Founder and CEO of Kidz Diaper - a premium and best-selling diaper brand in Dhaka, and Evaly - an ecommerce marketplace, Mohammad Rassel, hails from Savar, where he grew up in the late 80s. In 2016, he left his well-paying bank job to start a baby products company which eventually became Kidz Diaper.
In this immensely inspiring interview, Mr. Rassel opens up about going away to boarding school at age 8 (class 3), and his eventual path toward entrepreneurship, how a personal experience inspired him to start a baby product business, explains how he started Kidz Diaper, managed investment, and launched initial operation while still working as a full-time banker, talks about the early days of Kidz Diaper, how it has grown, the anatomy of building a baby product brand from scratch, the state of its business today, the challenges for Kidz and ambition going forward, reflects on the idea of risk and imperatives for entrepreneurial success.
Future Startup
What is your background?
Mohammad Rassel
I remember always being a part of a large group. If I start with my childhood, I began living in a dormitory with 60 students in class three at Residential Model School and College. I completed my higher secondary from there.
Future Startup
Which year are we talking about?
Rassel
I completed my SSC in 1999 and HSC in 2001. My admission in Dhaka Residential Model College was in 1991 and I spent the next ten years there. That was an interesting period of my life. I and my friends spent a significant part of life in the hostel. We used to go on vacation leaving all books and study materials behind at the hostel. There were plenty of vacations so we had a good time both in the hostel and at home during vacation. I was born in Savar. We are local there.
I studied Statistics from Jahangirnagar University (31 Batch). It took me a little longer than regular time to complete my bachelor because I was involved in all kinds of things at university. I did not pursue a regular master after that.
After graduation, I taught Mathematics at Saifur’s for a while. Afterward, I joined Dhaka Bank and completed my MBA from the Institute of Business Administration (IBA), Dhaka University (44 Batch) while working full time at Dhaka Bank. That was the end of my formal education.
I was not a very studious type and had this polarized tendency of studying hard at one semester and not going near the books the next. It reflected in my result throughout my academic life.
After my higher secondary, the plan was to go to BUET and then abroad for higher studies. Nothing goes according to plans. After college, when I finally got out of the hostel, it was a different life. Since I spent a large part of my life in the hostel, many things of social life were new to me. I struggled to find a balance with new found freedom. It took a toll on my admission preparation. So instead of BUET, I went to Jahangirnagar University to study Statistics. Had I maintained my seriousness after HSC, my story could have been different. I now might have been sitting somewhere in a Lab instead of being an entrepreneur (laugh).
A few years into the bank, I started trying different business ideas in small scale on the side. Renewable energy was a hot thing at that time; I tried my hands at Solar light lamp business. I always had this dream that I would pursue entrepreneurship as a career at some point in time. In fact, joining a bank was part of that plan. I thought that working at a bank would give me some idea about business and management.
Future Startup
When and how did you start your career?
Rassel
I started my career in the banking sector by joining Dhaka Bank in 2011. A few years into the bank, I started trying different business ideas in small scale on the side. Renewable energy was a hot thing at that time; I tried my hands at Solar light lamp business. I always had this dream that I would pursue entrepreneurship as a career at some point in time. In fact, joining a bank was part of that plan. I thought that working at a bank would give me some idea about business and management. My experience of working at a bank does help me in my business today. I have learned many financial intricacies from working at the bank. I learned about import and other areas of running a business from there.
After a few years of tinkering, I formally started working on my first venture, Kidz Diaper and Wet Tissue in 2016.
Future Startup
Did you leave your job by that time?
Rassel
I was still working fulltime at the bank and working on the business on the side.
Future Startup
When did you get the idea?
Rassel
The idea first came in around 2011 when my son was born. I was very cautious when it came to buying diapers for my kid, Ayan. I had to find the best quality diaper, it does not matter what it takes. In fact, I would prioritize it over every other thing in my life at that time. I used to buy pampers and I had to get pampers every time. I did not want to change brand. That’s when I realized that there is a huge opportunity in the baby products market. Parents are the most paranoid people in the world when it comes to their babies. If we could give a high-quality product, I thought it would work.
