A dusty street separates the head offices of Vishal and V2 Retail in the suburbs of Delhi en route to Gurgaon. And Ram Chandra Agarwal, erstwhile promoter of Vishal Retail who sold it off post-liquidation last year for Rs 70 crore, is in no mood to wait for the dust to settle. The proof lies in the cartons piled up at V2 Retail's office reception area. Executives work the phones to jot down orders. Amid a warren of posters lining the front-desk, there's one outlining ‘Obstacles to Success’ — ego, fear of failure, life changes, no plan, doing too much alone, lack of focus, lack of formalised goals, lack of priorities and lack of commitment — in that order. The conversation with Agarwal revolved around the mistakes he committed at Vishal and what he learnt from them. Excerpts:
Mistake 1:
A company is still known by the people it keeps.
Ram Chandra Agarwal faltered while recruiting for Vishal Retail. "Too many bad people came into the organisation. I believed in people and employed too many of them without any background check. They did some wrong things in the organisation," he says. He gives the example of an executive he entrusted with evaluating locations — "He was a big thief as he took money from landlords and finalised wrong locations, making a lot of money on the side."
Remedy:
Agarwal has now instituted thorough background checks and pre-recruitment screening. His inner circle consists of loyalists from Vishal. Meanwhile, he's entrusted a part of the finances to his wife and is awaiting son Akash’s entry into the business after the latter finishes his MBA from Lancaster this year.
Mistake 2: You need management bandwidth
Vishal recruited en masse from second rung B-Schools, but did not have the right leadership within the organisation to guide the 300-400 odd MBAs it hired. "There was no strong leadership in senior and middle management," says Agarwal, adding that even the business schools need to firm up their act with more practical exposure. "They (B-Schools) rely on theory and their students don't know basic things like planning or making entries in software." The lack of management bandwidth affected quality, a critical parameter to ensure retail success, as well. For Jagdeep Kapoor, CMD of Samsika Marketing Consultant and a close Vishal watcher, "not having a stake, was a mistake." In other words, he felt leadership was largely on autopilot with the cult of personality overpowering the rule of many.
Remedy:
Agarwal says he has a senior management team in place at V2.
Mistake 3: Lack of planning
"We didn't plan in time," rues Agarwal, "And this led to certain wrong choices, like in-store ambience. From lighting and fixtures to flooring, nothing was right earlier."
Remedy:
In his second innings, Agarwal seems to have his plan in place with an overall five-year horizon that can be brought down to a monthly level. "For me, the first thing is that my seven shops should make Rs 1,500 per sqft per month of sale. It sits at Rs 600 per sq.ft. per month today." He is stocking up on a slew of "competitive products", though his role model for surging ahead remains foreign retailers whose average monthly sales per sq.ft. are in the Rs 2,000 region.
Mistake 4:
Overconfidence.
It's hard to let go of success when it gets into the head. "I used to inaugurate four stores a week and such growth is impossible without management bandwidth. I opened four big garment factories and was confident about manufacturing too. In the end, I couldn't control all of that," says Agarwal.
Remedy:
V2’s philosophy is ‘one step at a time’. The 7-store chain now sells only apparel. General merchandising and other articles at the SKU level are being worked out, but there's no hurry.
Mistake 5:
Learning to manage scale
Vishal floundered beyond the Rs 500-crore mark. "Once you go beyond that, you need a professional hierarchy to share the load. You need corporate structuring and processes, which were simply missing. After a point, it cannot be a one-man-show." Agarwal had zero corporate training and his humble beginnings in Kolkata's Lal Bazar ingrained in him the desire to do everything on his own. "I started the store myself, I sold from the counter, I bought everything myself, I did the accounts. I believed that I could do everything efficiently but what I learnt was that even if your second in command does the same job half-efficiently, you should pass on the load."
Amit Gupta, director at retail advisory firm Coralbay says leadership issues stem from the promoter in Indian retailers unlike in the West where a Wal-Mart has a standard operating procedure manual. "It tells you what is to be done in a store of 'x' sq.ft, it gives specifications to the ultimate level," says Gupta.
Remedy:
Agarwal has learnt the art of delegation and is following it to the hilt at V2. "Either Mansukh Tandon or JP Shukla will take over the reins of the CEO and will run the company on a day-top-day basis while I'll be the chairman…ultimately, you must empower people. You cannot do everything efficiently yourself," says Agarwal.
Mistake 6: Down-market image
While there was connect with low-income consumers, changing aspirations were not factored in entirely. "Instead of downgrading the customer, he should have upgraded his brand," feels Jagdeep Kapoor of Samsika.
Remedy:
Today, Agarwal claims his V2 stores are "a fresh change" from the old Vishal concept. He admits that variety is the flavour of the season with rising incomes and burgeoning demand, even at the low-to middle-income bracket he so fervently targets.
Mistake 7: Unprofitable growth
Vishal's growh was unprofitable. "Earlier, credit was cheap and I was expanding recklessly," says Agarwal, adding that in 2008, he set a ballpark target of Rs 5,000 crore to his employees within 1-2 years. Kapoor, too, vouches for profitable and sustainable growth as the way forward. He quips that it is akin to family planning -"You can't go on producing children, you must nurture them too."
Remedy:
Agarwal is now going slow. "Once my model gives me Rs 1,000-1,500 per sq.ft per month of sales, I can easily expand 10,00,000-20,00,000 sq.ft. in two years."
Mistake 8 : Reliance on cash
Vishal's transactions were all cash deals, be it sourcing from vendors or operational expenditure. Cash was king. But that's certainly not the way to manage scale. Large operations require multiple currency layouts, not just heavy reliance on cash.
Remedy:
Today, Agarwal says that if the business model is good, money will follow. "There's a lot of money chasing a good business model," he says, pointing out that his reliance on cash now stands slashed by up to 50%.
Mistake 9 : Lack of management skills
Agarwal lacked the academic discipline to run a venture as large as Vishal.
Remedy:
While he admits to having learnt quite a bit from management tomes, Agarwal talks about strengthening the back-end in V2, with a firm grip on processes. "The most important thing ion retail is fill rate, which is having the right goods at the right time at the right place, and a good fill rate is only possible through a strong back-end. Now I understand fill rate, product, choice of customer, pricing, marketing strategy much better," observes Agarwal.
Mistake 10 : Inadequate technology backup
Vishal suffered partly due to an SAP issue, resulting in data loss. Besides, the critical standard operating procedure in retail was not followed at all. "In Vishal, the server was very small and there were issues with implementation of SAP, thereby creating problem in data extraction," says Agarwal.
Remedy:
Agarwal has now hired TCS as IT consultant. Though he doesn't have such high-end vendors servicing V2's IT needs as yet, he is clear that once he reaches the Rs 1,500 per sq.ft. per month of sale milestone, he would require an outsourced IT vendor to run his retail 2.0.
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Moinak Mitra ————ETCD2012 0309
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