'I want to be the number one salon in the world by 2020'

Nivedita Jayaram Pawar

He calls himself a 'Southern Wonder', having found much of his success in the 'real India'. But that isn't stopping C K Kumaravel, co-founder of Naturals Salons, from dreaming big - to become the number one salon in the world by 2020. What started as a small beauty parlour on Khader Nawaz Khan Road in Chennai in 2000 has grown into 335 salons across India. And his secret to success is the franchise model. In an interview, the 47-year-old entrepreneur reveals what it takes to have staying power in the beauty business. You launched Naturals to keep your wife Veena busy. What was your initial investment in the first salon? We invested Rs 20 lakh in the first year and continued to invest Rs 10 lakh every year for the next three years. In the first year, business amounted to Rs 20 lakh but we sustained a loss of 10 lakh. The second year, business was Rs 30 lakh and the loss Rs 5 lakh. The third year was better and business was worth Rs 40 lakh and we incurred a loss of Rs 3 lakh. The business started making money in the fourth year.    You experienced a rough patch initially.

After opening the second salon, banks refused to lend us anything more than Rs 2 lakh. Finally, the 54th bank we approached - Indian Overseas Bank - lent me Rs 60 lakh. With that, we opened the third, fourth and fifth salons. It took us 15 days to simply get an appointment with a L'Oreal stockist. We were too small for them. No one in the industry took us seriously or even considered us part of the industry. It also took us a long time to understand exactly how this industry worked and to get the pricing, training, customer retention and products right. It took us six years to launch six salons. But I am glad we learnt the hard way and didn't hire a consultant.

Where did you get the money to launch the first salon?

It came from the three Fs - Friends, Family and Fools (laughs).

What did you learn from the first salon and how did you incorporate that in the second one at Anna Nagar?

The biggest learning was the fact that using natural products was not a scalable model. Since we are called 'Naturals', we tried using only natural products in our salons. For instance, you need a certain ripeness of papaya to be able to use it for facials, or else it doesn't work. We learnt that the hard way. So after the first year, we retained the name Naturals but moved away from natural products. We also tried the Beauty on Wheels concept, where we put a salon in a tempo. We took it to wedding venues to service brides and grooms. Although it gave us tremendous visibility in the media, it was not accepted by the people. They didn't want the bridal couple to be attended to in a van. It was a novel model but it wasn't a scalable one.

We then tried the Dial A Beautician model, where we sent our therapists to the client's homes. The problem was the time taken to travel to the client's home and back. At times, the therapist was also made to wait and the customer was not willing to pay a premium for services at home. After trying all these models, we zeroed in on the franchise model.

C K Kumaravel, co-founder of Naturals Salons

You have practically perfected the franchise model. Why is this model successful?

When we first advertised for franchisees, we received 340 enquires but each one of them fell through as they did not want to invest in a new company. Moreover, the salon business was considered taboo. We then approached friends and relatives for franchisees and invested 50:50 in each franchised outlet. This worked and, in just one year, we were able to scale up from 6 to 13 salons. Today we own only 5 salons and have 330 Naturals franchise salons.

What is the average investment in each salon? What is the expected ROI?

The earning is around Rs 7 lakh per month from a 1,500-sq ft salon. The investment is Rs 45-50 lakh (including rental deposits and working capital for the first six months). Breakeven takes a year.  You are present in smaller towns such as Cuddalore, Tirupati, Thanjavur, Salem, Ranipet, Pollachi, Tirupur and Nagercoil. What's the scope in these markets?

Rural India is hungry for brands. They have the money but no avenues to spend it. Television and cinema have already enticed them with better lifestyle options. We have seen huge business from small towns like Nagapattinum, Ellore, Nashik, Aurangabad, Latur and Bhubhaneswar. What's even more surprising is the number of men coming in for services. There is zero competition in these towns. You can even make a few mistakes here as the market is in a forgiving mode. The Laturs and Ranchis is where the market is.

You entered the luxury segment with Page 3 in 2010.

We realised that Naturals was getting slightly 'rough' for some customers, who were slowly moving away. So we launched Page 3 to cater to the luxury segment. We have four Page 3 salons now. We also have another brand, Naturals Lounge, a bridge between the mass market brand Naturals and the luxury brand Page 3. How big is the hair and beauty segment in India? And what is the growth rate?

The organised sector is Rs 10,000 crore and growing at 30 per cent growth in the unorganised sector is slowing.  What is your ultimate dream for Naturals?

I call myself a 'Southern Wonder'. Now I want to be a 'National Wonder'. I also want to be the number one salon in the world by 2020 with 10,000 salons. We will be launching 20 salons in the UAE in 2014. We will also be launching in Sri Lanka, Bangladesh, Singapore and Malaysia. We want to be the number one salon in Asia by 2020. There is a salon chain in the Philippines and Cambodia with 605 salons. We want to cross that mark in 2014. If I could reach 335 salons with practically no funds. I could be the world number one with the support and know-how I now have.

The beauty business is very competitive. What are your strategies to beat the competition?

The problem is there is not enough competition. International brands do not pose a threat as they don't understand the Indian market. They believe India is just Delhi and Mumbai. The real India is elsewhere.

Finally, what is the company's revenue at present? And what topline are you looking at?

We will be finishing at Rs 250 crore this year. I don't set financial targets any more. My goal is to create 1,000 women entrepreneurs, 3,000 salons and 50,000 jobs. Money has lost its charm for me. 

Key Learnings: The Naturals Way

* Advertising doesn't work in this business; word-of-mouth does

* This is a loyalty-centric business and people tend to retain their hairdressers for years. Distributing gift vouchers is the most effective way to lure new customers * A brand ambassador helps. After Genelia D'Souza, we have signed on Kareena Kapoor. The campaign will be launched on January 26 * The Indian market is not in the metros; it's in the tier 3 and 4 towns

* Unless you are customer-oriented, you cannot scale up  * Use franchisees as partners. We work on a flexible royalty model, which starts only after the franchisee starts making money. After that, the royalty fee increases gradually

* Look at the salon business as a long-term business

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