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The Thakral makeover

Thakral Corp CEO Inderbethal Singh Thakral talks about the company's move from consumer electronics into China's beauty market, driven by change.

"Honestly, we have not been the leader in change. We haven't been the first movers. We have been somewhat phased out. But if you don't move now, you will be out completely" - Inderbethal Singh Thakral.

MANY organisations boast about being at the forefront of disruption and innovation, but Thakral Corp chief executive Inderbethal Singh Thakral humbly concedes that his company has rather been driven by change than been in the driving seat.

A look at how the company's operating business has evolved over the decades shows so. Starting out as a textiles trading company in the 1900s, Thakral Group added consumer electronics distribution in the late 1980s - first videocassette recorders (VCRs), then televisions (TVs), and eventually cameras - partly because Mr Bethal's father, then-chairman Kartar Singh Thakral, found the credit period for textiles too long, and partly because he wanted to give his children a more current sector to play in.

The group enjoyed the boom years of consumer electronics in the 1990s - until the 1997 Asian Financial Crisis, which also left aftershocks in China's economy in its wake. China was Thakral's main distribution market. Demand for consumer electronics fell, margins came under pressure and selling prices plunged, leading the group to report huge losses in 1999.

In 2010, the company started to notice a decline in its camera distribution business, as the space once occupied by the middleman shrank and the low-end digital camera segment disappeared into smartphones.

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At that time, the company had a significant 10 per cent market share in China, distributing camera brands such as Canon, Nikon, Samsung and Panasonic.

Mixed signals in the market led the company to delay revamping its business operations for a few more years, thinking that the spark had not altogether gone out. But three years later, Thakral finally put its foot down on the need for a restructuring plan. Mr Bethal says: "2013, we sat down and said: 'Enough. Before this takes us down, let's exit it completely'."

Some brainstorming led to ideas that were executed but turned out to be bad judgment calls. A while later, an opportunity presented itself through industry contacts, and the company entered an unlikely sector. Still focused on China, it was to distribute beauty and wellness products to an increasingly affluent Chinese population that is spending more money on the way they look.

Jovial and chatty, Mr Bethal turns a bit awkward when he talks about the beauty products that his company distributes. While attempting to describe the Color Me Applicator, an automatic vibrating applicator for foundations and powders, he finds himself quite at a loss for words, saying sheepishly that it "helps you lay your foundation to put your make-up on or whatever" before chuckling.

Thankfully, it takes more business acumen than vanity to operate in the beauty and wellness sector. After studying the market, Mr Bethal and his team felt that the beauty distributor space in China was not too crowded yet, as there were many small players that had regional capabilities, but not so much national.

Meanwhile, retailers were springing up by the thousands across the country and beauty brands that were trying to increase their reach themselves were finding their efforts limited without the help of an external distributor.

There were other positive indicators. The gross margins of distributing beauty and wellness products domestically were high at 30-40 per cent. After deducting marketing costs and other expenses associated with training frontline beauty assistants, margins still range between 10-15 per cent - far more attractive than the 2-3 per cent that consumer electronics distribution could garner.

Also, unlike in the electronics sector where product prices decline incrementally as new models are launched, prices of beauty products do not fluctuate over time except during seasonal promotions. There was a definite opportunity for Thakral, but Mr Bethal also needed to switch things up at the company.

"We told ourselves we can replicate what we did before in the camera business and adapt, make the changes and transform ourselves to do it."

First things first: the sales team had to adapt from selling electronics to peddling beauty products - a huge change. Those who could not make the switch or were not keen to, left. Those who stayed on without making any attempt to adjust also had to be let go. Thakral Corp refreshed its team by hiring senior managers from the beauty industry, and also got on board a French consultant to teach the management team to change the way it thinks.

Early results

Four years on, Thakral's Chinese distributorship of lifestyle and wellness products has started to break even, and even eked out a small profit of S$0.3 million for the six months ended June 30, reversing a S$2.1 million loss in the corresponding period a year ago. Overall net profit rose to S$2.7 million, from a mere S$193,000 in the previous year.

Revenue, however, halved to S$71.4 million, compared to S$134.4 million a year ago. Mr Bethal says this was because of the lifestyle division's continuing shift to higher margin products, as the group deploys capital to where it can make more money, and lets go of business lines that distract its team.

Thakral's gross profit margin for the first half of 2017 rose to 27.9 per cent, compared to 13.3 per cent a year ago. The group also announced an interim dividend of two Singapore cents per share.

