SELA Company was one of the first native players of clothes market, those players who in the beginning of the nineties resolved to create branded retail. SELA created the brand, worked up a customer, looked for ways of business optimization and learned to work with China. Today, the promoter and president of SELA Corporation, Boris Ostrobrod with pleasure remarks that his retail chain takes front rank for numbers of outlets among native projects of clothes retailers in Russia and he tells about his own treatment of business.

Boris Ostrobrod came to our place early in the morning, directly from airport. He had come from Tel-Aviv and, in spite of a night flight, he looked incredibly alive. To say the truth, it was not easy matter to catch Ostrobrod for interview. SELA Company has come from Petersburg, but head office has been situating in Moscow during the year already, SELA clothes are made in China, but the design was create in Tel-Aviv. At the same place, in Tel-Avive, according to Boris’ words, his house is situated… Generally, it is almost impossible to forecast in what moment and in what part of the world president of global clothes corporation SELA is happen to be, but we have done it. Naturally, that the main topic of the interview with the “elusive employer” was the topic of specificity of management of a global business.

Let’s take up a theme, where an employer feels comfortable, in what country. You have a global business; you work in Israel, Russia, and China… You have many orders in China, don’t you? Don’t you produce all your goods there?

Practically yes, for example today, by the way, I begin to produce my product in Russia. I have subdivisions in different countries, I, personally, see after such questions as sale of square meter of shopping space, after such index as total turnover of our company. My aim- is to provide the chain with such product, which would have competitive information.
Because, for the last ten years many of the biggest world players have come to Russia. For example, such a colossus as H&M, not to mention Top Shop, Zara and UNIQLO. In other words, today, there are many famous brands in Russia, that’s why if you can’t suggest people something exclusive, you would be out of business.

So, how do you feel under such competition?

I let you have it straight, in my time people frightened me that global retailers H&M, C&A and I would be destroyed. I thought: let it comes, I was not afraid. But today I can say that with opening in “MEGA HIMKY” H&M, the turnover of my shop, working in this shopping center, has increase by 25%.

How can you explain it?

There is some part of secret, but I think that the retailer attract to MEGA more costumers. And these costumers dispense between all the shops, which are situated there. But if in the street there are 20 seafood restaurants and no barbershop, what do you open- a restaurant or barbershop?

A seafood restaurant.

Certainly. Or, for example, in Moscow, today UNIQLO shop in the shopping center “Atrium” has been opened, and now I want to “Atrium” specially. Earlier I didn’t want to this place because there was a high rent rate and there were things which belong to the higher segment. And now there are H&M, UNIQLO, and I understand that audience which would like SELA, come to this shopping center. And I try to come to “Atrium” and I should come there. In other words I don’t avoid strong competitors, but vice versa- I want to be with them. And many companies do the same. For example, there are Russian clothes companies, which open their shops near SELA shop specially.

It’s true, if I go to H&M to buy a jumper, in this case for that to choose something I go to 4-5 shops, which adjoining property. And if my daughter asks a pink jumper, there are not so many chances to find it in one shop.

Many people ask me: What is so unique in my clothes business? Everybody sew the same shirts, down parkas… Bu I say: no, not the same! How many native clothing shops of retail are in Russia? May be it’s about 15 projects. But they are not the same, every brand has something special.

And do you have something special? Is it, in practice, the value of the brand?

Oh, it is one of the most impotent values of the brand. Some time ago one of our first designers, Arthur made a dawn-parka and inside the pocket in the dawn-parka he made the inscription: “an inexpensive pleasure”. In that time everybody scolded him for it. How he can do it and so on. But I think that when you make some convenient thing as, for example, a pocket for mobile, an eyehole for headphones, when you do something functional for people, they, certainly, value it. I can’t say, probably, there is some personal designer's underscore. You are sure to go to one hairdresser, not to several. The same thing is in our SELA. Due to our discount cards, we see that 50-40 % of our costumers- are regular. People write to us from across the country, they can address to me, directly, with any kind of questions. Every day I answer to letters.

And what conclusions do you draw for yourself?

