Recession-proofing a retail empire
Tuesday, December 2, 2008/
Kristina Karlsson, the entrepreneur behind Kikki.K, explains her strategy to expand her mature business while juggling business and a new family. By AMANDA GOME
By Amanda Gome
Kristina Karlsson, the entrepreneur behind Kikki.K, explains her strategy to expand her mature business while juggling business and a new family.
Well-known entrepreneur Kristina Karlsson started the retail/stationary business Kikki.K with $3000 in 2001.
Now at 35 years old, she has 31 stores and she’s just had a baby. She reveals today her export expansion plans, her strategy for the year ahead and what it’s like juggling baby and business.
Amanda Gome: What has the last year been like? It started off well and then it has been very tough for retail.
Kristina Karlsson: We haven’t actually found it that tough yet and I hopefully not at all.
We have had a really big growth this year and I guess we see ourselves in the “lipstick” category, where you can go out of our store and have spend $40 and feel fantastic.
And there is nothing like stationery to pick up your mood if something is a bit tough, so we actually haven’t found it very tough.
So you have made stationery hot and sexy like red lipstick. So if you can do that for stationery, then can businesses do that for their products and make them recession proof?
You had 23 stores at this time last year and you’ve now got 31. Last year you had revenue of more than $20 million, so obviously your revenue has grown. Have you focused on cost cutting in preparation for a downturn?
As a business you always do that anyway. In tough times you really stop to look to make sure you don’t have costs that are not necessary. We haven’t really done anything different more than be really careful.
What about your expansion strategy during the last year, and where else have you got stores overseas?
Two weeks ago we opened in Saudi Arabia. We have New Zealand which is our company owned stores, so we have Australia and New Zealand that we own ourself and we have done a master franchise for the Middle East. We’ll have four stores in Dubai before Christmas if everything goes to plan.
How did you go about setting up the franchise?
We had a company from the Middle East contact us and wanted to do it. It happened really fast. It wasn’t the plan to go to the Middle East this year.
You obviously went over there and visited?
Yes, I didn’t go to Saudi but I went to Dubai, and I’ve never been to Dubai before and I was absolutely fascinated.
What’s it like, what are the opportunities?
Well it is amazing. It’s just a shopping Mecca, you could just spend days and days going from shopping centre to shopping centre. I guess the interesting thing is everything is just the best, the biggest and very different from Australia, and obviously for me being from Sweden. But fascinating. The potential there is huge. A lot of people come from all over the world to Dubai and also people travelling through. So I think that is going to open the world for us, be the first step in going global.
What was it like being a woman doing business there?
Fine. It is a Middle East company but the people I dealt with are English, so I didn’t see any difference to what I normally would.
What did you learn setting up a franchise agreement?
You have to be very detailed. You have to make sure you cover yourself. I actually heard Janine Allis (founder of Boost Juice) speak a few years ago and she said she spent a fortune on her franchise agreement and I took that on board to really get some fantastic advice.
And that process worked well because you invested the right funds?
Yes. We started in retail with no experience and so we’ve always taken a lot of advice but also being really careful as no one should take too many risks.
So we did contact people who had used this company to franchise and asked their opinion before we went ahead and took their advice on franchising.
How have you handled the huge fluctuations in the dollar this year?
Well you know what? When I started the dollar wasn’t that good so I’ve seen the really fantastic dollar as an added bonus in the last couple of years. I guess it is just the nature of business.
There is nothing you can do about it so I tend to focus on working with the suppliers obviously to get the best cost and also the best quality for that price and looking for where I can change to make it better.
I don’t always deal with the US dollar. A couple of my suppliers that I deal with are local but I also deal with a couple of businesses where we buy in Australian dollars as well, so we are kind of covered.
What has been one of your biggest challenges in the past year in a business sense?
Our fast growth. I think that is with any growing business, the challenge is to have enough resources to do it all. For us the biggest challenge has been that we wanted to do it all at once and we are growing fast and always have been working 24/7. Now we are stopping and looking at more of a strategic way of growing, to make sure we are not focusing on everything at once.
As an entrepreneur that is what you seem to do, you love new ideas which are fantastic, and you don’t always have the resources and you can’t obviously do it all yourself, so you need to make sure you have enough people and the right people in the right spot.
You took a cash injection from an equity investor in 2000 and that helped you open more stores and employ more people. Fast growth companies obviously need cash – what is the environment like? Are you thinking of taking in more cash?
No, actually not. We work really well with the cash that we have, with the growth that we are having, and we are working with suppliers to make sure we don’t need to get more cash injected. Obviously at times like Christmas where you need to invest in a lot of stock, we are using overdraft facilities and things like that. But we haven’t had more cash injected from an investor point of view.
And things are going well with your bank?
Yes, it is fine, when you are growing and are delivering what you said you will deliver everything runs smoothly, so I’d like to continue that way.
What is the plan for next year, four stores in Dubai?
Yes, actually four stores before Christmas so we will definitely grow a few stores in the Middle East, and then we’ll continue building our stores in Australia and New Zealand and we might even look at another country. In January we’ll sit down and plan for what the next step will be.
