A.S.Watson: From single dispensary in 1841 to global health and beauty chain

Winner of the DHL/SCMP 2016 International Award, the company has ambitious plan to expand by opening over 1,000 stores annually, says Malina Ngai, chief operating officer

PUBLISHED : Monday, 05 December, 2016, 2:44pm
UPDATED : Monday, 05 December, 2016, 10:23pm

A.S.Watson began as a single dispensary, and was one of the first companies in Hong Kong.

It has now become an international health and beauty retailer which is not only celebrating its 175th year anniversary, but has an unmistakable footprint across Asia and worldwide, with 13,000 stores in 25 different markets.

At the forefront of Watsons’ international expansion is Malina Ngai, its chief operating officer and a former athlete.

“We are really proud we started in Hong Kong,” she said. “We have actually become like a beauty destination for our customers, so this is quite an achievement.”

The retailer began life as the Hong Kong Dispensary in 1841, and then transitioned itself into A.S. Watson & Company, named after the British pharmacist and early company manager, Alexander Skirving Watson.

Initially, Watsons simply wanted to make sure people were healthy, focusing on curative health.

As living standards improved, the company shifted into beauty products, from shampoos and soaps to skin care and cosmetics.

“We know our customers [want] to look beautiful, to look good and feel great,” Ngai said.

She joined the business in 2001 when Watsons was just beginning to expand, not just outside of Hong Kong, but outside of Asia.

By then the company had 900 stores across Taiwan, mainland China, Macau Singapore, Malaysia, and Thailand, and had built up its “critical mass and scale” as a health and beauty retailer in the Asia-Pacific.

Its next step was to see if the business model would fit overseas, in Europe, and so it acquired retailer chain Savers Health and Beauty in the UK.

However, it initially struggled to adapt its business model to local markets, realising the need to suit different types of customers.

“There have been a lot of different challenges but it’s also been interesting,” Ngai said.

“When you’re in different markets, customers are different, and your staff are different because of different cultures.”

To address this, core to its plan has been to employ local staff, and then apply what Ngai calls the “Hong Kong-style” of working, defined as being “very competitive and always wanting to win”.

“Our staff not only work very hard, but look very smart.”

After cementing its UK expansion, strategic acquisitions of retail chains followed in the Netherlands (Kruidvat Group), Germany (Rossmann) and Russia (the health and beauty chain Spektr), while the company was still growing its presence in Asia.

Today, that internationalisation process remains a dominant part of its DNA, rewarded this year with the International Award at the DHL/SCMP Hong Kong Business Awards.

Last year, its revenue hit HK$152 billion, with 85.7 per cent coming from non-China markets. It now has an ambitious plan to expand by opening over 1,000 stores annually.

A.S. Watson is majority owned by Hong Kong conglomerate CK Hutchison Holdings, chaired by tycoon Li Ka-shing, Hong Kong’s wealthiest person.

A quarter of the beauty retailer is controlled by Temasek Holdings, an investment company owned by the government of Singapore.

Since 2014, A.S. Watson has opened around 1,300 stores per year, up from 800 to 900 in previous years.

“That’s actually quite a lot for a retailer,” Ngai said. “Compare us with anyone globally, in all different kinds of retail, and we are one of the fastest growing.”

The company is also continually modernising, having invested US$60 million in digital and customer analytics systems over the past three years.

Through e-commerce, data mining, and social media, the retailer hopes to better analyse what products do well in its stores and how to create a user-friendly digital experience for shoppers.

Any consultant will tell you when it comes to opening retail stores, you have to focus on the customer, and today that also means digital shopping
Malina Ngai, chief operating officer, A.S.Watson

Strategically Watsons takes a detail-oriented, customer-centric approach, Ngai says, putting the company’s success down to its culture of dedication, passion, and precision.

“Any consultant will tell you when it comes to opening retail stores, you have to focus on the customer, and today that also means digital shopping.”

“Our strategic framework is why A.S. Watson has been so successful, and our teamwork plays a crucial role. Running the business is not only about me.”

The company also champions long-standing philanthropic efforts, from providing free medicine in Guangdong as a dispensary, to setting up one of the first medical scholarships in Hong Kong, which helped people including Dr Sun Yat-sen, seen in the Chinese-speaking world as the father of modern China.

Today, it supports student sports scholarships and professional sports training programmes, as well as an effort to serve meal boxes to local communities.

Ngai adds that she always felt she was destined to work at Watsons. The former track and field athlete participated in competitions sponsored by the Watsons brand since high school.

“I [have] a lot of trophies that have Watsons branding on them,” Ngai said with a laugh.

From 1983 to 1988, she represented Hong Kong at track and field in the heptathlon, a combination of seven track events. In 1987 alone, she rewrote the local record books for discus throwing, five times.

Then after a javelin injury, she switched course to join the national rowing team between 1992 and 1995, bagging various medals at international level.

After studying sports management and working in the commercial world, she joined the company 15 years ago.

“I’m not sure how an athlete has managed to became a retail manager, but I think there are some elements in common,” she says, explaining that just as the company needs to keep improving, athletes need to constantly evaluate and perfect the specifics of their performance and movement.

“I have applied the same approach to retail, looking at how we [can] improve sales,” Ngai said.

“It’s been that determination to win which has kept me at A. S. Watson.”

But she also underlines, there is no room for complacency, in either.

“We can say we have been successful today – but we also have to realise tomorrow we could be beaten by the competition.”