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STRATEGY

In a Former Life: M. Farooq Kathwari

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Present life: CEO of Ethan Allen, a $679-million manufacturer and retailer of furniture, with 316 stores and 21 plants, headquartered in Danbury, Conn.

Former life: Political activist. In Kashmir, where Kathwari grew up, "students were beaten, arrested; police would use their sticks," he says. In the early 1960s, Kathwari regularly led protests and marches for Kashmiri self-rule. Times were riotous then: the ruling Indian government had kept Kashmiri leader Sheikh Abdullah in jail since 1953. Also, India was blamed when a holy relic of the Prophet Mohammed was missing from the Hazratbal shrine in Srinagar. On a plane, Kathwari met an American journalist who was in Kashmir to cover the relic's disappearance. After taking the journalist around to demonstrations, Kathwari got into trouble with the Kashmiri government. In 1965 he came to America and requested political asylum.

Lessons learned: "If your nation's been fighting for self-governance since 1586, you realize that to change things sometimes takes a long time."

That helped Kathwari cope when he became president of Ethan Allen, in 1985. For seven years prior to Kathwari's arrival there, the company's sales had been mired at about $200 million. "I had to change our whole image. Early American colonial was no longer a style category people wanted. We sold 70% of our line during four months of the year, and we didn't have unified national pricing," says the CEO. "When we started doing 'one cost,' we had to raise prices in the East. There was opposition from the eastern independent retailers, who were used to doing things their way and were worried they'd lose money."

Kathwari convinced the East Coast retailers that their short-term losses would ultimately be worth it when the company became a stronger national presence: "But we needed to do it in stages," Kathwari says. "Trying to do everything at once would have meant failure." Before implementing unified pricing, Kathwari made several incremental changes, all of which were initially resisted by the independents: he banished other brands from Ethan Allen stores, he flew 600 in-store salespeople to Danbury to persuade them that the company's new styles would sell enough to support brand exclusivity, and he switched the company's advertising strategy from more than 100 locally managed ad campaigns to one nationally coordinated push.

Kathwari's patient revolution has paid off, stabilizing the company and preparing it for the next big leap: E-commerce. "We'd have a tough time doing E-commerce, though, if we didn't have one price nationally," he says. "But that's all a major result of work we started years ago."




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