Jack Chen is a person who understands market analysis. Together with his understanding of the complexities in adapting methods to realize profitable abroad expansions whereas delivering dynamic e-commerce platforms which can be essential in charming customers, Chen brings an unparalleled worth to world of high-value investments. In 2021, LUXUO interviewed Kuei “Jack” Chen, Managing Companion and Founder at SKS Capital to debate his choice course of when investing in new manufacturers. Now two years on, LUXUO catches up with Jack to debate SKS Capital’s entry into the sweetness sector and additional plans of growth in Singapore alongside localising the model to fulfill native shopper behaviours and wishes.
Good to fulfill you once more within the Lion Metropolis! You have got spent loads of time currently in Singapore. Why is that this capital metropolis changing into strategically necessary within the development of SKS Capital?
Singapore has certainly turn out to be an more and more strategic location for the expansion of Capital for a number of causes. First, as SKS strategically focuses on cross-border growth, Singapore’s worldwide nature makes it a micro-market the place manufacturers can take a look at their means to develop. Its various shopper base and excessive focus of various nationalities present a comparatively low-risk atmosphere to gauge how nicely a services or products could be acquired on a bigger scale.
Second, Singapore additionally acts as an entry level for firms and establishments from outdoors of Asia seeking to penetrate Asian markets. Its well-established authorized framework and business-friendly atmosphere make it simpler for overseas firms to arrange operations, offering a stable stepping stone into different regional markets. It’s price mentioning that Western Funds of Funds (FoF) typically utilise Singapore as a gateway to spend money on the Asian market, particularly aiming to seize alternatives within the East Asia and Southeast Asian (SEA) area. We’re actively partaking with potential traders from all around the world in Singapore to debate alternatives in Asian markets.
We all know SKS has been specializing in the sweetness sector. Are you able to inform us why this sector is so attention-grabbing and the way it has modified over time. Any main distinction pre and put up Covid?
The sweetness sector has at all times been an interesting area for SKS Capital, and its evolution over time has solely heightened our curiosity. Earlier than diving into the adjustments, it’s important to acknowledge the challenges the sector has been dealing with. One key subject is the dominance of massive international manufacturers that have a tendency to supply normal merchandise for a worldwide viewers. Whereas these merchandise have broad attraction, they typically lack the nuanced choices that at the moment’s customers are more and more in search of.
This leads me to the alternatives which have arisen, notably within the wake of recent Hollywood influences and shopper tendencies. Persons are not simply on the lookout for fundamental skincare or make-up merchandise; they’re on the lookout for one thing distinctive, one thing that resonates with their individuality. This quest for distinctiveness creates an enormous opening for manufacturers that may supply a wide range of merchandise tailor-made to totally different calls for. That’s the place SKS comes into play. We intention to fill this hole by investing in firms that present extra decisions for the discerning buyer.
One other change is affected by the COVID-19 pandemic, notably in how customers have interaction with manufacturers. Direct-to-Client (DTC) fashions have seen a big uptick as e-commerce proliferated in the course of the lockdowns. This shift to on-line procuring hasn’t simply been a survival tactic; it’s became a long-term technique that aligns with shopper comfort and choice.
To sum up, the sweetness sector is present process an interesting transformation. From a market saturated with international manufacturers to a panorama that cherishes uniqueness and private preferences, the adjustments are each difficult and exhilarating. Add to this the pivot to e-commerce accelerated by the pandemic, and it’s simple to see why this sector stays a compelling focus for us.
Learn Extra: Kuei Chen, SKS Capital: It’s All About Forging Human Connections
Asia is such a various area. Are you able to inform us what widespread tendencies you see throughout the area and level out any particular regional variations?
The sweetness business in Asia Pacific stands out as a significant participant within the international market, with international locations like Japan, South Korea, and rising hotspots like India enjoying pivotal roles. Southeast Asia, with its mix of conventional and trendy influences, has seen a surge in digital adoption, with over 100 million new web shoppers because the pandemic. This digital transformation has been accompanied by improvements in retail, resembling livestreaming, augmented actuality (AR), and a shift in direction of cashless funds. The area’s complexity is additional highlighted by its fast e-commerce development, which skyrocketed from USD 5.5 billion in 2015 to USD 100 billion in 2021.
The Asia Pacific area has witnessed strong development in shopper spending within the magnificence sector, pushed by elements such because the rise of the center class and growing digital penetration. Particularly, India’s magnificence market is a testomony to this development, with projections indicating an growth from $14 billion to $21 billion by 2027, fueled by an increasing center class and a youthful demographic the place half of its 1.4 billion inhabitants is underneath the age of 30 (as per the Magnificence in Asia Pacific report). Moreover, Southeast Asia’s digital financial system’s fast ascent, approaching a gross merchandise worth (GMV) of USD 200 billion in 2022—three years sooner than anticipated—underscores the surge in shopper spending within the digital realm. Nevertheless, this development has not come with out challenges. The market panorama is rife with intense competitors, with each international and native manufacturers vying for a slice of the market share.
