He cracked the whip in the West Asian credit market

When S. Sundar Rajan joined the Dubai Furniture Manufacturing Company (DFMC) in 1999 as its Chief Executive Officer (CEO), he was entering an organisation making mattresses and not furniture. The company had started its operations in 1993 for producing the King Koil American brand of mattresses. Beginning with just 20 mattresses a day; today it rolls out 800 to 1,000 premium and ultra premium mattresses a day from its 2,00,000 sq ft facility in the Dubai Investment Park. Along the way, in 2001, Sundar Rajan also brought on board the ultra premium brand of Serta mattresses and today the company holds the numero uno position in the West Asian market.

But its success story, which hit a rough patch in the beginning, is a tale of determination and grit as well as huge risk taking, which Rajan, a graduate from the Jamnalal Bajaj Institute of Management Studies with former stints at Kurlon, MRF Funskool and Dalmia (Dairy) Industries, took.

Seated in his facility in Dubai, which has adopted modern technology, mainly from Europe, to produce perfect “sleep solutions”, he recalls the 20-year journey of the company, and the strategies it used to grow to its present status as the market leader in the mattress and other accessories segment, with annual sales of Rs 200 crore.

“Unlike India, where the credit period for any product category is usually 30 days, West Asia is a credit-oriented market, where on paper the credit period is 90 days, but the actual payment comes within 150-180 days.”

Dealer-driven

This was the scene when he joined the company in 1999, “the volumes were low and we were driven by dealers, who dictated the terms and were a big obstacle to our growth. For every new product we launched they expected us to take their approval.” Further, each would dictate his own specifications; some would say the mattress was too firm, others would find it too soft, yet others would dictate the price and refuse to take any price hike. That, too, in a scenario where the factory’s rented premises battled with stiff rental hikes of 30 to 40 per cent every year.

Rajan, who had dreams of doubling and even trebling the company’s business, soon realised that he couldn’t allow dealers to dictate to him how he should run his business. If he was to take his orders from the dealers, he couldn’t even grow at 30 per cent. With competition also growing, within six months of his joining he had to decide whether to adopt a totally new strategy or close down the business.

Entering battle zone

Rolling up his sleeves, he first took on the dealers and decided that he would give them zero days of credit. “All the dealers said you are from India, you don’t know the West Asian market, this will not work, so take back the changes, and let’s do business as usual. But I was adamant because I knew this was not the way.”

Next the dealers went to his owners (DFMC is owned by the Arenco group) and complained that at this rate their business would close, “but they stood by me and told them to speak to me.” The worst part was many within his own staff - then 60, now 200 - doubted his strategy, and some left. So he came to India and recruited people, including MBAs from premier Indian B schools, and “people who had earlier worked with me and who I could trust to work the way I wanted. As a team we started turning the market from 150 to 0 days credit.”

Some dealers left, others joined the competition, but the more loyal ones remained. It took Rajan three years to bring it to zero day’s credit. Even more amazing, he moved to advance cash payment. “Today we are on 100 per cent advance cash payment and we are the only company in West Asia operating on advance payment not only in retail but also hospitality. In three years, liquidity which was stuck in the market we saw in our bank account,” he grins.

In 2000, to register even faster growth at a time the company was launching new products, he also took the decision to start company retail outlets. As expected there was a storm of protest at this major shift. “Everybody said you can’t compete with your own retailers, they will leave you and you’ll be doomed.” But he went ahead laying down guidelines on how a retail showroom should look… the décor, lighting, training showroom staff on handling customers, installation and after sales service.

Rajan ensured product differentiation between the company and dealer showrooms to avoid direct competition. New products were launched and the first showroom opened at Dubai’s Zabeel street. But in the first months there were zero sales. “Our competitors went to our dealers and said they will now open more showrooms. We are here to give you more credit, free display, everything you want. They did enough to poison the dealers and our volumes started dipping because the dealers were losing confidence in us,” he recalls.

So the CEO planted himself at the showroom to see customer reaction, and why they were not buying. Slowly the first sale happened. “We delivered the product the next day in style, the delivery guys were trained how to thank the customer, install the product, and we gave a gift too.”

When contacted the customer said he was very happy both with the quality of the product and the service. Soon word of mouth spread and in five months they had broken even. That gave him the confidence to open more showrooms. Today the DFMC has 17 showrooms in the UAE and 50 in West Asia.

This approach and strategy made them the market leaders in West Asia with 60 per cent of market share in both King Koil and Serta brands. “Today competitors are following us in opening showrooms. And in the first decade we have grown by six times,” beams Rajan, who formally launches his products in India later this month.

But he hasn’t stopped innovating. The company has set up its own megafoam manufacturing plant using German technology,” says Rajan, adding that megafoam is environment-friendly and hence better for health. They also make a unique baby mattress…. read about it soon in BrandLine!

As I dig into delicious kheema at Sanjeev Kapoor’s signature restaurant in Dubai, and Rajan, originally from Tamil Nadu, savours his bhendi-baigan, recalling the earlier days, he says, “You see a different face of mine today; the smile you see today had then disappeared. I knew if I fail I’d lose my job. But I had no choice because we were not growing. More than the credit, the decision to go into retail paid big dividends. Today 40 per cent of our retail business comes from company showrooms.”

>rasheeda.bhagat@thehindu.co.in

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