And how many stores do you plan to open next year?
That is a good question. We actually talked about that the other day, we could do anything from 12 stores up.
How much room is there left in Australia?
I couldn’t tell you off the top of my head but there is room for quite a lot of growth.
What is happening online? Retailers have been very slow to adapt to online in Australia. What has been your experience online?
We’ve grown 102% in online from last year to today, and I see that continuing. There will be even bigger growth in the future because I just realise now that I do most of my shopping online, I guess now having a baby and working.
I love shopping and the pleasure of shopping by walking in and looking and buying whatever you can see, but if you need things like makeup and stationery, grocery, I think that is just going to grow for sure. That is how I do it and I talk to a lot of my friends and talk about Christmas shopping this year, and a lot of my friends said that they are going to do it all online.
What do you think of Australian retailers, where are they at?
The ones that I buy from, I find good.
Who do you buy from?
I buy from Coles online a lot, I buy organic vegetables and things like that online. What else do I buy online… I buy a lot of baby clothes, toys, gifts like that. So I find that it is good.
I buy things overseas as well and I absolutely love it, there is an excitement to get something in the post and that is what we have really focused on. We always put a handwritten note in our orders and I think that the experience of actually getting the package should be how it would be to come into our stores.
What percentage of revenue is coming from online?
I couldn’t tell you off the top of my head actually, but it is like a store on its own, so it’s small in that way, but we are planning for it to be much bigger.
What are several things you did that you learnt about online? One of the things is making it personal, what else have you learnt about the site?
For a start, why I think we have been successful is we have an increased awareness of our website. I guess that has come through because we have our website on our products, we have it on our receipts in the store, shopping bags, so I guess there is an increased awareness that you can buy Kikki.K online.
We are definitely managing it better, we have someone totally focused on that now and I think that’s really important. We have an online store manager whereas before we didn’t; of course it is as important as we do in our physical stores.
Do you outsource your IT development and maintenance of your site, or is it internal?
A little bit of both, we have someone to help with more the technical side but the updates and everything we do in-house. We have someone totally dedicated on doing that. We give great customer service, people can call us anytime to ask questions and the strength of my brand as well is helping.
Now, you’ve got a big company and you’ve had a little boy eight months ago, how have you set up for that? Has it been easier than you thought or more difficult?
I am still in the process! It has probably been more difficult than I thought. I didn’t have a lot of experience with babies before, so I didn’t know what to expect and I haven’t really up until now changed my lifestyle. I think we counted that he has been in five countries when he was six months, always jet lagged and he hasn’t had fantastic sleep patterns because he has never really been in one kind of time zone.
But saying that, it is a fantastic thing to have a baby and it has really forced me to plan better and focus on what I am good at. And also give me a better sense of balance, but I haven’t really changed – he sits in on meetings every week, he comes with me, he’s a bit of a highlight in the office, but obviously now he has started crawling a few weeks ago, things have changed.
I have to read out your quote from last year “I am having a baby but I am still going to be running the business as there are lots of things I can do from home.” I hoped at the time you could pull it off!
Well I think I have in many ways but obviously I am not as close to everything, so that is why when I first got asked to be interviewed, I was not sure I could answer all of your questions because I am not as deeply involved in everything, but I am still running the business.
So how are you doing it? You put in a managing director?
Well Paul (Lacy) is our CEO (her partner).
And then you’ve got all your sales teams and your marketing and all your other operations report to him. Did you have trouble stepping back from that?
Yeah, but it was a process. And it’s hard because you are passionate. I am so passionate that I love going to the warehouse to see how we can do it better. You know, I loved having every role in the business.
It is hard, but on the other hand the best thing is that you hire people that are much better than you and bring something that we haven’t had before. In the finance department we now have a CFO and it is fantastic. Well that was a few years ago, but if I look at it from where I started, it has changed so much, in much better ways.
So now we have a management meeting once a week and I just go in. I can go into how much depth I want to, we have a general manager for retail and we have someone we have just got in, more of a strategic person, who is working next to Paul who is also fantastic. It is exciting and it is good to have people that can help us go global.
What has been the hardest part about having Axel (her baby son) and the business?
The hardest thing is that there is so much that I love to do and there are so many opportunities. I see opportunities every single day and I think there is so much we can do and every country I go to I think ‘my god we could be here’.
It is slowing yourself down…
Yes it is, and also in the beginning when he was sleeping a lot I could do much more, now he is not as happy sitting next to me at the computer anymore, but it is fantastic too because I have seen another side of life that I didn’t have before.
And you don’t want to miss it either. Are you planning on having your second one close?
No. I would like to have one more but I feel like I just had him and I’m not thinking about number two. I would like to have one more but not in the near future.
And I should just add that we have opened in Perth. We were not in Western Australia, we opened there three or four weeks ago and that is going really well, way above our expectations there, so that is really exciting. And it is funny because I read an article about Gerry Harvey the other day and he was saying that if Harvey Norman is down then everybody is down – and with all due respect, it is really not true in everyway.
Gerry also says that online retailing is a dead-end!
The last thing that I wanted to add is that tough times never last, but tough people do, so that is a good one to have in your head.