EXECUTIVE Q&A: KARMARTS FINDS A BEAUTIFUL FORMULA FOR SUCCESS

BackJul 29, 2016

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Wongwiwat: Quality and innovation vital

Karmarts Plc (KAMART) was first incorporated as Distar Electric in 1982 and listed on the Stock Exchange of Thailand in 1994. It changed its business focus to cosmetics in 2009 and changed its name to Karmarts Plc in 2011. Wongwiwat Theekhakhirikul, director and assistant managing director for business development, discusses the company's strategy and outlook.

Please explain the history of Karmarts.

Karmarts originally started as an electrical appliance business with the Distar brand in 1982 and shifted to the business of NGV for automobiles in 2006 before we began to focus purely on consumer products in 2009 as a distributor of beauty and cosmetic products. In 2010 and 2011 we focused on marketing these products through traditional trade channels before expanding into franchising to create the Karmart brand. This has proved successful and we have continued to grow, expanding via modern trade and exporting to Asian countries, and in 2015 we incorporated a joint venture in Vietnam.

What is Karmarts' business model?

Today we have more than 1,000 beauty products under our six house brands: Cathy Doll, Cathy Choo, Baby Bright, Jejuvita, Reunrom and Crayon. We also manage the distribution of other brands such as Missha. Our core distribution channels are our franchised Karmart shops, traditional trade to both retailers and wholesalers, modern trade, exports through joint ventures in China, Malaysia and Vietnam, and our online store.

We have 54 shops and by 2017 we aim to remodel all of our franchised locations to ensure that every shop has the same standard to further build the reputation and awareness of the brand.

Who are Karmarts' target customers?

Typically, our customers are teenagers because of the product type, design and price point. Recently, we have been adding new products to cater to a more mature audience and with this strategy we aim for our brand to achieve the same levels of awareness as international brands in consumers' minds. This will also expand our existing customer base.

Karmarts' performance has improved recently. What are the reasons for this?

Our revenue has been growing consistently since we started in the beauty and cosmetics business in 2009. However, we had accumulated losses from previous businesses, which were written off in 2015. Consequently, our financials from now on will demonstrate the actual performance of our beauty and cosmetics business. We have also improved production efficiency as 30% of our sales come from our own production.

What differentiates Karmarts from its competitors?

Our innovation in products differentiates us. We continually add new products and maintain high quality. As a result, 70% of our first-time users enjoy using the products and become repeat customers. It is this ability to have multiple products to match our target customers' needs as much as possible that will continue to differentiate us from others.

Our production and marketing teams are continually focused on ensuring that the quality, design, positioning and pricing of the products are in tune with the customers' demands.

What are the biggest risks facing your business?

This business is less capital-intensive when compared with our previous businesses, which to us is attractive. However, the concept and formation of a strategy for the company is very important. Generally, people believe that it is easy to excel in this industry but effective marketing is very important. As our brand becomes more popular we will continue to do more targeted advertising to support higher growth. Human capital and resources are also critical and we have to maintain a low turnover of employees and continue to invest in their capabilities.

Where do you see Karmarts five years from now?

Our focus will be on the Asean market because there are similarities between Thailand and its neighbours in terms of climate, culture and income levels. Plus, with the economies in this region continuing to develop further, disposable income and demand for beauty and cosmetic products will continue to increase.

Last year, exports represented only 5% of our revenue but we expect this proportion to double in 2016 and hope for that growth to continue. In order to meet this future demand, we are moving our production facilities from Rayong to Bangkok, which will give us the possibility of expanding capacity further in the future.

The Executive Q&A Series is presented by ShareInvestor, Asia's leading financial internet media and technology company and the largest investor relations network in the region. The interview was conducted by Pon Van Compernolle. For more information, email pon@rossvancompernolle.com or supat@shareinvestor.com. Website: www.ShareInvestorThailand.com

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