Ravi Navlani talked to BIGMOSCOW magazine about startup capital, and business as a knowledge game.
— I was born in India and grew up in Dubai, but all my life I have been attracted to Russia in some strange way. I felt a certain spiritual connection with this northern country. Here many religions, cultures and ethnic groups were bonded together in a strong fusion. The first time I came to Russia, it was to visit a friend who had built up a business here, and I realized at once that this is a country of huge opportunities. Our Surya Group company, which was founded by my father in the nineties, delivered household equipment and textiles from Dubai directly to Russia. I was the youngest of three brothers in the family, I was raring to go, I wanted to prove to my parents that I was worth something, and at 21 I went to Russia to develop the family business. I didn’t know the Russian language or anything particular about the country or its laws or local business nuances. But I had a great dream: to create my own enterprise in Russia and to become successful.
— Did you carry out any market research beforehand?
— It was not necessary. After the collapse of the Soviet Union, the production of fabrics in the country virtually ceased. Ninety-five per cent of all fabrics used were imported. At the beginning of the 21st century, all our goods were literally sold from the trucks. It was at that time that a middle class began to appear in Russia. We sold goods by the wagonload, thus helping to develop homeland production facilities and the new brands appearing in the market.
— How difficult was it to register your enterprise?
— I opened it in three days. Contrary to the general misconception, there is much more bureaucracy in India than in Russia.
— How did you select storage and office premises?
— Many companies supplying textiles were based on Selskokhozyaystvennaya Street in Moscow. That was where we found the premises for our first office. With no Internet, goods were advertised through a specialist journal. Clients rang us, came to the base and selected their fabrics. It was not hard to lease storage premises with an area of 500 square metres.
— What was your initial capital?
In Russia, the Moscow region enjoys a very great demand for quality clothing, including work clothes for women, and casual and eveningwear. Over the last decade, the rate of growth for all our customers, who include manufacturers of school uniforms, outsize clothing, evening gowns, and business attire for women, is in double figures.
However, the current state of the market with the rouble’s low exchange rate makes things difficult for clothing importers, but with this, businessmen should look upon it as an opportunity to increase the volume of domestically produced clothes. A large number of well-known clothing brands originally started off as modest operations. Gradually, purely through their own efforts, they grew into large companies. The times we are living through are ideal for such independent growth. We are witnessing in Moscow the sudden appearance of very small and medium-sized clothing manufacturers, but the support they receive from society is in general a lot less than that which similar companies receive in the West.
Start-up costs for a business in Moscow can vary from very high to middling. Setting up a display area for fabrics requires sufficiently large premises, as well as equipment and staff, the scale of which depends on the size of the company and the entrepreneur’s management skills. A good move would be to set up a company internet portal for your corporate clients, but even if your company has online resources, a business involved in the textile trade should always have actual physical premises. Hiring qualified staff prepared to work under a results-based bonus scheme is no easy task in Russia. The best workers don’t usually enter our sector, which means that employees have to be “hand-picked”.
The goods go at first to the warehouse, and then on sale: it is a very primitive way of running a business but a textile enterprise can still operate successfully in this manner in a business environment such as the one in Moscow or Russia. The turnover cycle from the initial order to dispatch can be from 50 to 100 days, so you will have to invest capital in stock. A business which has settled its payment obligations should have paid for itself and started to yield dividends within 1,000 days. That’s how it was in 2001 when we set up our business, although these days it might take more time than that.
Russia is a country with a rich culture and traditions. The present crisis will come to an end and bring a brighter future for us and future generations. Businessmen today should be aware of the role they are playing. They cannot be mere machines for receiving profits: they have obligations towards both society and the world we live in. I personally believe that the fashion industry is moving in an increasingly individualistic direction, and that the only way to boost domestic production is to develop an individual approach to the client. I am certain that the fashion market will grow due to the fact that Russians, Muscovites in particular, take the matter of fashion very seriously indeed.
