An evening with CK Kumaravel and K Veena, founders of Naturals Salon

On Friday, Sep 3, we had a fascinating webinar by CK Kumaravel and K Veena, founders of Naturals Salon.

Introduction

With more than 600 salons spanning across the country, Naturals has become a trusted name in beauty and wellness for customers in India. The Chennai-based salon chain has also gone international with its operations in Dubai and is now seriously looking at the US. Naturals has converted what was considered a taboo activity (Barbers are looked down upon in India.) into an aspirational, lifestyle business. The founders aspire to make Naturals the number one salon in the world.

Naturals started out as a standalone salon in 2000. What set Naturals apart from other salons was its focus on offering sophisticated but affordable hair and beauty services. Currently, Naturals operates through its four signature brands namely, Naturals Unisex Salons, Naturals W, Naturals Lounge, and Page 3 Luxury Salons.  

After a difficult initial period, the operations stabilized and the company set its eyes on expansion. Gradually, the company got its franchising model right. Today, Naturals boasts of over 700 salons across India.

The salon and beauty market in India has been witnessing a steady year-on-year growth at 25-30% with a CAGR of 18.5 %. While the industry is growing at the rate of 30-35%, Naturals is growing at 50-60%. Naturals has become India’s No.1 hair and beauty salon.

Purpose

Behind the company’s rapid growth and market leadership, is a strong corporate purpose shaped by Mr Kumaravel’s mother, RC Hemalatha. When her husband died in 1979, Mrs Hemalatha told her six children that from then on, she would be both father and mother to them. She lived life to the fullest. Not only she did look after her children well and helped them to succeed in life, but she also ran a school, a bakery, managed agricultural activities, ran a factory, and pursued her passions of singing and dancing. Mrs Hemalatha demonstrated what a woman could do if she was given sufficient freedom.

Naturals believes in financial independence for women and has empowered 300+ women to become entrepreneurs in the past 16 years. The dream of the founders is to create a housewife-free India, where women are encouraged to earn their living by pursuing their passion. By 2025, Naturals aims to set up 3000 salons, empower 1000 women entrepreneurs, and create 50,000 jobs. The founders believe that there is no better style statement than standing on one’s own feet.

Learning about entrepreneurship

Mr Kumaravel hails from Cuddalore, a small town near Pondicherry. He learnt the basics of entrepreneurship from his father, who would buy pharmaceuticals in bulk, repack them in smaller sizes and then sell to pharma shops. Once while travelling to Singapore, the shampoo bottle his father was carrying in his suitcase broke and spoiled all his clothes. Instead of complaining, he looked at it as an opportunity. He applied the principle of his pharma business to shampoos. That is how Velvette shampoo was born. He made his own packing machine and offered the shampoo in small affordable packets or sachets that even poor people could afford. Mr Kumaravel’s father’s philosophy was what the rich people could enjoy, poor people should be able to afford. The Velvette shampoo was later voted as one of the 50 revolutions which changed post-independence India. Mr Kumaravel summarized that the ability to think differently and convert a problem into an opportunity is the essence of entrepreneurship.

Inspiration from Gandhiji

Mr Kumaravel was not a serious student while studying at PSG, Coimbatore during his college days. Once he and his friends decided to listen to a guest speaker, Mr MS Udayamurthi who had come to talk about Gandhiji. On Gandhi Jayanthi, we hoist the flag, distribute sweets, say Jai Hind and go home and enjoy television. The Americans look at Gandhiji differently. On one of his portraits in Washington, it is mentioned,” A single man can make a difference”. While Americans are drawing inspiration from Gandhiji, we have been distancing ourselves. After all, he is a Mahatma and we are only ordinary Atmas! The guest talk had a powerful influence on Mr Kumaravel. He feels that all of us should write below our own photo, “A single man (or woman) can make a difference.” When we see this daily, our subconscious mind will make us gradually believe that we can indeed change the world with our efforts.

Venturing out on their own

Mr Kumaravel joined the family business. His brother Rajkumar who managed Velvette Shampoo and Ranganathan who managed Cavin Care would often be dismissive of the young Kumaravel’s ideas. This prompted Mr Kumaravel to start out on his own. His message: We can either discuss or decide. Usually, the people who discuss a lot cannot take a decision. Mr Kumaravel’s preferred style is to decide and move forward rather than spend an enormous amount of time discussing.

