 "First establish the brand on your home turf: Kamal Tandon")
The first Nalli Silks store was set up in 1928 by Nalli Chinnasami Chetty, a weaver from Kanchipuram, in Chennai's T Nagar. Today, the Nalli Group's revenue from its silk and fabric business is Rs 550 crore. The entire group's turnover, including that of the recently launched jewellery division, is Rs 700 crore.
When and how the idea of evolving into a chain developed
Following the liberalisation of the Indian economy in the 1990s, Chetty's grandson Ramnath Nalli, vice-chairman of the group, decided to expand the business. In 1991, Nalli held an exhibition-cum-sale in New Delhi to test the north Indian market. Today, Delhi is our second largest market after Chennai. Nalli currently has 24 stores in India, one in Singapore and one in the US. With a plan to open two-three Nalli Silk stores every year, the company is targeting a turnover of Rs 650 crore by next year.
Key things to keep in mind when venturing beyond home market
Before venturing into other markets and territories, a company needs to establish a strong brand in the home market. When we came to Delhi, people wanted to see what Kanchipuram saris looked like. They liked what they saw, so we decided to enter the market. Second, educate consumers about your product. Third, build trust and quality.
Strategy/business model adopted for the expansion
We funded the expansion via internal accruals and bank loans. All Nalli stores are company-owned. This business is hard to monitor. At Nalli, we supervise everything, from weaving to designs, and this is why we are reluctant to get into franchising. We have our own manufacturing centres across Tamil Nadu, Karnataka and Andhra Pradesh, and our exclusive weaving. There has never been any discount sale at our stores.
Choosing a new location
The three key things in any retail business are: location, location, location. The metros are expanding fast, making it difficult for customers to commute. We see lot of potential in the metro cities, even where we are already present - in Bangalore we have four stores; we recently opened a third store in Delhi.
Maintaining quality and consistent service across outlets
We educate and train our salespersons to offer personalised services. We teach them not to push sales, but if a customer wants to see a hundred saris, show them a hundred saris. It is also important to offer information on the product. At Nalli, we put appropriate labels on every sari - pure silk, polyester sari, pure zari (gold and silver) etc.
Challenges faced
Our weavers are the backbone of the enterprise. However, the lack of adequate labour in the weaving industry is a problem. With the lure of jobs in MNC factories, many weavers are abandoning their vocation, particularly the second or third generation weavers. Look at Kanchipuram. They have companies like Nokia and Ford there. These young boys and girls prefer call centres over weaving as a source of livelihood.
Scaling the model - at what point a chain becomes viable
We saw growth potential in the market and opened our stores one after another. For us, it was never about economies of scale. We could have expanded faster but the issues here are weaving, and supply and demand. We can open 10 stores but the store has to be profitable. At Nalli, we make sure that the store is profitable from Day 1.
Branding decisions
We are the only retailer in apparel today that turns over the inventory 12 times a year. Generally retailers turn over the inventory three to four times a year. This means they keep stock for three to four months. We add new stock every month. We do quite a bit of seasonal advertising. Our campaigns are planned around Diwali and the wedding seasons.
Lessons learnt
The key to success in this business is purity, fair price, quality and customer service. We learn every day from our customers. We learnt that while one colour sells in one market, it may not even move in another location. Times and fashion are changing and catering to the varying customer tastes is an important lesson that we have learnt.
PE/venture funds' interest
A lot of PEs are interested in this category. The sari market is growing at the rate of seven per cent. The women's ethnic wear market (including sari and salwar kameez) is expected to touch $17 billion in 2017, of which sari and ancillaries are likely to have a 57 per cent share, according to Technopak Analysis. The unorganised clothing segment still forms nearly 90 per cent of the market. There's hardly a sari business owned by a company. PEs look for organised players who have systems and processes in place and have a formal business plans. Recently, Kalamandir launched its IPO. This shows the market has huge potential.