5100 52.73

1995-96 2662 5200 51.19

1996-97 2815 4800 58.65

1997-98 2211 6300 35.1

Sources: Official Records of Co-optex, Chennai.

From Table 4.8, it is clear that more than 50 per cent of the silk sales are

done only through exclusive silk showrooms. In the year 1997-98, only, 35.1

per cent sale was effected through exclusive silk show rooms.

139

4.5.12.1 New Marketing Strategy Adopted by Co-optex in the Sale ofSilk Sarees

To increase the sale of silk sarees, a new strategy was introduced by

Co-optex by making available silk sarees of customers' choice virtually at their

door steps.

Co-optex adopted new sales promotion efforts by organizing 'Campus

Sales' and introducing an instalment scheme.

The campus sales is made for employees of textile mills, educational

institutions, private organisations, companies, factories and the like. The society

has inducted vans for this purpose. These mobile sales depots are stationed for

a couple of days at one place to display silk sarees, and these sarees are sold

for cash and on credit. This service fetches good dividends, especially in

Coimbatore region comprising the three districts, Coimbatore, Nilgris and Erode.

In the first half of 1998, the sale of silk sarees in the region netted Rs. 50

lakhs, but during the corresponding period in 1999 the sales registered a

quantity jump to reach Rs.90 lakhs. This figure is the combined turnover of about

25 established show rooms and mobile depots. 15

15. "Co-optex Adopts New Marketing Strategy" The Hindu, August 3, 1999.

140

For the sake of salaried employees of small and tiny units, the society has

started an instalment scheme, under this scheme, the customer can opt for

payment of monthly instalment ranging from Rs.300 to Rs.1000. (in multiple of

Rs. 100) for a period of ten months. The scheme carries an incentive, that is, if

the customer pays nine instalments regularly, the tenth would be borne by the

society.

From experience it is found that the demand for certain silk sarees was

area specific. For instance the Kanchipuram Varieties were sold briskly in

Coimbatore, whereas in Erode and Nilgris the 'Salem Silk' was in good demand.

The earlier practice was to stack all kinds of sarees in the show rooms

which led to accumulation of unsold stock of certain varieties and this in turn

added to overheads.

Therefore to liquidate the dead stock, Co-optex slightly modified the

strategy, by going in for segregation of varieties.

Co-optex is also very particular that genuineness of the mobile depots

must be protected by not allowing the seconds and sub-standard sarees to enter

unscrupulously.

The silk sales are encouraging and Co-optex has increased silk sales as

detailed in Table 4.9.

141

TABLE 4.9

Sale of Silk by Co-optex from 1988- '89 to 1998-199

(Rs. in Crores)

Year Silk Sales Total Sales Percentage to iota! Sales

1988-89 18 100.60 17.89

1989-90 24 184.19 13.03

1990-91 29 137.72 13.03

1991-92 39 172.22 22.65

1992-93 40 195.27 20.49

1993-94 42 233.00 18.03

1994-95 51 227.54 22.41

1995-96 52 257.55 20.19

1996-97 56 264.70 21.16

1997-98 48 327.33 14.56

1998-99 63 328.63 19.17

Source: Records of Co-optex, Chennai.

From Table 4.9, it is clear that silk sale has an increasing trend except in

1997-'98. The percentage of silk sales on total sales also has an increasing

trend except in a few years.

Trend and Growth Rate

The computed results of trend and growth rate of silk sales are given

below.

TABLE 4.10

Trend and Growth Rate of Silk SalesDuring the Period 1989 to 1998

142

Silk Sales

Particulars Trend Co - efficient

A I B10*

3.0076.1103

(6.5794)

Percentage to Growth Rate

11.665

* Indicates that the Co-efficients are significant at 5% level.

Figures in brackets refer to t' value.

It is observed from Table 4.10 that the Co-efficient of silk sales by

Co-optex is found to be significant at five per cent level. It is clear that the

positive trend in silk sales was found to be 0.1103 per cent per unit per annum.

The compound growth rate of silk sales was found to be 11.665 per cent per

annum.

The trend of silk sales by Co-optex in ten years from 1988-'89 to 1997-98

is presented in Figure 4.1.

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144

Co-optex has planned to open more exclusive showrooms in all important

centres where there is potential for silk. Planning is also being done to open

Boutique show rooms and a few more exclusive product show rooms like home

textiles at important places.

4.5.13 Loomscape

It is a novel experience for Co-optex to display and sell curtain clothes

and Home furnishings in an exclusive shop opened under the Caption

'Loomscape' at Chennai. Higher Income Groups welcome products and

Co-optex has decided to open exclusive showrooms 'Loomscape' in Hydrabad,

Bombay and New Delhi.

4.5.14 Grading of Show Rooms

There are 337 showrooms of Co-optex inside and outside Tamilnadu and

they are graded on the basis of turnover made by them. By grading the

showrooms, only the required goods are sent to the concerned showrooms.

Thus unnecessary accumulation of stock in the showrooms is avoided.

The grading of showrooms of Co-optex as on March 31, 1998 is shown in

Table 4.11.

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146

From Table 4.11, it is clear that 152 of the total show rooms have sales

between 10 and 25 lakhs. Next to it 75 show rooms of Co-optex have sales

between 25 and 50 lakhs. 38 showrooms have sales of 5 to 10 lakhs. 25

showrooms have sales from 50 to 70 lakhs of sales. 12 showrooms have sales

of 100 to 150 lakhs. 11 showrooms have sales of 75 to 100 lakhs. 11 showrooms

situated in Chennai (3) , Madural (2), Coimbatore (1), Salem (2), Vellore (1),

Bangalore (1) and Mumbai (1) have the maximum sales of more than 150 lakhs.

Only 4 showrooms situated in Ernakulam Region have sales upto 5 Lakhs.

4.5.15 Modemisation of Show Rooms

One of the major promotional functions that contributed to increased

sales in Co-opteX is modernisation of its show rooms on par with private textile

shops to attract more customers. By modernising the show rooms, customers are

attracted and invited to come inside the shop so that sales can be increased.

The finance for the modernisation is obtained from National Co-operative

Development Corporation (NCDC) and NABARD.

NCDC sanctions 75 per cent of the total cost of the estimate as loan and

25 per cent of the total cost as share capital or subsidy through State

Government. The funds are released to the State Government on reimbursement

basis.

147

An exclusive saree shop has been opened in Cuddalore. Co-optex has

modernised showrooms and 5 new showrooms have been opened at Thiruthani,

Erode, Gwalior, Vashi (Bombay) and Sabarmathi (Ahemedabad). The turnover

of Rs.264.7 Crores in 1996-'97 has been increased to Rs.327.33 Crores in

1997-'98 because of modernisation of showrooms. During 1997-'98, the

Government has sanctioned Rs.50 lakhs for modernisation of showrooms for

nine Primary Weavers Co-operative Societies and the showrooms of 41

Weavers' Co-operative Societies situated at the newly opened Co-optex

Handloom Marketing Complex in Chennai.16

Celebration of Co-operative Week

Co-operative Week is annually celebrated in every region. Cultural

programmes and seminars are the features of the Co-operative Week.

Generally Co-operative Week is celebrated for one week from November 14th

every year. Hand Loom Week is also conducted by Co-optex. Even though they

are arranged in all places, they are well arranged only in urban areas. During

Co-operative Week the handloom fabrics are advertised.