After he ventured out on his own, Mr Kumaravel embraced a key principle that he had learnt from his brothers: All the progress in the world is made through unreasonable people. The size of the dream makes the difference between ordinary and extraordinary lives. The rain will fill the vessel we keep outside. It is upto us whether we want to keep a spoon or a large vessel to collect the water. As much time and energy is required to lead an ordinary life as an extraordinary life.

The first venture, Raaga Herbal products did well for three years but then declined over the next three years. At this juncture, Mr Kumaravel could have gone back to his brother, Mr CK Ranganathan as advised by his mother, but he decided to stay the course. As he put it, the choice was between a comfortable life and an exciting life. He chose an exciting life. He and his wife, Veena hit upon the idea of starting a salon business.

Starting the salon business

For an entrepreneur, irritation can be the biggest source of energy. The main irritant in the salon industry those days was the absence of a good quality affordable salon. There were beauty outlets in 5-star hotels which were intimidating to the ordinary customer and the local barber shops which maintained poor standards of hygiene and quality. There was nothing in between. The couple decided to position their salons somewhere in between. They hit upon the idea of using natural products and offer customers quality at an affordable price.

The couple did not have any prior knowledge of the salon business but nevertheless decided to go forward. Mr Kumaravel explained that knowledge of an industry is not a prerequisite to success. In fact, most of the disruptions in recent years have been caused by industry outsiders. So, they hired a senior executive from Taj Salon and this person then recruited many others.

How did they choose the name Naturals? Mr Kumaravel was fond of Natural ice creams in Bombay. Film stars would come there regularly. Meanwhile, his wife was a great proponent of using natural ingredients prepared from fruits and vegetables. That is how the brand name Naturals was chosen. Mr Kumaravel is an ardent fan of the Copy Customize Innovate framework. If there is anything good happening outside, he tries to bring it within his own business.

While Mr Kumaravel took charge of sales and marketing and business expansion, his wife handled the launch of new products and services and training. Over time, based on customer feedback and customer requirements, new services have been added to the portfolio. The company has developed a structured process for collecting feedback from customers on the floor and digitally and incorporating it in new product development.

How does an entrepreneur raise funds? Mr Kumaravel explained that there are three sources of funds: friends, family and fools. At last, they were ready to set up their salon on Khader Navaz Khan Road. Their limited ambition was to generate an income of Rs 60,000 per month for Veena. For the first 3 years, the business made a loss and friends felt they did not have the necessary luck and advised them to close the business. But the couple could sense (They were Labouring Under the Correct Knowledge. That is the meaning of LUCK for Mr Kumaravel!) that the trajectory was favourable. While the revenue was increasing, the loss was decreasing. From year 4, the business started to generate profits. By adding one more salon, the profit went upto Rs 2 lakhs per month. It was difficult to spend more than this amount. That is how business expansion became the need of the hour.

Scaling the business

When it came to scaling up the business, banks were unwilling to lend the Rs 60 lakhs they needed to set up 4 more salons. They felt that investment in a salon should be around Rs 3 lakhs and not Rs 15-20 lakhs as the couple were proposing. As many as 53 bankers refused to provide funding. But Mr Kumaravel did not give up. He drew inspiration from the book, “The chicken soup for the soul”: Some will, some won’t, so what, someone is waiting. The 54th banker the couple approached, agreed to finance the business for a very unusual reason. He felt that since the business was being managed by a husband and wife, it was likely to succeed!

Having set up 6 salons in 6 years, the business was running smoothly. Mr Kumaravel and Ms Meena travelled to London and approached Anita Roddick of Body Shop for a tie up but she felt both India and naturals were not yet ready. However, the founders learnt a lot from Roddick and decided to embrace the franchising model.

In 2007, when the founders invited applications for franchisees, they received 440 applications but only 33 people filled in the application form. Only three of them were serious and finally no one signed up. The founders realized that the investment was heavy and potential franchisees felt the promoters could not be trusted with such large amounts of money. So the founders decided that the investment would be shared equally by them and the franchisees. Gradually, Mr Kumaravel and Ms Veena were able to onboard franchisees, the number increased steadily from 6 to 13 to 27 to 58 to 110 to 190 to 270 to 310 and finally about 700 today.

