When Simon and Eleanor Kwok considered investing $20,000 in a tiny cosmetic counter in the shopping arcade where Eleanor worked 21 years ago, the couple never thought they would come this far. Now, SaSa Cosmetics is a public company that employs more than 900 people and owns 40 retail stores across Asia. Mr Kwok looks at home in the spacious two-floor store in the busy commercial district across from Times Square. The shop is one of SaSa's image stores - an image very different from the days of its first humble cosmetic counter. The name SaSa was inherited from the company's unsuccessful predecessor. The couple felt changing the name of the business would have changed its luck, but could not afford the $1,000 cost. 'My wife started this concept of open-selling by allowing customers to try out the products,' said Mr Kwok. 'Business was picking up and we moved from the 40 square foot counter to a 300 sq ft one.' The couple would still be in the arcade if they had accepted their landlord's request to raise the rent from $17,000 a month to $48,000. They were forced to leave the arcade they had operated in for more than 10 years. They struggled at first with the even higher rent at their first store in Lockhart Road. But the street-level selling gave them customer recognition and sales soared. Opening others store in busy areas seemed a natural expansion. Their stores in Causeway Bay and Tsim Sha Tsui attracted tourists from Japan and Korea, who found SaSa's discounted branded products a good deal. Discounts of 30 per cent saw tourists flock to the stores and made SaSa a name known in the region. It was a good time for them, tourism was booming and the company was expanding at a rate of two stores a year. By early 1996, when a friend suggested they go public, SaSa had 10 stores in Hong Kong. At the time, the company was run as a typical family-owned business - Mrs Kwok dealt with day-to-day selling and staff management. Mr Kwok handled the purchasing. They closed shop at 10pm, had dinner and started stocking for the next day until 3am. 'We were working very hard, but were very happy,' said Mr Kwok. Their ambition was growing with the business. In 1996, Mr Kwok felt he was ready to take SaSa to Japan, Taiwan, Singapore and possibly the mainland. Listing was a natural way to do it. But the Asian financial crisis came after the company went public in June 1997. With the money raised from public offering, Mr Kwok did not want to slow down. Used to the region's prosperity, he felt the warnings were exaggerated. 'I thought the crisis would be over soon,' he said. At a time when cutting back would probably have been the most prudent thing to do, SaSa went ahead with an aggressive $250 million expansion plan. The result was a loss of $128 million in the six months to September last year - and a devastating effect on its share price. The shares fell from their IPO level of $3.65 on June 13, 1997, to well below $1. In March, the stock stood as low as 37 cents per share. Despite Mr Kwok's efforts to buy back large amount of shares to support the price, the market was not impressed. The company had to learn the art of trimming rather than expanding. In a letter to shareholders, Mr Kwok admitted the environment was more difficult than he had anticipated. After a review, the company decided to close a few outlets in tourist areas and concentrate on Hong Kong and Taiwan. Everybody felt the pain - in September last year, SaSa cut senior staff salaries by 15 per cent and junior ones by 5 per cent. Another change was brewing in Mr Kwok's mind. He felt external help was necessary. After 20 years of operation, it was time to make the transition from a family business to a professional managed public company. Roger King, a seasoned senior executive and managing director of a number of Hong Kong companies, was brought on board in August as chief executive. Mr King is working closely with Mr Kwok and there are plenty of plans afoot. Their ideas include beauty salons and health products. With Mr King's acquisition experience, they may buy or form an alliance with an existing firm. Interim results for the six months to September are due for release this month. Sales have stabilised and transactions have picked up, but the average spending per customer is still declining. However, Mr Kwok plans to expand into the mainland. The main barrier is the import duty (as high as 100 per cent), but prospects look brighter with the prospect of China entering the WTO. What forces took SaSa from a 40 sq ft cosmetic counter to a company for which the sky seems to be the limit? Five years ago Mr Kwok would have said luck had everything to do with it. Now he attributes a large part to the couple's hard work and the efforts of staff.