The first meeting for Kidz I had with an entity from Germany. This was back in 2015. My wife, Ms. Shamima Nasrin, also joined this journey at that time. We built connections with Germany to source the high-quality products from Europe. After a series of brainstorming, thought and discussions, we entered into a joint agreement with a German company named Telsons. We have the company’s name on Kidz Diaper Packets. The initial plan was to launch kids food, kids care products, diapers, baby care, I mean everything for kids.
We spent the entire 2015 in collecting samples. That was the only thing we did. We did a humongous amount of work in collecting samples from the best of sources in Europe.
Future Startup
You were still working full-time at the bank at that time, right? How did you manage time?
Rassel
Yes, I was still working full time at the bank. I used to find time on weekends and after work. Every day after office, I would do something that was scheduled for the day. Since we did not have a business yet, I could manage it. It was mostly collecting the samples and comparing them with each other. You could call it the development phase and it did not require a lot of time.
We bought almost 100 types of samples from Europe and liked almost all the products. Our initial plan was to get into baby care - lotion, cosmetics and soap, and other baby care products. We worked hard to find sourcing in Europe and found some really good ones. But we faced some technical difficulties in importing products from Europe. The tax was higher and it made the product very expensive for our market. But we did not want to compromise on the quality. After much thought, we decided that we would send the samples to one of the Asian Countries and see if they could make us the same quality products. So, we sent some best sample along with raw materials to China and asked them to make us the exact same quality products. When we received our first samples from China, we found that products from two factories really good.
Later in 2016, we decided to start with wet tissue for babies on trial basis. In the Asian market, we are currently operating in Bangladesh. We have plans to enter a few more Asian markets and the European market in the near future.
Kidz obtained its registration in Bangladesh and Germany at the end of 2016. In December 2016, we brought our first batch of wet tissue in markets worth BDT 15 lakh taka to see the response from the market.
Future Startup
What happened next?
Rassel
I was still in the bank, working full time. Mr. Atiqur Rahman, our Director (Operations) today, joined Kidz as a working partner. He just returned from the United Kingdom completing his higher study at that time and took over the day to day operation. By the time, I already told my Manager in Dhaka Bank that I would quit the job very soon. And in six months, I quit my job.
We made the best possible products in the market. I can confidently tell you that our product is the finest in quality and comfort and you would not find anything better than our product in the world.
Brand has been a source of fascination for me. When in business school, I loved the concept of brand and building a brand. I have found that building a premium brand is tough and often takes a long time. You have to be patient to build one. But if you could build, it will give you a loyal customer base and help you in building a sustainable business. Building loyalty at the top is easier than building loyalty at the bottom because customers are generally price-sensitive when it comes to low-end products. For customers of a premium brand, price does not matter once they become loyal to a brand.
Our products are reasonable in price and best in quality and comfort compared to other products in the market. The price of our 56 pieces wet tissue packet is higher than 120 pieces pack of other brands. But, you won’t consider the price range of these tissues for your kids after first use.
Initially, this was a huge challenge for us. Particularly, in distribution. Because when you are a new brand and expensive, retailers often don't feel comfortable giving you shelf space because they fear that you would not do well and long last. But we pushed hard. We applied deliberate strategies to get a better result from our distribution. We made it a priority to ensure better visibility wherever we put our products. Since we knew where we wanted to go from day one, we invested heavily in the marketing, promotion and providing incentives both for demand (customers) and supply (retailers).
The idea first came in around 2011 when my son was born. I was very cautious when it came to buying diapers for my kid, Ayan. I had to find the best quality diaper, it does not matter what it takes. In fact, I would prioritize it over every other thing in my life at that time. I used to buy pampers and I had to get pampers every time. I did not want to change the brand. That’s when I realized that there is a huge opportunity in the baby products market. Parents are the most paranoid people in the world when it comes to their babies. If we could give a high-quality product, I thought it would work.
Future Startup
What are the things you did for promotion?
Rassel
We did a lot of things including TV ads. We bought one of the most expensive TV ad spots for nine months and it worked very well. Kidz is promoted widely in versatile means:
• Signboards of retailers (now, you can see Kidz brand in Pacific Blue everywhere from Dhaka to Cox’s Bazar)
• Television Commercials
• Primetime TV spots
• Funding relevant social programmes
• T-shirts
• Digital promotions including Facebook and other social networking
It has helped us to build awareness in the market and by ensuring a great product, we have built the loyalty.
