Sephora vs. Salsa competes for the cosmetics market

Introduction: Thursday, October 27, 2005, Shanghai Huaihai Zhong Road. From 15:14 to 15:34, the reporter spent 20 minutes at the entrance of Sephora on the first floor of Snow Leopard Mall. In these 20 minutes, there were 14 on-site sales staff in the Sephora store, and a total of 65 visitors to and from Sephora.

After completing the statistics, the reporter immediately walked to the Shanghai Women's Goods Store just one station away. The Hong Kong Salsa was on the first floor of the mall. From 15:47 to 1607, in the same 20 minutes, there were a total of 29 on-site sales staff in Hong Kong Sa Sa restaurant, and a total of 38 visitors were in and out.

Such a set of simple, perhaps not very rigorous, on-site statistical data reflects the current state of competition between Shanghai Sephora and Hong Kong Salsa's two major cosmetics stores in Shanghai, and the first chapter of both Shanghai Romance goes back to In March this year.

Chapter 1: Landing and landing
On March 27, 2005, Hong Kong Sa Sa won the first prize, and its first branch in the mainland opened on Huaihai Middle Road in Shanghai. However, the consumers who took the initiative did not enjoy themselves.

According to the reporter’s statistics, Hong Kong’s Sa Sa’s first store in Shanghai sells only about 40 brands and more than 100 varieties. In Hong Kong, Sa Sa’s Hong Kong stores typically have 70 brands and more than 150 varieties. Here, there is no such international brand as CD, Chanel, Lancome, etc. What is more disappointing is that there is no legendary ultra-low price here. Consumers are puzzled: This salsa is not Bishasha. In some Hong Kong Sasa stores that are familiar to consumers in the Mainland, many international brands such as CD, Chanel, Lancome and Shiseido are sold at a discount of 70%, 50%, or even 30%.

The collective absence of international first-line brands and their low-cost strategy, which they rely on, cannot be used to declare the bleakness of the first shot of Hong Kong's Sa Sa mainland. Regarding the absence of international first-line brands, the explanation given by Hong Kong Salsa is: “Because of the rush to open stores, we are currently negotiating with major brand agents and will gradually introduce these brands into Hong Kong Sa Sa Shanghai.”

However, according to the reporter's understanding, since September 2003, Hong Kong Sa Sa has already started related preparations and the time is not sufficient. The real reason is that the negotiation between Hong Kong Salsa and the international first-tier brand suppliers has been hindered. The focus of the differences between the two parties is the salient features of Hong Kong's Sasha's sales strategy - low prices. Neither the company nor the distributors are willing to see the low price of Hong Kong Sa Sa's impact on its existing sales channels.

On April 12, 2005, two weeks after the first opening of the first store in Shanghai Shasa, the Sephora Huaihai Middle Road Store announced a trial operation, which resulted in the Louis Vuitton Group’s first move in the cosmetics retail store market in Mainland China and Asia. . Lancome, Guerlain, Givenchy, Estee Lauder, Clinique, Yves Saint Laurent, Dior and many other international first-tier brands all appeared at the first Shanghai store in Sephora, which is in stark contrast to Hong Kong Salsa. Obviously, Sephora's international operating model and Louis Vuitton background have won more support from international top-tier brand suppliers.

Lang Zhenzhen, vice president of L'Oreal China, said: We are looking for long-term cooperation with each other. L'Oreal and Sephora do not want to use price as a competitive advantage. In addition to the top brand Helena, L'Oreal's Lancome, Biotherm and other have entered the Sephora. According to the rules of the director of the Marketing Department of Shiseido Nagai, the Shiseido target group is a white-collar woman with a high income between the ages of 25 and 35. Joining Sephora, Shiseido has the same positioning as Shiseido.

Chapter II: Unique Arms
In cosmetics costs, the proportion of channel costs is often as high as 70%. The retailer’s own brand can justify the profits of channel dealers, so the private brand has become a unique weapon for many cosmetic retailers to gain profits. Watsons knows this well. The Sephora and Hong Kong Salsa, who had just landed in Shanghai for a while, are obviously also a master.

This time, the self-owned brand, Sephora took the initiative. Since its trial operation, its own brand, Sephora, has taken advantage of the store's advantageous terrain. Sephora's own brands include make-ups, toiletries, perfumes, etc., all of which are originated in France, with prices ranging from 30 to 150 yuan. Compared to the first-line international brands in the store, Sephora own brands for young women. The customer is more attractive.

Lin Guozhong, general manager of Sephora (Shanghai) Cosmetics Sales Co., Ltd. disclosed that according to foreign practice, its own brands generally account for 10% to 15% of Sephora's product sales. However, since the opening of the Sephora Huaihai Zhong Road store, the sales situation of its own brand has been all the way up, once accounting for 30% of the sales volume of the in-store products.

The Hong Kong Salsa launched its own brand, “Sasa,” after more than half a year of opening Huaihai Zhong Road store in Shanghai. Its own brand products are mainly divided into three categories, namely makeup products, nail polish and makeup tools, about 260 varieties, this reporter has made relevant reports.

