suiting the world
Gautam Singhania, Chairman and Managing Director, Raymond Group talks about the company’s legacy and its future strategy.
He the divestedHe was stayed family bornthe true enterprise non-corein to 1965 the in in business’ businessesa 2000. Marwari Facing primaryof family.steel,a tough premise—ofHe cements,took scenario, over and bringingthehe synthetics. speedilyreins wool of from stores the are back contemporaryof the sheep and to stylish,the back yet of followthe man. the The original company’smodel conceptualized by the founders. He believes a promoter’s first obligation is always business; everything else will then fall in place. He launched KamaSutra condoms in 1991. He has a keen sense of fashion and is often a guinea pig for all his brands’ style experiments. He has a penchant for all things fast—cars, jets, and power boats. His passion for cars led to the creation of the Super Car Club, the first of its kind in India. He became the first Indian to win a race in the Ferrari Challenge in 2015. A gracious host, he is personally involved in the planning and security of guests at his annual parties. Outspoken, nonconformist, and risk taker are some of the words used to describe him. An ecommerce skeptic, he is an avid tweeter. One day at a time, is how he prefers to construe life; for him, life is a journey and not a destination.
prominent management thought leader once told me that a good business strategy is one that can be outlined in a short time… without any bells and whistles. Gautam Hari Singhania, Chairman and Managing Director, Raymond Group, in what may be the shortest-ever cover feature interview, took me through his company’s growth strategy and future plans in a little under sixteen minutes. Without missing a single detail. Taking over the mantle from his father, the legendary Dr Vijaypat Singhania, he engineered a turnaround and made the company 21st centuryready. Whether it is producing Super 250s, the ultimate luxury fabric, or creating a store that delights Gen Z, Raymond has successfully straddled a wide spectrum of customers. Many may cavil at the company’s quarterly numbers which are not heartening, but if one looks beyond them, one can see the company is on the right track. Raymond is keeping it simple. It is sticking to its core strength—fabrics—and building on it. It is testing new markets and offering innovative products. And most importantly, it is clear about what the brand stands for and signifies to the customer. While the world went the ecommerce way, Raymond bet on its bricks and mortar stores, and invested time and money in renovating them. It is perhaps the only company in India to cross 1.5 million sq.ft of self-controlled retail space in the business of lifestyle and fashion. Even as ecommerce majors are fighting for market share, Raymond has a clear pole position. Whether it was the decision to divest noncore business or engage professionals for the company’s day-to-day management, or being skeptical about the online business story, Singhania has always embraced the unconventional path. In this exclusive interview with The Smart Manager, he talks about why Raymond continues to be an aspirational brand and why strategy, at the end of the day, is only about enhancing shareholder value. Simple, is it not?
A common thread across most articles and interviews on the Group is the 2021 vision...
Not 2021, but 2020. It has probably become 2021 since we lost one year because of the way things are...
Could you elaborate...
We are not going to divulge our strategy. However, we have a clear vision of what we want to do and you will see it unfold slowly. It will play out the way it is required. Eventually, no strategy is good if you do not deliver shareholder value. So, whatever we do is fundamentally aimed at enhancing shareholder value. That is the direction in which we have to move.
Raymond’s present strategy revolves around upscaling and growing your existing inhouse power brands and expanding into newer markets. What are the new markets you are looking at, both national and international?
The three fundamental markets are Europe, America, and Japan. These are really the big ones. Apart from these, we have the Middle East and Africa, which are relatively small. My focus is to find five very large customers in each of these three markets and work towards being more than just a vendor; to be a strategic partner to them. So, our fortunes get tied to a certain extent.
As for growing our inhouse brands, apparel business is a strategic core for Raymond with four power brands in the portfolio—Raymond, Park Avenue, Parx, and Color Plus. We are among the three biggest apparel brand players in India today. Our growth strategy is based on the triad of sharpening our product portfolio, enhancing and expanding our retail footprint, and effective go-to-market strategies. Our power brands complement each other to offer complete wardrobe solutions for the discerning Indian male.
In products, our focus is to sharpen brand positioning, leveraging each brand to its full potential—thereby capturing the ‘full wallet’ of our customers. Our range is available from R150 to R300,000 a meter. We are the only brand that grows 2000 times on the price point. There is no brand in the world that does it.
With increased variance, in the white shirt category we are now a dominant player in the country. We have introduced Raymond Whites, coupled with world-class products such as light-weight jackets and top-end sweaters. Our apparel business has been witnessing strong doubledigit growth over the last three years, which is significantly ahead of the industry growth rate and we will continue to scale up this business to attain profitable market leadership.
How has the Ethiopian foray worked?
Actually, today (18th April, 2017) is a historic day for us as we could start some commercial production last night. I think Ethiopia is a very misunderstood country; it is the gateway to Africa. Most people do not understand this; they still associate it with 25-30 year-old pictures of famine and poverty. I think the Ethiopian government is proactive and positive, and keen on promoting industry there.
It is a low-cost manufacturing base. Also, from an export point of view, being a least developed country it has massive duty advantages to America and Europe. So our manufacturing unit there enjoys cost as well as duty benefit. Both together give a significant advantage to the company and its customers.
Raymond today has transformed from a traditional textile business to a complete male grooming brand. It caters to a wide demography of customers—Gen X to Gen Z...
If you look at the last ten years, a conscious decision we took—and it is evident now—is to bring the brand ‘up’—in terms of age profile, not in perception. We have expanded our offerings—increased cotton, wool and silk offerings, and introduced linens, made to measure, and custom tailoring. We have also enhanced the product range significantly. Previously, plain dark suits ruled the roost, but now we have checks and brighter colours. So we have upped the offerings and this has opened up the market so much. Initiatives such as ‘made to measure’ are game changers.
