According to a research report published earlier by Frost & Sullivan, the total sales revenue of Hong Kong’s healthcare and equipment market sharply rose to HK$870 million in 2010 from HK$620 million in 2006 with compound annual growth rate equaling 8.9%. Along with the rise in young people’s awareness towards healthcare and the increase in the ‘gray hair’ population, total sales revenue is expected to grow at a compound annual growth rate of 10.2% from 2010 – 2015, said the report, with the estimation showing quite optimistic an attitude. Frost & Sullivan painted a bright picture for the industry, predicting sales value to reach HK$1.42 billion in 2015. Undeniably, a rise in awareness of citizens about healthcare and the limited number of players in the local healthcare product market are favorable for businessmen to develop the local market.
Charlie Yip, chief executive officer of OTO HOLDINGS (6880), told our reporter people living in metropolises shoulder immense pressure due to the sluggish economy and therefore help lift the sales of healthcare products, which become one of the very few categories that can benefit from an economic downturn. Currently, the group offers products under four main categories, namely, leisure products, beauty products, healthcare products and diagnosis products, and targets the young generation of both sexes. Yip pointed out the leisure-product category is the most popular one in the local market and contributes to 70% of the group’s turnover. This category is also the source of profit for the group, he noted. On average, the group puts out 10 – 14 brandnew healthcare products each year with the retail price ranging from HK$500 – HK$25,000. That means the median price is approximately HK$12,750.
Yip took the example of the new product series launched earlier. The group invited artist Michael Miu to be a spokesman for a foot massager which can allow users to enjoy to the fullest of foot massaging during the Father’s Day period in June, a move that indirectly boosted gift shopping around the time. When summertime came in July, the group launched a massager which female customers can put it on near the waist for reducing fats and having massage at acupuncture points. This massager can get females, who long to be as beautiful as Snow White, ready for the ‘Midsummer Night’s Dream’ by helping slim the body. Yip said the group sought professional advice from Chinese medical physician in order to design an effective body-slimming massager for females, adding the ‘guanyuan group acupuncture points’ are those relevant to body slimming to Chinese medical practitioners. Therefore, it is crystal clear that this OTO massager incorporates itself with medical elements. When winter sets in after summer, the group will launch a massager that carries a warming function, which can bring warmth and comfort to the users, who thus can enjoy a ‘not really that cold winter’.
Paradoxically, despite the pleasing growth of local retail business, such growth could not catch up with that of corporate and overseas businesses and even drag down the group’s 2012 overall profit margin to 67%. Fortunately, the overall return on assets was not too low. As at 31 March 2012, the group’s turnover jumped 17.2% to HK$246 million with gross profit up 11.5% to HK$163 million. Yip emphasized the group would only hike price when putting out a new product and would not cut price only to boost the turnover, latter of which Yip considers a strategy that contradicts business principles. The group centers around increasing sales channels when trying to improve business performance, while at the same time keeping retail customers as the most basic customer source. Hopefully, the group can gradually increase its market share in the corporate as well as overseas markets. As the group does not have their own plants for production, a lot of internal resources can be saved. The management of OTO allocates resources to 15 factories located at different regions and outsources the production of healthcare products of different designs and functions. Unlike ordinary non-durable products, healthcare products have a longer life cycle and can be used for years, which are good for customers but may create a chasm in income for the group. The management of course realizes the problem. As such, the group categorizes products by series and not by item, said Yip, who said every one or two series covers products targeting the 11 areas of a human body. That means the group is keep offering products in 11 different markets and therefore can ensure it can secure the profit estimated in annual budget, noted Yip.