Some of you may know Kamal Osman Jamjoom (KOJ), the retail conglomerate, but many more of you know Nayomi, Mikyajy, Mihyar, Moda, and Toy School, the private label brands that the company owns, runs, and operates.
“Yeah, that’s always been the plan, why would people want to know me?” laughs Kamal Osman Jamjoom, founder and chairperson of the namesake group.
With a warm smile and his signature quick wit, Kamal Osman Jamjoom walked into his cabin in the KOJ DIP office to meet me for the interview. Considering most of the staff was still working from home, I wasn’t greeted by a flurry of busy employees, but corridor walls that were freshly painted green and yellow – you know, the Subway colours – marking their recent acquisition of the QSR brand.
“Congratulations on the big acquisition,” I said. “How did you know I caught a big fish this weekend?” he quipped and proceeded to showing me pictures of his big aquatic catches.
Apart from being an angler, Kamal Osman Jamjoom is the owner of KOJ, a massive retail conglomerate in the region that started its business operations with one of the earliest The Body Shop (TBS) franchises in Jeddah, KSA back in 1987. “I began the business in 1987 after I worked for Procter and Gamble (P&G), when I was 27 years old. When you’re young, you make very simple decisions that then become your life,” he smiled. When I asked him what made him take the entrepreneurship path, he joked, “I always wanted to have my own business for some strange reason. In our family, all my uncles were traders, except my father, who was an architect. And my cousins (children of the uncles) had better cars than I had.”
But it was certainly more than that, as we now know. KOJ started in Jeddah at a time when there were very few malls and shopping options. The oil boom of the 1970s, which resulted in the infrastructure and population boom, presented many opportunities for both foreign and homegrown businesses. “It was a healthy time for businesses to set up, although retail was very new. We had the wealth here and western brands started to develop as franchises with retail specialty stores away from department stores. And luckily, without realising it, we rode the wave of that boom. As more and more malls opened, we opened more and more stores. We thought we’d open three TBS stores initially and that would be our little business,” he said. Today, after the acquisition of The Body Shop stores in the UAE too last year, KOJ operates over 161 TBS stores alone in the GCC.
The Group has evolved in the last 35 years to become a leading independent brand owner as well as a long-term franchise partner for brands including Lego, Subway, Neal’s Yard Remedies, Early Learning Centre (ELC), and The Body Shop reporting a turnover in excess of SAR 1 billion with over 700 stores, employing about 4,000 professionals representing a global mix of 50 nationalities working across seven countries.
While the Group’s acquisition of global brands has added value to the region’s overall retail ecosystem, it is what Kamal has managed to do with his private label brands that has been rather impressive.
“I learnt about management, manufacturing and marketing at P&G and then about retail with TBS and ELC. I then thought we could try developing our own label and have more control on product development and design, pricing and manufacturing,” he said. “It was a somewhat difficult road to take as it is easier to sell an iPhone than to make one.”
Lingerie brand Nayomi was the group’s first private label that was launched in Saudi Arabia in 1992, with the brand being built around the concept of a beautiful and elegant princess. He then launched his second private label, the value makeup and cosmetics brand Mikyajy, catering to the unmarried women of the region with limited income. He then launched Mihyar – The Moon Rider, in 2012 with the aim to revolutionise habits of Arab men, by bringing together an extensive product range, including ready-to-wear and designer thobes, accessories, footwear, and undergarments under one roof. And finally, his latest Abaya brand Moda, was created for the traditional and conservative, yet modern Arab female customers.
Private Label Boom
In essence, a private label product is manufactured by a contract or third-party manufacturer and sold under a retailer’s brand name. As the retailer, you specify everything about the product – what goes in it, how it’s packaged, what the label looks like – and pay to have it produced and delivered to your store. Now private labelling is usually driven by a ‘why’ factor. Why do the retailers need to manufacture a special brand for themselves?
For Kamal, his first steps into private labelling started more by chance and not choice. “I had the franchisee for a brand called Triumph but that didn’t work out, so we had the choice of either closing that store completely or starting our own label and selling. We went around Europe and started buying products carefully, which we were able to sell in that store. And then we realised that we had to manufacture in scale to get our price point down to be more competitive. We had to develop our understanding of sourcing, manufacturing, design – it was a long journey – and eventually Nayomi came about as our first private label,” he said.
