When Rao Sahib Jashanmal traveled to Basra, Iraq, in 1919 shortly after the end of the First World War, he immediately recognised the city’s potential. The Indian businessman set about establishing a department store that stocked luxury products for the expatriates working in the oil industry. So successful was the store that in 1934 the British authorities asked Jashanmal to set up a similar retail outlet in Kuwait.
“That became our blueprint. Wherever oil was found, we would go. When the oil industry started in Bahrain in 1935, we opened a store there and then again in Dubai in 1956 and Abu Dhabi in 1964. It was always the same model; we had a department store at the bottom of the building, our residence would be at the top and the workhouse would be at the back,” Tony Jashanmal, executive director of Jashanmal Group, tells CEO Middle East.
The family’s business model coupled with the region’s retail boom has served the Jashanmal family well. Nine decades later, the company is one of the most successful privately held firms in the region. The Dubai-based retailer currently has over 2,000 employees working in around 100 stores and owns regional franchise rights to a whole host of fashion brands including Calvin Klein, Kate Spade and LK Bennett.
The group’s distribution network, which accounts for around 65 percent of its overall business, is just as far-reaching. The firm supplies over 1,000 points of sale – including duty-free operators, supermarkets and hypermarkets – in five countries with a wide range of products including home appliances, perfumes and cosmetics and consumer electronics.
“When all these towns started expanding and more money started coming in, we not only expanded with our stores but we also started to distribute our items. The majority of our business is now on the distribution side,” says Jashanmal.
“Today, we are big in the electrical appliances business. We deal in stationery, perfume and cosmetics and fashion. [On the retail side] we have three models of business; specialised stores, such as those in the luggage business [Around the World]; we have franchise stores for branded stores such as Burberry and Clarks; and department stores,” he adds.
Despite its size and the number of brands the group represents in the region, Jashanmal is keen to stress that the company does not make a habit of simply collecting brands. “You don’t want too many things that compete against each other,” he explains.
“You have to be loyal to your brand otherwise you’ll start seeing it in money [terms] rather than passion. If this happens you don’t give enough justice to the product. It’s not a matter of collecting brands; it’s the size and the quality of running that business,” he adds.
During the early years of its retail business, the Jashanmal family established a policy that they would only grow their business in new countries if a family member was able to live in that particular country. “Every country was so isolated from the other that they had to function independently. In those days, so much business was done on a personal basis and the personal presence always made the difference,” explains Jashanmal, who grew up in Kuwait.
It is for this reason only that the firm has yet to set up its operations in Saudi Arabia. “For a long time we didn’t do Saudi Arabia because we felt that we had to concentrate on these countries first and we had another thing which was from the past, that when the countries were smaller we always believed that somebody from the family should be in those countries. As we expanded around the Gulf we ran out of Jashanmal male members,” he laughs.
Like many retailers looking to grow their business, the oil-rich kingdom provides plenty of untapped potential for the Jashanmal Group. The wealthiest Arab state has lagged behind its neighbouring countries on the growth of shopping malls and retail spending. Retail accounts for around 17 percent of the country’s total GDP but is set to rise significantly amid rising oil prices and government handouts following the Arab Spring. Annual retail sales per capita are set to reach SAR15,274 ($4,078) by 2015, according to a report by Business Monitor International.
“We are going to be involved in Saudi Arabia very soon,” says Jashanmal, who adds that the firm is currently in talks to set up its operations and is likely to be trading before the end of the year.
“It will be much more retail because retail is easier to start. You basically have the stores and run them, whereas if you are doing the distribution business you have got to know the whole market, be involved in the whole market and in the whole system,” he adds.
Jashanmal also cites Egypt, Syria and Iraq as potential markets for expansion in the future but the firm will be careful to exercise caution. “We are a 93-year old company and in those 93 years there have been two World Wars. I was also in Kuwait during the Iraq invasion so I saw 70 years of business wiped out in two days. When you have been around for a long time, you don’t speculate too much,” he explains.
“[Iraq] is where we started the company and everybody likes to go back to their birthplace but apart from that, it is our region. It is a country in which we have operated in before and it’s a country that has potential. We are doing a lot of research….there are several opportunities but today it is more an issue of security. I find it difficult to ask my people to go there at the moment.”
The Jashanmal Group’s diversified geographical footprint has stood the company in good stead during the political instability in the region over the last nine decades. “During the 1960s, it would have been a problem if we were only [operating] in Iraq. In the 1990s if we were just in Kuwait – which many were – it would have been an even bigger problem so being spread out has definitely helped us.”
Its far-reaching geographical footprint has also served the firm well during the economic downturn and most recently the Arab Spring, which has toppled the leaders of Tunisia, Egypt, Libya, forced Yemen’s president to step down, triggered an uprising against the regime of President Bashar Al-Assad in Syria and led to unrest in nearby Bahrain. As a result Jashanmal is optimistic about the region’s retail sector, predicting double-digit growth for 2012.
“Last year we recuperated from the downturn, and this year, I think we are enjoying the resurgence. I do see a good near-term future for our business; we certainly hope for double digit [growth] this year and the signs are already good,” he says.
“For business to grow you need two things to happen; people have to have a disposable income and they have got to have confidence, they want to know that they are still going to have their jobs and then they will spend. No one likes to keep money in their pockets,” he laughs.
“Oil prices are still high so that’s boosting GCC [economies]. We are also in India and the Indian economy is also growing. In the areas where there is still growth, there is going to be a lot of expansion. We are not, for instance, in Egypt or Syria – we have a small business in Syria but it’s not significant – so in the areas in the Arab world which have a problem at the moment [we are not reliant on],” he adds.
The positive outlook means the group is unlikely to have to look for outside funds in the form of an initial public offering. “If you have something that suddenly needs a lot of capital or if you have financial problems [you might want to look at an IPO] but we have avoided both of those and always maintained steady growth,” says Jashanmal.
Around 30 years ago, the Jashanmal family made an executive decision to not only relinquish the day-to-day running of the company to a non-family member but also to appoint non-family members to its board of directors in the interest of transparency. Jashanmal is currently the only member of the family to sit on the board of directors but he represents the combined thoughts of the Jashanmal family.
“For the best type of governance in a family you need two things; one is to have outside directors on the board so that you get bigger and better views (this also helps minimise family disputes) and the second thing is that the day-to-day management should not be family members. At the CEO level, professionals can be better assessed on their performances so you take the family element, the sentiment out.” he says.
The decision has also enabled family members to pursue other areas of work that they feel most passionate about, adds Jashanmal. “It is a family business but it doesn’t mean that every family member is interested in running the business. They are more interested in the fact that their business is run well and it gives them much more opportunity to do the things they actually want to do.”
It certainly looks like the Jashanmal Group will be around for at least another 93 years.