By GRACE SEGRAN
From INSEAD Knowledge (http://knowledge.insead.edu)
The day before she was to launch her new company, Maya Hari found that she was expecting her first baby. She decided to put the launch on hold. Two years later, in August 2008, Stylkist was set up, but this came just days before Lehman Brothers went under and the financial meltdown began.
The impact was immediate and big.
Two of the investors Hari had been talking to, decided they were not ready to take the risk. "Talk to us in six months or a year's time," they told her.
The flagship store, which was to be opened in December, had to be put on hold until she got more funding and, to add insult to injury, there was no seasonal increase in sales. "Fundamentally, (although) India was not in recession yet we did not see a peak over Diwali (the Festival of Lights)," says Hari.
In response to the sudden economic downturn, Hari exercised prudence.
"We trod cautiously and aimed at bringing on additional resources, while making sure we stay cash positive," Hari says. "Although we would like to grow our footprint rapidly, we are holding back the company's development. For example, we are keeping our team size at three, until business picks up."
Hari is also prudent about their marketing activities, restricting it to highly targeted and proven marketing activities that yield a high return of investments.
"This should stand us in good stead in the event that the market takes a further downturn," she says.
The company is inherently growing, says Hari. Despite poor market conditions, Stylkist's consumer base, sales and the number of boutique partners have been growing.
In January 2009, five months after its launch, its cash flow was positive.
The former engineer who worked in marketing and sales in the United States for Cisco and Schlumberger has a creative streak. She dabbled in art and photography to stay connected with her passion. While in the U.S., she established "Pink Lotus" which organized exhibitions of artists from India and other parts of the world in galleries in San Francisco. There was also an online portal for people to learn about the company.
In the middle of all this, Hari and her husband decided to do the)r lBAs and enrolled at INSEAD in Fontainebleau, graduating in December 2005.
Ever the entrepreneur, Hari found that there was a growing need for contemporary decor in India "and I wanted to create an Indian version of Crate and Barrel" dealing with fabric decor and small home accessories such as wall art, vases and platters.
Never having worked in India before and having no network there, Hari decided she would gain corporate experience before starting her business.
She worked with Google and then MSN in marketing and "learnt a great deal about running a business such as how to deal with vendors and customers."
"Having sat through three years flitting with the idea, I decided to launch the company with two partners," she says. That was when she found she was pregnant.
After the decision was made to delay the launch of the company, she spent the two years researching the market intensively and made contact with suppliers.
"By the time we opened last year, we hit the ground running," says Hari. The hiatus was not wasted.
When the investors backed out at the time of the financial crisis, she started looking for smaller sums, spreading the funding needed between different investors.
This made her think harder about the investors who want to come on board. Are they right for her fledgling company and can they add value?
"We need expertise in areas that we are not familiar with, such as offline retailing and corporate gifts. Someone who has product design experience could advise us on the creative side of the business. An investor who has built up a business in contemporary products and sold it, would add value on how to build a business and when to exit," she argues.
Stylkist has three channels through which it does business: e-commerce, retailing and corporate gifts.
Hari says there's a burgeoning market in e-commerce. However that's a tall order for India as people are suspicious about buying things online, wondering if they'll ever get their purchases or their money back.
Hari made the shopping Web site stylkist.com as elegant and trendy as possible "and visitors to the website asked if we were American or Indian!"
She believes e-commerce will be the company's long-term challenge and it will need to supplement this with both retail and corporate gift activities.
"We are constantly observing the buying trends and, for now, our priority is retailing as it's selling quite well in the spaces we have in major stores. That's our low-lying fruit," says Hari.
Its second priority is e-commerce. "We are still learning about pricing strategy. Customers start by buying small items to see if internet shopping works. We are slowly building up repeat customers who buy larger items," she says.
As for corporate gifts, the company partners with other firms. "For now, we are happy to leave that space to them and give up a percentage of the profits," Hari says.
In the short term, business looks promising for Hari with gradual expansion for e-commerce and offline retailing, with the flagship store in Mumbai a key objective.
In the medium to long term, the prospects are expected to improve. Within three years, the company aims to be operating several large-size businesses and shipping Stylkist goods outside India through e-commerce.
In five years' time, Hari says they could be looking to franchise, grow organically or expand internationally. A decision on this will depend on how things pan out.
"Just look at Fab India, the fabric and home accessory store," Hari says. "In 10 years, they have 120 stores and continue to grow. That's the promise of India -- its economy is large enough for businesses to grow."