“To make life more difficult, I decided to go into make-up and launched Mikyajy,” he continued, I chuckled. “Mikyajy started out as a store where you can buy value cosmetics. In the US there was a strong market of value cosmetics, but in this region we only had premium products. So I thought there is a gap in the market for more price conscious consumers. We started out with third party brands and gradually introduced our products, and now it is a full-blown private label,” he added.
With KOJ’s own brands, the retailer isn’t just trying to win among the competition, but also create competition, eventually providing a healthy retail market for the GCC consumers with ample choices.
“If you compare the GCC markets to those around the world, it’s a fairly free market. Competition is good and that benefits the consumer. Free markets will make the good performers who know how to meet the needs of consumers get ahead, and for businesses who don’t provide a good product or service to fall behind,” he said.
Now, the pandemic has been a true determinant of which brands are working, which retailers are actually listening to their customers, and what business models are to dictate the future of retail. Early in the Covid-19 crisis, many consumer-packaged-goods (CPG) brands disappeared from store shelves due to panic buying and pantry loading. Some shoppers, not finding their preferred brands, instead bought private-label goods—and have continued to do so. The fact that private labels are frequently cheaper than national brands has helped, too, as financially strained consumers tighten their purse strings. These two advantages—high availability and low price—have made private-label products considerably more appealing to consumers during the Covid-19 pandemic.
According to the Global Private Label Report from Nielsen, private labels accounted for 10% of global retail sales in 2018. With consumers increasingly turning attention towards affordability and sustainability without compromising on quality, the MENA region in particular is a land of opportunity for private label brands. Especially so for the UAE where private label had just a 2.2% retail market share, according to Nielsen.
A more recent McKinsey and Co survey consumer survey showed that nearly 40 percent of US consumers have tried new products or brands since the onset of the Covid-19 outbreak, 20% of whom stated affordability as the primary reason.
The consumer shift toward private labels benefits retailers as well, since private labels are typically more profitable for them. Furthermore, high-quality private labels can gain a devoted following and become a powerful driver of customer loyalty to the retailer.
While increased profit margins has been considered a key pro for the private label business model, Kamal believes that it eventually depends on scale and quantity.
“If you make a private label, you could make higher margins but if you buy an international brand (as a retailer) then you could sell 1000 times more. So then from a cashflow perspective, you are making more with your international brand over the private label. It all depends on the units you make,” he explained. “With an international brand you have production lines that are operating 24/7, which introduces huge economies of scale. When you think about it, it’s all about production quantities. Of course, you need your branding and design, but somebody has to make it at the end of the day. If you can give a factory an order that keeps the production line running, then obviously your unit cost comes down tremendously. So you can make a bigger margin on private labels but if you haven’t got the volumes, units, distributions and sales channels, it is very difficult to make it work. That’s why we invest in our stores for our brands.”
However, to make a private label truly work, retailers would need to take a deeper look at five key areas – brand strategy, assortment and pricing, marketing and packaging, product design and sourcing, and organisation and operating model.
The Value Proposition
What is your brand’s value proposition, and what distinct consumer need does it meet?
“My school on branding and marketing came from Procter and Gamble. Part of that training was the knowledge that you should develop a brand that meets certain needs of a consumer. For Nayomi,,we came up with the brand name and decided it’s going to be a lingerie concept. Then the customer started associating themselves with the great products, service, quality and the seasonal offers that we have,” he explained.
Leading retailers are now developing brand language in their stores, websites, products and packaging that not only draws shoppers’ attention but also convey the spirit, essence and functional benefits of the brand.
“Mihyar is built on a timeless idea of the desert Bedouin warrior, an Arabian stallion crossing the sand dunes. It’s almost like the spirit of the desert, and around that, we celebrate the heritage of the region, which is the brand equity we want to achieve,” he said.
“We try to identify the spirit of the brand – it’s not always easy. If you look at globally successful brands the spirit is easily defined and it resonates with the consumer, which helps customers perceive the brand as their friend. The best thing a brand can be is a friend to its loyal customers,” he added.
Even as retailers have introduced new private-label products and brands over the years, few have thought through the role of private labels in their businesses. It is important to ask – what gap are you filling? Is there competition in the market already, and if there is, how are you going to stay ahead?
