By Aaron Greenwood
In just over a decade, Paras Shahdadpuri has taken consumer electronics and household appliance brand Nikai from the verge of insolvency to profitability by tapping the booming market for affordable products in emerging markets worldwide.
Inauspicious beginnings|~|Shahdad200.gif|~|Nikai chairman Paras Shahdadpuri|~|Despite inauspicious beginnings, Nikai has emerged as one of the leading players amongst the new breed of mostly Asian consumer electronics vendors taking market share from their established rivals by providing decent quality product at fractional prices.
Established in Japan, Nikai floundered in the early-1990s as it struggled to compete with major domestic and international consumer electronics rivals such as Panasonic, Sony and Philips.
With the company facing insolvency, former Indian diplomat and commodities trader Paras Shahdadpuri stepped in and acquired the brand and its existing product range in 1995.
A resident of Dubai, Shahdadpuri promptly relocated Nikai’s operations to the Emirate and set in place a strategy aimed at rapidly expanding its product range and retail presence in selected markets worldwide.
Indeed, with little in the way of brand heritage or recognition, Nikai has built a formidable business tapping the increased demand for low-end consumer electronics and household appliances in emerging markets across the Middle East, the Asian sub-continent and Eastern Europe.
Fundamental to this success has been the company’s strategy based on outsourcing manufacturing to companies based in emerging and established economies, including China, India, Italy, Taiwan, South Korea, Turkey and Denmark.
Shahdadpuri, who maintains a key role as chairman of Nikai, says that many of these manufacturers also produce products for high profile brands including Panasonic, Hitachi and Toshiba.
“Gone are the days when a company must rely on a hardcore manufacturing base,” he says. “These are dedicated manufacturers that produce products for major international brands. This is the way forward for Nikai.”
Shahdadpuri adds that the company is committed to developing long-term relationships with key manufacturers that have a solid reputation for producing high-quality products.
“The new thinking of Nikai is reliability. When I started the company our corporate ethos was based on sincerity. By sincerity I refer to our commitment to providing quality products, and in terms of our dealings with distributors, retailers, consumers and our after-sales service,” he says.
“We have an in-house quality assurance team that visits our manufacturing partners on a regular basis. We only deal with companies that have a solid reputation based on quality. It is a challenging job for us given the scope and diversity of our product range.”
Indeed, Nikai today boasts a presence in more than 80 countries worldwide and a product range consisting of around 450 unique products, ranging from LCD TVs, mp3 players and DVD players to fridges, kettles, microwaves and air conditioners. The company recently invested more than US$10 million in product research and development in a bid to expand its range of white goods and household appliances.
This considerable investment also enabled the company to take its first tentative steps into the high-end market with the launch of its Midas range of premium consumer electronics products and appliances.
The Midas line-up includes a 22-carat gold-plated range of LCD and plasma display TVs that Shahdadpuri says has proven particularly popular with customers in the Middle East. The range pitches the company in direct competition with regional heavyweight LG, whose own 71 inch 24-carat gold-plated plasma display TV has enjoyed massive success in markets including Saudi Arabia and the UAE.
“Technology’s evolving at a rapid pace,” he says. “Digital innovations are revolutionising the CE industry and LCD TVs are a primary focus for us, as are mp3 players. Our Midas range is crucial to our ultimate goal of reaching every segment of the consumer market, from low-end to high-end.”
In an effort to reposition itself further upmarket, Nikai opened a dedicated 3000 sq ft flagship retail outlet in Dubai in 2005 that stocks its entire range of products. It also boasts an impressive home theatre room, which is designed to showcase the dynamic qualities of the Midas range of flat screen TVs. However, Shahdadpuri says the company has no plans to open additional retail outlets in the region.
“While our flagship showroom does a great job of showcasing our entire range of products, we remain very happy with our existing channel relationships throughout the Middle East,” he says.
||**|||~|NIKAI-O200.gif|~|Nikai's HQ is located in Dubai|~|Shahdadpuri remains modest about the role he has played in guiding and fostering the company’s impressive growth over the past decade.
“To be honest I did not have a great vision for the company in terms of what it has grown to become,” he says. “My management team has been incredibly helpful in making the company what it is today.
“In ten years our operations have grown ten-fold and we now boast more than 400 employees. We are very proud of the fact we have managed sustained growth over this period. We want to ensure we maintain this growth rate well into the future with an expanded product range and enhanced retail presence across the Middle East.”
