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Fabrica
4. Market

4.1 Industry Overview

Because Fabrica is so different from present alternatives it is going to create a new market. So we look here at the world weaving industry rather than the still non-existent market for samples. The producing countries of interest-those with large capacity plus relatively stable governments and convertible currencies (notably excluding Russia, India and Indonesia) are listed below:

World Woven Textile Production 1997:
selected major producers (million meters)

CountryProduction,
million meters
Population,
million
GDP,
$million
Est. avg price
per meter
production value,
$million
% of GDP
Brazil2,144164.3$773,853$3.65$7,8261.0%
China17,7471246.9$920,212$2.09$37,1454.0%
France1,46058.9$1,402,409$5.93$8,6650.6%
Germany3,27882.6$2,124,472$6.07$19,9080.9%
Hong Kong3,9176.7$176,880$6.12$23,97613.6%
Italy1,28457.7$1,138,998$5.61$7,2030.6%
Japan3,267126.3$4,268,940$6.59$21,5370.5%
Korea3,26146.4$441,310$4.51$14,6943.3%
Mexico1,45696.2$411,736$3.55$5,1651.3%
Spain1,20047$671,630$5.09$6,1100.9%
Taiwan2,63921.9$291,336$4.98$13,1514.5%
Thailand3,29061.4$150,430$3.00$9,8716.6%
USA4,239270.5$8,101,475$6.36$26,9510.3%
TOTAL49,1822286.8$20,873,681 $202,2041.0%

Source: International Textile Manufacturers' Association, World Bank

Data from different sources are inconsistent, but it appears that these countries probably account for about 60% of all woven textile production, including traditional hand-weaving. What is of more immediate interest is the potential demand for Fabrica samples in each country. Based on a combination of quantitative questionnaires, industry figures and regression analysis of these data against economic variables, we have estimated the following:

Potential Demand for Fabrica samples, 1999
selected major producer countries

CountryTotal
production runs
Patterned weave
production runs
Fabrica
sample price
Fabrica samples at
20% of patterned
production runs
Sales value
Thailand731,20091,400$10018,280$1,828,000
USA1,371,393289,995$40057,99923,199,592
Japan1,076,192233,425$40046,685$18,674,008
Hong Kong1,243,325256,039$36151,208$18,499,998
Germany1,036,391212,259$35442,452$15,021,751
France456,33091,957$33318,391$6,124,659
Taiwan755,780134,775$2186,955$5,886,879
Korea888,050147,588$17729,518$5,225,459
China3,294,107320,048$8164,010$5,205,488
Italy390,19375,594$28915,119$4,363,564
Spain347,41562,891$22912,578$2,882,480
Brazil525,59475,365$12515,073$1,878,918
Mexico351,90549,455$1209,891$1,186,570
TOTAL12,467,8742,040,791 408,158$109,977,365

In general, demand for samples increases with the price of the fabric and the complexity of the design, and the length of production run decreases with the same factors. Pricing is discussed under heading 5.2.2 below.

4.1.1. Production and pricing trends

The steady reduction of trade barriers in developed nations, combined with the extension of elementary infrastructure to many of the least-developed countries, has seen a steady migration of basic weaving to the third world. This has tended to represents strong bias in growth, rather than an actual net decline in production in the developed countries: China remains the only low-income country with total production valued over $10 billion. Global production growth only slightly exceeds population growth, at about 1.7% yearly. Real prices for the commonest fabrics have shown a long-term decline. The net result is that producers in all of the listed countries except China are under strong cost/price pressure, with many of the older, technologically less sophisticated mills operating far below capacity because they cannot compete with ultra-low-wage producers. (It was specifically to give Thai mills in this position a new competitive edge that Dr. Sathit conceived the original KS 16.)

4.2 Competition

There is no direct competition to a Fabrica sample. Computer color printout from fabric design programs provides an extremely quick way to get a good general idea of a design, but no computer printing process can closely match dye colors: computer printers create different shades by varying mixtures of four basic "process" colors, cyan (blue-green), magenta, yellow and black. Yarn dyes, relying on a great variety of pigments, can produce brighter, deeper colors than process inks. In addition, of course, the computer output does not reproduce the texture of actual fabric.

Hand weaving of samples is impractical because of the high degree of expertise required of the weaver. One current KS loom user had previously purchased an expensive Swiss handloom, and ended up donating it to a neighboring vocational school because no one in the mill could produce acceptable fabric on it. (We exclude here samples produced by fabric designers who are themselves master weavers, an admirable but dwindling group.)

The only current way to get a real machine-woven sample is to make it on a production loom, at a cost which can exceed $3,000, and a wait of 67 working hours plus lead time if the mill does not have a free loom.


Direct Costs of Making Fabric Sample

4.3 Environmental considerations

We are not aware of any forces in the political, economic or technological macro-environment that are likely to cause a major change in potential demand for Fabrica samples. As long as fabric is being used to produce real products, no advances in computer emulation will displace a real sample.

4.4 International opportunities

As already indicated in the tables above, Fabrica's opportunities lie mainly outside Thailand. Every advanced economy represents an opportunity, as do some of the more transparently managed developing countries. Our licensing system will let us expand with extraordinary rapidity, which will be essential to discouraging/delaying the appearance of competition.

4.5 Market research

Our most important market research data are the 20-odd satisfied current users of KS 16 looms, but we have also surveyed potential sample purchasers in Thailand, the US, France and Japan, receiving an overall 63% level of definite intention to buy at planned prices. We have already begun low-key sample sales in Bangkok, eliciting comments like these:

"I heard about the KS loom about one and a half years ago, but I did not buy one because of its price even though I realized that samples would get me orders. I had to say 'no' to several customers who asked for samples before they would order. [Then] Fabrica contacted me... The service they are offering is very useful to the industry. We, the weavers, will be able to close deals easier and faster .... Apart from the quick output, the price charged per sample is reasonable especially when compared to what I would lose if I have to stop a machine for making sample."8

8 Mr. Bandid Pongsarojanavit, Managing Director of Soon Hua Lee Textile Ltd. Part., actual Fabrica customer
Fabrica Co., Ltd.
Table of ContentsAppendices
0. Executive Summary
1. Company
2. People
3. Product
4. Market
5. Marketing Strategy
6. Operations Strategy
7. Financial Plan
8. The Deal
Sample Production Costs
Glossary of Terms
Patentable Features
Sample Order Flow
Financial Assumptions
Investment Structure
Yearly Income Statement
Yearly Cash Flow
Yearly Balance Sheet
Monthly & Quarterly
Proprietary to Fabrica Co., Ltd.