Indian customers are alluring, but cash management is a challenge.
Swapan Kataria sits in his south Delhi warehouse, surrounded by large bundles of sofa cloth and other upholstering material in an array of wefts, warps, colours and textures. Sourcing such material from around the world, the entrepreneur built a successful company in India by rearranging the business model he invented for the market in Canada, which he made his home in 1998 after being raised in India. He now divides his time between the two countries.
In Toronto, the 39-year-old Mr. Kataria sold home furnishings made in India, China, Turkey and Mexico to middle-class consumers.
In India, his firm Wow Textiles, owned by his Canada-based Royal Designs Pvt Ltd., supplies exotic, expensive furnishing cloth from locations such as Spain, Italy, Belgium and Canada. It costs 4,000 to 5,000 Indian rupees ($92 to $115) a metre.
Mr. Kataria says even if only 2 per cent of India's billion people are considered affluent enough for his goods, that amounts to 24 million people, not far short of Canada's overall population of about 32 million.
Labour costs are low in India, and customers change their furniture fabric about once every five years, while in Canada the time frame is every eight or nine years. Also, more Indians (60 per cent) do re-upholstering, compared with 25 per cent in Canada, Mr. Kataria adds.
Wow's furnishings now sell in 39 Indian cities, and especially well in small towns with affluent customers.
“The biggest thing for them is to have a global presence in their homes,” says Mr. Kataria, detailing a market where imported fabric can act as a local status symbol, like owning a BMW or a Mercedes Benz.
He cites cities such as Kanpur, Aurangabad, Kochi and Nagpur – mere dots for distant businesses in Canada – as potential centres where wealthy customers would be happy to pay good money for high-quality material.
In 2008, Mr. Kataria started out with the aim of $1 million in annual sales, and he claims he has already crossed the $2-million mark.
But it's not easy.
Dealing with retailers in India can be difficult because banks and small and medium enterprises (SMEs) have poor linkages that makes supplying on credit risky.
“There is no credit rating system in India for SMEs,” Mr. Kataria says. “As many as 32 of my 57 accounts are on 100-per-cent advance because they have delayed payments.”
Banks will not help you carry the cash load enough, Mr. Kataria says. “In India, the credit risk is of the business owner.”
In fact, it is common to have business deals done for cash, even with large transactions.
Mr. Kataria, who is also India director for the Indo-Canadian Chamber of Commerce, says the culture of banks and businesses in Canada is significantly different, because there is an emphasis on a history of transactions that generate relationships and ensure adequate working capital is available against receivables.
As sellers in India cannot take timely payments for granted, it often pays for a business to make allowances when managing its cash flows. Good relations with bankers or trustworthy links with customers are always an asset, but it might take an extra dash of effort in India to make sure cash flow from business and credit links with banks run smoothly.
Mr. Kataria says he brought back with him to India some smart “distribution thinking” he learned in Canada and adds that understanding local customers as well as the financial culture has helped him find his footing to expand into a vast market.
Special to the Globe and Mail
Narayanan Madhavan is associate editor of the business news pages of Hindustan Times, a leading Indian daily newspaper. He has previously worked for Reuters, the international news agency, as well as The Economic Times and Business Standard, India's leading business dailies. Though focused mainly on business and economic journalism with a strong focus on information technology and the Internet, he has also covered or written about issues including politics, diplomacy, cinema, culture, cricket and social issues. He has an honours degree in economics and a master's degree in political science from the University of Delhi.