4.5.17 Design and Development Division

In the case of Handloom Fabrics it is necessary to introduce new designs

to attract customers. When there is a change in fashion obviously the customers

16. "Welfare and Development Schemes for Handloom Weavers", Tamil Nadu

Journal of Co-operation, Vol.90, August '98, No.5, 26.

148

may prefer new designs. Co-optex has fully realised the importance of

introducing new designs whenever need arises. For this purpose in Co-optex

there is a separate division called Design and Development Division.

The Design and Development Wing of Co-optex is headed by a special

officer who is assisted by a Chief General Manger, a Product Development

Manger, and a Manager (Design & Production). In addition the wing has a

designer and the product development supervisors are assisted by weavers and

pattern makers.

Co-optex is having five design and service centres at Madurai, Salem,

Tiruchi, Coimbatore and Kadayanallur.

In order to provide effective training to the designers, the Government of

Tamilnadu has established the Government College of Arts and Crafts at

Madras and Kumbakonam. They impart training in the National Institute of

Design at Ahmedabad, the All India Institute of Handloom Technology at Salem,

and the Weaver's Service Centre at Madras and Kancheepuram.

In order to cater to the needs of the consumers, Co-optex is collecting

new designs from many sources. Co-optex has a consumer council to find out

the views of the consumers regarding the designs of various fabrics. The

members of the body are drawn from different age and income groups like

professionals, housewives and the like. This independent body consists of

149

actual buyers who are aware of the ever-changing trends in taste and fashion.

They critically examine the products, suggest improvements, if necessary, and

these suggestions are implemented by Co-optex.

Design competition is conducted by Co-optex to create a healthy

competition among the weavers.

Designers create new designs out of their own experience and

professional excellence.

Most of the designs of co-optex are based on the antique sarees collected

from temples. The new designs which are created by Co-optex on the basis of

the temple carvings are known as 'Kovil Collections".

Co-optex obtains samples of special varieties that are in great demand in

other States. On the basis of the samples obtained, Co-optex creates new

designs to suit its customers.

The National Institute of Design is mainly concerned with the

development of designs for interior fabrics such as bed covers, draperies,

carpets, floor cushions and quilt fabrics.

4.5.18 Personal Selling

'Personal selling' is a process of informing customers and persuading

them to purchase products through personal communication in an exchange

situation. 17

17.C.B.,Memoria, and R.L. Joshi, Principles and Practice of Marketing in

India, Kitab Mahal, Allahabad, 1988, p.449.

150

It provides the marketers with their greatest opportunity to adjust a message to

satisfy consumer's information needs. Besides it is more precise as compared

with other promotional methods.

Personal selling is another marketing strategy adopted by Co-optex like

other selling strategies.

Through Personal selling, the prospects are found; they are convinced

and the customers are kept satisfied. For the success of 'Personal Selling'

proper training is to be given to salesmen.

Co-optex gives periodical training to its salesmen. Personal selling is a

technique dealing with the buyers in order to complete the deal. Personal selling

creates Product Awareness by providing certain appealing elements to arouse

the interest of the prospective buyer. The technique of personal selling can

further be extended for the development of product preferences, bargaining and

negotiation of prices, before successfully concluding a sale deal.

4.5.19 Commission and Incentives

Co-optex apart from giving monthly salary, gives commission and other

incentives to the sales personnel who attain the target fixed.

Recently Co-optex introduced a New Sales Incentive Scheme for all the

staff working in marketing, administration and the technical side in order to

151

increase the overall sales performance. To evaluate the sales performance and

productivity of showroom staff and others, a system has been developed by

Co-optex wherein marks are being awarded for each criterion.

In the retail showrooms for marketing staff, marks are awarded for Sales

','Disposal of old goods', 'Inventory turnover' and 'Profitability'.

Table 4.12 shows the 'criteria' and marks allotted for the marketing staff.

TABLE 4.12

Marks Allotted for Marketing Staff

Sl.No. Criterion Marks Allotted

I. Sales 60

2. Disposal of Stocks 20

3. Inventory turnover 15

4. Profitability 5

Total 100

Source: Records of Co-optex, Chennai.

The following is the basis on which marks are allotted for sales.

152

TABLE 4.13

Incentive Marks for Sales

Criteria Marks Allotted

Upto the previous year sales 20

100.01% to 115% of previous year 30

sales

115.01% to 130% of the previous year 50

sales

Above 130% of the previous year sales 60

Source: Records of Co-optex, Chennal.

For sales incentive purose, only the realisable value of cash and credit

sales are taken into account.

Suppose during the current year the sales is maintained at the previous

year's figure, 20 marks are allotted. If there is an increase in sales, over the

previous years figure,marks are allotted on the basis of the percentage increase

in the sales.

In the case of disposal of old stock also, marks are allotted as follows:

'53

TABLE 4.14

Incentive Marks for Disposal of Old Stock

Criteria Marks Allotted

Below 25% 0

25%-30% 5

30%-35% 10

35%-40% 15

Above 40% 20

Source: Records of Co-optex, Chenna.

If inventory turnover is less than one, no mark is given. If it is between

one and 1.50, five marks are given. If the turnover is 1.51 to 2.00, 10 marks are

given and if it is above 2, 15 marks are given.

For profit only, if the expense ratio is above 35 per cent, no marks are

allotted. If the ratio is 25 per cent, 35 per cent marks are allotted and if the ratio

is less than 25 per cent, 5 marks are given.

On the basis of the marks allotted, a formula is adopted by Co-optex as

follows:

75 and above marks A formula

40 - 74 marks B formula

Below 40 marks C formula

On the basis of the formula adopted the incentive is given as follows:

TABLE 4.15

Incentive Formula

Sl.No. Retail Cash and Retail Credit Sales (Net) A B C

1. Upto last years sales 0.75% 0.65% 0.55%

2. For increase in sales over last yearsales

i) Upto 15% 2.25% 2.00% 1.75%

ii) 15.01%-30% 3.25% 3.00% 2.75%

iii) Above 30% 4.25% 4.00% 3.75%

Source: Records of Co-optex, Chennal.

Similarly, the incentives are calculated for the staff in administration,

technical and marketing sides also.

Credit sales forms a major part of the toal sales of Co-optex. Credit can

be given but the amount due from credit sales always bear a risk. To encourage

the collection of amount from credit sales, commission is given.

'54

155

TABLE 4.16

Commission for Credit Collection

SI. No. CriterionCommission Percentage on Entire

Collection

1. Collection Upto 60% of the amount 0.10

due

2. Collection above 80% - Upto 95% 0.20

3. Collection above 95% 0.60

Source: Records ot co-optex, unennal.

The commission and other incentives given to all staff of co-optex in the

last ten years from 1988-'89 tol 997-'98 are shown in Table 4.17.

TABLE 4.17Commission and other Incentives

(Rs. in Lakhs

Year Thial Sales 1

Commission and Percentage on Salesother Incentives

1988-89 10060 71.91

0.72

1989-90 18420 18468

1.00

1990-91 13772 177.68

1.29

1991-92 17222 243.53

1.41

1992-93 19527 193.88

0.99

1993-94 23300 149.30

0.64

1994-95 22754 205.15

0.9

1995-96 25755 135.78

0.53

1996-97 26470 276.59

1.05

1997-98 32733 163.30

0.5

Source: Records of Co-optex, Chennai.

156

From Table 4.17, it is understood that Co-optex spends nearly one per

cent of sales for the purpose of commission and other incentives.