I think that problems are usual things. Somewhere there are problems with assortment, somewhere with deliveries. But, today, qualitative goods which come in time and to right place are not enough.
Today, people want to be given by something else- a bit of respect, emotion, attention. Before the interview you asked me the question what my most colorful impression in business was. I began to remember. And, by chance I remembered such a picture. It was, probably, in 1993 year or in 1992. In that time there was a serious commodity shortage and we got dawn-parkas only in January. Today, for example, if dawn-parkas are got in September, we can’t sell them, according to technology. But in that time we got dawn-parkas in January, can you imagine?! To sell them was just impossible. But, thanks God, he helped us. In that time there was very cold weather and we sold dawn-parkas through the window in our office. The line was about hundred meters. It leaves a lasting impression with me and now I am sure that people need what we do. They even stand in a line! Then people, standing in the line didn’t permit to sell two dawn-parkas to one person. Today we can’t imagine such thing.
I tell you what happen with I Pad. I returned from USA, in the first days, I Pad was sold in this way: one I Pad to one person! But you are right that less and less companies produce scarce commodities, for that people would stand in a line, but there are such handymen…
But, certainly, everybody is so upset because of crisis, but I think that crisis- it is not only to see everything black but what has happen…

And what’s happen for your opinion?

For our business the situation was like everybody stops buying everything. There were real reasons, certainly, but, generally; it was like soap bubble in the area of building and realty. People wanted to buy, but prices was unreal, but stagnation like a chain- where one followed by one. And then people just stop buying at all. Our rescue fell off on 40% in dollars and on 30% in rubles. We buy our goods for dollars. But expenditure levels were the same. Do you know why any business can bust? I think it spends more than it gets. We came to such situation, when our expenses became bigger than our income. Certainly, that fact that we had no loan debt burden helped us a little. Because we began to spend our trading stock which we had, began to spend accounts receivable. And when we sow it we had to do serious reorganizations which we would never do if only the crisis.

What kind of reorganization? Tell us, please.

We did a very impotent reorganization. Our company was developing in that way: we had two offices in Russia: the first- in St. Petersburg and the second- in Moscow. The first replies for developing of the company in one part of Russia and the second in another part. The offices were competing with each other and at some moment, this fact permitted us to take market extensively. During the crisis we changed that structure. We saved only central office in Moscow. But our retail was in St. Petersburg. It permitted us to save good money. There were also three shopping offices and we saved only one.

Don’t you produce your goods only in one region?

Generally, we produce them in one region- in province Zhejiang, Jiangsu and Anhui. It collected historically. It is a very strong textile area, especially Nimbo; do you hear about this town? It is situated near Shanghai. The case is that we start our business in China, working with State Company Shanghai Knit Wear. Earlier, private companies in China may not legally to handle export, only State Companies made export supplies. Shanghai Knit Wear was such an export-import oriented company. They made a contract with me in dollars, but they paid factories in Yuan, local money, and they cashed on VAT, because VAT returned to them. And it was quiet big sum. In time all that State Companies went private and private enterprises was at liberty to handle export. But as we had business in that region of China we stayed there. We had two shopping office there, they were situated in the same building but on different floors. We needed two offices for that to know purchasing prices. The offices competed with each other and it was profitable for us. One more our office was in Guangzhou, but we opened it three years ago he worked with accessories mostly.
In crisis we saved one shopping office in China. Besides we had large trading stocks which were reorganized and something we sold to different stock chains. And, besides, we cut the price, which was offered by suppliers on 20%. Our aim was to cut the price, but to save the previous level of quality.

How can you manage to do it?

In China we had about 60 constant suppliers, their business developed together with our business. But for that to make our factories to cut the price, we had to take 23 new suppliers extra for winter season. A new supplier – it is very difficult, he has another repayment terms, as distinct from fabrics which know you. You give your fabrics an indent and they began to work. They have no need in prepayment. We remit money to them only when the product is made and if quality of the product is good enough. With new suppliers it is different. Firstly a new supplier doesn’t know you and he taste you. Certainly, in China everybody knows each other. But you can’t be sure that the fabric, which would get your order, would do it by itself. I think this fabric can give your order to another fabric on a contract.

I have such a question: I had small retail business, but I leave China because I was tired from that fact that I couldn’t draw stability of quality. Is it a national character?