— We had a strict upbringing in our family. My father said: “You won’t get anything just like that. You are 21, we are taking a risk, so we’ll give you a loan of $500,000 at 40% annual interest.” In 2001, this was not a bad investment. As a pledge that I would fulfil my obligations, I took out a policy on my own life with my father as the beneficiary.
— What can you say about the Russian mentality?
— In England or India, people are very diplomatic, they smile at you, say certain formulaic pleasant words, behind which there is very often absolutely nothing. There are no smugness or pretended emotions in the behaviour of people here. If they smile, they are really pleased to see you. If they ask how things are with you, they are really interested. This was in sharp contrast to the world I had come from. I had to get used to the sincere display of feelings. To many foreigners, the Russians seem very reserved. But if you really make friends with someone, that person will become virtually a brother to you, will come to help you at any time, will give you his all. And such a friendship usually endures for many years.
— How have Russian customers changed over the years you have been working in Moscow?
— At one time we used to sell a lot of polyester. Few people understood what was fashionable and what was not. They all dressed in the same way, clothes were usually in dark colours. I remember the days when many Moscow women used to wear only black synthetic skirts. There was no design, no patterns, no bright colours. Gradually Russia’s economy began to grow, and the standard of living rose with it. Russians’ wages became sufficient for them to buy more clothing and footwear. They began to follow trends in fashion. Many new Russian designers and brands appeared which were not there ten or fifteen years ago. Now Russians greatly appreciate quality. Fifty-four per cent of people aged from 25 to 64 have higher education. Russians want to understand what they are paying money for. In India, for example, people economize, so they prefer cheaper fabrics, often ignoring quality.
— How hard is it to find clients in Russia?
— My father always says: “You may earn a million dollars today, lose it tomorrow and get it back after a few days. But if you lose face, you won’t get it back.” We value our reputation above everything. This is why we work with people for the long term, and our business model is based on relations of trust. The client is God for us. Beginning from 2001, and for the following eight years, sales volume increased every year by 50-70%. We now sell hundreds of thousands of metres of various fabrics every month. We were very lucky in finding reliable long-term partners. After all, business is a game of knowledge. The one who knows the most is the strongest.
— Are Russian partners reliable?
— What about cheap textiles? Are they competition for you?
— There are grades of clothing fabrics: economy, medium, medium plus, premium and de luxe. We are right in the middle. We supply fabrics of the medium and medium plus grades. Everything that comes from Vietnam, Bangladesh and Sri Lanka is economy grade. Such fabrics are often sold not by the metre, but by the kilogram. So you might say that each company occupies its own niche.
— What do you think of the activities of Russian textile factories?
Russia’s woven and knitted fabrics market has a very interesting structure. After the collapse of the Soviet Union, production of raw materials for light industry came to a virtual standstill. But historically, people here have always loved making things themselves. Therefore 100% of raw materials and accessories are imported. It’s an interesting fact that there are a large number of factories producing finished products, but that hardly any cotton is grown, and there are no enterprises which process it. I see this as a massive market with great prospects. For what we make, we also import 100% of our raw materials from abroad, and buy one or two things from the Republic of Belarus.
In Russia, it doesn’t require a great leap to enter the wholesale fabrics market. If you have good, reliable suppliers in India and China, and you negotiate favourable terms with them, then you can create a modest working warehouse, and import the rest to order, as most suppliers do. Hardly any equipment is required, other than that for the warehouse. Costs can rise with sales and marketing; now most customers look for raw materials on the internet. You need a good website and web promotion, as well as an eager sales department. Overall, your project can be up and running for under $100,000.
I see the prospects for this market as being enormous. Due to the reduction in clothing imports and the trend towards import phase-out, a greater number of manufacturing companies will emerge, and the demand for quality, inexpensive materials will grow. At the moment, such can only be found in Asia, which is why companies supplying raw materials will flourish. The only thing that would change the situation is if Russia begins to develop its own core of fabric producing enterprises.
