Jack Chen is an individual who understands market evaluation. Collectively along with his understanding of the complexities in adapting strategies to comprehend worthwhile overseas expansions whereas delivering dynamic e-commerce platforms which might be important in charming buyers, Chen brings an unparalleled price to world of high-value investments. In 2021, LUXUO interviewed Kuei “Jack” Chen, Managing Accomplice and Founder at SKS Capital to debate his alternative course of when investing in new producers. Now two years on, LUXUO catches up with Jack to debate SKS Capital’s entry into the surprise sector and extra plans of enlargement in Singapore alongside localising the mannequin to meet native shopper behaviours and wishes.
Good to meet you as soon as extra inside the Lion Metropolis! You will have spent a great deal of time as of late in Singapore. Why is that this capital metropolis turning into strategically important inside the progress of SKS Capital?
Singapore has actually grow to be an increasingly more strategic location for the growth of Capital for various causes. First, as SKS strategically focuses on cross-border enlargement, Singapore’s worldwide nature makes it a micro-market the place producers can test their capability to broaden. Its quite a few shopper base and extreme focus of assorted nationalities current a relatively low-risk ambiance to gauge how properly a providers or merchandise might be obtained on an even bigger scale.
Second, Singapore moreover acts as an entry stage for firms and institutions from outdoor of Asia searching for to penetrate Asian markets. Its well-established licensed framework and business-friendly ambiance make it easier for worldwide firms to rearrange operations, providing a steady stepping stone into completely different regional markets. It’s value mentioning that Western Funds of Funds (FoF) often utilise Singapore as a gateway to place cash into the Asian market, significantly aiming to grab alternate options inside the East Asia and Southeast Asian (SEA) space. We’re actively partaking with potential merchants from in every single place on this planet in Singapore to debate alternate options in Asian markets.
Everyone knows SKS has been specializing within the surprise sector. Can you inform us why this sector is so attention-grabbing and the way in which it has modified over time. Any fundamental distinction pre and submit Covid?
The sweetness sector has on a regular basis been a fascinating self-discipline for SKS Capital, and its evolution over time has solely heightened our curiosity. Sooner than diving into the modifications, it’s necessary to acknowledge the challenges the sector has been coping with. One key problem is the dominance of large world producers that tend to produce customary merchandise for a world viewers. Whereas these merchandise have broad enchantment, they often lack the nuanced decisions that at current’s buyers are increasingly more searching for.
This leads me to the alternate options which have arisen, notably inside the wake of newest Hollywood influences and shopper tendencies. Individuals will not be merely trying to find elementary skincare or make-up merchandise; they’re trying to find one factor distinctive, one factor that resonates with their individuality. This quest for distinctiveness creates an unlimited opening for producers that will provide a variety of merchandise tailored to completely completely different requires. That’s the place SKS comes into play. We purpose to fill this gap by investing in firms that current further choices for the discerning purchaser.
One different change is affected by the COVID-19 pandemic, notably in how buyers work together with producers. Direct-to-Shopper (DTC) fashions have seen a serious uptick as e-commerce proliferated all through the lockdowns. This shift to on-line shopping for hasn’t merely been a survival tactic; it’s became a long-term approach that aligns with shopper consolation and selection.
To sum up, the surprise sector is current course of a fascinating transformation. From a market saturated with world producers to a panorama that cherishes uniqueness and personal preferences, the modifications are every troublesome and exhilarating. Add to this the pivot to e-commerce accelerated by the pandemic, and it’s easy to see why this sector stays a compelling focus for us.
Be taught Additional: Kuei Chen, SKS Capital: It’s All About Forging Human Connections
Asia is such a varied space. Can you inform us what frequent tendencies you see all through the world and stage out any specific regional variations?
