Aurora Magazine

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Khaadi's multinational ambitions

Published in Sep-Oct 2015

Shamoon Sultan, CEO, Khaadi, on his vision for the brand and the future of prêt wear in Pakistan.

AURORA: What was your vision for Khaadi when you opened shop in 1999?
SHAMOON SULTAN: I started Khaadi on December 13, 1999 with one small 400 square foot store in Zamzama and we had primarily fabric, menswear and some very basic kurtis for women. I was a textile graduate from Indus Valley and I didn’t know what else to do. I had worked for Noorjehan Bilgrami and another textile company and I went to India a couple of times where I saw a lot of craft promoted through retail. There was absolutely nothing of the sort in Pakistan so I thought let’s give it a try. I had no vision for the brand at that point; I just had faith in the product and what I was doing.

"We started getting feedback from day one. We were stocked out in two weeks and we had to shut down the store."

After that we started expanding our factory, then we would open the store for two hours in the evening from 6:00 p.m. to 8:00 p.m. and sell whatever was produced the day before. That went on for some time but it worked because retail was not developed and this was a new concept. Now you shouldn’t even plan to get into retail unless you have a 15 to 20 store model. At present, Khaadi has 40 stores across Pakistan and about 30 to 40 more coming up in the next two years. We are in 11 cities at the moment but the plan is to go into at least 50 cities of Pakistan.

A: What is your sense of how women’s ready to wear has evolved over the last few years?
SS: It hasn’t evolved at all. What are we looking at? Defence in Karachi, Gulberg in Lahore and F-6 and F-7 in Islamabad? Is that what Pakistan is? In a population of 200 million, there are maybe one or two million ready to wear customers. It has just started if you ask me.

Everyone has been talking about prêt but have we even gone out of Karachi or Lahore? And let’s look at Karachi itself, because we recently did a very extensive focus group and they have confirmed what we have been saying which is, go out to an area like Gulshan or Hyderi and see if the prêt market has even started there. I don’t think retail has evolved. Yes, retail has started to evolve but there are still too many mom and pop shops around. As organised retailers we are not even two percent of the market and out of the two percent, maybe half a percent of the entire retail spending is spent on prêt. The fabric market is still humungous and there is no comparison between fabric and prêt.

A: What has brought about this current boom in prêt?
SS: The time factor. Why would you want to buy prêt? Either you have the time to go to the tailor or you don’t. When you are a working woman you need quick fashion. It is not about being trendy or anything like that, it is all about time. If 90% of women start working in Pakistan, the unstitched market will finish.

A: But women were working 10 years ago.
SS: Yes but 10 years ago there was no retail, just high end stuff. So there is really no comparison. If you wanted to buy something ready to wear, you would go to a designer once a year. Now it is affordable, it is a commodity.

A: Are women in the smaller cities and towns of Pakistan ever likely to adopt prêt?
SS: It will be a cultural change because buying unstitched fabric, designing it and giving it to the tailor is a hobby for women in the smaller cities. So you are telling us to change their habits and it is not going to be easy.

A: So it is not about the price in those areas?
SS: It has nothing to do with price. Price is important but at the moment I don’t think it is a major factor. Even if I were to start retailing an unstitched suit for Rs 2,500 and a women’s kurta for Rs 300, they would still go for the former. And we see that in Khaadi stores too, in the smaller cities we sell more unstitched whereas in the larger cities, prêt is the big seller. In the future we are planning to go to areas like D.I. Khan, Murree, Okara and Swat but I know that 95% of our sales will be unstitched cloth. These are the areas where it will be impossible for a brand to go and sell a kurta. I am now seeing prêt and unstitched as two separate business models and we are structuring the company in such a way that we have different teams working on each area.

Only 10 to 15% of our customers buy both ready to wear and unstitched, otherwise it is either this or that.
Only 10 to 15% of our customers buy both ready to wear and unstitched, otherwise it is either this or that.

A: And yet most brands tend to bifurcate by age, targeting prêt towards young people and unstitched cloth towards older women.
SS: They could be right but I think they are very new in this business and they still need time to learn. Urban and rural is a big phenomenon in Pakistan and we have to understand that. The FMCGs and other sectors have understood it and that is why they have been successful. The retail sector will change the dynamics of this country but it is going to take time. It will be 20 to 30 years before it happens; it will be a very slow process. We need about 10 malls the size of Dolmen for it to change.

A: Another problem with the newer brands is that they are not distinctive in any way.
SS: They are all looking at Khaadi and there is nothing wrong with that. We look at international brands and how they do their retailing. But the sad part is that in the local market no one is trying to come up with their own identity; I can tell if someone is wearing my brand but it is becoming very hard to differentiate between other brands. I doubt that it is going to happen in the near future. At Khaadi, we are trying to differentiate but we cannot change it completely because our customers have certain expectations.

