Expanding CHARLES & KEITH’s Global Footprint

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Mr Charles Wong, the Chief Executive Officer of CHARLES & KEITH Group of Companies, was able to build a humble shoe store into an international brand without borrowing from banks or investors. But how did he accomplish this feat?

In a two-hour session at NTUitive on June 24, Mr Wong recounted his entrepreneurial journey, which he described as “a learning journey loaded with mistakes”. All in all, business is about taking risks and seizing opportunities, he said.

Back in the 1990s, Charles Wong and his brother Keith developed a penchant for shoes after helping out at their mother’s shoe shop in Ang Mo Kio. In 1996, the Wong brothers opened their namesake store ‘CHARLES & KEITH’ in a tiny 500 square-foot space in Amara Hotel.

Now, twenty years after CHARLES & KEITH’s debut, the homegrown women’s footwear and accessories brand has the world at its feet.

With close to 600 stores worldwide, including Seoul, Tokyo, Kuala Lumpur, Shanghai, Cairo, Dubai, and Paris’ Galeries Lafayette, CHARLES & KEITH has evolved into an international brand. The company, which is heralded as one of the most admired fashion forward organisations, has another sophisticated shoe line Pedro under its belt.

To me, leadership is about making fast decisions, and to not procrastinate.
Mr Charles Wong, Chief Executive Officer of CHARLES & KEITH Group of Companies.

To round it off, in 2010 CHARLES & KEITH sold 20 percent of its shares for more than S$30 million to L Capital Asia, the private equity arm of French luxury giant Louis Vuitton Moet Hennessy (LVMH).

The company currently manages over 300 staff at its headquarters in 6 Tai Seng Link. Charles, the eldest of three brothers, is presently stationed in Shanghai to supervise the brand’s development and proliferation in China. Keith, the Chief Operating Officer, oversees the creative team. And their youngest brother, Kelvin, is the brainchild behind CHARLES & KEITH’s bags and accessories.

The brand launches 20 to 30 designs weekly. Many factors contribute to the brand’s success, including its chic and trendy designs, the company’s full control of the supply chain from manufacturers to stores, and its emphasis on training and hiring top talent.

The company also employs advanced technology to enhance its business model, such as data analytics to predict consumer buying behaviour and improve inventory management.

What challenges did you face at the start of your entrepreneurial journey?

At the age of 21, I went to Malaysia attempting to source for manufacturers. I went in and out of Malaysia every day to inspect the productions. I was cheated a few times due to my young age, but I learned a few lessons and overcame the failures quickly.

Another challenge that I faced was the rental price. The rental for the space at Amara was around S$4,000. I shared half of the 1,000 sq ft store with another lady. Three months later, she gave up her space and I thought it was a good opportunity to take up the other half of the shop.

After that lady left, I renovated the shop and ordered my stock from the factories. Just then, the landlord said they needed to close the mall for a nine-month renovation. To compensate, they offered me a space near the hotel entrance with free rental for six to nine months.

Mr Charles Wong, Chief Executive Officer of CHARLES & KEITH Group of Companies, shared his entrepreneurial journey at NTUitive on June 24, 2016.

The other tenants – around twenty of them – sued the landlord, but I didn’t. Therefore, in the end the landlord told me I could have the twenty tables of space (which was supposed to belong to the other tenants) to sell my shoes. It was supposed to be for six months, but the landlord extended it to a year and didn’t charge me any rent.

I sold my entire stock within two months and I made some profit. I called the wholesale companies in Singapore inquiring if they had stock to clear because I had the space.

How did you find the funds to open your second store?

During my first year at Amara, I managed to clear a lot of stock for many wholesale companies. I made reasonable profits during that one year, and I decided to open my second store during the 1997-1998 financial crisis.

If you start your first store right, and make certain that the focus is right, then you will generate the profit to open the second store. Many people start to open their second store when they haven’t even earned any profit from their first store. And they are persistent about raising money to expand.

We had never raised any money until five years ago. We have always been very stringent in terms of costs.

When you open the first store, it is easy. But when you open the second, third, and fourth stores, you require accuracy in merchandising, ordering, and planning decisions. You need to hire specialised people in these areas.

In the beginning, I couldn’t hire many people and I had to do almost everything myself in order to break the margin. I had to deliver the goods and serve the customers.

We saved as much as possible and made a lot of mistakes, but we learned from our mistakes and moved on quickly.

For my second store at Causeway Point, the landlord quoted me a rental price of S$25,000. At that time, Causeway Point was still under renovation. So I had no idea what was the potential of that area. I was thinking whether my revenue would be S$40,000, S$60,000 or S$100,000? I was putting in a lot of numbers and making many assumptions.

Then my uncle challenged me, “If you don’t jump into it, you will always be there calculating, and you will miss the opportunity.”

In the worst case scenario, if I [were to lose] money from my second store, I could still cover the loss with the profit I had made from the store in Amara. And so, without much hesitation, I signed the S$25,000 lease at the age of 22.

In 1998, you ventured into Indonesia despite the risks. However, your brand has since achieved international success in expansion. Tell us more.

During the May 1998 riots which drew international condemnation, my franchise partner told me that she had the opportunity to open a store in Indonesia, and she was willing to pay for the renovation. I thought ‘why not’ as I needed orders to keep my factory running and to ensure that the factory was solely dedicated to us.

Therefore, we ventured into the Indonesian market despite the Ministry of Foreign Affairs cautioning us against visiting Indonesia.

Pedestrians walk past a Charles & Keith store in downtown Kuala Lumpur, Malaysia, on Sunday, March 17, 2013. Malaysia is scheduled to release inflation data for February on March 20. Photographer: Sanjit Das/Bloomberg via Getty Images

Today, Indonesia is our third largest market with around 50 stores.