4.5.20 Sales Promotion Methods

Sales Promotion has been defined as 'those marketing activities other

than personal selling, advertising and publicity, that stimulate consumer

purchasing and dealer effectiveness, such as displays, shows and expositions,

demonstrations, and various non-recurrent selling efforts, not in the ordinary

routine".18

Sales promotion is an important instrument for selling the goods

produced. It is essentially an art of creation, application and dissemination of

information about the goods which stimulate the buying decisions on the pa rt of

the consumer. Sales promotion activities are very important for the handloom

sector because of its poor marketing infrastructure, low marketing budgets, high

cost of production, limited geographical sales area and the like.

It serves as a bridge between advertising and personal selling and it

supplements and co-ordinates efforts in these two areas.

Sales promotion in Co-optex includes the small expenses met

by the Regional Offices, for the purposes of putting, arch, serial bulbs, auto

18. A Glossary of Markeitng Terms, American Marketing Association, 1960,

p.20.

157

advertisements, hand bills and the like. The amount is allotted to the Regions by

the Head Office and the Regional Offices decide on the methods of sales

promotion. The accounts are sent to the Head Office.

Table 4.18 gives the sales promotion expenditure incurred by Co-optex

from 1988-89 to 1997-98.

TABLE 4.18

Sales Promotion Expenditure(Rs. in Lakhs)

Sales PromotionYear Sales Percentage on SalesExpenditure

1988-89 10060 22.98 0.23

1989-90 18420 16.93 0.09

1990-91 13772 32.84 0.24

1991-92 17222 43.65 0.25

1992-93 19527 36.33 0.19

1993-94 23300 23.47 0.1

1994-95 22754 27.26 0.12

1995-96 25755 67.22 0.27

1996-97 26470 56.61 0.22

1997-98 32733 48.00 0.15

Source: Records of Co-optex, Chennal.

58

From Table 4.18, it is clear that co-optex is spending less than one per

cent of the total sales for the purpose of sales promotion activities.

4.5.21 Discount and Commission

Discount and Commission are given by Co-optex, for disposing of the old

stock. Usually, NABARD extends credit to Co-optex against its stock according

to its age. Eighty per cent of the value of stock is given as credit against the

fresh stock, 50 per cent against the value of the stock kept for more than a year

but less than two years. If the stock is kept for above two years, only 20 per

cent of the value of the stock is given as credit. If the stock is kept for above

three years, no credit is given by NABARD. So, to dispose of such stock,

Co-optex fixes the discount. Normally the discount announced by Co-optex is 20

to 60 per cent depending on the age of such stocks. Very old stocks which are

not sold through discounts are sold through auction sales starting from a base

price of 30 per cent. Suppose, even if it is not sold through auction then

Co-optex calls for tender and the stocks are cleared in kilos. The discount and

commission given by Co-optex in the ten years from 1988-'89 to 1997-'98 are

given in Table 4.19.

TABLE 4.19

Discount and Commission(Rs. in Lakhs)

Year Discount and Commission Total Sales Percentage on Sales

1988-89 740.02 10,060 7.36

1989-90 1,691.54 18,420 9.18

1990-91 1,127.89 13,772 8.19

1991-92 1,218.55 17,222 7.08

1992-93 1,583.91 19,527 8.11

1993-94 1,901.80 23,300 8.16

1994-95 2,418.14 22,754 10.63

1995-96 2,038.97 25,755 7.92

1996-97 1,907.87 26,470 7.21

1997-98 2,877.42 32,733 8.79

Source: Official Records 0t uo-optex, unennai.

From the Table 4.19 it is clear that Co-optex spends nearly nine per cent

of its sales money for the purpose of giving discount and commission. Normally

the discount given by Co-optex attracts the people very much.

4.5.22 Samples

Samples of products are offered for trial. Some samples are given free

and for others a small amount is charged. Sampling is the most effective method

of sales promotion but at the same time it is expensive.

159

160

Samples are received by Co-optex from private shops, master weavers

and the like for the purpose of production 'Mundu set' types of dress is famous

in Kerala 'Marble Print' in Pondicherry, ' Dye and Dye' in Andhra 'Kalamkari' in

Kumbakonam. Co-optex get samples of those fabrics and make their member

Primary Co-operative Weavers' Societies to produce such varieties. This

enables Co-optex to increase the varieties of stock.

The amount spent on samples by Co-optex in the ten years from

1988-'89 to 1997-'98 is given in Table 4.20.

161

TABLE 4.20

Expenditure on Samples(Rs. in Lakhs)

Year Total Sales Expenditure on Samples Percentage onSales

1988-89 10060 1.58 0.020

1989-90 18420 1.29 0.010

1990-91 13772 0.59 0.004

1991-92 17222 1.81 0.010

1992-93 19527 1.22 0.006

1993-94 23300 2.64 0.010

1994-95 22754 2.55 0.010

1995-96 25755 0.62 0.002

1996-97 26470 1.62 0.006

1997-98 32733 0.80 0.020

Source: Records of Co-optex, Chennai.

Table 4.20, clearly shows that Co-optex spends a very negligible

percentage on samples.

4.5.23 Rebate Scheme

The Government of India decided in February 1953 to levy additional

excise duty on cloth, except export quantity produced by the textile mill industry.

The proceeds of the duty were to be utilised for meeting the cost of schemes

introduced for the development of the handloom industry. A separate fund known

162

as 'Cess Fund' was created for this purpose. But it was insufficient to meet the

expenditure on handloom development schemes. Due to some difficulties in the

operation of this fund, in 1960, the Government of India abolished this cess fund.

The additional excise duty on mill cloth was credited to General Revenue Fund.

The crisis in 1952 in the handloorn industry led the Government of India to think

about long term relief to this industry. So, All India Handloom Board was set up.

The Textile Enquiry Committee was appointed for this purpose. The All India

Handloom Board appointed a sub-committee for the revival of the handloom

industry on a continuing basis.

In 1953 the sub-committee submitted a report suggesting among other

schemes, the introduction of the Rebate Scheme.

The committee found that there was a difference in the cost of yarn used

by handlooms for making cloth, and the mill-made cloth for coarse variety to the

extent of nearly 20 paise. The committee concluded that the levy of excise duty

on mill-made cloth at the rate of 11 paise per yard did not provide full relief to the

handloom cloth because as there was still a difference of 9 paise. Under these

conditions the committee suggested the introduction of the rebate scheme to

meet the difference of 9 paise per yard of cloth. This scheme was introduced not

only to fill the gap between mill cloth and handloom cloth, but also to work as a

consumer incentive to improve the marketing of handloom cloth.

163

The Government of India approved the scheme of rebate on handloom

cloth towards the end of 1953 As per the recommendations of the

sub-committee appointed by the All India Handloom Board, the Government of

India introduced the rebate on handloom sales in 195419 and State

Governments were instructed to implement this scheme for clearing the

accumulated stocks of handloom cloth. The working of the rebate scheme was

however subject to certain modifications. In 1959 steps were taken to minimise

the expenditure on the rebate scheme.

The Government of India further modified the scheme in 1960. A special

rebate of 10 per cent was allowed on handloom cloth, for the purpose of clearing

accumulated stocks.

The rebate allowed, improved the sales of handloom cloth and it provided

continuous employment opportunities. The available resources were utilised

which resulted in a better turnover.

Till 1974-75 the rebate during the normal period was three per cent on

wholesale and five per cent on retail sales. During festival occassions like

Deepavali, Pongal, Ramzan and some noted festivals,10 per cent rebate was

allowed by the Tamilnadu Government.

