This article first appeared in The Edge Malaysia Weekly on December 13, 2021 - December 19, 2021

IT has been a tough two years for premium baby, children and maternity product vendor Kim Hin Joo (Malaysia) Bhd, which operates the Mothercare retail stores and The Entertainer toy outlets in the country, owing to the Covid-19 pandemic and temporary shutdown of its stores.

Even so, Kim Hin Joo group managing director Pang Fu Wei still believes in the group’s prospects. Driving that optimism is the opening of its first Mothercare Experience Store in Malaysia, a 15,000 sq ft mega store at Tropicana Gardens Mall in Petaling Jaya, last month.

Putting customers at the forefront, the store features a new experiential concept, which includes a stroller test track, babywearing zone, baby gear cleaning services and nursery advisers, so that shoppers are provided with a visual and tactile experience that will help them make better purchasing decisions.

“We came up with this concept because we felt that experiential retail really is the future. Gone are the days when retail was all about density, how many products you could fit into the store and sales per sq ft ... at some point, there needs to be a good level of curation,” Pang tells The Edge.

“With the pandemic, everyone talks about online stores, but we think it is important to also have a physical store strategy. In some ways, we are lucky because baby retail is still very much dependent on physical retail, because when someone becomes a parent, he or she is exploring a whole new product category and may not know where to begin. You may be able to do the research online, but you still need the physical feel to test the products. And this applies to products such as strollers, car seats, breast pumps and so on.”

While the “experience store” concept may be new to Malaysia, it is not new for Pang. The 32-year-old Singaporean also oversees the Mothercare stores in the island republic, where there are two Mothercare Experience stores that are already operational. The Singapore stores are parked under Kim Hin International Pte Ltd, a major shareholder of Kim Hin Joo Malaysia.

“We saw tremendous success with our Singapore stores, which is why I was excited to roll out a similar concept in Malaysia. With each iteration, we are refining the process by seeing what works and what doesn’t. We have plans to set up a second experience store in the country with our KLCC store, which we plan to renovate and convert into a Mothercare Experience store,” he says.

The experience store at Tropicana Gardens Mall marks Kim Hin Joo’s 21st Mothercare outlet in Malaysia. It also operates four The Entertainer outlets in the country. 

Pang says there are no plans yet to open more stores next year, but the group is looking forward to renovating its KLCC store and expanding its Gurney Plaza store in Penang.

“If there is anything 2021 has taught us , it is to really expect the unexpected. Because of the ongoing pandemic risks, I have to say that I am still quite hesitant to commit to any new leases at this point in time. Being a family business, I want to make sure that I get it right and there is no room for error. I would rather be six months late than six months too early and end up burning unnecessary capital ... because I want to deliver solid growth in the coming year,” he stresses.

Kim Hin Joo was founded by his father, Pang Kim Hin, in the late 1980s. Today, the 71-year-old patriarch helms the board as its executive chairman. He is also the largest shareholder of the group, through a 62% stake held via Kim Hin International and direct equity interest of 2.97%. 

Prior to Pang’s appointment as managing director, the role was held by his sister Pang Shu Ming from November 2017 to June 30 last year.

Pang is grateful the group did not have to permanently shut down any of its stores even though Kim Hin Joo Malaysia went through its toughest year in 2021 with two Movement Control Order periods and skyrocketing logistics costs. 

The company also managed to remain profitable, although at a much lower level. Its net profit for the first nine months of its financial year ending Dec 31, 2021 (9MFY2021) fell 48% year on year (y-o-y) to RM2.28 million on the back of a 12.7% decline in revenue to RM53.05 million. Pang attributes the better-than-expected performance to the efforts of his team.

It is interesting to note that even though revenue contribution from its retail segment fell 17% y-o-y in 9MFY2021 to RM41.1 million, its distribution segment’s contribution grew 4% to RM11.95 million.

The group is the exclusive distributor in Malaysia for popular baby product brands such as Tommee Tippee, Playgro, Bumbo, JJ Cole and Charlie Banana.

“We have actually expanded quite a bit on the distribution side. We have taken on two new agencies — Love To Dream and Grobag, which is under Tommee Tippee — and this, combined with new distribution channels, has helped us to grow over the past year,” says Pang.

“We have focused on all opportunities in our distribution segment, which includes distribution to speciality retailers, pure online retailers, hypermarkets and pharmacies, and we have listed our products on online marketplaces such as Lazada and Shopee.”

Over 90% of the group’s sales are currently conducted via its physical stores, but plans are underway to expand its online presence.

“Online sales have been a great growth engine for us. From 2019 to 2020, our online sales grew more than 100%. And this year to date, it has grown by 54%,” he says. 

We have grown our presence through our own dotcom and expansion on marketplaces. We want to grow organically online but not at the expense of undercutting our physical stores.”

On whether the group faces the threat of online competitors that offer cheaper alternatives, especially those from China, Pang says it was never its intention to compete in the mass market. “We have always been in the premium market, and that is the only space we want to compete in. I think the day that we decide we want more market share and go after mass-market consumers, we will end up giving up the most profitable part of our business.” 

Kim Hin Joo’s share price has declined 47% since its initial public offering at 43 sen in 2019. At the stock’s closing price of 23 sen last Wednesday, the company’s market capitalisation stood at RM87.4 million. At that price, the group’s trailing 12-month dividend yield came in at 4.35%, higher than the prevailing fixed deposit rates of 1.8% to 1.9%.

“I think retail is not a theme that people are looking to invest in now because of the pandemic, and this is not exclusive to us — it is across the sector. However, I have confidence that as the economy recovers, so will our bottom line. And once profitability grows, I believe our share price will [improve] ... even in the worst of times, we have remained profitable,” says Pang.

“We have a dividend policy to pay out 40% of our earnings and last year, we even paid out more than that. We definitely intend to maintain our dividend policy.”

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