suit­ing the world

The Smart Manager - - Contents - (In con­ver­sa­tion with Poorn­ima Subra­ma­nian.)

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.

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