CEO Tan Wee Keng was thrust reluctantly onto the hot seat following his father’s untimely demise. He has since grown the company and is planning for succession
As a child, Tan Wee Keng used to help out at his father’s office and warehouse, handling baby products under the family’s business brand, Tollyjoy. Moving from various premises in the east of Singapore to its current location in the easternmost tip of the island, the company’s current CEO and second generation leader is inextricably linked to the business, which recorded S$16 million (US$12 million) in annual revenue in 2016.
If Tan could turn back time, he might now be known as a renowned surgeon instead of an entrepreneur at the head of a 200-strong company.
“I always had this dream of going into medicine,” Tan tells Perspectives@SMU. “But before I was about to join the army [for National Service], my father fell quite ill with cancer. Worrying about the future of Tollyjoy he made me promise that I would not choose anything else but the family business.
“Medicine then wasn’t so advanced at that stage and cancer almost always meant the patient would invariably pass on. It was quite difficult to reject someone who had that disease and I was obliged to fulfil what conceivably could have been my father’s last request.”
When the company founder died aged just 57, the two older sons stepped into the breach while Tan, the youngest of the three, completed his business education at the National University of Singapore. While their father had intended for the three brothers to run the business together, Tan’s older brothers left to pursue their own interests, leaving the newly-minted business graduate to forge the path ahead during an uncertain time.
“I felt like I was trapped,” Tan recalls the early 2000’s when much of Asia had just recovered from the 1997 Asian Financial Crisis. He had just taken the helm at Tollyjoy when the September 11 attacks in the United States sent the economy into a tailspin. “We had a major problem with our business model in Malaysia; customers were leaving us in droves, revenues were plummeting and we were deeply in the red. There were rumours and chatter about our staff wanting to leave.”
“I eventually realised, ‘There’s only so much time I can spend sulking and that being reticent was getting me no where.’ So I snapped out of it and had no choice but to take the bull by its horns and face what seemed to be an insurmountable problem, head on.”
“The boy in charge” takes charge
Despite an uncertain start at the helm – “I was the boy in charge,” Tan recalls in self-deprecation – the reluctant businessman steadied the ship and expanded Tollyjoy’s reach into the region. The company’s products, from baby wear to feeding accessories to baby carriers, can be found across Southeast Asia where Tan employs a mix of direct selling to retailers (Singapore and Malaysia) and distribution deals (Vietnam, Brunei, China, Maldives, and Myanmar) to expand the footprint of Tollyjoy and its sister brand, Little Precious.
Tollyjoy also has a presence in India in partnership with the e-commerce giant, Amazon.com. “In a situation when competition is based purely on margin, brick and mortar suppliers who are not prepared to reduce the take on sale will fail in the face of growing online competition”, he believes.
Citing conditions in Singapore where retailers try to demand up to 40 percent of the sales proceeds, Tan describes the balancing act between raising prices to maintain profit margins and delivering brand value as a ‘Goldilocks’ situation.
“Not too cheap, not too expensive,” Tan quips with regard to Tollyjoy’s brand positioning for producing ‘reliable, durable and value-for-money products’ vis-à-vis premium brands. “We realised that this was what our customers wanted.”
One way that Tollyjoy has kept up with the market is through product development and understanding market trends. Where in the past clothing lines used to last for two years, Tan says the refresh cycle is now only three months. This trend towards shorter refresh cycles and the resulting need to come up with new products not only to meet consumer expectations but also remain competitive puts extra pressure on manufacturers such as Tollyjoy. There is a need to strike a fine balance in the production strategy to ensure that the cost of production does not exceed the returns.
“If we had to come up with new moulds every nine months, it can be done,” Tan explains. “The costs come from the actual production and not creating the mould. But if we cannot be sure that the product will be a success, then it would be a huge risk to mass-produce the item.
“As production costs in Singapore are very high and could be ten times more expensive, our solution is to outsource to a lower-cost country to mass-produce cost effectively, without compromising on quality. This not only makes it affordable but also gives us business flexibility, as an unpopular item can be discontinued at relatively lower cost. 95 percent of our production is done outside of Singapore in order to keep pace with consumer demand for new products.”
He adds: “Maintaining a tight inventory makes it easier to manage the supply chain, which involves adding or removal of products, and product marketing. We have 50 different categories spreading over 500 SKUs (stock-keeping units). A single different colour is a different SKU, and we have to track all of them”.
“Nonetheless, we have developed the necessary ‘human software’ over the years to manage this.”
Planning ahead
Many of Tollyjoy’s employees have been with the company for 30 years or more – “Many have seen me running around the premises as a kid” – and Tan describes his relationship with them as one of being colleagues instead of boss and staff. Having weathered the storm and prospered despite his initial reluctance to succeed his father, Tan now looks at succession through the senior Tan’s eyes.
“While I complained about how I came into the business, I can now kind of understand where my father was coming from,” says Tan, who has three children aged nine to 17. “At the same time I do not wish to repeat history. I try to hint but not force or coerce – that, ‘There’s a business here, maybe you should come earn some pocket money during the school holidays.’
“I subtly try to influence them but my subtleness was too subtle and they didn’t get the hint,” he confesses with a sheepish chuckle. “But we still have to make plans for the future. This is already the second generation, and as they say, businesses seldom survive beyond the third generation. We are financially sound and there are plenty of opportunities to expand our market reach.
“We just need to find the right way to manage the business whether it’s through an IPO or a management buyout or an investment from a VC; we are open to all kinds of opportunities so long as the brand stays.
“It comes down to the question: What’s more important: The family or the brand? If you think about it logically, it’s the brand.”
Follow us on Twitter (@sgsmuperspectiv) or like us on Facebook (https://www.facebook.com/PerspectivesAtSMU)
Last updated on 30 Jan 2018 .