Thakral also has an investment division which lends mezzanine debt to developers and helps them to arrange funding with lenders and other investors. It also generates recurring income from retirement resort homes and staff accommodation assets in Australia, both of which did well in the period.

The investment division saw its half-year income edge up to S$13.5 million, from S$13.1 million a year ago. The division was instrumental in tiding Thakral over difficult seasons when it was restructuring its business, as it continued to keep the money mills turning with its recurring income.


Make no mistake, Thakral is by no means a major player in the Chinese beauty market, which is still dominated by huge international and local Chinese houses distributing their own brands and portfolios.

Mr Bethal says Thakral is still "at an infant stage", largely unnoticed by other market players. The group also faced many challenges from the onset, with beauty brands sceptical of Thakral's offerings as a distributor, and hesitant to give it a chance.

Thakral's saving grace is its track record in China as a consumer electronics distributor. "It gets a door open immediately; we get a meeting without any hesitation, but then the proof of getting it delivered - everybody needs time," he points out.

Besides the fight to win the trust of brands, the other challenge is the length of time - up to two years - required to bring a product to market. Yet another is the retention of beauty assistants who will not think twice about quitting if the boss does not give them the incentives they expect.

"Getting your brand to the level where you can first of all attract beauty assistants to join you is another big challenge," he says.

"At least for some of our brands, we have crossed those hurdles. For the new ones we are going to launch, it is going to be a repeat performance of every hurdle that we have gone through. The good part is we know what to expect."

Through the entire process of making the leap from electronics to beauty products, Mr Bethal has learned this - that "change is inevitable, and we have to get ready to adapt and move forward".

"Honestly, we have not been the leader in change. We haven't been the first movers. We have been somewhat phased out. But if you don't move now, you will be out completely," he adds.

Businessman ambitions

Growing up, Mr Bethal thought that he might one day become a banker. But all that changed when he made his first S$60,000 at the age of 18. His brother had tasked him with working with a supplier to come up with textile designs to sell to his wholesaler customers at a premium price. That handsome profit whetted his appetite for more.

"That was enough. I knew where I was going to be," he remembers, laughing. In fact he stopped studying and began training under his brother and father in textile trading. He never went to university.

"That was the first S$60,000 I made and that got me hooked. I became set on investment and entrepreneurship. The adrenaline rush is something you must experience, I guess. You look back after that and say: 'That was fun'."

When he was 21, he moved to Japan to train under his uncle and cousin to learn about running the textile trading business in Japan, and stayed for more than four years.

After that, his father relocated him to Hong Kong to run the group's business there, distributing Japanese consumer electronics brands.

Those were the best years of the electronics sector. The company's revenue quadrupled from HK$90 million (S$15.7 million) in March 1984 to HK$370 million in March 1985.

"By 1989, we had acquired some of the distributorships such as Panasonic and Sharp. In 1991 and 1992, we took up more businesses. By 1995, our revenue came up to almost S$1 billion," he notes.

In 1995, the group spun off and listed its electronics distribution arm on the Singapore stock exchange so as to focus on the growth of this segment.

"We realised that if we didn't float this company separately, we will not have enough working capital to support the growth. As a group itself, we were starting to go everywhere.

"We were already buying land in India; my father had investments in Indonesia's textile industries, my elder brother (Gurmukh Singh Thakral) had investments in Eastern Europe, which was growing strongly also in electronics as well, in products such as VCRs, TVs, and audio products."

But the electronics sector eventually declined, and then it was back to the drawing board again, to figure out the company's next step.

Thakral's share price may have taken a beating over the years, falling from more than S$7 at its peak in June 1997, to 42 Singapore cents as at Aug 11, 2017.

But once more in the thick of transformation, Mr Bethal is hopeful that the repositioning of the company in the beauty and wellness business, supported by its growth engines in the capital investment business and retirement home space, will lead to even better days ahead.


Executive director and CEO,
Thakral Corporation

1959: Born in Singapore


1971-1975: Victoria School


1975: Joined Thakral Brothers' textile division in Singapore

1980-1984: Attached to Thakral's textiles division in Osaka

1984: Moved to Hong Kong to run Thakral's consumer electronics operations

1986-1991: Set up offices in Guangzhou, Beijing and Shanghai

1994: Set up JV for property development in Wujiang, China

1995: Thakral Corp listed on the SGX Mainboard

2005 Relocated Thakral HQ from Hong Kong to Shanghai

2006 Took short break from Thakral

2008 Rejoined Thakral as MD, distribution business

2009: Appointed director of Thakral Capital Holdings; concurrently runs distribution

2013: Strategy shift from consumer electronics to beauty and wellness market

2016: Became CEO