Mr Kumaravel explained that the Indian middle class looks at the rich as arrogant and exploitative. Indeed, they think that the desire to be rich is itself wrong. But as Mr Kumaravel’s teacher told him, every good human being has the moral responsibility to be rich. Otherwise, money will go to

the bad people. The problem society faces is not the action or violence of bad people but the inaction or silence of good people. Money is beautiful as it gives us many choices in life. Of course, money is neither the journey nor the destination. It is really a fuel. We should not be chasing money, but money should chase us. Money is the by-product of providing a great service. We should love people and use the money wisely.

Going into rural areas

Once while visiting Coimbatore, Mr Kumaravel came across an elderly woman and two young girls who had come to visit the Naturals Salon in the city (the first salon to be set up outside Chennai). They drove down more than 3 hours from Karur twice a month to visit the Naturals salon. The woman requested Mr Kumaravel to allow her to set up a franchise in her town. Mr Kumaravel was not sure whether the small town was ready but on the request of the lady, decided to visit the town. On reaching there, he could make out that the lady came from a very rich family. There was a fleet of cars parked in the house including a BMW and a Mercedes Benz. Seeing that she could easily take the financial risk, he agreed to set up the franchise.

Looking back, Mr Kumaravel feels that he had made the same mistake as Anita Roddick! Over the years, Mr Kumaravel has come to the firm conclusion that the aspirations of people in small towns are high and there is a strong latent demand. Maybe because they do not have too many avenues to spend their money. Today, Mr Kumaravel is a strong proponent of small towns and rural India.

Later, the woman told him that she was able to make a profit of about Rs 50,000 per month. For this lady, money was not a problem at all. But she had to take permission and account for the spending to her husband and two sons, each time she took some money lying at home. Now, she had the financial freedom to spend the money the way she liked! Mr Kumaravel feels that financial freedom is the best fashion statement that a woman can make.

Women empowerment

Mr Kumaravel concluded his presentation with the statement that women are talented but lack self-belief. Women need to start thinking that they are responsible for their own lives and their own success. Men and women represent the two wings of society. It is unfair to confine women to household chores alone.

In Italy, Michaelangelo was working on a large block of marble. When asked what he was trying to do, he explained that he was trying to bring out and reveal to the world, the angel lying inside the block. There is an angel within all of us. Today Indian women do not have financial independence. But once they realize their potential and achieve financial independence, the world will change beyond imagination.

Beauty is not how we look. It is about self-confidence, passion and energy. Every Indian woman is entitled to that.

Women are intrinsically talented, focused, and disciplined. Indeed, they are and have always been superior to men. But they must seize the initiative. They must realize that authority and responsibility are not handed over on a plate. They must be taken. In the past, Indian women have shouldered major responsibilities. Mr Kumaravel does not look at himself as someone who has been trying to empower women. Rather, he looks at himself as a beneficiary of women entrepreneurship.

Q&A

On Scaling up

The passion of an entrepreneur can get a business started. But it cannot scale the business. For that to happen, systems and processes are required. So at some stage the entrepreneur’s mindset must shift from working in the business to working on the business.

On selecting franchisees

For the parent company, franchising is about using the time and money of the franchisee responsibly. The franchiser and franchisee should be clear about their roles and responsibilities. The franchiser owns the brand and has knowledge of the business. The franchisee knows the local conditions and manages day to day operations. The value created through the partnership must be shared equitably between the parent company and the franchisee. If these conditions are fulfilled, the business is franchiseable.

Ultimately, chemistry is important while selecting a franchisee. Would we be comfortable inviting the person to come home or would we be comfortable visiting their home for dinner? Come to think of it, these two questions are actually quite profound and cover compatibility with respect to income, education, culture, common interests, etc.

Mr Kumaravel believes in a parental approach towards the franchisees. He considers it a moral responsibility not to allow the partner to fail.