The sweetness commerce in Asia Pacific stands out as a major participant inside the world market, with nations like Japan, South Korea, and rising hotspots like India having fun with pivotal roles. Southeast Asia, with its mixture of standard and trendy influences, has seen a surge in digital adoption, with over 100 million new net buyers as a result of the pandemic. This digital transformation has been accompanied by enhancements in retail, resembling livestreaming, augmented actuality (AR), and a shift within the path of cashless funds. The realm’s complexity is extra highlighted by its quick e-commerce progress, which skyrocketed from USD 5.5 billion in 2015 to USD 100 billion in 2021.
The Asia Pacific space has witnessed sturdy progress in shopper spending inside the magnificence sector, pushed by parts such as a result of the rise of the middle class and rising digital penetration. Notably, India’s magnificence market is a testament to this progress, with projections indicating an enlargement from $14 billion to $21 billion by 2027, fueled by an rising heart class and a youthful demographic the place half of its 1.4 billion inhabitants is beneath the age of 30 (as per the Magnificence in Asia Pacific report). Furthermore, Southeast Asia’s digital monetary system’s quick ascent, approaching a gross merchandise price (GMV) of USD 200 billion in 2022—three years before anticipated—underscores the surge in shopper spending inside the digital realm. Nonetheless, this progress has not include out challenges. The market panorama is rife with intense opponents, with every world and native producers vying for a slice of the market share.
Native avid gamers in SEA have showcased every innovation, and a deep understanding of their shopper base. They’ve harnessed experience to work together and captivate buyers. Enhancements like livestreaming and “Shoppertainment” have grow to be prevalent, indicating how native avid gamers are on the forefront of the retail evolution. Furthermore, the rise of e-payment choices and quite a few charge methods, from cash-on-demand to Buy Now, Pay Later (BNPL) suppliers, has revolutionised the retail panorama. This has not solely equipped consolation to buyers however moreover opened up alternate options for a whole lot of 1000’s who had been beforehand unbanked or underbanked inside the space.
SKS has its origin in Taiwan, which isn’t a traditionally large magnificence market. How did you establish your connection all through the world?
Our manufacturing heritage, which extends over three generations and spans 60 years, has allowed us to assemble a vast group every in Asia and globally. Our presence, with workplaces and factories in quite a few nations, significantly bolsters our attain. Attributable to our specialisation in main packaging, we’ve not solely established sturdy relationships with fundamental producers like Estée Lauder, L’Oréal, and Shiseido nonetheless have moreover constructed sturdy connections all via the availability chain—from packaging and success to formulation and in-house design.
Along with, we strategically collaborate with the easiest avid gamers inside the space, which reinforces our expertise and permits us to produce full choices inside the magnificence sector. This consists of forging deep connections with market leaders in logistics and product sales channels, whether or not or not it’s e-commerce platforms or standard retail. Thus, even Taiwan itself won’t be a giant magnificence market, our intensive group and deep relationships have positioned us as a key participant inside the regional magnificence commerce.
What’s your key offering when chatting with native producers?
When partaking with native producers, our key decisions are multi-dimensional, geared towards making a win-win partnership for all stakeholders involved. The cornerstone of our interaction with native producers is their enlargement overseas. It’s a necessary side of our funding theme to introduce producers to new markets, thereby together with substantial price to their enterprise. We contemplate in not merely rising, nonetheless rising accurately and successfully. Conversely, we moreover think about introducing worldwide producers to native markets as soon as we set up an outstanding match. We regularly provide an entire approach for overseas progress that options market evaluation, a concrete entry plan, and identification of native companions. This will sometimes span all through quite a few channels, along with e-commerce enablers, retailers, and distributors. We provide the know-how and the group to verify a clear and worthwhile overseas entry
What are the challenges when taking native magnificence producers overseas?
Growing native magnificence producers to worldwide markets comes with its private set of distinctive challenges. The regulatory requirements, for example, can differ broadly from one nation to a unique. Whether or not or not it’s meeting the FDA necessities inside the U.S. or conforming to EU legal guidelines, understanding and adhering to these tips are important steps for any mannequin searching for to arrange itself in a model new market.