One of the fallouts of restructuring is that brands tend to lose their traditional customer base. What has been your experience?
We have enhanced the range, not reduced it; so we have brought in more customers. We have not lost our core—fabrics. Everything is built on that; we have pure wool fabrics, exotic fibre fabrics, polyester wool, polyester viscose, blended fabrics, and a huge range of cotton fabrics. We have also got into backward integration and are making linen fabrics.
We are setting up a huge plant in Amravati as a part of the Make in India initiative; this facility will provide employment potential exceeding 8000 workers with capital infusion of about 1,400cr in different phases. This project is aligned with our strategy to expand the cotton textile manufacturing footprint by creating world-class linen, cotton shirting, denim, and garmenting. The new plant will ramp up our production capacity to 46 million meters in the next three years. We are also looking to scale overall production to 26 million meters by 2018 at our Kolhapur facility.
You are experimenting with the format of the company’s next-generation stores—experiences that would delight a millennial and at the same time not intimidate Gen X. What are the salient features of the new-age stores?
We are focusing to expand aggressively in order to create an optimal retail footprint through exclusive brand stores, large format retail footprint, and multi-brand stores. With 1100 exclusive brand retail stores and market reach spanning 400 cities, Raymond is the largest and the most penetrated fashion retailer in India. Beyond continuing to expand store reach optimally, we are also renovating and digitizing our existing stores to enhance shopper experience. We have also created a unified, robust CRM platform with sharp analytics-driven actionability to configure a digitally immersed omni-channel business. We are also experimenting with the design of the store. In the Thane store, space is the prominent element. Similarly, the store at Indira Nagar (Bengaluru) has a lot of visual media—a moving video screen as its window, and everything sold on an iPad.
In an era when most believe bricks and mortar stores may not be viable, Raymond stores are getting larger. Does this mean the Indian customer is not going to buy online?
I have not been an advocate of the online space per se. I think shopping, more than anything else, is an experience. If you go to malls, it is an experience; it leads to an impulse purchase. I do not know anybody who goes to a mall saying he needs to buy a suit. But if the customer has
I have not been an advocate of the online space per se. I think shopping, more than anything else, is an experience.
got an hour, he walks in, looks at stores, and ends up buying something.
If you look at the online space, most of them are using somebody else’s [investors’] money and subsidizing it [goods]. This [model] fundamentally does not make money. I mean it is not as if I am going to charge more because a customer walks into our store, but you are not going to get it cheaper without somebody else paying for it, if it is online.
But you also have forayed into these channels. How do you plan to integrate them?
I think a lot of people go online to research. Today, the consumer is much more informed. I do a lot of online research to look up products, the way they are designed, compare, etc. But I want to see the product unless it is a
commodity such as bath salts or shavers. For example, I had a particular brand of shaver. When mine packed up, I needed another one with the same specifications. So that could be bought online. Buying commodity products becomes easier online because there is convenience. Similarly, a soap—we would sell Park Avenue soap online; the customer knows the product and its specification is clearly defined.
You do not believe in the China story. Why? And what can India do better?
Everybody talks about China and its success. But if China was actually so good, why are my exports growing? I have this theory. It basically says they make the quantity, we make the quality; they make the volume, we make the value. You cannot make chalk and cheese in the same
factory. There is a consumer that just wants large volumes at a low price point. But then you cannot make what I sell in that factory.
China is different. I am not saying it is not going to succeed, but its game is different. We have to understand that they operate in a different space. Why are my exports going up if China was really so good? And it is not only about the product and quality. It is also not just about the pricing. It is about the whole package— do they answer your phone call? Do they service properly? Do they respond?
One of my largest customers just doubled his order with us. Why would he do it if he could go to China? He is obviously getting something here which is valuable. Let us look at an example. A $30mn, $40mn, or $50mn customer would have obviously looked at China. I am not talking about something he is buying for $50,000. I am talking about something like $10mn. He may have looked at six options and decided that India is the best place to buy from. He chose me, may be because I gave him the full solution, from fabrics to garments.
Anti-globalization and protectionism are prevalent sentiments today. How should companies, which depend on exports for their revenue, recalibrate?
Think it differently. You know the world is going to change. Twelve months ago, who would have thought of Brexit? Who would have thought Donald Trump will be elected as President of the United States? Who would have thought of demonetization? And there are so many things which were unthinkable that have happened. So let us brace ourselves for volatility. Something will happen in Korea, something will happen in Syria; anything can happen. So you just have to live in this VUCA world.
Our success lies in the fact that we pursue innovation as a part of an ongoing strategy and not as a knee-jerk reaction imposed by market conditions.
Five years down the line, what would India be—a manufacturing-led economy or a services-led one?
I think it will be a balance of both. We have core strengths in manufacturing. However, India being such a large country also needs services—whether you take aviation, retail, IT, or restaurants—as you have a ballooning middle class.
How do you strike the balance between a mentor and being interfering, especially given that you are the brand custodian?
My role is very clearly laid out. I think when an individual is secure in what he is doing and puts the right people and trusts them, he does not need to interfere. In fact, in my company the complaint is I do not give them as much time. Once you create a system, you should let it work. I get as little involved as I need to. ■
China is different. I am not saying it is not going to succeed, but its game is different. We have to understand that they operate in a different space.
Raymond's Bengaluru store has integrated lot of visual media such as moving video screen as its window, use of iPad to sell merchandise, etc.