Manchester-born Kajal Ruia was the founder of Ruia NYC, a shoe boutique with a shop in Manhattan, New York. In this blog she shares the biggest mistake she made as a founder.
“Ruia NYC was a European shoe boutique I launched in New York in November 2010. I’m from Manchester in the UK but decided to focus on New York, and specifically SoHo, because it’s an international designer shopping hub for both locals and tourists. I also identified a gap for lesser-known unique European designers.
My original strategy was to purchase all inventory for the season up front and to focus on evening and special occasion footwear. This meant a large amount of cash was tied up in stock, but it also meant we’d have a wide range and enough sizes in each style. The only option was to hold drastic sales, sometimes with prices below cost, at the end of a season to clear shelf space and free up cash for new incoming collections. This was not a sustainable strategy as it ate into profit margins. It would have led to us having a reputation for discounting, which would impact our regular-priced sales.
I learnt several lessons from this mistake. These lessons led to implementing a consignment buying system where I only paid for items sold and returned unsold items to designers at the end of a season. The lessons were:
- Stay as liquid as possible – Crucial for all startups in any industry. It is well known that the reason most businesses fail is due to cashflow issues. Even if they remain profitable, not having funds available to meet commitments can be disastrous. This means carefully examining the timing of when payments are due and received to ensure all commitments can be met.
- Constantly review your original strategy – In this example I am discussing procurement strategies, but the principle is applicable to all areas of business. No matter how much planning and research you do, things don’t always go according to plan; both internal and external circumstances change so regular analysis and an open mind are necessary.
- Pay attention and listen to your customers – A retail selling environment gives a business owner direct access to customer feedback. Recording customer comments in a graphable format gave me much deeper insights than simply analysing sales data. For example, I found that the customers who were buying evening shoes were also looking for casual styles, and by focusing on a niche I was missing out on potential sales.
- Develop collaborative relationships with suppliers or any other third parties – Negotiating consignment terms with designers was by no means easy and required developing close relationships where we could both work together to understand each other’s motivations and strengths. For example, some designers were very excited by the opportunity to access the New York market and the large amount of publicity the boutique had so we could offer PR as an incentive.
These are some of the lessons learnt that led to Ruia NYC being the success it was!
Ultimately, after three incredible years, I was forced to close the business due to US Visa issues, which leads to the final lesson - limit your exposure to risk from external circumstances you can’t influence. If you are heavily reliant on something external which you can’t control, I would advise changing your strategy accordingly.