The detail of retail: Ishwar Chugani

On the right, the company’s ‘hits’ or best sellers are displayed, while on the left are the ‘misses’ — the slow sellers.

“It is a reminder to all of us on what to keep buying and what to avoid as we enter the office each day,” says Ishwar Chugani, managing director of Giordano Middle East and executive director of Giordano International.

I sense the idea is a feature of Chugani’s light-hearted nature but as he strolls through the store, expressing

amazement that someone has bought an odd-looking woollen top, there is a serious undertone.

Joining Giordano in 1993, Chugani has been part of the company’s international success story that has seen it grow from its humble beginnings in the 1980s to become an $859m listed company on the Hong Kong Stock Exchange, with over 2,500 stores in 40 countries.

The Middle East, which now represents between 10-12 percent of the global business, was Giordano’s first step outside its Asian base.

At the time, it had 200 stores across China and Hong Kong, and had recently opened in Malaysia. Chugani managed to convince the Giordano management to set-up its first Middle East store in the Burjuman Shopping Centre through a franchise awarded to ETA Ascon Star Group (a diversified conglomerate that was part of Al Ghurair Group).

“At that time, [Al Ghurair Group] was not open to partnering or franchising but the then-chairman, when I met him in 1993, said ‘okay we will try the UAE’. In 1995, [Giordano] came in with us on a joint venture and then we expanded from there,” Chugani recalls.

The company’s UAE presence grew fast between 1995 and 2000, as it took advantage of the lack of competition, being one of the few brands in the city compared to the 300-plus today.

“When we entered the market in 1993, there were hardly any global brands. It was mostly local brands or department stores carrying other brands. We were quicker to take on locations,” Chugani says.

In 2012, ETA exited the joint venture. Giordano remained in the market, setting up in the Jebel Ali Free Zone and Chugani joined the global company’s board of directors.

Giordano now has 264 stores across the Middle East, all managed from the Dubai headquarters. 

“Today we have a fully-fledged team. In fact, Saudi [Arabia] has 100 stores, double the number in the UAE because of its geographical size and population,” Chugani says.

Predominantly men’s clothing (70-75 percent in each store), the company focuses on simple yet high quality styles, always in a variety of colours, with what it describes as ‘reasonable prices’. Chugani insists Giordano caters for all sectors.

“We try to understand what everybody wants. Everybody wears shorts, jeans and t-shirts. We don’t have to change our DNA and let people forget who we are. From day one, we’ve always wanted to be the provider of everyday clothing, good quality, that you can easily mix and match,” he says.

“Even people who would wear a AED5,000 jacket would wear a wrinkle-free shirt. Today that’s still one of the highest selling items and the best value in terms of quality,” he adds.

One of the key tenets of his management style is to keep a tight rein on inventory. With access to Giordano’s network globally, Chugani says he can see what sells around the world, limiting the amount of ‘mistakes’.

“That’s why we’re one of the very few brands that do not go on sale,” he says proudly. “Retail is detail. You have money to pay for your merchandise; if you have excess inventory, that eats up [the money] and then you have to start discounting — that brings your margin down. So for us, it has always been a philosophy in the group that we need to monitor inventory from the time it comes in, until the time it goes out.

“Inventory for us should always be [an] asset, never a liability. A lot of information, and a lot of our planning [happens] from the time we buy, including what we buy [and] how many pieces we buy. And when you do that right, then the chances of you having obsolete, slow-moving stocks are much less.”

But that does not stop other retailers from discounting, and the more they do, the greater pressure it puts on margins across the board, Chugani says.

“Now we see sales almost throughout the year. Anything overdone will lose its lustre and charm,” he says.

The rare time Giordano does participate in sales is during major promotions across a city or during a shopping festival-style event, although the brand still does not discount single items, but instead offers value in buying multiple items.

“We have this philosophy that your stores should always be fresh and always be new. We’re paying very high rents, top rents in terms of per square foot, so every square foot counts,” he says.

Chugani admits he has not always got it right. The tight control on stock served him well through the lean times, and from 2010 to 2012 the company enjoyed double-digit growth in its business, but in 2013 and 2014 they had to take a step back and reassess.

“We got carried away; when you have super-growth, you get carried away. You think, anything you buy you can sell. We had a lot of inventory at the end of 2013, and when you have that, it’s a lot of money tied up. We went back and looked at what brought us to where we were, looked at what customers wanted, trimmed down a lot of the fat in terms of merchandise quantity, and once we became a lot leaner by 2014, we saw things moving up again. In business there are a lot of things you can control and there are a lot things you cannot, so we focus on what we can control,” he says.

