By G. Sharmila
Previously, Pestle & Mortar co-founder Hugh Koh related the tale of the brand’s beginnings and how they got investors in to fund their venture. Today, he tells KINIBIZ the plans he has for the brand and its holding company Pencil Produce.
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At the time of this interview, Pestle & Mortar co-founder and creative director Hugh Koh and his four partners have just obtained funding from angel investors. “Now that we are really trying to expand the business and grow the e-commerce arm of it, we needed to raise more funding. We just closed a round of funding with some angel investors, this time around though we looked for strategic partners rather than just investors.
“I really hope that in five to 10 years’ time we will list or sell Pencil Produce, so that’s something we are really aiming for. A lot of people have a lot of money, but we wanted investors who could bring something to the table. I think money is important, but with knowledge, we’re able to propel the business to the next stage,” Koh explained.
Currently, the Pestle & Mortar brand is available in Tang’s outlets in the Klang Valley and in Malacca, Koh shared. “We also opened a Pestle & Mortar outlet in Penang late September, which is the first outlet outside the Klang Valley,” he said, adding that the outlet has been doing very well. In October, the brand is going to be in Robinson’s at The Gardens’ Mall.
Hugh Koh
“We’ve been very selective about where our brand is present in. Say, when we were in Parkson, we were not just in any Parkson, but Parkson Pavilion. And even in Tang’s, the ones that we are in, it’s more of a strategic play. So currently with Tang’s, we started off in 1 Utama, which is our target group. Then we were presented with Malacca, and it turned out to be a really good move,” Koh said.
However, the company decided to pull out Pestle & Mortar from Parkson Pavilion, which Koh dubbed a “strategic move”. “We currently have a cafe-cum-boutique called League of Captains, so because we opened that up and we have another store near Pavilion that carries the brand, we felt it was a better fit and better representation of the brand. If we do have better options, we’ll take those options,” Koh explained.
What are his plans for Malaysia going forward? “If we do open up another Pestle & Mortar store, it will be outside of Malaysia as we are looking to expand to the rest of Southeast Asia and the US. That’s something we’re looking at within the next two years. The main goal for us is finding a partner in the US, we’re looking for someone who can localise our brand in America. As long as we find the right partner, then I think it can be done,” Koh shared.
At the moment however, the focus is more on e-commerce, said Koh. “Currently 70% of our sales are brick and mortar and 30% from e-commerce. A lot of our marketing efforts are based on e-commerce,” he added.
“We lack expertise in the IT side and we’re looking to build that. A lot of the money we raised will be pumped into e-commerce. At the moment, our sales are predominantly from the brick and mortar side, but I think our target within a year or so is to shift the majority of our sales to e-commerce. We’ll have greater reach and cater to a wider customer base,” he said.
According to Koh, the Pestle & Mortar line is available on Zalora Malaysia website, and in Singapore on a website called Straatosphere. “We will be entering Zalora Singapore this month as well. A milestone for Pestle & Mortar is that we showcased our collection at a trade show in Las Vegas in August, our focus for the next year is actually concentrating on international sales,” Koh said.
“We have opened up a handful of accounts in the US and we’re currently working on a fulfilment-cum-logistics centre for sales in that country. Outside of Malaysia, our biggest customer base is in the US, followed by Singapore and Australia.
“So we saw that there was a demand for our clothes and from a branding perspective as well, we definitely want to say that we are available in the US, which is a huge market compared to Malaysia. Of course we’re not neglecting the rest of Southeast Asia, but I think for us to be able to go to the US, it is in a way our portfolio to say that ‘we’re available there, do you want to carry us?’,” Koh explained. According to him, in January, the label will be showcased at a trade show in Long Beach, California.
However, Koh’s plans go beyond that of just Pestle & Mortar. “Last year, we started diversifying our business. What we realised when we opened up the Bangsar outlet was that it was a pretty big space, we didn’t have enough clothes to fill up the entire space. So we decided to consign other brands, look at other brands that complement our products. And that led us to the distribution business which we now do,” he explained.