“I don’t think any of the international women’s fashion houses are going do an abaya brand, and hence compete with our brand Moda. So you have to be careful about where you choose your battles. There’s smart people out there and you have to choose who you should compete with and who you shouldn’t. If you work out where there’s a gap then you have a chance. I knew that international brands weren’t going to come and copy this. For retailers, it’s just becoming better at identifying where there’s a strategic gap in the market to meet the consumer need,” he added.
US inflation hit a 40-year high of 7% and the IMF’s World Economic Outlook in January forecast that advanced economies will see 3.9% inflation in 2022. The GCC states have not been immune to this global trend, although the picture in the region is complicated and varies widely between countries.
Pick Your Price Properly
Now, inflation in regional and global markets have resulted in the continued growth of the private label business model. However, setting and regularly enforcing price-gapping measures is particularly important for private labels, many of which attract consumers precisely because of perceived value. Again, questions like ‘What is the process for regularly identifying and addressing white-space opportunities? What is the “reference” national brand for price and quality benchmarking? How regularly are prices being adjusted for promotions or competitor price changes?’ need to be constantly evaluated and addressed.
“With our private label, we always get a good sense through results and sales. If we see a certain item that was selling well, isn’t selling anymore, we try to re-engineer the product to make it more cost-effective to the consumer. So we try to design with fewer parts, different materials, manufacture in different locations or have big volumes to bring the cost down. Regionally, the consumers are becoming more demanding on price and we have to respond to that,” he explained.
In today’s day and age, where consumers are more open to trying new brands, are value-conscious, sustainability and purpose-driven, the opportunity for private labels to succeed is ripe. For retailers, this simply means higher agility and adaptability, control over production, pricing and branding and flexibility. However, at the end of the day, it all boils down to a good product.
“A brand dies or succeeds on the product – you have to get your product, right. So the first thing you have to do is to make a great product. And then you price it correctly, package it correctly and make sure that you serve your customer with respect and treat them well. Hopefully they will become a loyal customer and you can retain them for life,” he said. “And then you overlay your marketing to communicate your imagery, to reinforce the glamour and attraction of the brand. You’ve also got to make sure you never have to stop on your best sellers. There’s so many little elements that are critical that if you get one wrong, things can go up in smoke,” he added.
Go online or go home
And just when the momentum was set and there was equilibrium between KOJ’s private labels and the blue-chip franchises, which were serving its own cohort of unique customers with their distinctive brand positioning, the pandemic created the urgent need for the Group’s online arm to function and thrive.
“We had a digital strategy, and a website as we started out fairly early, but the issue was, there wasn’t any traction. We did it because everybody was talking about the internet and online sales, so we had to be in the space. Initially, we saw really weak sales online on our digital platforms,” he said.
However, the early investments in the systems and people, proved highly helpful once the pandemic hit as the customers were now moving online and continued demanding the same products just on a different platform. “In the end, it’s a sales channel, right? I think as a retailer if you make a great product, you have to work out what are the ways to offer it to consumers,- stores is one way, online is another and in the old days in Europe it was mail order. So it’s all about sales channels,” he said.
“Online is just a conversion of the age-old mail order catalog – a modern technological version of that. We didn’t have that in this part of the world. When we first built our digital stores, the traction was low because credit card usage was low, and the absence of the mail order system in the region meant that we didn’t have a robust delivery system in place like the postal services in the west. The pandemic accelerated three elements – delivery system, payment system, and habit forming – as a result of which our online business eventually exploded,” he added.
Irrespective of the sales channel, a clear understanding of the core customer and what those customers want, high performing products sold at the right price, and great customer service with beautiful stores located in the right malls, has led to the success of its private labels and consequently the whole Group.
In 2020, KOJ won the franchise rights for Lego certified stores for KSA and since then it opened seven major stores. In 2021, it acquired the franchise rights and stores of The Body Shop brand in the UAE. A few months ago, the Group entered the F&B sector through an exclusive master franchise rights for Subway, the largest QSR chain in the world. Organically, its existing brands opened 100 new stores across GCC countries with most of the developments taking place in KSA and UAE.
For the coming years, the Group plans to focus its major investments on its people, customer experience in-store and online, data-driven technologies, and private label product innovation.
When I asked him if he plans on going global with his private labels, he said, “Oh I would love for the Americans to wear Kandoora, but I don’t see that happening now. But, never say never, right?”
We laughed and headed to the warehouse for the photoshoot and on our way out, I tried to squeeze in another question – one about the IPO plans for KOJ. “Never say never,” he smiled.
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