19. Welfare and Development Schemes for Handloom Weaveers, opcit., p.27.

164

According to the suggestions of the Government of India, from 1975-76

onwards, State Government permitted 20 per cent rebate on sales of handloom

cloth and the Government of India agreed to meet 50 per cent of the

commitment.

Subsequently from 1976-77 a differential rebate was allowed at

differential rates on different varieties. The differential rebate followed is shown

in Table 4.21.

TABLE 4.21

Differential Rebate

Varieties Wholesale Rebate Retail Rebate

Dhoties, Towels and - 5%

Angawasthrams

Bed Spreads 5% 10%

Shirtings and Coatings 5% 10%

Silk 5% 10%

Source: Records of Go-optex, unennai.

The subsidy on sales in the form of rebate has been the most important

factor contributing to the increased sales of handloom cloth, by removing the

handicaps of the industry against mill competition.

The rebate given at varying rates and diverse terms and conditions is the

main attraction for customers to purchase handloom cloth. The rebate facility

i65

enables the handloom weavers in the Co-operative to increase their earnings by

continuos employment throughout the year. An aslowance of 20 per cent as

rebate with certain ceilings according to the variety of cloth produced, has

helped the weavers within the Co-operative sector greatly to compete with the

powerlooms sector and the mill sector.

Usually the rebates are allowed only during certain festival periods and

noted days, like Deepavali, Pongal, Handloom Festival, Tamil New Year,

Ramzan, Adi month, Onam, Ganesh Pooja, Anna, Periyar and Chief Minister

Birthdays, Holi, Ugadi, clearance sale, summer sale, Raksha Bandhan and the

Marriage season. In total 100 days enjoy rebate. The State Government have

revised their rebate policy with effect from September 8,1997. As per the new

rebate policy, rebate at the rate of 20 per cent is being allowed on the sale of

handloom goods of Primary Weavers' Co-operative societies throughout the

year and they are eligible for reimbursement of the rebate from Government for

the whole year, without any ceiling. The sale of handloom goods made to

Co-optex by Primaries is also eligible for claiming rebate. However, the

quantum of rebate is allowed by the Primaries, in respect of procurement made

by Co-optex. The State Governent have sanctioned Rs.14190.49 lakhs and

7310.30 lakhs to Primary Weavers' Co-operative societies and Co-optex

respectively towards rebate for the past five years.

166

The rebate claims made by Co-optex to the Director of handlooms, and

the balance amount due to Co-optex are given in Table 4.22.

TABLE 4.22

Rebate Claimed by Co-optex and the Amount Outstanding withthe Government of Tamil Nadu

(Rs. in Lakhs)

Year Actual Claims Ceiling Limit Balance Due

1991-92 1456.74 1456.74 -

1992-93 1472.83 1456.74 16.09

1993-94 1486.99 1456.74 30.25

1994-95 1663.07 1456.74 350.98

1995-96 1667.06 1456.74 510.43

1996-97 1694.46 1456.74 23762

1997-981618.06 1456.74 161.32

Source: Records of Go-optex. unennal.

From the Table 4.22, it is clear that except 1991-'92, in the remaining

years the actual claim for rebate was in excess of the ceiling fixed for rebate.

The financial commitment related to rebate has been increasing year by

year. The payment of rebate claims takes nearly two years. Thus rebate claim

due is a serious problem to the societies. More than 50 per cent of the working

capital is locked up in the form of rebate claims in the hands of Government.

167

If rebate claims are settled in time, the functioning of the societies can be

improved. It is one of the acute problems faced by the Weavers' Co-operative

Societies.

If rebate is given to all items whether they are fast moving or not, it will

stimulate the traders to take active marketing measures. It will boost the sale of

handloom products and reduce the unsold stock. Clearance of unsold stock will

enable the handloom weavers to continue their production without interruption.

Normally sales will increase if rebate is given.

4.5.23.1 Deepavali Sales

DeepavaU is an important festival when Co-optex has a good market for

its products. Rebate and discounts are given at the maximum rate of 20 to 40

per cent during this period.

Details of Deepavali Sales effected by Co-optex from 1989 to 1998 are

given in Table 4.23.

TABLE 4.23

Deepavali Sales on Total Sales

168

(Rs. in Crores)

Year I Total Sales I Deepavali Sales

1988-89 100.60 42.84

1989-90 184.20 54.86

1990-91 137.72 60.24

1991-92 172.22 57.99

1992-93 195.27 57.78

1993-94 233.00 62.03

1994-95 227.54 60.85

1995-96 257.55 62.50

1996-97 264.70 68.55

1997-98 327.33 54.95

Source: Records of Co-optex, Chennai.

Deepavali Sales as Percentageon Total Sales

42.58

29.78

43.74

33.67

29.59

26.62

26.74

24.27

25.90

16.79

Table 4.23 shows that a considerable quantity is sold during the period of

Deepavali. In 1990-91 the Deepavali sales percentage was the maximum

(43.73%). But in 1997-'98 Deepvali Sales has come down to 16.79 per cent. As

rebate is allowed for purchase at any time of the year, many purchase goods

from Co-optex, much ahead of the Deepavali season.

169

4.5.23.2 Pongal Sales

Pongal is another important festival celebrated by the people in

Tamilnadu and in other places, it is celebrated as 'Makara Sankaranthi'.

Details of sales effected by Co-optex during Pongal from 1989 to 1998

are given in Table 4.24.

TABLE 4.24

Pongal Sales on Total Sales

(In crores)

Year To/al Sales Pongal Sales PUI1X Sales as Percentage oniota! Sales

1988-89 100.60 21.77 21.64

1989-90 184.20 14.61 7.93

1990-91 137.72 22.73 16.50

1991-92 172.22 19.88 11.54

1992-93 195.27 22.67 11.61

1993-94 233.00 20.36 8.74

1994-95 227.54 19.94 876

1995-96 257.55 23.26 9.03

1996-97 264.70 18.79 7.56

1997-98 327.33 11.79 3.60

Source: Records of Co-optex, Chennai.

170

Table 4.24 shows that up to 1994 Pongal sales constituted an important

portion of the total sales. But after that year the percentage of Pongal sales had

been below 10 per cent.

4.5.23.3 Handloom Festival Sales

Apart from the regular festival periods, Co-optex celebrates its own

festival called the Handloom Festival every year. This is also another strategy

adopted by Co-optex to increase its sales.

Table 4.25 gives details of the salos of Co-optex during the Handloom

Festival from 1989 tol 998.

171

TABLE 4.25

Handloom Festival Sales on Total Sales

(Rs. in Crores)

Year Total Sales Handloom Handloom Festival Sales as1-estival Sales Percentage on Total Sales

1988-89 100.60 5.70 5.67

1989-90 184.20 8.86 4.81

1990-91 137.72 6.80 4.94

1991-92 172.22 5.46 3.17

1992-93 195.27 7.18 3.68

1993-94 233.00 6.60 2.83

1994-95 227.54 10.36 4.55

1995-96 257.55 11.84 4.60

1996-97 264.70 5.83 2.20

1997-98 327.33 7.57 2.31

Source:- Records of Co-optex, Chennai.

Table 4.25 shows the percentage of Handloom Sales effected by

Co-optex. It is seen that nearly 3 to 5 per cent of total sale is done during the

Handloom Festival.

An ANOVA model was useçi to find out the significance of the sales for

three seasons. The three seasons chosen are Deepavali, Pongal and Handloom

Festival.