— There are many factories in Russia which produce fabrics for the home: those which are used for blinds, curtains, bedspreads, plaids and covers for decorative cushions. But in the ready-made clothing market, producers such as China and Turkey have very few competitors. The companies supplying fabrics to Russia include very few with international management. This is a strong point of the Surya Group.
— Tell us about fashion trends. What fabrics are most in demand in Russia now?
— On the whole, clients have become more demanding. People travel to other countries more. Fabrics with abstract patterns and natural fabrics are in fashion. For example, to meet the requirements of Rospotrebnadzor, cloth for school uniforms must contain at least 35% of natural fibre.
— From which countries are you currently buying fabrics and furnishings?
— Our main suppliers are in China, India, Turkey, Korea, Taiwan and Indonesia. Each season we compile a new selection. We cooperate with 115 factories throughout the world.
— Do you supply both wholesale and retail?
— Our company has four offices in Russia and one each in Belarus and China. For fabric deliveries alone, about 500 clients actively cooperate with us. It is worth making special mention of the fact that we are beginning to develop actively in the retail trade. This is a Surya Group startup which appeared two years ago in response to the huge potential of the retail market. We also have the concept of online sales, and combining offline and online sales for our partners.
— How many people are working in your company in Russia now, and what is their average monthly salary?
— We have 75 employees, On the whole, our staff receive a salary higher than the average wage for Moscow (56,000 roubles in July, according to research by hh.ru) and higher than that of our competitors. I am very proud of our team. I like it when people work not because they are forced to, but in pursuit of their own dream, striving in every way to achieve what they have thought up.
— How have the sanctions against Russia affected your business?
— I am convinced that as soon as a problem appears, an opportunity appears too. If certain companies and states look sceptically on Russia, we, as foreign investors, look for ways of making use of new opportunities here. Sanctions help us develop the market. We give some kind of discount to our clients and they reduce their part of the profit. This evens out the influence of currency rate changes.
— How do the police in Moscow treat foreigners?
— Previously, if a policeman saw a foreigner, even from a long way off, he would turn his car and stop him to check documents, insurance and registered place of residence. I, for example, was always being checked. Yet for the past few years, I have not been stopped even once. But anyway, I have now learned the language and understand the mentality, so I know very well how to talk to the guardians of law and order.
— You speak excellent Russian. How long did it take you to learn the language?
— I am sure that the secret of success is simply practice. I talked a lot with partners, clients and friends. Apart from that, I was lucky in having a natural talent for learning foreign languages easily. There are businessmen who came to Moscow at the same time as I did who have still not been able to master it. I can speak Hindi, Sindi (the native dialect of my ancestors), English, Arabic and Russian. But for some reason it is my knowledge of Russian which has been of the greatest help to me when I travel about the world. In any country, I meet people who speak Russian.
— Is your wife Natasha Russian?
— No, she is Indian. She was born in Hongkong and graduated from university in England. It just happened that her parents gave her a Russian name. I now realize that there was a purpose in my meeting her.
— Do you rent an apartment in Moscow or have you bought a place of your own?
— From the security point of view, ever since I came to Moscow in 2001, I have preferred to rent an apartment in a diplomatic block on protected fenced-off territory. Unfortunately these apartments are not for sale.
— Where do you like to spend your leisure time in Moscow?
— I am very fond of walking in the grounds of the Danilov monastery.
— What makes you personally most proud?
— I am proud of our active support for Russian children’s homes. I am very glad that the staff of our Russian branch are actively involved in various social events and actions. For example. Instead of a corporate event for staff in honour of the 14th anniversary of the founding of our company in Russia, we organized a party at No. 19 Children’s Home. The smiles of the children give us energy for new successes in business. The global mission of the Surya Group is to make the world a better place.
— What is the main advice you would like to give to foreigners who want to open a business in Russia?
— Don’t believe all the negative information about Russia you find in the press. You won’t understand what this country is really like until you come here. There are more opportunities here, sometimes it is easier to manage a business than in the West, and people understand each other instantly.