Native gamers in SEA have showcased each innovation, and a deep understanding of their shopper base. They’ve harnessed know-how to have interaction and captivate customers. Improvements like livestreaming and “Shoppertainment” have turn out to be prevalent, indicating how native gamers are on the forefront of the retail evolution. Moreover, the rise of e-payment options and various cost strategies, from cash-on-demand to Purchase Now, Pay Later (BNPL) companies, has revolutionised the retail panorama. This has not solely offered comfort to customers but in addition opened up alternatives for hundreds of thousands who had been beforehand unbanked or underbanked within the area.
SKS has its origin in Taiwan, which isn’t a historically giant magnificence market. How did you identify your connection throughout the area?
Our manufacturing heritage, which extends over three generations and spans 60 years, has allowed us to construct an unlimited community each in Asia and globally. Our presence, with places of work and factories in numerous international locations, considerably bolsters our attain. Due to our specialisation in main packaging, we’ve not solely established sturdy relationships with main manufacturers like Estée Lauder, L’Oréal, and Shiseido however have additionally constructed strong connections all through the provision chain—from packaging and success to formulation and in-house design.
Apart from, we strategically collaborate with the very best gamers within the area, which reinforces our experience and permits us to supply complete options within the magnificence sector. This contains forging deep connections with market leaders in logistics and gross sales channels, whether or not it’s e-commerce platforms or conventional retail. Thus, even Taiwan itself is probably not a big magnificence market, our in depth community and deep relationships have positioned us as a key participant within the regional magnificence business.
What’s your key providing when speaking to native manufacturers?
When partaking with native manufacturers, our key choices are multi-dimensional, aimed toward making a win-win partnership for all stakeholders concerned. The cornerstone of our interplay with native manufacturers is their growth abroad. It’s a crucial side of our funding theme to introduce manufacturers to new markets, thereby including substantial worth to their enterprise. We imagine in not simply rising, however rising properly and effectively. Conversely, we additionally concentrate on introducing overseas manufacturers to native markets once we establish an excellent match. We often supply a complete technique for abroad development that features market analysis, a concrete entry plan, and identification of native companions. This may occasionally span throughout numerous channels, together with e-commerce enablers, retailers, and distributors. We offer the know-how and the community to make sure a clean and profitable abroad entry
What are the challenges when taking native magnificence manufacturers abroad?
Increasing native magnificence manufacturers to worldwide markets comes with its personal set of distinctive challenges. The regulatory necessities, for instance, can range extensively from one nation to a different. Whether or not it’s assembly the FDA requirements within the U.S. or conforming to EU laws, understanding and adhering to those guidelines are essential steps for any model seeking to set up itself in a brand new market.
Logistical complexities additionally current challenges. Past simply transport and distribution, there are particulars like customizing the provision chain to fulfill native demand, management price and managing inventory ranges successfully.
Localisation is one other very important side. This goes past merely translating textual content on packaging—it includes cultural adaptation. For example, what appeals to customers in a single nation by way of branding, packaging design, and even the product itself might not resonate with customers in one other market. Due to this fact, localising the model just isn’t merely about translation however a couple of complete understanding of cultural norms, shopper behaviors and preferences, and even native competitors. It’s an intricate course of that requires a deep understanding of the brand new market to efficiently introduce a model to a special shopper base.
Apart from, digital platforms differ between areas too. It contains understanding the subtleties of rating algorithms and the popular promoting codecs on totally different e-commerce platforms. This requires a deep understanding of the platform dynamics, together with find out how to successfully talk with native customers.
A notable instance illustrating the pitfalls of not adapting to native demand/preferences is Sephora’s preliminary entry into Japan. The corporate maintained its warehouse fashion and self-service method, which was at odds with the native choice for personalised service and in-depth consultations. Sephora needed to redesign its method to align with Japanese shopper expectations, a pricey lesson within the significance of understanding native market situations.
Lastly, it’s essential to concentrate on the “unwritten guidelines” in every market. For example, the cost constructions for Key Opinion Leaders (KOLs) differ considerably between East and West. In China, many stay streamers cost a hard and fast quantity along with a fee from gross sales. In distinction, influencers within the U.S. or Europe typically work for a hard and fast quantity solely. Additionally, whereas YouTubers within the West have larger artistic freedom in how they current sponsored content material, Chinese language KOLs have a tendency to stick carefully to detailed pointers offered by the model.
Understanding these complexities and adapting methods accordingly are key to profitable abroad growth. It isn’t merely a “copy-paste” of what works within the dwelling market however requires nuanced understanding and tailor-made approaches.
How essential is it to offer provide chain and advertising helps to your portfolio firms? How is SKS able to such assist?
With over three generations and by being the second largest provide chain for magnificence and cosmetics on the planet, it’s embedded in our DNA to assist our portfolio firms.
We have now a deep understanding of your complete magnificence worth chain, from sourcing and packaging to logistics. Our in depth community throughout Asia allows us to supply turnkey provide chain options, accelerating market entry for our portfolio firms.