172

The hypotheses are:

1. The sales between season do not differ significantly.

2. The sales between years do not differ significantly.

TABLE 4.26

Deepavah, Pongal and Handloom Festivals

Sources of Variance Sum of Squares d.f Mean Squares F Value

Between Seasons 7369.73 2 3684.865 44.920

Between Years 445.73 4 111.4325 1.358

Residual 656.27 8 82.03375 -

Total 8471.73 14

The table value for F for seasons 4.46 @ 5 percent level of significance.

Table value for F for years 3.84 @ 5 percent level of significance.

The results of ANOVA indicate that there is significant difference in sales

for seasons since, the calculated F Value (44.92) is greater than the table value

of F (4.46).

So, the hypothesis is rejected.

But the ANOVA test between years indicates that there is no significant

difference in sales since, the calculated F Value (1.358) is less than the table

value (3.84). The hypothesis is accepted.

173

The Government rebate scheme has been in operation for over four

decades. Consumers and merchants wait for the rebate period for making their

purchases. This shows that rebate has become a trade practice and an ethical

business strategy.

Originally the rebate scheme was introduced by the Government of India

and followed by the State Governments to help the weavers to market their

products and clear the stocks.

But the weavers do not really get much benefit from the rebate scheme.

On the other hand the private sector traders benefit more. They purchase from

the societies during the rebate period and sell them at high profit to the public by

giving them a 'discount'. They adopt different market strategies to increase their

profit. They increase the cost price and then give the purchaser a discount' to

please him. But co-operative institutions, cannot indulge in such practices.

R.Venkatraman formerly President of India suggested that instead of

allowing rebate on every sale of handloom cloth either wholesale or retail by the

Co-operatives, the Primary Societies should be allowed to market their product

without any rebate, at prices to be fixed by them, to any agency they choose. So

long as the Primaries are able to dispose of their stocks without much difficulty,

no assistance is called for. But in the event of the Primaries having accumulated

stocks exceeding three months from production, State Handloom Weavers'

174

Co-optex Societies should step i n , purchase the entire stock of unsold cloth at

certain floor prices to be fixed for each variety with reference to the cost of

production, subject to such quality control as may be prescribed.

The State Society could sell such cloth through their sales depots

throughout the state with rebate at rates to be fixed by the Government. This

shall be the only rebate that would be allowed on any sale of handloom cloth.

But the Primary Societies were not willing to market their cloth without any

rebate, and as such the suggestion could not be implemented.

4.5.23.4 Market Development Assistance Scheme

From April 1, 1989 onwards the Government of India introduced the

market development assistance scheme as a substitute for the existing rebate

scheme. After a series of systematic discussions and evaluation of the various

alternatives contemplated under this scheme, the Government of India decided

to implement the scheme.

Under this scheme, the primary Handloom Weavers Co-operative

Societies, Apex Handloom Co-operative Societies and State Handloom

Corporations get financial assistance. As stipuled in the Government of India's

guidelines under the Market Development Assistance scheme, not more than 75

per cent of the market development assistance can be utilised for allowing

rebate. The remaining 25 per cent of Market Development Assistance is to be

175

utilised on various development activities, meant for improving the marketability

of handloom goods. The total Market Development Assistance earmarked for

the financial year 1 997-'98 was Rs.5046.00 lakhs.20

Allowing discount has now become universal in all business institutions

and as such the abolition of rebate by Co-optex at this stage is not possible, as it

will adversely affect its business.

However it was felt by the government of India that the increasing

commitment under rebate could not be a permanent affair. Although rebate is a

timely help to the handloom sector, the rebate scheme will not lead to real

growth of the handloom industry. As an alternative, Co-operative Societies can

be helped to function as a viable unit so as not depend much on the rebate

system.

The Government of India has made it clear that the handloom industry

should be so organised that it can command market on its own strength. The

real solution is to improve the standard of production and design.

Trend and Growth Rate

The trend and growth rate of Rebate Sales and Sales without rebate, is

computed and the results are presented in Table 4.27.

20. Welfare and Development Schemes for Handloom Weavers, Op.cit., p.22.

176

TABLE 4.27

Trend and Growth Rate of Rebate Sales and Sales withoutRebate from 1988—'89 to 1997—'98

Particulars Trend Co-efficients Growth Rate

a b

Rebate Sales 8.7863 0.0516* 5.298(6.8263)

Sales without Rebate 8.051 0.0304 3.083(0.9832)

Figures in brackets are 't' values.

* Indicates that the Co-efficients are significant at 5 % level

Indicates that the Co-efficients are not significant at 5 % level

The results from the Table 4.27 show that the Trend Co-efficient for sales

with rebate is significant and that for sales without rebate is not statistically

significant.

The compound growth rate of rebate sales and sales with out rebate were

5.298 percent and 3.083 per cent per annum respectively. It shows that rebate

has helped in increasing the sales.

Rebate was introduced with the view to off-setting the price variance in

costs of inputs being made available by the mills. It is an incentive to the

consumer. Now, the private sectors also have introduced rebate or discount. So

the rebate scheme does not seen to fascinate the customers so much. It just

177

helps in bringing down the selling price of Co-operative products to be on a par

with the handloom goods being sold by the private trader.

4.5.24 Credit Sales

Trade credit is the most prominent phase of the important sales

promotional devices. It is an essential marketing tool acting as a bridge for the

movement of goods, through production and distribution stages, to customers

finally. A firm usually grants credit to protect its sales from the competitors and to

attract the potential customers to buy its products at favourable terms. Trade

credit creates receivables or book debts which the firm is expected to collect in

future. Co-optex gives credit facilities to the customers for the growth and

development of the handloom industry.

The book debt arising out of trade credit has two characteristics.

First it involves an element of risk which should be carefully analysed.

Cash sales are risk-less but not so the credit sales.

Secondly it is based on economic value. To the buyer the economic value

in goods or services is realised immediately at the time of sale, while the seller

expects, an equivalent value to be received later on.

Credit Sales Schemes in Co-optex

There are two types of credit sales in Co-optex. One is called as Retail

credit and the other is called as Institutional credit.

78

4.5.24.1 Retail Credit Scheme

The credit given to Government employees, teachers, employees of

Government departments, Banks, Private mills, Co-operative Stores, Spinning

mills and the like is called retail credit.

4.5.24.2 Sales to Government Employees

The Government of Tamil Nadu has approved a scheme for the sale of

Handloom cloth on credit basis to Government servants . * According to this

scheme, handloom cloth is supplied once a year on credit basis upto the limit of

one month basic pay of the individual concerned. With effect from 1997 the

limit has been increased upto one month of gross salary. As per the modified

scheme enumerated on September 1, 1976, the Government sanctions demand

draft or cheque to Co-optex. After the purchase is made, the unutilised amount

if any is refunded to the authorities concerned.

The Government employees are given Blue Colour Printed form of

application with printings in black ink. They are given 10 months instalments for

the repayment of their credit.

*GOMs . No. 1700 (Industries Labour and Housing) dated April 29, 1968.

179

4.5.24.3 Debt Collection Period

For Government employees the amount is paid in advance by the

Government to Co-optex. The amount paid by the Government is recovered from

the employees in 10 instalments.

Though the Government sanctions advance cheque or demand draft for

the purchase made by Government servants, practically it takes forty-five days in

the case of Chennai city and thirty days in the case of other moffusil area to

encash the cheque or demand draft. It is so because of the delay in the

preparation of schedule of demand list and presenting the cheque or draft for

collection in treasury or sub treasury. Co-optex should expedite the preparation

of schedule of demand draft and submission of cheque or draft for collection.