For instance, Pencil Produce brought in the Bellroy wallets which are very popular in Australia. They proved to be a major hit with our customers.
“Bellroy was really happy with that and asked us to carry their brand. We’re now distributing seven international brands,” Koh said.
“We also started a multi-label store. A lot of times, people that liked the same things we did had difficulty finding them in Malaysia. So they had to resort to buying from other online means, such as international online stores. And because of that they ended up paying a lot of tax and people were also sceptical as to whether their products would actually arrive.
“So we saw that a void existed and we decided to fill it. So we started Major Drop, it’s an omni-business – we run a retail storefront located at Sunway Pyramid but are concentrating more on the e-commerce sales via www.majordrop.com,” he said.
Koh said frankly that Pencil Produce had intended to open more Major Drop stores this year but at this stage with the currency weakness (they buy everything in the US dollar), it’s a little difficult. “I think e-commerce is the way to go, we use the store as a branding and marketing tool, to push the lifestyle and music that we like. The plan is to shift all our customers to e-commerce, it’s just a lot better,” he said.
He revealed that Pencil Produce made close to RM4 million revenue last year, a 130% growth from the year before. “We have managed to reduced losses, we’re still growing the company. We’re still looking at hiring new people, yes, there has been some cash burn, but we expect to turn a profit next year if all goes well,” he said.
Has the business been affected by the goods and services tax? Koh admitted that to some extent, there has been a dip in sales since the start of the year. “People are spending less. End of the year, a pickup in sales is expected, at the same time we’re preparing for the worse. Using the next six months, we are projecting – we have to be careful with expenditure. We’ve cut back on a lot of spending and will concentrate other areas such as branding, building the team, standard operating procedures,” he shared.
Would he say he has “made it as an entrepreneur” or is he still “on the way there”? “I would say we are on the way, to be serious, I do see the light at the end of the tunnel. I really see the potential in what we’re doing and there is a market for it. On top of that, we’ve got a great team, they are very dedicated people,” Koh replied. “I think we still have a long way to go but I think we’ll get there. It’s just a matter of time,” he added.
On a personal level, he said that running the business has taught him to become more people-oriented as he is an outgoing, but really shy person. Running the business has given him the opportunity to travel and meet people as well, Koh said.
Has there even been an instance when he’s had to turn away a potential client or opportunity for the betterment of the business? Koh admitted that a lot of their decisions in the early days were based on gut feeling.
“You still need some of that, but these days our decisions are justified with data. Even our designs are, we look at colours, top sellers, etc. So there have been a lot of other brands that have approached us, but we didn’t really see that we were the right fit for them, so we’ve had to turn them down.
“Even with wholesale accounts, it’s money in the bank, but we think long-term so we’ve had to reject them. It’s not about getting that one big order and not hearing from them again, we have to ensure we have that constant conversation with them about how we can help them with their business with our product. We want repeat customers, we want long-term partners. We’d rather them order small amounts but over the long-term, rather than one big order,” Koh explained.
Pencil Produce has also been involved in various entrepreneurship programmes, Koh shared. The company has given talks to SME Corp, Taylor’s University, INTI University, HELP University, staff of DiGi.Com Bhd and also at its Bangsar flagship store.
Koh shared that Pencil Produce was also in the running for the Endeavor Malaysia at one point. “It’s about fast tracking your learning. You can address issues and learn something right away, rather than reading a book,” he said, commenting on what they learned from participating in the programme.
His advice to new entrepreneurs? “Do something you’re really passionate about. For us, a lot of our staff want to be in the office, even if it means working nights and weekends. Finance is also a big part of it, you need to have your finances in order.
“You need to constantly yearn to learn new things. Keep an open mind, I used to be more judgmental but these days I am more open. It’s important to network as well, things happen if you know the right people. Just believe in what you do, that’s the most important thing.”
Yesterday: Starting a clothing label from zero
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