On the advertising entrance, our group’s digital-native background positions us nicely to totally perceive the market wants, buyer behaviours and craft localized advertising plans that includes the proper merchandise for the proper markets. We additionally give attention to an omnichannel technique that seamlessly combine each on-line and offline distribution channels, optimizing engagement in any respect buyer touchpoints.
SKS units itself aside with distinctive strengths which can be troublesome to duplicate. Our data-driven insights, backed by a mature ecosystem, allow us to establish the subsequent business leaders with a depth of perception. We elevate this method by actively involving our skilled distributors and retailers within the analysis course of, counting on their wealthy expertise and real-world knowledge to gauge the potential and market match of potential manufacturers. Apart from, we provide end-to-end options that transcend mere monetary assist, offering a full suite of companies—from provide chain optimization to strategic advertising—that can be very exhausting to copy. Lastly, our strategic benefit is additional amplified by our regional know-how, underpinned by a various group and powerful partnerships with native business leaders. This distinctive mix of capabilities not solely differentiates us but in addition ensures that we add substantial worth to our portfolio firms.
How key’s the idea of “sustainability” when deciding on firms your fund invests into?
Delivering sustainable options is on the core of our funding philosophy. With our deep familiarity with sustainability requirements and L’Oréal provider ESG audit, we possess a novel benefit in guiding and training our portfolio firms towards environmentally accountable practices.
We prioritize ESG compliance and actively promote sustainable approaches in each side of our investments. From packaging supplies to the manufacturing course of, we offer professional steering to our portfolio firms, making certain they undertake eco-friendly practices that align with worldwide requirements. Our dedication to sustainability not solely displays our moral values but in addition strengthens the long-term viability and success of the manufacturers we assist.
Who as of late are most all for investing within the magnificence sector?
Numerous forms of traders are interested in the sweetness sector for various causes. Non-public fairness corporations worth its regular development and recession-proof traits, whereas household places of work see it as a long-term, secure funding for diversification. Angel traders usually have backgrounds in magnificence, wellness, or shopper tech and are looking out for high-potential startups. Company traders are aiming for strategic integrations of modern merchandise, and retail giants need to combine these manufacturers into their platforms. Now, investing via SKS Capital provides 4 key benefits. First, we offer danger mitigation by diversifying portfolio, in contrast to particular person traders who might put all their eggs in a single basket. Second, our data-driven insights and expansive ecosystem allow us to not solely establish but in addition nurture high-potential firms. Third, our deep business connections throughout Asia supply distinctive entry to partnerships and offers. Lastly, for these unfamiliar with the sector’s operational intricacies, we provide experience in provide chain administration, market entry, and regulatory compliance. General, we provide a extra complete, lower-risk different to direct funding.
The place do you see your fund in 5 years?
In 5 years, SKS Capital goals to be a pacesetter in enterprise capital in Asia’s magnificence and shopper business. We’re not simply seeking to scale for the sake of income; we’re dedicated to enriching the patron expertise by introducing them to a various array of high quality manufacturers. This additionally permits us to foster cross-market collaborations, enhancing worth for each our traders and portfolio firms.
We’re on observe to develop a extra mature ecosystem within the SEA area, focusing on an bold 50 p.c annual improve within the quantity of products offered. We additionally plan to diversify our investor base to incorporate a larger variety of institutional and household workplace traders, aligning with our “For Us, By Us” philosophy.
Ethically, we’re dedicated to advancing mature ESG options that improve your complete worth chain.
Income-wise, we’re exploring new enterprise fashions, together with franchising and distribution, to enhance our core enterprise capital actions. We intention to be often called the “Gatekeeper of Client Pursuits in SEA,” analogous to the position TPG or ABG performs in America.
Our funding focus is designed to be agile, permitting us to grab rising alternatives in areas like AI advertising, cost-efficient operations, and modern retail methods. This method goals to optimize key efficiency metrics resembling Return on Promoting Spend (ROAS) and Buyer Acquisition Price to Lifetime Worth Ratio (CIR). By doing so, we’re positioned to ship unparalleled worth not simply to our traders and portfolio firms, but in addition to finish customers who profit from the cutting-edge manufacturers and merchandise we carry to market.
You can be organising a one-day seminar in Singapore on October 25 2023. What would be the key highlights? What would you like current traders and potential new ones to recollect when heading dwelling after the seminar?
We intention to supply groundbreaking insights into the position of enterprise capital within the magnificence sector, notably specializing in cross-border alternatives and improvements, which will probably be additional mentioned in a panel session. As well as, attendees can even get a more in-depth have a look at the manufacturers we’re at the moment supporting via a portfolio showcase, understanding magnificence market in Korea, China and SEA. We additionally invited a famend beauty-focused YouTuber Tina Yong to supply her distinctive insights on digital magnificence tradition. The occasion can even present ample alternatives to community and join with business leaders.
As for key takeaways, attendees will depart with a greater understanding of SKS Ventures’ distinctive worth proposition. They can even get a present snapshot of the business panorama in Asia, empowering them to make extra knowledgeable choices. It’s a complete expertise designed so as to add worth to current and traders, manufacturers, distributors and retailers.
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