No, it is not national character. Can you imagine that you are fabric and you get at once several orders but it is good money and you just can’t refuse?!

I can.

But Chine people can’t do it! What they do? If they have many orders, at the best case, they will order cloth by themselves because want to control quality of cloth. And after that they will give the order to some smaller fabric and this fabric will sew it. And in 80% of the cases, everything would be all right. We know our suppliers and we have no problem with them. Besides, they know that if something is incorrect we will not pay them. But new fabric asks 25% prepayment before doing something. So when I understand that they do something wrong, I can’t reject the goods because I lose my money. So, it is not so easy to forge relationships with new suppliers. But in the crisis it gave us opportunity to show our previous partners that if they wouldn’t cooperate with us, we wouldn’t work with them.
I have my own quality control system, which was reorganized too in the crisis. Earlier I had merchandiser; with his help I placed orders at fabrics. That merchandiser had assistants and group, dealing with quality monitoring. All the orders which were done by merchandiser, he sent to quality monitoring. In case of such organization, there is a variant of agreement between a control brigade and a fabric. For example, we order this cutaway made from this paper but the fabric use paper which is cheaper, on 2 grams smaller. A consumer doesn’t notice it he pay the same sum. But the difference is great deal of money which was taken by a maker. A fabric can bribe my quality monitoring. But there were several variants: for example, my control group and a fabric may play checks and my group may lose. It’s China! A very hard country!

But they put across you and they may have a row with you and lose a good client!

Yes it may happen. But if they want cheat you they do it. That’s why we should be friends with China people. If Chinese is your friend, he can’t give you up. Today we change the scheme of work of quality monitoring in China, today our monitoring agency obeys Israel. Today it is independent group of specialists; there is fear of agreement too but not so big.

Do they send goods to Israel for control by DHL?

They check goods by themselves and send to Israel, they subscribe everything and in such a way we know who check goods. But what China people do? For example, we give a reference on every shipment, in other words it’s number and without this number it’s impossible to ship goods. We give the permit for shipment after checking the final variant- shipping sample, when goods have been packed in the storehouse. But Chinese people don’t send us shipping sample from box, they sew it in independent laboratory. In other words goods pass quality monitoring but you get other goods under this brand. It’s not a global problem, but it takes about 10 %.

In other words are 90% people honest more or less? And when you catch them out in deception, what do you do?

If it happens, I say: I can’t pay for it. They know that they would be caught in any case, because I have quality monitoring in Russia too. But it’s more difficult for Russian controller to take in, because he has no original, which was stipulated by us. That’s why our controllers just compare with Russian system of standardization.
The most impotent thing is- you should understand that you must not fight windmills! You never rap over the knuckles a fabric with use for yourself. If you begin to push against them, they just stop working with you. Because a good fabric finds a client in one go. 
In other words the idea that the customer is always right- is wrong?
No, certainly, a client is always right and a fabric respects him and wants to work with him but if the client begins to give the supplier a head game, the fabric give up working with him. I am sure a good fabric has orders always.

You want to say that good quality and democratic price without giving somebody a head game are impossible?

We try to work in such a way that China people feel ashamed of giving us unsatisfactory goods. It happens because every person wants to be honest. A fabric should be proud of this fact that it works good. That’s why we don’t argue with good suppliers. But if there is a problem we say so: sorry, these goods are poor quality; we will pay for them only when they would be sold. We have such a notion payment after sale. If the goods would be sold we would pay for them, if they would not we wouldn’t pay. Or I ask about a discount. To say the truth we have had no case when a fabric does something badly but say that it’s good. Earlier they asked me to send them a specimen, to prove that it’s bad, today they even don’t insist on my proving something. My word is enough for them.

How much do they get?

When a fabric gives me the price, it shows me all the calculation. So, in this calculation they put their profit 10-12%.

Do they show you it? Why?

A fabric wants to prove that this price is correct. I am shown by the expenditure estimate. And, I, for example, say: I don’t want this zip, I make another in place of it, and I want another cloth instead of this. I have my own calculation too. But, from experience, I know how much does a thing cost. I think, that a fabric gets about twenty per cent in any case. Because in the expenditure estimate a supplier can write that the price of a zip is such, but the price can be less in the fabric where they buy it. This fabric may give a discount.

