Challenge of Scaling a Start-up: When, How, Where?

"Expansion takes a lot of resources, focus and investment. Entrench yourself in your home country, and then only expand"

Joan Yeoh, Country Director of Love, Bonito Malaysia

Lazada did it. Zalora did it. And Grab definitely did it with guns blazing. What did they do? The dream of any local startup: scaling regionally. The only thing common to all South East Asian countries is that they are in South East Asia! Made of diverse cultures and languages, this place we call home is a startup paradise but also with a scaling challenge.

This month, we chat with Joan Yeoh, Love, Bonito Malaysia’s Country Director about her experience in entering new markets. She joined Love, Bonito three years ago and has grown the Malaysian line of business. Under her guidance, Love, Bonito launched their dedicated Malaysian website, expanded to 7 retail stores nationwide, and grew the local team from zero to fifty! 

(This interview has been edited for grammatical accuracy and clarity.)

Before we talk about scaling, let’s take a step back. When should a company even consider expansion?

It really depends on the readiness of the brand. Stabilise your brand and business; ideally a company should become well-known in their own markets and be famous for their own niche before deciding to scale.

Expansion takes a lot of resources, focus and investment. Entrench yourself in your home country, and then only expand.

Love, Bonito didn’t have an aggressive expansion plan till the last few years. The focus was on growing the brand in Singapore first. People abroad who already know the brand then look forward to having the brand in their local respective markets. For example, those working in Singapore from Malaysia or visiting Singapore would ship from Love, Bonito to their friends’ home. But because they are already shopping with Love, Bonito, they recognize the brand (like “OMG, Love, Bonito is here!”) when they see it in their country, and becomes a good starting point for the expansion to a new market with a halo effect from the home ground’s brand awareness.

What are some scaling challenges unique to Southeast Asia?

My experience from working in MNCs like Nike is that they talked about globalization and localization at the same time, this idea of “glocalization.” When you are referring to the US or Europe, to a certain extent, there is a standardised playbook. 

Southeast Asia is different, because you are looking at completely different countries, each having their own multicultural ethnicities. Look deeper into each country and they are also in different economic phases, embracing different trends. And then they speak different languages. What works in India is not necessarily going to work in Malaysia. Malaysia and Singapore are probably similar but there are still enough differences. And then you look over to Thailand, which is very very different!

This concept of brand essence is interesting. How do you stay true to your brand while scaling?

Let me give you an example from Love, Bonito. As a brand, Love, Bonito creates thoughtful fashion for the modern asian woman.

Right now, there is an opportunity that is ripe globally and regionally: the modest fashion trend. Globally, it is projected to hit $US322 billion. This trend is prevalent in the Malaysian and Indonesian markets.

But we are not a modest brand. And probably won’t be authentically so, especially when brands such as Naelofar Hijab exist; they are stronger as they started as modest fashion brands. But we know there is such a huge potential in the Malaysian and Indonesian market. In 2016, Naelofar hit RM $50million in revenue with just one product, scarves.

The questions to ask: When balancing between local and global, how scalable or sustainable will it be over the next few years?  Will this type of expansion drive towards the local market or other markets? Will it scale the market size or contribution?

If the answer is yes, what we need to do is to look for the opportunity to fit into local customer needs. If we know the majority of the modest fashion market is looking for longer tops, we pivot our designs to fit those needs.  But will our brand essentially be empowering women to become the best versions of themselves? Yes. Are we still being a thoughtful brand to women? Yes. These are the brand checkpoints that are important when we scale and localise.

A short guide on how to scale into a new market?

1) Look at the operational complexities of a market. How hard is it to operate from a local company? How complex will it be to scale the business into the neighboring country? As you expand, you are going to set up a company...will it be a private limited? You will need to hire local resources...how do you do that? When dealing with this, it’s typical to work with a local professional or an agency.

2) Look at the government policies. Do they ease operational complexities? What are the laws, the guidelines, the import duties, tariffs and taxes that you need to be aware of?

3) Understand the macro and the micro. I like travelling so I make it a point to travel once a quarter to a new place. When I can, I talk to locals living the life there to gain insight into the trends. This is the softer side. What is their culture? What do they do for their past times? Where do they eat? Do they go to the gym or do they zumba or taichi?

When we do a marketplace map, we look at the specific places we want to be in. You are better able to identify your niche within a foreign market. Map where your target market is and where you want to be.

4) And then talk. We talk to mall operators. We talk to relevant people around the malls. We find out what type of experience the mall gives its customers.

And then study your customers; determine their customer profiles. When Love, Bonito was looking to set up its store, we spent at least a few weeks sitting down in the mall, looking at footfall and traffic, examining the people. What type of customers walk by? What are they dressed in? Is it more casual or more professional?  Are they shopping? If so, what paper bags are they carrying from which stores?

Even in one country, there are different trends within the different states.

You mention there are different trends within different states. Can you provide an example?

Generally, the assumption is that East Malaysia (Sabah and Sarawak) is likely to be less tech savvy than West Malaysia. But they actually spend 2.6x more time browsing the web. They are 4x more likely to buy online, even though East Malaysia is a smaller market. 

Why?

When we went there, we realized why. They have less malls per capita. Brands in East Malaysia are limited. Even if they want to shop in a retail environment, there isn’t much choice compared to West Malaysia. And if they do decide to buy something, retail products are priced up to factor storage, duties, taxes, and delivery.

But online? They have access to the same products as KL. Our online pricing does not change from East to West Malaysia. At most, they pay a little extra for shipping.

Any parting advice?

Three words. Fewer. Bigger. Better.

If we are still for a moment and think: if we were to do fewer things, that means we only do things that matter. How can we make those specific things bigger and better?

We tend to want to do many things. We have a hundred items on our to-do list that we want to finish because it bugs us. But really, are those things important? Will they change your business?

If you are scaling, there will be many opportunities coming your way. Sponsorship opportunities, micro influencers...these are all nice to have. But with a limited budget, what are the few things you can do, bigger and better?

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