All right, I may bore my readers as my focus has been always on the consumer sector in China. But I do find a lot of interesting subplots going on in this sector, as I am spending my weekend shopping in Hong Kong. You see, Hong Kong actually is quite a matured city (in terms of high rental cost and as an international center), so it is not strange to see new forms of retailing evolving in such a sophisticated city, catering needs for a diversified pool of customers. Say for instance:                                                                                                      

  • The birth of Cosway (288 HK)  in Hong Kong: I am actually quite amazed to see that direct sales is happening on street stores level now. This is a subsidiary of Berjaya Corp and so far it has already opened more than 90 little shops on the street level to recruit anyone who is interested in building a direct sales network. In fact, it’s so visible now that I can see people selling Cosway’s water filter equipments in the noisiest part of Causeway Bay. If you still believe direct sales business model is classified as “underground economy”, well I hope you will have time to visit Cosway’s stores. It’s quite small on the street, but you can find them and they work! I tell you every time I walk by a Cosway store in Hong Kong, I see customers shopping and getting new customers. So go figure.
  • The funny shoes that are selling in department stores from Skechers (btw you know GEM, the cute little HK singer as the brand’s spokesperson?) : Okay, I know that this is more like a global story, but I have tried the shape-up shoes and it’s really comfortable. So other than athletic shoes and leather shoes, now there are tone-up and shape-up shoes you can find in stores. (Interestingly, Kingmaker is the OEM  for Skechers and we should see if Skechers can help to revive this company)
  • The rise of L’Occitane: Okay, I have to admit this is essentially another global name, but its success in the Asia region is quite a unique story . Partly coming from an unique marketing effort and product differentiation, the shops can sell  a can of cream up to 100 USD. Having seen a Cosway store and then to a L’Occitane store in Hong Kong makes me feel my head a bit giddy… how can all these forms of retailing works within the same place, even in the same area?
  • To make me feel more schizophrenic, I can actually find milk powder in front of the SaSa’s shop. It looks like to me, Sa Sa now also diversifies in selling baby products- while their mothers are busying shopping cosmetic at the same time. Oh, not to mention those health drinks sitting next by the milk powder. The other thing really amazes me is Sa Sa’s outlet store. Wait a second… Sa Sa already sells mass market cosmetic products already, and yet u can find a shop (at least in a crowded area of Jordan) to dump off old inventories? Kudos for good management.
  • The emerging concept of outlet mall in China: Okay, outlet mall is nothing special in US, but now you can find these malls in Beijing and Shanghai! You will find them in Guangzhou soon, and if you don’t believe it, check out with companies like PCD Stores or Guangzhou Friendship. Then you will understand how companies like Ports Design can dump off inventories and get additional cash from happy customers who thought they found bargains.
  • Continual evolution of Suning and Gome in China: Now both players consider stores wholly run by store managers instead of guided by direct sales from the brands. So it will be more like the broadway stores in Hong Kong, where the staffs are responsible for selecting, teaching and selling these consumer electronics to cusomters instead of the sales agent from the manufacturer. So margin improvement, hint hint…
  • Last but not least, the way I see how everyone uses 3G phones these days. I used to think phone is used for talking, but now it can be used as a camera, or a laptop for browsing and download… every time I enter in the mobile phone store I am totally lost in those new 3G/wifi/wireless plans that can easily and could potentially cost me a lot of money.

Needless to say, for all the companies that I have mentioned above, I think their potential in the Greater China market are huge. Many of them still do not even have a presence in China but already has many many customers from mainland, such as Cosway. We shall see how these companies fare in the China market in the future, but to be honest, my view is that there will be many re-rating opportunities for the companies mentioned above, as investors will discover in the future how companies will be rewarded for their creative strategies to differentiate and service the specific needs of customers. For others, like Texwinca’s Belano brand or Espirit, it’s now or never to reformulate a sales strategy to turnaround their business, as they can eventually simply disappear in the Hong Kong market or become a third tier brand, even in China. Take a look at how Theme struggles even in China will remind us to stay motivated and ahead in this constantly changing retail landscape.

All right, I promise my readers I will move on to discuss other topics so that it’s not just all about consumer. See you next time!

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2 Comments

  1. Hum in terms of competitor, I don’t think Amway has the same business model as Cosway. And as for multiple valuation, at this point given the expected growth potential, I have to (honestly say) that using a PEG valuation method is a more appropriate methodology. I mean, yes, if the company fails to deliver this company will be very expensive for now. To conclude, the real growth story has not started yet for Cosway, which is when Cosway will obtain license to operate in Mainland. But thus far having seen the growth of shops in Hong Kong by actual store observation, development is decent for this company.


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