A: Which international brands do you look at?
SS: I look at Zara very closely; they do high street fashion and it is absolutely fantastic. I like Paul Smith’s style of retailing a lot.

A: I believe you are planning an expansion based on the Zara model.
SS: The model that we are about to make in the next one year or so will be very difficult for other brands to follow. We are going on to large format stores that will be five times larger than our regular stores; they are the size of any Zara store in the world.

We will open our first store in November and we have signed four more. We have created certain volumes where we can sustain large format stores. When we opened the Dolmen Mall Clifton store four years ago, it was four times bigger than our normal store and that changed everything for us as a brand. And now we are doing the same thing all over again, so you never know what will happen four years down the line. The way I look at it, all the big malls that are coming up will only have one big store or a maximum of two. Now if we take up those stores then Khaadi will be the first to go in for large format stores and we will always have that advantage. That will set us apart from the competition. Now if other people come into this market and say they want a big store because Khaadi has a 25,000 square foot store, it will not work for them.

All the new malls that are coming up in the next few years will have one of those stores and we have taken all of them. Our biggest problem right now with the kind of store we have is that it is too small for us. But the entire retail format, the retail culture will change after we open our store. Maybe two years down the road I may start looking at IKEA as inspiration and then I will want my stores to be that size.

A: There is this perception in the market that Khaadi has slashed its prices.
SS: We have not increased our prices but we have not slashed them either. As the business grows bigger it has become price competitive and we have tried to pass it on to the consumer as much as possible. Were we to increase our prices by 10 to 15% the competition will be most relieved because right now they have to match our prices. The prices could increase just a little but right now I think it is better not to. We are the best priced in the market, and in such a small category it is about making things affordable. We are in a country where the good things, like fashion, have to be affordable. What is the per capita income in Pakistan? We have to look at these things. We want to become a national brand; we don’t want to be an elitist brand. This is what Zara’s success is based on; they try to make clothes for everyone.

A: How many new designs do you roll out each week?
SS: It is not about new designs every week for us because we are going into collections. So for this autumn/winter, we will have four prêt collections. From October we will do a new launch every week when a new collection comes in and each collection will have 40 to 50 designs. So we are talking about 200 to 250 designs per season in the prêt category. In unstitched we will probably have around 300 to 350 designs. Khaas will be about 30 to 40 designs per season. Kids is the next big thing on the cards and we will have about 200 to 250 new designs there.

A: Has it been difficult to find good designers?
SS: My wife, Saira and I are both from a design background so it has been the easiest thing for us and I think that is what sets Khaadi apart. The most successful brands in the world are those where you have a bit of both: design and business. Right now we are competing with all the textile giants of Pakistan, so it’s Khaadi versus Gul Ahmed, Al Karam, Nishat, Sapphire, and so on. They have years and years of experience but maybe the design element is missing. And I think we are more successful because unlike them we are not vertically integrated.

A: Apart from these factors, what sets Khaadi apart from other brands?
SS: I think the quality of fabric is probably the same across the board for the major brands. As a company we never compromise on quality to cut costs but because we are not a 100% integrated unit, there are certain restrictions. But we have created a lab to test every fabric for colour fastness, tearing, etc., before using it and we are enhancing it every year.

I want to have the best lab in Pakistan and we will be spending even more on that this year so that quality control can become even better. We want to create an in-house quality assurance system that can be challenged anywhere in the world. The real difference right now is our pricing strategy, the retail experience that we give and our design.

We also have some phenomenal human resources with us. I want to make Khaadi a multinational out of Pakistan and I want to put in all the systems that any multinational would have – and it has to be run professionally. I think we are going in the right direction and in a year or two we will be a retail company run completely by professionals.

A: Is the boom in prêt likely to have an impact on the overall textile industry?
SS: I think the retail market is too small. It would have to grow thousands and thousands and thousands of times to have an impact. How many brands do you think there are in the market? 10, 12 or maybe 15? You would need to have at least 1,500 brands to make an impact, but Pakistan has the appetite to have 1,000 to 1,500 brands. But everyone needs to have their own focus and business model, you cannot keep replicating someone else.

A: Where do you think ready to wear will be five years from now?
SS: Retail is going to grow very fast but ready to wear will not grow as fast, although it will grow maybe five to 10 times what it is now. But that is nothing. If now it is two to three percent of the entire market, we will go up to maybe 10%. In the organised sector it is a big chunk but I wouldn’t just look at the organised sector. If and when you go to Tariq Road, Liberty Market or any other key retail area of Pakistan and you see more brands there, then there will be real change.

Shamoon Sultan was in conversation with Marylou Andrew. For feedback, email