Trust is key: making partnerships work in Asia19th Sep '16
Neal’s Yard has expanded into Asia by nurturing relationships that are more than skin deep. Hugh Wilson finds out more in our Routes to Growth series
Company: Neal’s Yard Remedies Trading in: Hong Kong, Taiwan, South Korea, Thailand, Malaysia, Singapore, The Philippines, Japan Sector: Health and beauty
That business is an all-consuming affair in Asia is a truism, but it’s one Calum Mackay knows to be accurate.
Mr Mackay – director of international sales at ethical health and beauty company Neal’s Yard Remedies – suffered acute appendicitis recently while visiting Taiwan, and was taken aback by the bedside vigil conducted by staff from the company’s local partner.
“They didn’t leave my bedside till midnight on the first day and kept up regular visits after that,” he says. “It probably went above and beyond what I might have expected colleagues in the UK to do.”
Mr Mackay, a 10-year veteran of international retail, says it shows how South-East Asian culture blurs the distinction between work and life. “Whether it’s Hong Kong, Taiwan or further south, they want to understand you as a person, beyond your nine-to-five role. And they make that investment of time,” he adds.
That approach suits a company that sells through 20 standalone stores and department-store counters across South-East Asia, but doesn’t own a single one.
The company’s presence in the region is maintained by local partners, a model which allows quite rapid and relatively low-cost expansion but also surrenders an element of control over brand. Trust is essential if the model is to work.
And that’s perhaps especially crucial for Neal’s Yard Remedies, a brand whose ethical ethos has to be maintained as rigidly in Seoul as it is in Southampton. Mutual trust is one element of that. Finding the right partner and agreeing rights and freedoms for their market is another.
“We structure deals as development agreements, which means the partner has the right to develop our brand and we agree the different ways they can do that,” says Mr Mackay. “There’s an element of franchising if they take on the store format, but the agreement is also a little more reflective of the multi-channel nature of the business.”
‘Whether it’s Hong Kong, Taiwan or further south, they want to understand you as a person, beyond your nine-to-five role’
No two agreements are the same, but as a rule partners have to guarantee at least one heavily-branded department-store counter or standalone shop in a new market, and demonstrate the acumen, infrastructure and capital required to support mutually-agreed ambitions.
The company’s agreement with South Korean partner Starluxe was initiated following an introduction from the local UK Trade and Investment (UKTI) team. Mr Mackay says contact brokered by British embassies can be beneficial for both sides in markets where a “warm introduction” is seen as more appropriate than a cold call.
“There’s also quite a nice, small network of people who do my role in other British companies,” he adds. “Companies like Hamleys, Mothercare and even Marks & Spencer or Debenhams. We meet regularly and I might get an introduction that way.”
Once a partnership is established, guidebooks and manuals reinforce brand values, but the key to maintaining control and consistency is regular personal contact, says Mr Mackay.
“Every partner wants to be a part of Neal’s Yard Remedies – so they respect our boundaries – but you have to have regular visits, too. Last year we introduced an Asian-based regional representative who ideally visits each market every two or four months, and she trains and educates people on our ways of working. Visits also show the
partner that we’re interested in their market.”
Franchising from afar can be fraught with difficulties but it appears to be the right model for Neal’s Yard Remedies. The international arm is now an established part of the business and Asia contributes £5m of a total group turnover of £38m. With more expansion planned, the company’s rise in the region looks as smooth as its fine moisturisers.