Friday, 5 July 2013 00:05
Oldest souvenir boutique in Sri Lanka shifts focus from under-performing entity to Rs. 73 m profits in 2012
By Cheranka Mendis
Known as the oldest gift and souvenir boutique in Sri Lanka, Laksala has managed to move away from ‘under-performing entity’ and ‘inactive government organisation’ tags to a profit-making entity, making steady headway to become a self-financed organisation.
Restructured and re-modified within two years, it has managed to move away from Rs. 24 million losses in 2008 to a Rs. 73 million profit in 2012. With Q1 financials for this year recording profits of Rs. 20 million, Laksala is likely to touch Rs. 90 million in profits by the end of 2013, Laksala Chairman and Chief Executive Anil Koswatte said.
Thanks to the successful streamlining, Laksala enjoyed an annual sales growth of 75% in 2012 over the previous year, and a 37% increases as at end of June 2013. Reaching half a century mark next year, Laksala has over 7,000 suppliers on board as at now and over 25,000 SKUs.
From losses to profit
The organisation underwent a rigorous revitalisation under the guidance of Strategic Enterprise Management Agency (SEMA), shifting its focus, expanding its product range, and investing in modern, vibrant showrooms and better customer service.
He noted that with the core values of delighting the customer, value creation and shared values among rural community, multi-faceted opportunities for best customer choices, and quality, reliability and value for money, Laksala marched forward to upgrade and redefine itself from being mere showrooms operating with the basic and minimum facilities.
“The loss-making showrooms were closed down while the employees of these units were compensated under a voluntary retirement scheme which was drawn under a win-win system,” Koswatte said. Many employee motivational programs were also conducted to upgrade and improve customer service and professional standards of the existing employees of Laksala.
“All management and operational matters of Laksala are conducted under the stipulated financial management practices and guidelines of the country and are carried out in a transparent manner acceptable to the public,” he expressed. In this regard, Laksala has implemented the internationally accepted SAP Business One computer software systems to support its operations.
Laksala also managed to make its way to the top 50 profitable State-owned business enterprises in 2012. In the Annual Report of the Finance Ministry for 2012 positive observations have been made on Laksala’s performance after its restructuring process. The report has cited Laksala as a recognised business entity among the State sector and has positioned Laksala in the 33rd position among the profitable State-owned organisations.
Streamlining the face
Under the restructuring exercise, outlets such as those in Galle and Katubedda that were decrepit were revamped as modern gift boutiques while the flagship showroom in Thunmulla was upgraded as a state-of-the-art gift boutique with new facilities, amenities and products in an extended land area. The oldest showroom in Fort is currently under refurbishment.
Showrooms were also established down both ways of the Southern Highway, as well as in Pinnawela, Ja-ela K-Zone and at the Racecourse Building. The floor area of the Bandaranaike International Airport outlet was also increased from 80sqft to 960 sqft under the project. Laksala now has its sights set on Yala and the Botanical Gardens, he revealed.
More suppliers onboard
“Prior to the restructuring process, many suppliers and craftsmen left the supply chain as a result of the numerous financial hardships they had to bear due to the under-performance of Laksala,” Koswatte said. “However, as a result of its restructuring process and the Divi Neguma program, Laksala has managed to entice them on board once again and has continuously ensured their financial stability.”
Prior to restructuring, there were only 800 suppliers registered with Laksala, he said. This number has moved to a 7,000 with annual purchases from suppliers having increased from 47% in 2010, 54% in 2011, to 72% in 2012. The target is to increase the supplier base to 15,000 within the next few years.
All suppliers are paid immediately or within 14 days of supplying goods to Laksala, depending on their contract guidelines. Each craftsman has to fill in a detail cost calculation and Laksala determines the price per product with a 30% mark-up for the artisan. “We guiding them to make quality products to earn a substantial profit, and purchase the best possible quantity from the suppliers to uplift their livelihood.”
While the body constantly educate the handicraft artisans on emerging international standards for gifts and souvenirs, they have also set up a small-scale R&D unit within its flagship store premises to look in to value addition and quality maintenance. He acknowledged that the unit is soon to be expanded to provide better solutions for customers and artisans alike.
“We have identified that there is a need for new product development if we are to move forward without any hitches. We do not let the craftsman discard any product they bring to us. Even if we do it three to four times, we ensure that the product is perfect before putting it on the shelf.”
Targets for the future
In the short term, the target is to increase the number of outlets to 15, Koswatte said. As progress is seen on this front, the key goal is to attract the foreigners as well as the elite Colombo or high-spending Sri Lankans to Laksala.
As at now the organisation’s name does not carry much weight in this targeted crowd, he said, and Laksala has begun discussions with tour operators and travel lecture guides to promote the institute in the future. Attending trade fairs is also on the books for the future
In the middle term, the focus is to increase the supplier base to 15,000 and to expand the product category to include 50,000 SKUs. “The long term goal is to enter the international market and diversify the product.”
Sharing his expectations for Laksala, Koswatte noted that the annual sales value growth for 2013 is Rs. 854 million while for the next three years (2104, 2015, and 2016) the sales growth expectation is Rs. 1,100 million, Rs. 1,350 million, and Rs. 2,000 million.
Expected annual profit for 2016 is Rs. 200 million and he is confident this figure can be reached before the targeted year. By 2016, with a supplier base of 15,000, the number of SKUs will be increased to 50,000 and some Rs. 1,300 million has been budgeted for handicraft purchasing.
By the end of 2013, Laksala has budgeted Rs. 650 million for handicraft purchases with SKUs of 30,000.
Pix by Daminda Harsha Perera