Logistical complexities moreover present challenges. Previous merely supply and distribution, there are particulars like customizing the availability chain to meet native demand, administration value and managing stock ranges efficiently.
Localisation is one different crucial side. This goes previous merely translating textual content material on packaging—it contains cultural adaptation. As an illustration, what appeals to buyers in a single nation relating to branding, packaging design, and even the product itself couldn’t resonate with buyers in a single different market. Subsequently, localising the mannequin is not going to be merely about translation nonetheless a number of full understanding of cultural norms, shopper behaviors and preferences, and even native opponents. It’s an intricate course of that requires a deep understanding of the model new market to effectively introduce a mannequin to a definite shopper base.
Along with, digital platforms differ between areas too. It consists of understanding the subtleties of score algorithms and the favored selling codecs on completely completely different e-commerce platforms. This requires a deep understanding of the platform dynamics, along with learn how to efficiently speak with native buyers.
A notable occasion illustrating the pitfalls of not adapting to native demand/preferences is Sephora’s preliminary entry into Japan. The company maintained its warehouse mannequin and self-service methodology, which was at odds with the native alternative for personalised service and in-depth consultations. Sephora wanted to revamp its methodology to align with Japanese shopper expectations, a dear lesson inside the significance of understanding native market conditions.
Lastly, it’s important to focus on the “unwritten tips” in each market. As an illustration, the charge constructions for Key Opinion Leaders (KOLs) differ significantly between East and West. In China, many keep streamers price a set amount together with a charge from product sales. In distinction, influencers inside the U.S. or Europe often work for a set amount solely. Moreover, whereas YouTubers inside the West have higher creative freedom in how they present sponsored content material materials, Chinese language language KOLs generally tend to stay fastidiously to detailed pointers equipped by the mannequin.
Understanding these complexities and adapting strategies accordingly are key to worthwhile overseas enlargement. It isn’t merely a “copy-paste” of what works inside the residence market nonetheless requires nuanced understanding and tailored approaches.
How important is it to supply present chain and promoting helps to your portfolio firms? How is SKS in a position to such help?
With over three generations and by being the second largest present chain for magnificence and cosmetics on this planet, it’s embedded in our DNA to help our portfolio firms.
We’ve a deep understanding of the entire magnificence price chain, from sourcing and packaging to logistics. Our intensive group all through Asia permits us to produce turnkey present chain choices, accelerating market entry for our portfolio firms.
On the promoting entrance, our crew’s digital-native background positions us properly to completely understand the market needs, purchaser behaviours and craft localized promoting plans that features the appropriate merchandise for the appropriate markets. We moreover think about an omnichannel approach that seamlessly mix every on-line and offline distribution channels, optimizing engagement the least bit purchaser touchpoints.
SKS models itself apart with distinctive strengths which might be troublesome to duplicate. Our data-driven insights, backed by a mature ecosystem, permit us to determine the following commerce leaders with a depth of notion. We elevate this methodology by actively involving our expert distributors and retailers inside the evaluation course of, relying on their rich experience and real-world data to gauge the potential and market match of potential producers. Along with, we offer end-to-end choices that transcend mere financial help, providing a full suite of suppliers—from present chain optimization to strategic promoting—that may be very arduous to repeat. Lastly, our strategic profit is extra amplified by our regional know-how, underpinned by a varied crew and highly effective partnerships with native commerce leaders. This distinctive mixture of capabilities not solely differentiates us however moreover ensures that we add substantial price to our portfolio firms.
How secret’s the thought of “sustainability” when deciding on firms your fund invests into?
Delivering sustainable choices is on the core of our funding philosophy. With our deep familiarity with sustainability necessities and L’Oréal supplier ESG audit, we possess a singular profit in guiding and coaching our portfolio firms in the direction of environmentally accountable practices.