Delay in encashment leads to loss by way of interest and to delay in making

payment to the primaries for the handloom goods purchased. Co-optex should

see that all Government cheques and demand drafts are encashed within one

week.

Table 4.28 gives the percentage of credit sales by Co-optex to

Government employees from 1994-'95 to 1997-'98.

80

TABLE 4.28

Percentage of Credit Sales to Government Employees byCo-optex from 1994-95 to 1997-98

S1. No. Institutions 1994-95 1995-96 I 1996-97 1997-961. Education Department 28.36 28.82 29.07 29.27

2. Health and Medal 12.12 12.15 12.53 12.93

3. Agricultural Department 5.58 5.79 6.05 6.20

4. Revenue Department 8.45 8.33 29.07 8.79

5. Police Department 5.08 4.89 5.50 5.29

6. PWD 6.02 6.09 5.69 5.45

7. Township 1.02 1.13 1.24 1.22

8. Law Department 2.68 2.58 2.24 2.93

9. Animal Husbandry 1.81 1.86 1.84 1.56

10. Adidravidar Welfare 1.47 1.46 1.59 1.61

11. Rural Welfare Department 2.12 2.00 2.45 2.09

12. Land Development 1.06 1.09 1.06 1.10

13. Forest Department 0.4 1.04 1.12 1.07

14. Sales Tax Department 0.75 1.02 0.77 0.79

15. Food Corporation 1.18 1.34 1.37 1.09

16. Fire Service 1.04 0.9 1.01 0.96

17. Co-operative Department 0.83 0.6 0.69 0.79

18. Municipal Corporations 4.86 4.48 4.58 4.46

19. Electricity Board 0.26 0.22 0.08 0.27

20. Social Welfare Department 0.77 0.77 0.75 0.45

21. Fisheries Department 0.44 0.76 0.31 0.51

22. Factories 0.67 0.39 0.70 0.36

23. Transport Department 0.16 0.3 0.20 0.47

24. Sugar Factories - - - 0.05

25. Govt. Automobiles Department 0.36 0.39 0.30 0.28

26. Registration Department 0.44 0.29 0.34 0.38

27. Rehabilitation Department 0.31 0.24 0.31 0.22

28. Backward Class Welfare 0.3 0.3 0.23 0.30

Department29. Most Backward Class Welfare 0.5 0.05 0.09 0.11

Department30. Others 10.96 10.72 9.62 -9.00

100 100 100 1 100

Source: Records ot (;o-optex, unennai.

181

Table 4.28 shows the percentage of credit sales to Government

employees in Government departments. It is clear that the credit sales to the

Education department is the highest in all the four years from 1994-'95 to

1997-'98 (29%). Next to the Education Department, Health and Medical

department employees enjoy the highest percentage of credit sales in all the four

years.

Retail Sales to Non-Government Employees

The second type of retail credit is known as the 'Instalment Safes". This

is given to those who are not Government employees.

For non-government employees, the conditions are that the pay

disbursing officer or the employer should promise to collect the money due from

his employees from their salary every month and remit it to Co-optex. If this

assurance is given then, they are given credit and instalments facilities for six

months.

Non-government employees are given yellow colour printed form of

application with printing in black ink. They have to get a guarantor also. In case

they fail to make the payment then it will be collected from the person who has

given the guarantee.

The Table 4.29 gives the percentage of instalment credit sales by

non-government employees, for the four years from 1994-'95 to 1997-'98.

1.0912.1319.90

1.132.700.414.330.190.49

21.30

100.00

1.0717.7319.31

1.393.270.523.960.210.46

20.24

100.00

1.15

11.9221.43

1.362.900.414.790.260.50

18.17

100.00

182TABLE 4.29

Percentage of Credit Sales by Co-optex to the Non-GovernmentEmployees from 1994-95 to 1997-98

S1. No. I Institutions 1994-95 1995-96 1996-97 1997-98

11.

12.13.14.15.16.

17.

18.19.20.

Municipal Corporation

Transport CorporationPanchayat Union

Electricity Board

Port TrustBanks

TWARD BoardCo-operative Spinning MillsMunicipalityCo-operative WeaversSocietiesTown PanchayatsOthersSchoolsPrivate MillsCo-operative StoresTea EstatesFactoriesSocial WelfareSugar FactoriesOthers

1.

2.3.

4.

5.

6.7.8.9.10

2.45 1.58 1.64 2.12

10.95 11.01 9.73 12.03

0.99 1.49 1.27 1.22

5.75 5.49 5.73 5.80

0.96 0.71 0.80 1.20

9.83 9.63 6.22 8.26

0.25 0.22 0.22 0.43

1.37 1.48 1.40 1.45

2.46 2.41 2.49 2.41

1.33 2.33 2.36 2.17

1.1512.3220.89

1.132.540.371.570.130.50

23.05

I Total 1100.00Source: Records of Co-optex, Chennai.

183

Table 4.29 gives the percentage of credit sales on instalments basis done

by Co-optex for four years from 1994-'95 to 1997-'98.

Credit sales are used by schools (21 %) Transport Corporations come

next in Credit sales on instalment basis (12%).

4.5.24.4 Institutional Credit

The second type of credit given by Co-optex is called Institutional Credit.

This type of credit is given to institutions and Government departments. Supply

of cloth to Municipality, Hospitals, Police Departments, Free Distribution System,

Education Departments and the like is done only by Co-optex. A contract is

made with Co-optex by the Government department concerned. This is also

called as "Contract Sales". This sale is made only through Institutional Sales

Showrooms and not through ordinary sales showrooms. The Institutional Sales

Showrooms are specially situated for this purpose in each region. But they are

situated only inside Tamil Nadu. There are nine ISSR in Tamil Nadu.

Government places bulk orders with Co-optex for cloth and usually the

Government before placing the next order pays the amount due. But often the

payment is delayed.

Table 4.30 gives the percentage of contract sales by Co-optex to various

departments during 1994-'95 to 1997-'98.

184

TABLE 4.30

Percentage of Institutional Credit Sales by Co-optex to variousDepartments from 1994-95 to 1997-98

S1. No. Institutions 1994-95 1995-96 1996-97 1997-98

1. School and Colleges 0.07 0.04 0.05 0.03

2. Health and Medical 1.42 0.87 0.80 0.753. Agriculture Department 0.10 0.07 0.09 0.05

4. Revenue Department 0.19 0.27 043 0.79

5. Police Department 0.01 0.06 1.00 0.003

6. Public Welfare Department 0.20 0.17 0.12 0.11

7. Municipalities 0.93 0.72 0.80 0.71

8. Law Department 0.02 0.01 0.02 0.56

9. Animal Husbandry 0.06 0.06 0.05 0.09

10. Adidravidar Welfare 2.23 2.12 3.39 1.80

11. Rural Welfare Department 0.14 0.12 0.14 0.0612. Land Development 0.01 0.01 0.02 0.01

13. Forest Department 0.03 0.01 0.01 0.02

14. Sales Tax Department 0.02 0.02 0.01 0.02

15. Food Corporation 0.06 0.02 0.16 0.0316. Fire Service 0.01 0.01 0.01 0.01

17. Co-operative Department 0.06 0.05 0.67 0.06

18. Municipal Corporations 0.50 0.39 0.32 0.27

19. Electricity Board 0.87 0.42 0.46 2.09

20. Social Welfare Department 1.42 1.62 3.37 10.05

21. Fisheries Department 0.003 0.07 2.05 1.5222. Factories 0.13 0.11 0.04 0.06

23. Transport Department 2.44 2.09 2.09 1.9224. Sugar Factories 0.027 0.004 0.85 0.3625. Govt. Automobiles Department 0.05 0.02 0.03 0.003

