Don’t know if the development of the cosmetic chain stores is related to the recent wage raise of China’s factory workers, but lately there are a couple of companies want to make ambitious move to expand their chain business in China.
Sa Sa’s success story in Hong Kong pretty much reflects again the consumption story in China. Since Hong Kong signed the CEPA agreement with China in 2004, financial performance has taken to a new level as mainland shoppers purchase Sa Sa’s cosmetic products – partly this has to do with lack of availability of imported brands in China as China has a rather complicated system of registration of cosmetic products. Also, having the right business model is not as easy one would think, and it has to do with customers still in general not making enough living to purchase cosmetics products. But given the overall wage raise trend in China, maybe this trend will change as companies including Sa Sa are making ambitious store opening plans. If u ask me personally, Sa Sa should have the ingredients to make it right this time, and strategically sound as well. It recently hires the ex-CFO of Li Ning to help implement business plan. So to me, this time around Sa Sa is serious about getting a strong foothold in the China market.
On the other hand, other players try to get a piece of pie on the huge potential cosmetic chain market in China. Ming Fai, a company involved in hotel amenities business, has recently transformed itself and also get involved in the cosmetic chain business in China through the help of private equity firm by acquring a beauty accessories brand in China called “7 Magic”. 7 Magic is the type of 10 dollar shop (10 RMB) where ladies can buy items like hair clips.
Again, we will see how Ming Fai will develop as a cosmetic chain store by selling 30-50 RMB cosmetic products from the current 10 RMB accessories model, but similar to Sa Sa, store opening plan is also ambitious for Ming Fai. Many consumer subsectors still in early stages of development, including one area that I will write about in my next article.