Giordano’s growth in the Middle East is about 8-10 percent, according to Chugani, with double-digit growth expected in many particular markets. The area managed by the Dubai office is growing all the time — the reach now stretches beyond the Middle East to India, Pakistan, Africa, Central Asia and Latin America.

“We’ve just launched Pakistan this year, where our franchise partners will open six stores by the end of the year. We’ve been in Georgia for some time now, in Tbilisi. That’s a strong market for us. Africa, Central Asia and Eastern Europe will be key from this office,” he says.

Using the Middle East as a hub for expansion into Africa, Chugani believes the potential for Giordano to establish future franchise businesses is exceptional.

“We just started Zambia this year and the second store will open soon. And we’re talking to a few people from Angola and Mozambique. For proximity and supply, everything will happen here. I have a full team for business development,” he says. 

“The potential is very big. Markets are growing, especially in places like Kenya, Nigeria and Ghana. We’re talking to people and the word is out that Giordano is open now, but we would not go into these markets ourselves. We would work with franchise partners. At the end of the day, they know their market.”

Chugani is targeting his 300th store within three years — a task that will require at least one opening a month.

“Growth will continue to come from Saudi and Qatar; we expect to open within the next three years at least six stores in Qatar. We see a lot of double-digit growth in Oman, Bahrain and Qatar. In tougher markets like the UAE, the growth will be there, but not as much. Saudi still has potential for growth in the Tier 2 and Tier 3 cities,” he says. 

There are already 54 Giodarno outlets in India, 48 of which are within department stores.

“Property is very expensive,” Chugani explains. “As well as that, there is an opportunity for us in India to grow the business through e-shopping. In fact, in India, that’s the fastest growing and one of the best avenues for sales. We’re working with the various big players [in ecommerce] and we’re providing them with our products,” he says.

The e-commerce market is another area of potential growth for Giordano, and Chugani says it’s slowly catching up in the region.

“Our e-commerce site is more of a complementary to the shop. It’s for our regular customers who know what they want, know their sizes and it’s a convenience to them. Secondly, if you go to our store and we have run out of a white shirt. With no commitment to you, we can order it for you, deliver it and you pay cash. Ever since we started cash on delivery, business has picked up,” he says. 

With Giordano expanding into new areas, getting the right people on board is one of the big challenges Chugani faces.

“Our people have been with us from the beginning, but bringing in new people, they’re looking for something different. They want to be in two years what it took [people] 20 years to do. We have to groom them, make them understand, and I think the new breed of employees joining today have to be treated in a different way. You need to make them a part of it from day one. We bring them here [the Sheikh Zayed Road headquarters] and have regular training. That’s the reason why we break up the business into small parts and everybody is a part of it because they’re all incentivised by what they get,” he says.

As a founding member and advisor of the Middle East Council of Shopping Centres, Chugani says he’s positive about the future of the retail industry, but sees a definite shift in terms of mall development.

“I think the retail industry will continue to grow,” he says. “There’s a lot of potential. In any market there will always be ups and downs, but as long as the government keeps building and bringing people in, there will always be business.

“A lot of business is being shifted towards the community, because as the city grows, day-to-day shopping is now done within your hub and special shopping within the larger malls. The larger malls will continue to grow because they will be preferred by tourists, and local residents will go to the larger malls when they have family and friends to take them.”

Chugani reveals that Giordano is considering small, ‘grab-and-go’ stores in metro stations, “if the development continues”.

“We’re also looking at smaller format stores, but within community centres. If you’re going to the gym and you need a pair of shorts, or if you have guests coming in and they’ve forgotten something and need a six-pack of underwear, things like that,” he says.

Rather than view the current state of Dubai’s retail market — where many are facing increased costs and lower margins — as a negative, Chugani refers to his vast experience and puts it down to the cyclical nature of the market.

“In a market where everybody is playing the same field, if costs go up everybody has to realise that the costs are going up. So how do you manage that? I’ve been living here for 35-36 years, things go up and things go down, so at the end of the day, you need to sometimes really look at what you do, what brought you to where you are and then decide,” he says.

“We’ve gone through that before. Costs have gone up before and tourists have stopped coming from one place, but one door opens and another closes. Dubai has always been like that.”

Chugani says there could be some consolidation in the next 12 months, but hopes retailers will better coordinate and help each other to reduce costs.

“I feel there’s a lot of opportunity, not for competition but for collaboration on reducing costs, maybe by using the same freight forwarder, things like that where you can get economies of scale. Lately we have spoken to a few other retailers [and] contractors. You have to be innovative, and always find new ways of doing things. The cost of everything is going up; it’s relative to what’s happening in the market.”