Yes, 10% is s a very little profit for production.

Do you remember that I have said that we should be friend with fabrics? Why should we do it? For example I have a fabric with sweaters and I have one more fabric but it has no money. And the last one is ready to provide me goods for determined price, if I give them prepayment. This supply is very impotent for me, because people come to my show room and order particular things and after that I had to provide them. So, I wouldn’t pay the prepayment I would ask another my supplier to give necessary sum. I obeyed to buy the goods. And the supplier gives this sum. It’s named to be friend with fabrics! I have such a case recently. The question was about 3 million Yuan.
Certainly, if the fabric wouldn’t help me, I would give prepayment by myself, because I have no choice. But I always try to save for an emergency. Chinese people get their money from their countryman in one way or another. But I may lose my money. Do you know what Chinese people do if they are not paid? I know the case when one fabric doesn’t pay its suppliers. The debtor- the owner of the fabric- was invited for conversation and was held by suppliers in their place until he repay.

You are always saying: “I go”, “I arrange”… Do you mean your team?

Certainly, but first time I go there by myself. It is impotent for Chinese people to know you personally. If Dima Agarunov comes and says something it is troth.

In other words, probably, do you go there once in a month?

Today, I am not; we have a good relationship… But once in three months anyway I go there.

If it’s not a secret, how many people do you have in your shopping office?

In China forty persons work in the shopping center, all of them are Chinese people. But now, we are looking for manager of different nationality. It summons Chinese people. Generally, I like Chinese people to value supreme power. If they have a chief- they never criticize him. If the chief says they must do. That’s why it’s not so difficult to manage them. For example there was President in Kirghizia and he was ousted. It’s impossible in China.
In crisis we cut our expenditure not only in China and in Russia but in Israel too. For example our designer's office was cost $250 but now $160, it is a great difference. We cut operating expenses on one shop too, because in our business if a shop has expenditure more than 50% it’s unprofitable.

In other words, does crisis give us a handle to organize you to become more efficient, more mobile?

Yes, we have created more acceptable structure, today, we have a very efficient command and we have very ambitious plans.

Tell us, what plans do you have?

We want to make SELA a national brand. We have such an opportunity. Firstly, we have our shops almost in every city in Russia. In other words we are ahead of the field of development of the chain. Somebody has 200-250 shops, but we have 450 shops.

How many of them are franchising?

It’s about 80%. We have about 80 shops of our own.

Are you pleased by your franchise?

They are good partners of 80%, they pay for goods, develop their shops. A half of the city is their personal client. But, as in school, every class has D students. We have them too. We have a small part of franchise, which either doesn’t know how to do business or do it in dishonest means. They spend money for goods on their own needs. For example they want to buy an apartment… We have such cases that franchise having sold the goods doesn’t pay us for them.

In other words, do you give goods for franchise on trust?

Certainly. May be we don’t give the first shipment on trust, but after some time, certainly, we trust our franchise. We give a credit for 30 or 40 days. There are franchises which give us a schedule of payments and they pay accordingly it. Some of our franchises pay accordingly realization, every week for sold goods. In most cases, I feel gratitude to my franchise, because they invest money in my business.

Can you describe a psychological portrait of franchise?

It’s some person or family which wants to have a constant source of income which is equal to $10 thousand per month. They have some family saving, and they want to invest them in business.

Is there some national feature? Is it true that some nations are the most successful in trading business?

No, it doesn’t true. We don’t divide people according their nation. But I can say, recently, we start working with more experiment franchise, which have retailer of other brands too. They look upon this business in another way, wildly as on the processing.

The most interesting thing is that 80% of our franchises have been working with us 10 years. By the way, forty new shops appeared in our chain in a recessionary year, and 35 from them are franchise. This is the index of vitality of the project.

Can you remember some great misfortune in your business?