Next, we expanded into the Philippines, Thailand, Malaysia and Taiwan.

We grew our business quite fast, and we went into the original equipment manufacturer (OEM) business too. Our factories were not only manufacturing for CHARLES & KEITH, but we were also producing for other shoe companies such as Bata and Aldo. We hoped to learn about other brands’ requirements, so that we could implement these requirements for our brand as well.

The OEM was doing quite well, but it occupied too much of our own production. We had to close the OEM business after operating for a few years.

In 2004, we signed a new deal with a Middle-Eastern company in Dubai, and we managed to open 50 new stores in the Middle East.

Learn from your mistakes, as well as from your peers and mentors.
Mr Charles Wong, Chief Executive Officer of CHARLES & KEITH Group of Companies.

In 2009, our revenue hit S$200 million and we attracted an investment from LVMH.

We have learned from our different partners in different countries. Today, we are managing one-third of the CHARLES & KEITH stores, whereas two-thirds of the stores are operated by franchisees.

There are currently 150 stores in China. What was your entrepreneurial journey like in China, and what challenges did you face in the Chinese market?

Six years ago, I spent a lot of time entertaining overseas guests and giving talks, and I had lost my drive in growing the business. I was a bit in the comfort zone then. I wanted to regain my entrepreneur driving spirit, so I decided to venture into China myself. I sold my 20 percent stake to LMVH for S$30 million, and invested in the Chinese market with that money.

At that time, I kept thinking if I were not around, can the company survive? I had to bring my company to the next level.

I went to China alone and started from scratch. I gave myself five years to learn the ropes. I hoped that five years later, my China business would be as big as my Singapore retail business.

In the first year, I lost $5 million RMB. In the second year, I lost $10 million RMB. During the third year, I lost $5 million RMB. I lost a total of $20 million RMB. I wanted to scale the business fast, and that was why I lost money.

But today, there are 150 stores in China with a revenue in the millions.

I expanded to China by recruiting the best talent. I hired the best talent for HR, finances, operations and inventory. I was very careful in hiring the right people.

Once you hire the right people, you have to give them a clear vision; you have to sit down and brainstorm, and make sure everyone is synchronised.

The headhunting market in China is ruthless. Typically, my staff would receive calls from different headhunting companies. If I wasn’t there, it would be a problem. That was the problem LVMH faced – manpower change. Job-hopping is very common in China.

To align with the Chinese market, we made a big shift in terms of R&D due to the winter season. As we are not competent enough in winter footwear, we have shifted to selling fewer shoes and more bags.

In China, there are even counterfeit bank products. The Chinese police will close down all these counterfeit websites only if you pay them a sum of money every month. But once you stop paying, all these counterfeit websites will pop up again.

What differentiates your shoes from other brands?

We have a huge team of 100 people, who focus on R&D [and] product development. We work with factories that manufacture exclusively for us.

To cater our designs to the different markets, our product development team analyses the sales data to understand what customers want. And they work closely with the design team to create shoes that are right for the market.

We do almost everything in-house, from designing the stores to designing the products, and we set a design theme for each season. Our product development is definitely stronger than any of the local or international players in the market.

We are extremely specialised. We have teams that specialise in visual display, photography, supply chain, inventory analysis, store design, international business, training and R&D, and so on. That is why we have over 300 staff in the Singapore team.

You have to make sure you build the business with competency, with the right team and people.

E-commerce is a big thing in the future. But in China, the biggest e-commerce competitor is Alibaba. How do you plan to compete?

I don’t think business is always about looking at what others are doing. You need to be very clear about what you want to achieve. We cannot always plan a business plan that is just to fight a competitor.

We definitely want to invest in e-commerce, but we need to be focused on our core competencies such as brand development, store design, customer service and customer relationship management (CRM).

Basically, we have to emphasise a lot on CRM now. How can we go to the extra mile for our customer?

We want to customise our emailers to specifically target each individual consumer, and make shopping easier by giving them fashion tips. How can we be a better fashion adviser to our consumers? How can our staff provide better service for our customers? How can we be more competitive and fast in terms of our supply chain?

How can we take the customer’s order from the online store, and deliver it straight to her house?

We would like our online store to look different to every individual who visits. We would like to customise our visual display according to what they want to see.

What is a good leadership style?

To me, leadership is about making fast decisions, and [to] not procrastinate. Even if I make mistakes, I admit the mistakes and make changes very fast. Learn from your mistakes, as well as from your peers and mentors. I delegate a lot of tasks to my colleagues. I would like them to make mistakes too; only through mistakes will they learn.

Any advice for new entrepreneurs starting their own brands?

You must have a big passion for your business, whether you are making money or not. Today, my biggest motivation is not about making more revenue, stores, or profit.

When I first started, I didn’t know there would be 600 stores today. But I think we were very focused on what we wanted to achieve.

If you are very clear that you want to build a global brand, then you need to hire and empower the right people; you have to set clear goals and objectives.

How good is your product, and what differentiation can you set for your product?

I think you have to figure out that there will be a lot of problems, which you must solve. We have made a lot of mistakes, and we learned through our mistakes. We might be affected because the factory delayed our production. We might be affected when my staff orders the wrong stock, or sets the wrong retail pricing and affects the margin. Every company has to undergo a lot of different issues and problems.

In the beginning, you need to possess a big passion for whatever you want to do, and it is not just being after sales and profits.

Initially, we spent a lot of money hiring and training our designers, renovating our stores, and producing attractive paper bags that cost S$0.50 each or catalogues that cost S$2 each. They cost a lot, but they will pay off one day. And over time, it builds your brand and its values.

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