Career by design

The founder of kikki.K wanted to bring a sense of fashion and design to the everyday, and took her business from its start-up $3000 outlay 10 years ago to revenue now of more than $20 million. Kristina Karlsson tells AMANDA GOME the kikki.K story.

In 2001, a 24-year-old Swedish entrepreneur, Kristina Karlsson, started the retail business kikki.K with $3000. Now, at 34, she has revenue of more than $20 million, 22 stores and offers from large competitors who are prepared to buy her business for $40 million. But she isn’t selling.

Kristina talks to Amanda Gome, and is happy to answer your questions. Email feedback@smartcompany.com.au.

Amanda Gome: How did you get the idea?

Kristina Karlsson: I always wanted my own business and so I decided that I should start with a home office. But when I went out to buy things for the home office I realized everything was price driven and poor quality. People basically stole things from their offices for their home office. 

I saw there was a niche to set up products to supply to home offices. I asked people if they would they buy a box for $20. They all said yes. Then I thought, that’s not enough. They might just say that. So I organised 350 people into 40 focus groups and took the boxes along. I had a tiny car and the last box was always sitting on my lap.

I asked them what they thought. When they bought it, it gave me the confidence to ring up retailers and make an appointment to see them.

We built the business by adding products (we now have 2700 products) adding things like notebooks, greeting cards and pens and wrapping paper. We also opened stores in fashion precincts, as our objects have become fashion accessories: you now have matching shoes, a bag and a notebook.

We learnt to follow fashion colours. If orange is hot one year, you don’t use it the next. Some products sell slower than others, but we have never had a disaster.

How did you decide on your design and brand?

I always knew since day one what my design philosophy is. It’s Swedish: very simple with natural materials. All our designers are Scandanavian. If I needed a designer there would be lots in Australia, but we have Scandanavian designers who want to work for us and they don’t leave as they have the perfect job.

I knew the name was really important but had already decided to call it kikki.K because I liked the look graphically. At the start I had to spell it about 15 times, but I thought well people will remember it. I like it graphically and now when I ring, people say they know it.

I did the logo after three bottles of red wine one night with a designer who was a friend. I drew it on a serviette and he said why don’t we put it on the computer. It has never been changed since.

How did you market the business?

In the beginning we had no money for advertising. I went to a bank and some venture capitalists, but it was not the right fit.

We thought it was better to get others talking about us than us talking about ourselves.

We always had lots of interest from editors of fashion magazines. We are always trying to do things differently and they like that. We stay in contact with the editors of home magazines and fashion magazines and when they need something they come to us and we respond quickly.

Did you expand by developing in to different areas?

No, we learnt to be very focused. We have 350,000 ideas all the time and our customers also email ideas in – but we have to stay focused. We have learnt that by experience. New ideas go to the product development team, which meets weekly. But in the end I act on my gut.

You were very young when you started. Was that a drawback?

I never had a problem with my age or gender. I grew up in Sweden where everyone is equal, so that’s never been a problem for me. I also got a lot of interest from the media, being an entrepreneur and a woman. I read hundreds of books and asked lots of questions.

What was the best thing you did to help grow the business?

Having a great mentor made all the difference.

I heard Gillian Franklin (entrepreneur who founded The Heat Group) and asked her if I could talk to her. She has been my mentor every since.

When I was really struggling and thinking I wasn’t going to make it, I would ring and ask her if she had five minutes and I would walk out 10cm taller. She gave me advice, but it was never sugar coated.

She called me today with an idea: She thinks about me in her spare time!

I have asked her what I could give her and even offered her shares, but she told me all she wants is for me to do this for someone else when I have time.

How have you avoided burnout?

For the first five years I worked 24 hours a day, seven days a week. I didn’t have a life outside of work. My friends would go to the races and I would decide to clean out the warehouse.

After five years all I wanted was to get up and run the business and live it without working 24/7.

Cashflow was a huge challenge. There were days when I didn’t know how I was going to pay the wages in the morning.

It was very busy – we had been doubling revenue every year but I was really struggling and at the end of my energy. Gillian said to me you need a mentor group.

It was great, because you get so tired you can’t see the business with fresh eyes. They identified that I needed a cash injection and that I also needed a finance person who could help with managing everyday cashflow, but also run operations. We had had a part-time bookkeeper and when we had five stores I was comfortable doing it all. But now we had 20 stores. The cash injection and taking on a finance guy were the answers. The cash injection from an equity investor helped add products to the range, helped me employ more people and open more stores in 2005.

I also focus on what I love doing. I am the creative director and head up the design and production teams, and the visual merchandising department, which I love.

What got you through the bad times?

If you have a bad day unless you are passionate there is nothing to carry you through. It is never about money. The resilience came because I was passionate, so even on the hard days I loved it.

Health is really important. I always took time out to exercise and drank wine in between to cope.

How has your manufacturing strategy changed?

It is very hard to find manufacturers in Australia who are big enough to do the volumes we need. We still make the storage boxes in Melbourne, but a lot of it is done in China. I learnt to be super clear when I brief them and always double check everything, which is annoying for suppliers but if I don’t it’s me who ends up paying for it.

I go to China once or twice a year to visit the factories but communications by email is good and it keeps the relationships going. We have no one over there from Australia, but the quality is fantastic.

How do you manage the fluctuating exchange rate?

We hedge. We never thought it would go over 90c so there is a cost fee, but we manage to buy a lot of products in Australian dollars and prefer to work with suppliers who do this. Of course the dollar has been fantastic lately.

How did you build your export strategy?

I always wanted a global business so I could go to all the cities I love. I started recently in New Zealand and now have three stores there. The first one was on Nuffield St, Newmarket, in Auckland, and we worked closely with Westfield. It was hard. We had to deal with new laws and new currency, but fortunately we had a lot of internet customers in New Zealand so we knew people loved it. It’s very hard when you are so busy to set up a new company and to understand new laws and different salaries. I went over to have a look first, and then I sent over a retail manager for three weeks before we opened.

We are planning a meeting in February to look at a lot of countries that I want to open in. We’ll start with Asia because it is close.

What have you learnt about staff?

I would have invested in much more senior people quicker. We have now got a really good senior CFO. In the last few years we have attracted fantastic people. The concept attracts a lot of people and people love being able to use their skills to help the business grow. We pay above market rates and it’s a great culture – young, fast growing and people love to get their hands dirty. In a fast growing company people grow up really fast; in a slower business, it’s a flat growing curve.

What are the main systems you implemented to move from being a small to a medium business?

We put a lot of energy into systemising everything. It’s all electronic. When stores open, (they will know) how the cleaning is done, how to operate manually if EFTPOS fails – all the tasks each day to make sure things run properly.

We also systemized job descriptions. At the beginning you do most of it yourself as it is a great way of making sure it is done. But you have to delegate. We are growing so fast that guys in our office move up quickly. So people can come in to do admin tasks or finance and they have electronic descriptions.

What will you need to drive further expansion?

It depends on how fast we do it. We may need to take on more investment and equity partners.

There is a lot of interest from large companies buying medium ones. The figure of $40 million has been mentioned, but I am not interested in selling.

I am also having a baby. I plan to keep running the business as there are a lot of things I can do from home.

It is also so much better now I have more resources and expertise. It just gets easier and easier, but I still love it as much as I did at the start.

We have now got 23 stores and after a few years we were making a profit, so we are doing pretty well.