The Agarwal Instinct

Prudently, and expectedly, their beginnings were humble. In 2012 when the co-founders of Campus Sutra—siblings Khushboo Agarwal, Aditya Agarwal, and Sonal Agarwal, along with Khushboo's husband Dhiraj Agarwal—were looking for an office space in Bengaluru’s central business district (CBD), the rentals were too high for their budget. But they just got lucky. The Agarwals cracked a deal: 400 sq. ft. of space in a building in Double Road, in the city’s CBD area, for ₹8,000 a month.

“It was the cheapest deal. We would have got nothing for that price in the CBD area. Typically we would have paid 3x-4x more (₹65-₹70 per sq. ft. was the prevailing rate in that area then),” says Aditya, 34, who is the chief marketing officer of Campus Sutra. While the deal was right up their alley, there was a little disclaimer from the broker: the building was haunted.

“All 20 rooms in the building were empty. Nobody took that place,” says Aditya. But for the young founders it worked out just fine. “As we grew the business, we took most of the rooms in the building. We started there with seven people including us but when we left the building, we were a team of 40. We were there for two years and we didn’t have any haunted experience. We removed the haunted tag from the building,” laughs Aditya.

Seven years ago, Campus Sutra started with an idea of generic merchandising for college campuses. The business was then focussed exclusively on custom merchandise (mostly stream-based such as engineering, medical, management, and others.) The target audience was the student community.

In 2014, the Agarwals pivoted from that model to a full-fledged fashion and clothing brand, selling a range of apparel and accessories including sweatshirts, shorts, T-shirts, tops, hoodies, denim jeans, athleisure range, caps, bags, and others. Today, Bengaluru-based Campus Sutra has a presence across the entire men and women casual wear category. It currently has more than 40,000 SKUs (stock keeping units).

Besides three company-owned stores in Bengaluru, the company’s merchandise is available at 200 large-format retail outlets in India and West Asia, including 40 shop-in-shops in Lifestyle stores and about 160 (shop-in-shops) in Reliance Trends stores.

“We have a presence across 12 states including many regional large-format stores such as Saravana Stores, which has a strong presence in Tamil Nadu. We have also launched in Dubai and will be soon entering the southeast Asian market,” says 36-year-old Dhiraj, who is CEO of Campus Sutra.

The company's products are also available on e-commerce platforms such as Amazon, Flipkart, Myntra, and Snapdeal, and its own online platform. Campus Sutra does 8,000-10,000 orders a day on an average, including all online platforms. At present 20%-25% of its business is offline. It expects 50% of its business to come from offline channels by 2021.

Biswatosh Saha, professor of strategic management at Indian Institute of Management-Calcutta (IIM-C) points out that brands in digitally enabled marketplaces need to match up to the depth (wide assortment) of digital merchandise displays with failure-proof ability to physically fulfill orders from a wide pool of SKUs. “The consumer convenience of anytime, anywhere shopping rides on carefully crafted resilient seller processes that are not only novel, but are complex to manage at scale. Campus Sutra, in our view, has been successful in designing these new processes and practices by paying careful attention to the unique requirements of online markets,” says Saha, who is currently working on a case study for his students on Campus Sutra’s strategies in a hyper-competitive space.

The company's products (apparel and accessories) are manufactured at third-party facilities in India, Vietnam, and Bangladesh. It is also tying up with other partners for shop-in-shops next year and aims to have a presence across 500 large-format stores.

Saha feels Campus Sutra has demonstrated resilience. “The founders possibly understand the potential as well as limitations of the online mode,” he says recalling a past conversation with the founders: “In many segments of the online space, there are no network effects, so there is no point to burn cash,” the founders had said, recalls Saha. “No doubt they became profitable right from the start and had the acumen not to run after the more popular mode of burning investor funds to fuel fast growth.”

In its first year of business, Campus Sutra clocked a revenue of ₹1.65 crore despite starting mid-year. In the next year it posted a revenue of ₹16 crore, followed by ₹40 crore in the third year of its business. In the fourth year, the company recorded a revenue of more than ₹100 crore. Last fiscal it posted ₹160 crore in revenue. For FY20 it expects to touch a revenue of ₹220 crore.

“We broke-even from the first year itself. Our approach and focus was to build a profitable company from the start. We wanted to break-even, be self-sufficient. Profit has been 7%-8% Ebitda each year since our inception,” says Dhiraj.