We prioritize ESG compliance and actively promote sustainable approaches in every side of our investments. From packaging provides to the manufacturing course of, we provide skilled guidance to our portfolio firms, making sure they undertake eco-friendly practices that align with worldwide necessities. Our dedication to sustainability not solely shows our ethical values however moreover strengthens the long-term viability and success of the producers we help.
Who recently are most desirous about investing inside the magnificence sector?
Diverse kinds of merchants are drawn to the surprise sector for varied causes. Personal equity firms price its common progress and recession-proof traits, whereas family workplaces see it as a long-term, safe funding for diversification. Angel merchants often have backgrounds in magnificence, wellness, or shopper tech and are searching for high-potential startups. Firm merchants are aiming for strategic integrations of progressive merchandise, and retail giants want to mix these producers into their platforms. Now, investing by SKS Capital offers 4 key advantages. First, we provide risk mitigation by diversifying portfolio, not like specific individual merchants who might put all their eggs in a single basket. Second, our data-driven insights and expansive ecosystem permit us to not solely set up however moreover nurture high-potential firms. Third, our deep commerce connections all through Asia provide distinctive entry to partnerships and provides. Lastly, for these unfamiliar with the sector’s operational intricacies, we offer expertise in present chain administration, market entry, and regulatory compliance. Complete, we offer a further full, lower-risk varied to direct funding.
The place do you see your fund in 5 years?
In 5 years, SKS Capital targets to be a frontrunner in enterprise capital in Asia’s magnificence and shopper commerce. We’re not merely searching for to scale for the sake of earnings; we’re devoted to enriching the patron experience by introducing them to a varied array of top of the range producers. This moreover permits us to foster cross-market collaborations, enhancing price for every our merchants and portfolio firms.
We’re on observe to develop a further mature ecosystem inside the SEA space, concentrating on an formidable 50 p.c annual enhance inside the amount of merchandise supplied. We moreover plan to diversify our investor base to include a greater number of institutional and family office merchants, aligning with our “For Us, By Us” philosophy.
Ethically, we’re devoted to advancing mature ESG choices that enhance the entire price chain.
Revenue-wise, we’re exploring new enterprise fashions, along with franchising and distribution, to complement our core enterprise capital actions. We purpose to be commonly known as the “Gatekeeper of Shopper Pursuits in SEA,” analogous to the operate TPG or ABG performs in America.
Our funding focus is designed to be agile, allowing us to seize rising alternate options in areas like AI promoting, cost-efficient operations, and progressive retail strategies. This methodology targets to optimize key effectivity metrics resembling Return on Selling Spend (ROAS) and Purchaser Acquisition Worth to Lifetime Price Ratio (CIR). By doing so, we’re positioned to ship unparalleled price not merely to our merchants and portfolio firms, however moreover to complete buyers who revenue from the cutting-edge producers and merchandise we stock to market.
You’ll be organising a one-day seminar in Singapore on October 25 2023. What can be the important thing highlights? What would you want present merchants and potential new ones to remember when heading residence after the seminar?
We purpose to produce groundbreaking insights into the operate of enterprise capital inside the magnificence sector, notably specializing in cross-border alternate options and enhancements, which shall be extra talked about in a panel session. In addition to, attendees may additionally get a extra in-depth check out the producers we’re in the mean time supporting by a portfolio showcase, understanding magnificence market in Korea, China and SEA. We moreover invited a renowned beauty-focused YouTuber Tina Yong to produce her distinctive insights on digital magnificence custom. The event may additionally current ample alternate options to group and be part of with commerce leaders.
As for key takeaways, attendees will go away with a higher understanding of SKS Ventures’ distinctive price proposition. They could additionally get a gift snapshot of the commerce panorama in Asia, empowering them to make further educated decisions. It’s an entire experience designed in order so as to add price to present and merchants, producers, distributors and retailers.
For further on LUXUO’s distinctive business interviews, click on right here.
