Chennai: Chennai-based Nalli Silk Sarees is grooming Lavanya Nalli, from the fifth generation of the promoter family, to be the first woman to take over the reins of the iconic 83-year-old brand. The 27-year-old Harvard Business School graduate joined the family business in 2005. She now plans a stint with McKinsey and Co. in the US to get a fresh perspective on managing a retail business. In an interview, Nalli said she expects the company to continue to grow faster than its competitors, but admits a shortage of weavers could emerge a challenge. Edited excerpts:
Competitive advantage: Nalli says the company’s growth rate is at around 12%, which is more than the industry average of 9-10%. Photo Sharp Image
What is the competitive landscape like for Nalli?
When the pie grows bigger, you need not worry about who is going to get a bigger slice. Last year, I think, we clocked around Rs 450 crore and now we are around Rs 500 crore (in sales). Our growth rate is at around 12%, which is more than the industry growth of 9-10%. We could do better in the future, possibly hit 15%.
Are there succession plans in place for your family business?
My brother Niranth Nalli just graduated and will be joining the business in September. He turns 22 this month. I will also come back to the business after two or three years (at McKinsey)
What are your expansion plans?
We have been coming up with at least two new stores on average every year and we are planning to add three more —in Pondicherry, Ahmedabad and Kancheepuram—by the end of 2011. We have 26 stores so far. We spend roughly around Rs 10 crore on average per store.
Why are there no TV ads from Nalli? This is something the local competitors do incessantly.
Nalli has been there for a long time and is an iconic south Indian brand.
Ad spending on average is normally around 5% of turnover and it varies from store to store.
Is there a scarcity of weavers currently?
I think it’s not yet a problem, but we see it becoming a problem because we do not have enough of the second generation moving into this business. I don’t know if Kancheepuram can churn out enough products to satisfy the demand in the future.
What’s your Plan B for this scenario?
We keep developing clusters around the area to ensure that the craft stays alive. And we continue to support the weaving community, and my grandfather has been very strong in embedding that knowledge within this community and ensuring that the knowledge lives on.
Child labour was a big part of this industry especially when it comes to contrast border (Korvai) sarees? How has that situation changed?
At least in Kancheepuram it has gone away after the government abolished child labour. Contrast border sarees that are in the market now are not (perfect), there is some bleeding (of colours). And the reason is if you want something that perfect, you need nimble hands, which means only children can do it. Previously, children used to help out their parents. Now they don’t and you will not see that product on our shelves.
How did the company react to you coming back from Harvard and implementing what you learnt there on such an old firm, which is in a sense set in its ways?
When I joined, I didn’t know anything and I learnt on the job. Once I earned my credibility, I sort of started making bolder suggestions and that would be accepted by the group. Thanks to that, I think, they will be much more receptive to the changes that I’d like to bring to the firm.
What were the changes you made to the business?
One was with the sub-brand Nalli Next (an exclusive boutique for women). I was very lucky to have joined the business in 2005, when there was a retail boom and increased spending power in India. I took forward the sub-branding idea because that way you are not losing out on Nalli’s brand equity and it gives us that latitude to experiment with retail formats.
What happened to the Lavanya Nalli brand (a premium fashion brand for women) that you started in Bangalore?
That brand has actually been folded into the parent company and that’s because we launched it the year before I left for Harvard. Remote management was much more difficult than I anticipated, even though we had a self-sustaining team in place. We have absorbed a lot of the suppliers and key personnel into the parent company and removed the name.
Are you looking to expand this Lavanya Nalli range at some stage?
When I come back to India, I think that’s going to be on top of the list. Right now I’m joining McKinsey in October and realistically spend two years there. Let’s see, as long as the work is challenging I’m going to be there, but at some point I’m going to come back. I’ll be working in retail.
Did you make changes to the supply-chain management?
We now have a production unit in Bangalore with in-house designers. We use just-in-time inventory model so there is no lag time. The design inputs from other Nalli stores trickle down to the suppliers. We tell them about the current trends and it comes hot off the handloom to the shelves. This is where I thought we could strengthen and brought in designers to work in-house. This way we could experiment and they (designers) could also help liaison with the suppliers.
Do you have plans to increase your international presence?
We have a store in the US and in Singapore, but what we are finding is that the demand in India is still huge. That’s where we want to focus right now.
Vidya Padmanabhan contributed to this interview.