Initially, this (price) was a huge challenge for us. Particularly, in distribution. Because when you are a new brand and expensive, retailers often don't feel comfortable giving you shelf space because they fear that you would not do well and long last. But we pushed hard. We applied deliberate strategies to get a better result from our distribution.
Future Startup
By the time you hired new people?
Rassel
We were 4 people in management including me and 4 people in sales. I was still in the bank, so it was only 3 people in management. A business development expert, Mr. Feroj Hossain, now our Executive Director, also joined Kidz’s management at this phase. His contribution dramatically improved Kidz’s sales.
We did not have an office. We used a room at our house as a warehouse where we stored Kidz’s products. I had a personal vehicle which was the only medium of transportation and logistics. In the first 3-4 months, sales figures were not that significant.
Future Startup
You were spending on promotion and had a small team, how did you manage the capital?
Rassel
I decided to apply for a bank loan for Kidz’s first batch of diapers and wet tissues. I received a huge support from Standard Chartered Bank. They sanctioned me BDT 50 lakh loan at that time. I spent the entire money in marketing and promotions. We spent on TV ads, other ATL advertisements, and ran a huge campaign on Facebook. At that time, our marketing budget was three times our working capital. We ran a huge promotional campaign. I must say that it is not an ideal strategy for a new business, fortunately, it clicked for Kidz.
Apart from TV and digital, we started to give sign-board to different shops and hospitals. We currently have 400 signboards in Dhaka. We started this work back then. The sales figure was not attractive at that time. We had only 3 salespeople. When our sales were barely BDT 2 lakh, we were spending 15 lakh in operation. Our promotional budget was almost five times our sales. We never hesitated in investing in building the brand because we knew that our ambition was to build a global brand. We had and have big plans. We never worried about the return from the promotion and investing in the brand.
After a certain period of trying hard, our sales started to grow rapidly. The distributors who were selling our products started to place repeat orders. There were some places where Kidz did not do well and we closed such ends after a while. But the shops that started to sell well, they continued to grow in numbers. As result, our credit loss is very insignificant, not more than 1%.
After a year, in September 2017, we decided to launch diaper when came to see that despite the higher price there has already been a demand for our products because of better quality. So, Kidz brought another item - DIAPER.
Future Startup
This is a very interesting pricing strategy. Most people think that low price is good for attracting customers but in reality, a low price does not always win.
Rassel
Well, the pricing strategy worked for Kidz for sure. We are still the most expensive brand in the category. Our price is higher than many international brands. This is not because we wanted to charge our customers more but because our products are superior.
We are offering the best possible products in this category in the world. Essentially, it is expensive to manufacture. Since our customers get to see that our products are better than other competing brands, they happily pay us extra.
Future Startup
You decided to launch the diaper in 2017, what happened next?
Rassel
We started working on launching diaper in mid-2017. It took us about 4 months to put everything together. All raw materials for Kidz diaper were collected from Japan and shipped to China for manufacturing the final products.
The raw materials of Kidz diaper are very expensive and guaranteed the best quality. Our raw material cost is almost three times higher than a regular diaper. Our price does not go that high because other costs are fixed. Our price now is about 30% higher than many existing products because we use very expensive and high-quality raw materials in manufacturing the diapers. We never compromised on quality and comfort. We are selling the world's best possible quality diaper. Kidz stands to be challenged.
We finally launched our diaper brand in January 2018. After diaper, we could see some real growth in our business. Before diaper, our monthly sales was about BDT 2 million. After diaper, it grew significantly.
Future Startup
You launched the diaper business in January 2018, what happened next?
Rassel
We brought a new sales team on board. Soon, Kidz sales team turned into 65 people. We started distributing Kidz diaper and wet tissue in all the districts. We continued our promotion, in a bigger shape. And it helped us to move quickly.
Future Startup
What have you done to grow your diaper business?
Rassel
We received a good response from the hospitals. Doctors and nurses started recommending Kidz. Today, our products are available in almost all major hospitals. We saw a huge growth in the first three months. Our sales grew to almost 4 times after the launch of the diaper. We are expecting that it would grow by three times this winter. And Kidz is prepared for that.