We had the project “Zimaletto” which was expected to be large-scale. We think so because the title was from a popular serial, which was watched, mostly, by housekeeper and students. But in consequence of it, our partner brought it to premium. And, finally, we hand it over. The project didn’t become large scale, but today there are 4 shops in Moscow, working under this brand. So, it’s difficult to name this project a great misfortune. Probably, I can say that a project with French clothes brand “Kookai”.
We weren’t the first in Russia who tried to work with that brand. But we didn’t manage to do it as our predecessors. I think that “Kookai” had strange provisions for franchise. We had to prepay all the goods, and very often we couldn’t buy as many goods as we needed. There were such cases that we didn’t have enough goods. But, at those times, when we began to develop that chain we had high rent rates, they were half as small as now. That’s why we gave up the idea of developing those shops.

So, in other words, you can’t remember some great mistakes.

We had a footwear project “Foot & Fruit”. Light shoes, sandals were well being bought in SELA. And we decided to start such a brand like “Ecco”. But those plans were at one time with crisis and we had to freeze the project. But we return to this project, we have had no losses with it, but I understand now such a project as “Ecco” needs much more investments than I have thought and it’s more difficult than I have supposed.

Do you have engineering education?

Yes, I am metallurgical engineer; I graduated from Mountain Institute and wrote my diploma in the department of light and rare metals.

Do you get benefit from engineering education?

For example, in Israel, all the chiefs of middle management are from Russia, because Russian education gives a wide range of knowledge. Israeli education gives good specialists, but in narrow area. In a word, Israeli engineer knows everything about a spoon. But engineer from Russia knows everything about a spoon and about a cup and how to brew tea. That’s why I am very satisfied by my education- I know chemistry and the physical chemistry and I even know the basic terms of economy. And the fact that I finished a physico-mathematical school № 38 in St. Petersburg gave me the base for all my life. Also, during my studies I was traveling about the country- I was in Irkutsk, in Bratsk. I made an acquaintance with my master of karate; I was practicing karate in earnest for 15 years.

And when you were in school did you want to work with textiles?

It’s a good question. I studied in 9, 10 class in 38 school. And even at that time, my classmates had good clothes. And I wanted to dress well too, I bought jeans from spivs. And back then I decided that sometimes I would work with clothes.

Are your children involved in your business too?

My son has been working with me in my business for 12 years. He works 24 hours per day. He has MBA, perfect experience of structural management. He began to work with me in 22 years old. In the beginning, he went with me to China.
Edward was industrious with his childhood, he experienced poorness firsthand and he always has an entrepreneurship sense. But he neglected schoolwork, he was a daredevil. Teachers even wanted to send him down from the school. Mother came to the school and cried and thanks to that fact, they felt sorry for him and he finished school. Certainly, I scolded him, I made him study. But it was uselessly. According to the tests in school my son, in the best case, was able to become an electrician. And the stronger I pushed him the greater he was a yob. And in some moment I decided not to push him, I just stop doing it and can you imagine, after half a year, he without my helping, entered to The University. After that he graduated the second degree of University of Manchester and began to work.
Children- are a very delicate thing, if he doesn’t want to do something, you never made him do it, and if you begin to try, it destroys your idealization. This is the basic law of Karmic interactions. What is “idealization”- it’s when you make a thing of something. For example, you dislike drunkards- you would be meeting drunkards for all your life. If you are not to be fussed about them, they would pass by you. Why should “idealization” be destroyed? The reason is that you put more emphasis on something than on God. It’s impossible to make children study. Children learn by your personal example. If you are not an idler, if you are a creative person. Even if a child doesn’t understand it today, anyway it will be evident at his time.

But my younger daughter was a positive, good girl. She always studied well. She drew perfectly and she entered to Institute of Design and now she does a term project. Besides she has been invited to H&M for practice. But she works with us, doing a youth collection. So she have to choose between us and H&M. But she is a skilled worker for us.

I have, probably, the last question for you- about the perspectives of Russian economy. What do you think about it?

I think that a consuming market is sure to develop. And, in this regard, Russian economy has very good perspectives. Necessarily, home consumption displaces import, because our own production is more profitable. And I begin to develop the production in Russia too. Today, import taxes are 45%. So, to import and to produce in Russia are equal on the money. But I gain time, having a production in the country in which, there are the biggest part of my sales, in other words in Russia.

And one more question: what recommendations can you give for these people who want in textile industry and to have their own textile business?

I say so: if this person has not begun to work a suitcase trader or to buy something, I think, he shouldn’t work in this business.