He believes in the Lakshmi Saraswathi Durga framework of franchising. Lakshmi is the Goddess of wealth, Saraswathi, the Goddess of Learning and Goddess Durga provides security. The franchisees should be able to make or save money, keep learning and evolving as entrepreneurs and also safeguard the interests of key stakeholders: customers, employees, vendors, partners, the bank, government, society.

On diversification

Before the outbreak of the corona virus, Naturals did not really look seriously at other segments. But during the pandemic, the company has been looking at other ways of boosting revenues. The idea is to think like a conventional retailer and use the floor area effectively. There is space available. There are captive customers who spent quite a bit of time in the salon. The staff have a good relationship with them. So why not sell them other products, including ones made by other companies. The retail business is currently generating about 10-15% of revenue. The plan is to take this to 30-40% and ensure that these revenues recover the running costs of each salon.

On providing beauty services at home

Naturals has tied up with Housejoy for providing services at home. But this has been a mixed bag. The unit economics also does not favour the home services business, especially for orders less than Rs 500, The salon business is about providing an experience. Many people are craving to come out of their homes after one and a half years of the pandemic. So the at home segment may remain a niche market.

On Indian business going global

In general, Indian businessmen are not transparent. They are not ready to share their knowledge and keep their secrets within the family. They do not put in place systems and processes. Why should Starbucks be coming to India to sell coffee when we have local brands who can serve equally good coffee? It is important for Indian businessmen and Indian brands to look seriously at the global market. The founders’ dream is to convert a southern wonder into a national wonder and finally a global wonder. Natural Ayur, a wellness product, launched in collaboration with Kerala Ayurvedic Pharmacy, is a step in this direction. The target is the Indian diaspora. By taking part in these overseas markets, Naturals will be able to strengthen its offerings and raise its standards further.

On entrepreneurs as the new age freedom fighters

India may have gained independence but many Indians have not got freedom in the true sense of the word.

India can be divided into four broad segments:

Power India: The ministers, politicians and bureaucrats and middlemen

Poor India: More than 50 crore Indians are crying for basic needs: education, healthcare, shelter, sanitation. They are being given doles. What they need is education and employment.

New rising middle class: This segment is enjoying a much better lifestyle today.

Entrepreneurial India: With limited resources, they can achieve a lot and accelerate the country’s development. They can align with the middle class, create jobs and lift India out of the shackles of poverty.

On robots and robotics

The salon industry is a high touch business. Apps can help in choosing the hair do but people are needed to do the work. While AI will certainly make people more efficient, the need for people will not go away. Vaibhav, the son of the founders is developing products which are technology centric.

On developing employees

Mr Kumaravel feels that the key issue in the development of employees is giving them a sense of pride. Once when he visited one of the Naturals Salons, an employee told him that he had spent 14 years in the industry. He had spent the first four years with his father as a barber. Then he had become a hair dresser, after that a hair stylist, subsequently a style director and finally the salon director. Today, people and society look at people working in salons differently. From a taboo activity, it has become an aspirational business without any cast barrier. It is not about being a service provider. It is really about being a smile provider to customers. Training also makes a big difference. Mr Kumaravel believes that if we train hard, we can work easy. When it comes to training, Naturals also leverages the support of partners like L’Oreal.

On his favourite books

Mr Kumaravel mentioned his favourite books: The seven habits of highly effective people by Stephen Covey As a man thinketh by James Allen Rich dad Poor dad by Robert Kiyosaki and Sharon Lechter Think and grow rich by Napoleon The Magic of thinking big by David Schwartz Mr Kumaravel learnt from his father that business success and knowledge of English are correlated. Despite the lack of education in English medium, he has become very proficient in English over time. Mr Kumaravel is also a great fan of audio books. These convert our downtime (driving, etc) into uptime. Instead of wasting time listening to music, we should listen to good audio books. Continuous learning has become an imperative today.

On bringing students into the classroom

The college should be a place for not only academic brilliance but also for imparting various life skills. Today our education system emphasises memory rather than creativity and imagination. We must teach students communication, teamwork, goal setting, leadership and financial intelligence. Various cocurricular and extracurricular activities like sports, music and dancing must also be an integral part of college life.

We thank Dr. Vedpuriswar for bringing out the highlights in the form of this note