We also sell a significant number of products through our Facebook page. We have a good customer base that regularly places their orders through kidz Diaper page. Our customer retention rate is over 70%.
We could have grown our sales by another 10-15% if we used a few other techniques such as giving free samples. But we don't do that. Our push sales are almost zero. We want our customers to come to us.
I didn’t convince them; I made my family an integral part of Kidz. They were initially a little uncomfortable. But eventually came to realize that after all ‘No Risk No Gain’.
Future Startup
That's an incredible journey. I want to go a little back to 2016 when you decided to leave your well-paying job, take a loan and start a business. It was certainly a big decision and risky one as well. How did you make the decision? How did you muster the courage and finally take the plunge?
Rassel
That’s a tough question. And to answer it, I have to go back to my childhood for a moment. I realized early in life that if I put effort and my mind into something and work hard I could achieve it. I was not a top student in the class and was not a serious student either but whenever I tried, I could do really good result. It gave me a belief that we all have the potentials, we just need to work hard to realize it.
Let me give you an example when in grade nine, I suddenly thought that I must do well and study in BUET and so on. So, I studied hard and scored highest in Mathematics and Physics. Although I did not make it to BUET, later, I learned that if I put my determination to achieve a goal, I can reach it. This mindset has helped me throughout my life. When I finally decided that I would start a business, I had this confidence that I would do well.
I never thought for once that I would not succeed. So, taking a loan and getting into a highly competitive market like the diaper, I was not worried at all. People around me told that there are giants in this space, Kidz will not survive and so and so, I told them that we are planning internationally, and we are not worried about competition. So I was confident from the beginning that if I could provide a better product at a good price, build a great team and properly execute, there is no reason to fail.
About risk, I’m afraid I don’t agree with the conventional definition of risks. So, I was not entirely convinced about risk from the beginning. When people say that business is risky, most of the time I don’t get it. Our life is always at risk, still, we live, and we develop more.
My wife always says how do I sleep so peacefully? But I don't see any point in stressing. There will be challenges in business and you have to manage it.
For instance, if your business is growing fast, you must be mindful of managing the working capital because the requirements will increase as your business grows. When you are running a business, you have to manage current affairs efficiently.
For me, the biggest challenge in business is managing fund. Yes, managing fund has been a challenge and a source of friction for me since I did not come from a wealthy background. But at the same time, dealing and overcoming these challenges is what I’m here to do.
Future Startup
How did you convince your family? What was their reaction?
Rassel
I didn’t convince them; I made my family an integral part of Kidz. They were initially a little uncomfortable. But eventually came to realize that after all ‘No Risk No Gain’.
Future Startup
Coming back to your operation today, how big are your team and operation today?
Rassel
If you talk about our business today, our shop coverage is almost 600, meaning you could buy Kidz diapers and wet tissues from almost 600 pharmacies all over the country. We have not started working with major chain stores because of their payment policy. Our products are available in over 150 hospitals.
We have reduced our sales team outside Dhaka. Our current sales team is 35 people. We have recently hired some people with extensive experienced in the industry. Kidz has the best sales team in this industry at the moment. We have a management team of 15 people.
Future Startup
You have invested heavily in marketing that was one of the things that helped you grow initially, what other things you have done to grow your business?
Rassel
Apart from marketing, the single thing that has helped us to grow and continues to do so is our product quality. As I told you, Kidz brings the best product in the market.
I believe we have been able to match our marketing effort with our brand building effort. Although we did not get immediate results from many of our promotional campaigns, it has helped us to build the brand and a lasting connection with our customers.
We have been deliberate when it comes to branding and advertising. We have designed strategy and deliberately worked hard to execute accordingly. We did not do anything which is irrelevant and does not offer apparent value. I must give credit to our advertising agency which has been very supportive and did an excellent job in selecting the target audience, positioning the brand image and building the brand. Mr. Abu Jafor Siddique, who is a mastermind in this area, played a vital role in building brand Kidz.
We are only in Dhaka now. We have recently scaled down our operation outside Dhaka. We have a small operation in Chittagong but Dhaka is our main market.
