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Aesop's tale of expansion in Asia
Publication Date : 02-09-2013
When Aesop, a Melbourne-based fragrance, skin and hair products maker, first ventured into Asia as a small outfit, it relied on distributors for sales.
But over the years, robust growth in the region has allowed the firm to build up enough resources to reclaim the rights to retail its own products.
Revenue worldwide - and in Asia - has been growing 30 per cent a year since 2007, says Nicholas Mulcahy, 45, general manager for Asia Pacific, in an interview at its latest, third store in Suntec City, Singapore.
Aesop recently took back the business in South Korea, Malaysia and Taiwan, and has been selling its own products in Singapore since 2008.
"When Aesop first started, it was a very small company. I joined in 2006, and the entire global workforce could have fit inside this store (the Suntec City store was about 501 square feet) then."
"As we've become larger, we just found that owning our own operations, making sure our support system and structures are more or less the same in each market, it's all about consistency, quality and control, because we're very concerned about small details."
Aesop is known for its plant-based products and minimalist approach to aspects of the business, particularly design.
Control is key, he says. "Products are all made in Australia under our control, the stores are all directly designed by us - collaboration with architects. We recruit all our colleagues in retail directly and train them."
As he walks around the Suntec City store, Mulcahy points out that its design is almost identical to its stores in other countries.
With 69 signature stores worldwide, excluding the brand's presence in department stores, Aesop has grown enough to give it "the capacity to run the markets directly".
Its staff size has grown from 30 to more than 400 today.
So far, the decision to retail its products itself looks to have worked out. The Singapore stores have seen strong sales growth of more than 10 per cent a year since Aesop regained the rights in 2008, in turbulent economic times. It has three standalone stores and a Tangs counter.
This success has been replicated in Hong Kong and Japan, says Mulcahy, who predicts that the same will happen for the new markets where distribution rights have been regained.
Even so, Aesop is still a small player. Its global revenue is not even one-tenth of beauty brands such as L'Occitane en Provence.
But this is something that he feels the company can use to its advantage. "We're still very focused, very tightly aligned with our values and the places you want to be. We're not a mass-market brand."
The Asia-Pacific market is about three-quarters of the business, and in the next three to five years, Aesop will maintain its growth at 30 per cent.
If that sounds ambitious, Mulcahy is quick to point out that in a place like Japan, the second biggest cosmetics market in the world, Aesop has only five stores - so it will remain a niche brand.
He adds that Aesop probably plans to add two stores a year in Singapore, a relatively modest target since "a lot of brands here have a store in every single mall".
Other plans for Singapore include establishing an office here, which, he says, may be combined with a "store on the street".
"We're quite fond of the heritage areas in Singapore, so around Chinatown and this sort of area."
Since Aesop opened its regional support office in Hong Kong last year, Mr Mulcahy has been commuting from the city, and became a resident there four months ago. The father of two boys, aged six and two, jokes: "My wife would say I'm not much of a resident there now since I travel so much."
Apart from Hong Kong, Singapore is a key hub as well, he says.
"A lot of general administration, logistics and business planning is done out of Singapore. As we grow in Southeast Asia, Singapore is going to be the hub."
In fact, the team that works on Malaysia is based in Singapore, and Mulcahy cites Singapore's proximity to the region as an important factor.
"Singapore is a mature retail sector, a very open market and in order to start a business here, there is less red tape here than in other parts of the world, where there are more barriers to entry for a company like us."
For example, he says, markets such as the Philippines or Thailand require foreign firms to partner with a local company before they go in.
Aesop is more comfortable flying solo and working with colleagues in local subsidiaries, as opposed to working with business partners.
Despite Aesop's ambitious plans, China - the biggest market in Asia - is out of the question for now as Aesop is fiercely against animal testing and China has a law that requires manufacturers of beauty products to test on animals before they can import their goods into the country.
In fact, a recent Bloomberg article said that "China's policies create a dilemma for companies like L'Oreal and Procter & Gamble that want to sell in the country without alienating consumers in markets where public sentiment demands humane treatment of animals".
Mulcahy says: "They require you to test them on animals so we don't want to do that. We have a lot of mainland visitors in Hong Kong but until we can sell on our own terms using our values, we will not be in mainland China."