26. Registration Department 0.01 0.01 0.01 0.0127. Rehabilitation Department 0.02 0.02 0.68 0.07

28. Backward Class Welfare Dept. 0.33 0.25 0.28 0.23

29. Most Backward Class Welfare 0.43 0.41 0.70 0.38

Department30. Free Distribution System 70.81 72.76 57.91 60.3731. Flood Relief 9.2 4.04 11.82 0.1232. Old Age Pension Scheme 6.92 12.65 10.88 14.564

33. Hospitals 0.39 0.14 0.58 0.6034. Spinning Mills 0.02 0.25 0.02 0,0135. Diary Development Dept. 0.02 0.01 0.06 0.0936. Others 0.85 1 0.07 1 0.08 2.18

_____ Total 100 100 100 -100

185

From Table 4.30 it is clear that with regard to institutional credit sales the

maximum percentage is utilised only by the Free Distribution System.

Table 4.31 gives the retail credit done by Co-optex from 1988-89 to

1997-98. The percentage of retail credit sales on total sales is also given.

TABLE 4.31

Percentage of Retail Credit(Rs. in Lakhs)

Year Total Sales Retail Credit Sales Percentage

1988-89 10060 3092 30.74

1989-90 18420 3782 20.53

1990-91 13772 4131 3000

1991-92 17222 4721 27.41

1992-93 19527 5234 26.80

1993-94 23300 5764 24.74

1994-95 22754 5550 24.39

1995-96 25755 5894 22.89

1996-97 26470 6749 25.50

1997-98 32733 5712 17.45

Source: Records of Co-optex, Chennai.

From Table 4.31, it is clear that retail credit sales constitutes nearly 25 to

30 percent of the total sales.

186

Details of retail credit sales from 1988-89 to 1997-98 are given in Table

4.32. The percentage of retail credit on total credit sales is also shown.

TABLE 4.32

Percentage of Retail Credit Sales on Total Credit Sales

(Rs. in Lakhs)

Retail Credit Sales asYear Retail Credit Sales Total Credit Sales Percentage on Total Credit

Sales

1988-89 3092 4561 67.8

1989-90 3782 11093 34.1

1990-91 4131 7551 54.7

1991-92 4721 10570 44.6

1992-93 5234 12856 40.7

1993-94 5764 15896 36.27

1994-95 5550 14231 39.00

1995-96 5894 16985 34.70

1996-97 6749 17805 38.00

1997-98 5712 25158 22.71

Source: Records of Co-optex, Chennai.

From the Table 4.32, it is clear that retail credit to customers is less than

50 per cent of the total credit, during the study period except during 1988-'89

and 1990-'91. In 1988-'89 it was 67.8 per cent but at that period, free distribution

187

sale did not take place. So, credit sales mainly included only retail credit. In the

year 1997-98 also retail credit came down to 22.71 per cent.

In the total credit sales, Institutional Credit Sales plays an important role.

The total institutional credit sales or contract sales and the Free

Distribution Sales [FDS] are shown in Table 4.33 along with percentage.

TABLE 4.33

Percentage of Institutional Credit Sales on Total Credit Sales(Rs. in lakhs)

Year Total Credit Sales I Contract . IDS Percentage

1988-89 4561 1469 32.21

1989-90 11093 7311 65.91

1990-91 7551 3420 45.30

1991-92 10570 5849 55.34

1992-93 12856 7622 59.29

1993-94 15896 10132 63.73

1994-95 14231 8681 61.00

1995-96 16985 11091 65.30

1996-97 17805 11056 62.30

1997-98 25158 9446 77.30

Source: Records of Co-optex, Chennai.

188

From the Table 4.33, it is seen that generally nearly 60 per cent of the

credit sales is effected only through institutional credit. In the year 1988-89,

free distribution sales did not take place. So, percentage of institutional credit

sales on total credit sales is less. (32.21) But after that the contract sales show

an increasig trend, with a few fluctuations.

The main aim of Co-optex is to provide continuous employment to the

weavers. By giving bulk orders for its departments and for free distribution of

cloth to poor people, the Government enables Co-optex to give continuous

employment to its weavers.

The retail credit and Institutional credit sales by Co-optex for ten years

from 1988-'89 to 1997-'98 is presented in Figure 4.2.

• —

• —

•-•'1•

I)

C,)

• —

qwqw

C-)

189

00

- rC'C'

C'C.'

'C

Il•1

C'

-IC'

C'- C

I-

.J.C

C'(I

-

U3.

-

C'

bcJ OG

(sII,Ii'l U! S')J) i's HP-'3 IEuOh)flflJ SII I pus' p'ç )!-') I!'J'1

Total Sales

10060

18420

13772

17222

19527

23300

22754

25755

26470

32733

(Rs. in lakhs

Percentage

45.34

60.22

54.83

61.38

65.84

68.22

62.54

65.95

67.26

76.86

190

Table 4.34 indicates the percentage of total credit sales, that is both retail

and institutional credit on total sales.

TABLE 4.34

Total Credit Sales on Total Sales

Year Total Credit Sales

1988-89 4561

1989-90 11093

1990-91 7551

1991-92 10570

1992-93 12856

1993-94 15896

1994-95 14231

1995-96 16985

1996-97 17805

1997-98 25158

Source: Records of Co-optex, Chennai

From Table 4.34, it is clearly understood that the major portion of total

sales of Co-optex is only credit sales which includes both retail credit and

institutional credit.

4.5.24.5 Amount Due from Credit Sales

Credit sales plays an important role; but always there is a risk in credit

sales. It may result in bad debts. In the case of institutional credit the

Government takes a longer period for paying the amount. Details of amount due

from credit sales are given in Table 4.35.

TABLE 4.35

Amount Due from Credit Sales on Total Sales

(Rs. in lakhs)

191

Amount Due fromCredit Sales

1988-89 I4561 1928

1989-90 11093 3322

1990-91 7551 3189

1991-92 10570 2721

1992-93 12586 3419

1993-94 15896 4988

1994-95 14231 3690

1995-96 16985 3687

1996-97 17805 4511

1997-98 25158 5734

Source: Records of Co-optex, Chennai.

Year I Total Credit Sales Percentage

42.27

29.95

42.23

25.74

26.60

31.38

25.93

21.71

25.34

22.79

192

Table 4.35 shows that every year the amount due from retail credit sales

and contract sates, is considerable. As it is so every year, the working capital of

Co-optex gets locked up. This situation needs urgent rectification

Trend and Growth Rate

The computed results of trend and growth rate of credit sales and the

amount due are shown in Table 4.36.

TABLE 4.36

Trend and Growth Rate of Credit Sales and Amount due fromCredit Sales from 1988289 to 1997298

Particulars Trend Co - efficient Growth Rate Percentage

a b

Credit Sales 8.6347 0.1145* 15.543(58.4274)

Amount Due from Credit 7.7139 0.0847* 8.834Sales (4.1464)

*Significant i 5 percent level.

Figures within brackets indicate 't' values.