Again, the only secret to our success has been product quality. Unfortunately, no one pays much attention to product quality. If someone comes up with an equally good product, only then I see we would face some challenges. Otherwise, we don't see any challenge in the market. People often think that if we offer a better price, people would buy. But usually, that is not how it works. We have been obsessed with quality, it has paid off and we will continue doing that.
If you talk about our business today, our shop coverage is almost 600, meaning you could buy Kidz diapers and wet tissues from almost 600 pharmacies all over the country. We have not started working with major chain stores because of their payment policy. Our products are available in over 150 hospitals.
Future Startup
What are some of the biggest challenges you have faced?
Rassel
The only challenge for us now is managing working capital. When our sales grows, the requirement for working capital also increases and every time, it gets more challenging to manage the working capital.
I’m also thankful to Dhaka Bank Limited, especially to Branch Manager Mr. Rafikuzzaman and SME Head, Mr. Sanjib Kumar Dey Sir for their exceptionally swift support. Without their support, Kidz won’t do as well as we have done.
I would suggest to early-stage founders that: start with a proper financial plan. If you start with BDT 30 lakh working capital, you should have another 50 lakh as a buffer so that you could inject the cash in a critical moment. If you are in trading business, that's okay. You buy something at one price and sell it at a margin and make a gain. But if you are in building a business and in entrepreneurship, you have to seriously work on both your financial plan and business plan. Many people understand business very well but make mistakes when it comes to financial planning. But in order to do well, you need them both.
Future Startup
Do you have any online dedicated site for kidz?
Rassel
Kidz has two dedicated and popular Facebook pages of major Categories Diaper and Wet Tissues. A lot of customers place orders on Kidz’s facebook page. We are selling through other ecommerce sites as well. We don't have a dedicated website for Kidz yet. At kidz, our priority is product - offering the best quality product and world-class brand. Distribution is not a priority at this point in time. However, it does not mean that we would not explore a new model of distribution in the near future.
I would suggest to early-stage founders that: start with a proper financial plan. If you are in trading business, that's okay. You buy something at one price and sell it at a margin and make a gain. But if you are in building a lasting business and in entrepreneurship, you have to seriously work on both your financial plan and business plan. Many people understand business very well but make mistakes when it comes to financial planning. But in order to do well, you need them both.
Future Startup
How big is the diaper market in Bangladesh?
Rassel
The market is huge. Only diaper market is worth BDT 8 billion yearly and it is growing. Top four-five companies dominate the market who own almost 70% of the market. However, import-based products continue to do well.
Future Startup
Do you plan to raise investment?
Rassel
I prefer bank financing; if banks come forward we would prefer that. Banks often could not absorb the rate of growth that we are having and there are other challenges of bank financing. Since there are these challenges with bank financing, if we could find a flexible financing source, we would definitely consider - flexible in the sense that the capital would be patient in nature and would not seek an immediate return.
Future Startup
What are the plans going forward?
Rassel
Although we have grown quite fast and are doing well, we believe that we have not started our main journey yet. We have some really interesting plans for Bangladesh market and then we plan to enter a few markets in Asia. Before that, we are not worried about the sales figure.
We are working on launching a few new product lines. Our next goal is to launch our baby care products and then finally, we plan to get into baby food. We are trying to bring our first test products for our baby care line by June 2019. Baby food would take a little longer. Our plan is to start exploring the baby food business by mid-2020. Our ambition is to provide all things baby to our customers.
Expansion wise, we want to enter India and Nepal and a few other Asian markets in the next few years at a small scale. We are eyeing Calcutta as a trial market. We have already done some studies on these markets.
I never want to explore international market overlooking the Bangladesh market. Our first priority is the Bangladesh market and it will remain so. We have been able to build a good footprint in the Bangladesh market and we want to continue and grow that as we go. We have some plans related to investment and if we could find some investment opportunities as well then we will see how else we could expand.
We are working on launching a few new product lines. Our next goal is to launch our baby care products and then finally, we plan to get into baby food. We are trying to bring our first test products for our baby care line by June 2019. Baby food would take a little longer. Our plan is to start exploring the baby food business by mid-2020. Our ambition is to provide all things baby to our customers.