Growing up in Siliguri in West Bengal, where Aditya’s father ran a small business (a kirana store), the Agarwal siblings (Khushboo, Aditya, and Sonal) had a modest middle-class upbringing. Eldest daughter Khushboo was the first among the siblings to leave their hometown to study in Kota (in Rajasthan), the city famous for its coaching centres.

“It was a big thing for a Marwari family in 1998-99 to allow their daughter to study outside. But my father is very progressive and he was perfectly fine with my sister studying outside. She (Khushboo) was the first in our entire extended family who went to study in a different city,” says Aditya. Khushboo studied for her engineering entrance exams at Bansal Classes, one of the well-known coaching centres in Kota. Later, Aditya also joined her to study for his engineering entrance.

It was a completely new environment for the siblings. “We were surrounded by students from across the country who were so competitive and focussed on cracking the exams. It was our first big exposure to the outside world. Everyone was out there to make a name for themselves,” says Aditya, who holds an engineering degree from ITM University, Gurugram, and an MBA from Xavier Institute of Management, Bhubaneswar. Prior to his entrepreneurial stint, he worked for four years with business software provider Tally Solutions. He was handling the company’s marketing division for the southern region.

Khushboo, 35, who is COO of the company, is a computer science engineering graduate with an MBA from ICFAI, Hyderabad. She looks after the operations of the business and the human resource (HR) vertical.Youngest sibling Sonal, 31, is a gold medallist from National Institute of Fashion Technology, Bengaluru, and has dabbled across design verticals including textile, furniture, and accessories before venturing into fashion designing. At Campus Sutra, Sonal is responsible for new product development and leads the in-house team of designers.

Dhiraj, who was born in Bihar and brought up in Bengaluru comes from a business family. He did his bachelor’s in business management from Christ College, Bengaluru, and an MBA from NMIMS, Mumbai. Dhiraj worked with Bharti Retail (which was then Walmart India’s joint venture partner) prior to starting the business. During his six-year marketing stint with Bharti Retail, Dhiraj was an integral part of the launch team for about 160 supermarkets and 16 hypermarkets across the country.

Despite the family members running the business, Dhiraj points out that starting the business together was not necessarily a family call but more about what each of them brought to the table. “For example, when we needed a head of design, Sonal fit the bill because of her expertise; the fact that she was family was secondary. Same was the case with technology. There were core areas and roles that we had identified. We have always had a very clear demarcation of roles and this brings down potential clashes or conflicts,” he says. “If we disagree on an idea, we execute it at a small scale to see the impact. It helps us measure the viability of an idea.”

The Agarwals started the business in 2012 with their own funds (each put in ₹1 lakh-₹1.5 lakh). Later that year, they took a bank loan of ₹25 lakh to scale up the business. In 2013 they put in their provident fund savings into the business. The entrepreneurial bug bit the Agarwals in their early days at college. “We always wanted to start something of our own. It was maybe the Agarwal instinct that helped us in building the business,” says Aditya.

“I still remember my grandfather used to collect all the cash from the kirana shop in the evening and bring it home to deposit in the bank next morning. And I used to feel very happy that a lot of money has come home. But he always said that it is not our money; we have to pay it back to the people from whom we got the stock. There are people who we owe and they have to be paid. From childhood we were taught that monetary discipline,” recalls Aditya.

The founders are conscious about spending and keep overheads low. Campus Sutra maintains a low-inventory model to avoid cash burn. The company employs over 160 people including at its warehouses and office staff. It also has about 150 employees across its stores and shop-in-shops.

“I have seen Campus Sutra exploring uncharted, innovative business models and adapt them at a fast pace. Where established brands struggle with long supply chain, constantly changing fashion trends, challenges of inventory management and multi-channel retail, I see Campus Sutra embracing it using innovative sourcing models and an online to offline presence,” says Rajul Jain, an angel investor, and co-founder and CEO of Increff, a Bengaluru-based supply chain management startup.

Despite a strong growth trajectory, the Agarwals are fully aware of the competition they are up against: Universal Sportsbiz which owns brands such as Wrogn, Imara and Ms.Taken. In the athleisure space, HRX is a key competitor. And in the casual wear segment, it competes with Myntra’s flagship private brand Roadster.

But the founders are not perturbed by competition. They are focussed on scaling the business and keeping costs low. “Our goal is to take the profit and plough it back to the business. We are building a brand with usage. The product does all the marketing. Our marketing expense is zero,” says Aditya.

Surely, the Agarwal business acumen is playing out well.