The results from the Table 4.36 shows that the trend co-efficient of credit

sales is statistically significant at 5 per cent level. For a longer period of time

there has been a significant growth in the credit sales effected by Co-optex. The

compound growth rate of credit sales is also 15.543 per cent per annum. But at

the same time the trend co-efficient of amount due from credit sales is found to

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be statistically significant. The compound growth rate for amount due from credit

sales is 8.834 per cent per annum.

Multiple Regression

Among the factors influencing the sales, the credit and rebate sales play a

very important role. To study the impact of these variables on sales, a multiple

linear regression model is used. Linear multiple regression is computed by using

the following formula.

Y=bo+b i *1 +b2*2

WhereY=sales

Xi =Credit Sales

X2= Rebate Sales

b0 Intercept

b1 & b2 are co—efficients. The estimated results of the above model are presented

in Table 4.37.

TABLE 4.37

Estimated Regeslon Results

Sample Size Regression Co - efficients and '1' value j2

b0b1 b2

10 249.525 0.9522* 0.879* 0.995 767.813(17.22) (3.824)

Figures in brackets are t values.

*Indicates that the Co-efficient are statistically significant.

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The value of R2 indicates that the two variables, Credit Sales and Rebate

Sales jointly account for 99 per cent variation in the annual sale of Co-optex. Out

of these two variables both are statistically significant at 5% level. Both variables

are positively related to annual sales. It indicates that by one per cent increase

in these variables it may lead to 0.9522, 0.879 increase in the annual sales

respectively. As per F value given in the above table the regression model is

found to be significant at one percent level.

4.6 REGIONAL SALES

Co-optex has bifurcated its entire market in India into 15 regions and one

export division. The names of the fifteen regions along with the sales for five

years are presented in Table 4.38.

TABLE 4.38

Region-wise Sales Performance(Rs. in Crores)

Sl.No. Region 1993-94 1994-95 1995-96 1996-97 1997-98

1. Coimbatore 14.31 14.47 14.36 14.59 11.69

2. Cuddalore 8.49 5.89 5.91 6.70 5.77

3. Kumbakonam 9.78 6.99 7.18 7.48 6.82

4. Madras 18.65 20.11 20.64 21.79 16.53

5. Madurai 14.04 11.54 11.78 13.01 11.35

6. Salem 12.46 17.30 19.19 18.67 16.04

7. Tiruchi 9.72 6.45 6.50 6.45 6.13

8. Tirunelveli 11.39 6.34 6.61 7.03 7.13

9. Vellore 10.25 7.32 7.29 8.27 7.34

10. Bangalore 9.29 11.03 11.33 11.21 10.77

11. Bombay 5.83 6.25 7.13 7.15 6.75

12. Ernakulam 6.26 6.28 7.66 7.31 6.42

13. Hydrabad 6.32 6.17 5.88 6.54 5.16

14. New Delhi 4.64 5.44 5.61 5.70 5.22

15. Vijayawada 7.22 8.04 7.82 8.66 6.58

Source: Records of Co-optex, Chennai.

Table 4.38 gives the regional sales figures for five years from 1993-94 to

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1997-'98. To find out the significance of the sales made between regions a two

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way ANOVA model was used. For this purpose the sales made by regions

inside Tamil Nadu and the sales made by regions outside Tamil Nadu are

considered separately.

The following is the Analysis of Variance of sales by regions within Tamil

Nadu for five years.

The Hypotheses are

1. The sales between regions do not differ significantly.

2. The sales between years do not differ significantly.

TABLE 4.39

Sales by Regions of Co-optex Inside Tamil Nadu

Sources of Variance I Sum of Squares d.f Mean Square F Value

Between Regions 909.4524 8 113.6816 49.000

Between Years 26.24 4 6.56 2.81

Residual 74.46 32 2.32 -

Total 1010.157 44

The table value of F for regions 2.18 at 5 per cent level ofsignificance.

The table value of F for Years = 2.61 at 5 per cent level ofsignificance.

The results of ANOVA test indicate that there is a significant difference in

the variation of sales between regions (within Tamilnadu) since the calculated F

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value (49.096) is greater than table value of F (218) at 5 per cent level of

significance.

The result also indicates that there is a significant difference in the

effectiveness of sales between years (for regions within Tamilnadu) since the

calculated F value (2.81) is greater than the table value (2.61) at 5 per cent

level of significance.

The hypothesis taken are not valid and so rejected.

The following is an ANOVA test which is calculated for testing the

significance of sales between regions outside Tamil Nadu and the significance

of sales between years.

TABLE 4.40

Sales by Regions of Co-optex Outside Tamil Nadu

Sources of VarianceSum of Degrees of Mean Squares F ValueSquares Freedom

Between Regions 90.43 5 18.08 82.98

Between Years 5.81 4 1.45 6.66

Residual 4.35 20 0.2179 -

Total 100.59 29

The Table value of F for Region = 2.71 at 5% level of significance.

The Table value of F for Year = 2.87 at 5% level of significance.

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The results of the ANOVA test clearly shows that the effectiveness of

sales between regions (outside Tamiilnadu) differs significantly since the

calculated F value (82.98) is greater than the table value (2.71) at 5 per cent

level of significance.

The results also show that the effectiveness of sales between years (for

regions outside Tamilnadu) differs significantly since the calculated F value

(6.66) is greater than the table value (2.87) at 5% level of significance.

So, the hypotheses taken are rejected.

4.7 GLOBALISATION AND ITS IMPACT

More than hundred countries have signed an agreement with World

Trade Organisation [WTO] to have free trading with effect from January 1, 2005.

In this situation, handlooms will be facing a severe threat as the protection now

available to the handloom industry will be withdrawn and it has to stand on its

own legs from January 1, 2005. The subsidies now available in the form of

rebate and Janatha subsidy will be phased out in the next two to three years.

Janatha subsidy has already been withdrawn and rebate subsidy is in the proces

of being phased out. Similarly , the protection available under the Reservation

Act cannot be enforced as the goods produced in foreign countries and imported

into India will not be covered under this Act. Hence, handlooms have to prepare

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themselves to face competition from the mill and powerloom sectors not only

within the country but also from foreign countries.

Co-optex has to restructure its marketing strategy and find ways to place

its products at appropriate market segments. Already the customer profile of

Co-optex is undergoing a change as handloom is no more capable of producing

cheap fabrics for rural and poor market segments. Co-optex products will find

better acceptance in the middle and upper class market. Contrary to the

expectations in the rural market, this market expects more designs and colours

appropriate to each season. To cater to this new market, the production should

be oriented more towards the customer and advance planning is required to

introduce more and more designs, colours, weavings and the like at more

frequent intervals. Similarly the decor of the showroom has to be re-oriented for

easy shopping for these customers. The salesmanship has to rise to a level

where customers are educated more about the products, fashion trends and the

like. Proper planning in these directions will help Co-optex to maintain its

market even in the face of stiff competition expected from January 1, 2005

onwards.

4.8 CONCLUSION

Co-optex is procuring and supplying the required raw materials to the

Primary Weavers' Co-operative Societies. Apart from this, the produced items

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are sold through the showrooms of Co-opteX. The survival of Handloom

Weavers' Co-operative Societies depends UOfl the marketing efficiency of

Co-opteX to a great extent. If the produced stock is cleared by Co-opteX then the

weavers can very well be given employment all throughout the year. It can be

said that it is a social obligation on the part of Co-opteX to concentrate more on

marketing of handloom items. Co-opteX has to adopt new marketing strategies

to face the challenges arising out of globalisation.