Shahdadpuri says the region’s booming population, the rising purchasing power of consumers and demand for consumer electronics goods and household appliances have aided the company’s growth.
“The Middle East region is witnessing an unprecedented population boom. The purchasing power of consumers in the GCC, particularly Saudi Arabia, Kuwait and the UAE, is also rapidly increasing which is being aided further by booming oil prices worldwide,” he says.
“In tapping this boom, we are implementing a retail strategy that aims to enhance and nurture our channel relationships in the region.
“We feel that we are well-serviced by our existing partners. We primarily work with distributors that boast large retail channel distribution networks. We provide them with a range of support including marketing tips and training in terms of distribution skill sets. We also guarantee high-quality after-sales service support.
“We aim to be omnipresent in terms of our retail strategy. We maintain a strong presence in the hypermarkets across the Middle East, including Carrefour and Panda. These retailers have helped our business grow very rapidly. We also boast a presence in the dealer networks, the electronics souks and smaller retail markets across the region.”
In addition to the UAE, Shahdadpuri cites Iran, Saudi Arabia, Qatar, Kuwait, Libya and Iraq as the company’s biggest markets in the Middle East. Not surprisingly, he concedes that the ongoing insurgency in Iraq has severely impacted the company’s business in the country.
“Iraq has been giving us a lot of pain to be honest,” he says. “The current political disturbance in the country has hit our business very severely. We were traditionally one of the biggest consumer electronics brands in the country, but since the war it has been difficult for us to operate there.
“We believe that Iraq must eventually stabilise and we believe it is in the interests of the major regional powers that this occurs as soon as possible. This should lead to a big business boom.”
Unlike many of its rivals, Shahdadpuri says the company does not use Dubai primarily as a redistribution base for shipping goods to neighbouring markets.
“Our volumes are so high, that for major markets such as Saudi Arabia, the product is shipped there direct from the manufacturing base,” he says. “But for markets that require smaller volumes and a greater diversity of products, we ship from Dubai.”
Indeed, export sales reportedly account for 80-90% of the company’s turnover annually.Despite this, Dubai remains vital to the company’s expansion strategy, as evidenced by its decision to invest $US10 million in the construction of 300,000 sq ft manufacturing plant in the Emirate that will produce a range of products primarily for export markets. The plant is scheduled to open in 2007.
“This market is mature enough for us to develop a small-time assembly and manufacturing plant,” Shahdadpuri says. “The UAE has already established or is in the process of negotiating a host of free trade agreements with some of the world’s biggest economies.
“This manufacturing base will enable us to take advantage of the export opportunities provided by these respective agreements and should expand our international business by a considerable margin.”
||**|||~|Shahdadpuri200.gif|~|Shahdadpuri says his company has grown ten-fold since 1995|~|Despite lauding Dubai as a “very welcoming and easy place to do business”, Shahdadpuri confesses that the company could have achieved a greater level of success had it based its operations elsewhere.
“The UAE in general is a great place to do business compared to other countries both in the region and worldwide,” he says.
“However, while the country boasts a huge regional export hinterland, the domestic market for consumer electronics and household appliances is comparatively very small.
“While we have created a very successful consumer electronics brand that has outperformed many established Japanese and Korean rivals, I feel in hindsight that if the company could have tapped a bigger domestic market it may have achieved greater success over the same period.
“If I had established my company in the UK for example, I believe it would have grown comparatively larger than it is today, mainly because of the purchasing power of that country’s population. But the opportunities I’ve received
here in Dubai, I may not have been offered in another place.
“Despite this, we still feel we can replicate the success we have achieved here in other countries worldwide. We already boast a presence in 80 countries, but the way forward in terms of growth is in negotiating joint ventures and tie-ups in other key territories globally.”
Shahdadpuri also suggests there may be the potential for the company to be transformed into a public enterprise sometime in the future.
“There is a desire there, but I don’t see anything definite on the cards for the next couple of years,” he says. “Certainly, if we are committed to following best business practices, why should we not consider diluting [Nikai]? The regulations are relaxing here for family owned businesses looking to go public, but who are determined to maintain majority control over their interests.”
In terms of his legacy, Shahdadpuri says he is committed to ensuring the company continues to develop reliable, high-quality products and that it takes a “sincere approach” to every facet of its business dealings.
“These are key priorities that remain very close to my heart,” he says. “We must maintain a very honest and transparent relationship with our distributor network. If we follow this strategy I foresee an even brighter future for this brand and its product range in the market.”