Unlike Sephora's own brand, which is completely dependent on imports, Hong Kong's Sa Sa brand has chosen a more pragmatic approach – subcontracted by the mainland cosmetics manufacturing companies. The words "Shenzhen Color Cosmetics Factory" and "Kunshan Yongqing Cosmetics Co., Ltd." can be seen on the outer label of Hong Kong Salsa's own products. Introducing its own brand to the Mainland by OEM means that Sa Sa of Hong Kong can be said to have taken pains to do so because it can bypass the hygiene quarantine of imported cosmetics and the approval time of up to six months to one year. And this method saves a lot of costs, making it more flexible in pricing. However, whether the facts of the Mainland distribution will affect the brand image of Hong Kong Sa Sa is not yet known.

Sephora, which is known as "Beauty Candy Store", is one of Europe's leading cosmetics retailers specializing in high-end cosmetics and fragrances. It was founded in Limoges, France in 1969 and joined the world's first luxury brand company LVMH (Louis Vuitton) in 1997. . At present, Sephora has nearly 520 branches in 14 countries and annual sales of 1.4 billion euros.

Hong Kong Sa Sa International Holdings Limited is Asia's largest cosmetics store group, founded in 1978 in Causeway Bay, Hong Kong. High-volume purchases are Sasha's bargaining chips, coupled with global purchasing strategies, and Salsa is always able to give surprise prices for products. Sa Sa of Hong Kong already has 69 stores in Asia, which occupies 35% of the retail market share of similar products in Hong Kong.

With different corporate backgrounds, Sephora and Hong Kong Salsa, with their different operating practices, coincided with their five-year plans for expansion in mainland China. The first stores were all opened in Huaihai Zhonglu; in 2005, they were only expanded in Shanghai; Will enter Beijing, Hangzhou and other places; and since 2007, both will compete for the market with 30 new stores each year; by 2010, Sephora and Hong Kong Salsa will have 100 stores in the Mainland.

2005 was the first year of the five-year plan for Sephora and Hong Kong Salsa. During this year, their primary task was to gain a foothold in Shanghai. After the opening of the first store, the two sides quickly launched a close-knit battle in the Shanghai market.

On Sep. 2, Sephora Shanghai Gubei Store opened. It occupied approximately 260 square meters in the center of the first floor of Gubei Carrefour. Sephora's third store in China will also open in Super Brand Mall in Pudong this December. The original plan was to open only two stores in Shanghai in 2005. The opening of the Sephora Lujiazui store may be a landmark event in which its market expansion plan was accelerated in advance, although Sephora’s explanation was: “The business conditions of the first two stores are better than expected. , so the plan for the third store will also be scheduled."

In contrast, the Hong Kong Salsa was not very smooth in its first year of the five-year plan. Its second store in Shanghai is located on the ground floor of Hongxiang Department Store on Nanjing West Road. It has an area of ​​about 400 square meters and will not be opened until the end of November. The third store has not been seen yet. According to a spokesperson for Hong Kong Salsa, Hong Kong Salsa hopes to open a third store in Shanghai during the year. However, the location of the third store and the opening hours of the store are not yet confirmed. A few days ago, a report issued by Citigroup stated that Hong Kong’s first store in Shanghai was expected to lose 10 million Hong Kong dollars in the first year. The report also stated that Hong Kong Sa Sa wants to adopt a more conservative strategy to expand the market.

With less than a month and a half remaining in 2005, Sephora has achieved some advantages in competition with Hong Kong Salsa in Shanghai, but this is only the first year of the two-year five-year plan.

Chapter 3: Where to go

In August 2005, Sephora's Shanghai second branch opened at the Carrefour Gubei store. This move created a precedent for high-end cosmetics retail stores entering the hypermarkets in the Chinese market. In fact, this model has become quite common in Europe. The opening of the Sephora Gubei store is only a replica of the European model. It is understood that Sephora has three locations in Europe: the first is the commercial center and the commercial street; the second is the hypermarket and the Shopping Mall; the third is the airport and the train station. Among them, more than 50% of Sephora's branches in Europe have entered the hypermarkets and Shopping Mall.

Predictably, the Sephora Gubei store is just the beginning of its copy of the European model. Sephora said that since Carrefour is a partner of Sephora, it may open more stores into Carrefour in the future, and if conditions are ripe, it does not rule out the possibility of entering other hypermarkets and Shopping Mall. Although Sephora's ability to replicate the European model to adapt to the complex Chinese market is still a question mark, there are already industry insiders discussing how the cooperation between Sephora and hypermarkets will impact the traditional department store channels.

In fact, the real impact on the traditional department store channel is that Sephora is constantly fighting for the “exclusive first-sale right” of the first-line brands. In order to coincide with the opening of the Sephora Gubei store, Guerlain in France conducted a one-week exclusive sale of new products at the Sephora store. Prior to this, some internationally renowned brands including GUCCI included Sephora as their new product launch platform. Sephora revealed: “In the European market, first-line brand new products will first be listed in the department store at Sephora. We are currently communicating with the brand and we hope to demonstrate this advantage in the Chinese market.”

While Hong Kong Sa Sa currently has no time to consider whether their mainland stores will have an impact on the traditional commercial channels, they must first consider how to get rid of the current embarrassing situation as quickly as possible - the small discount and discounted way has been the biggest feature of Hong Kong's Sa Sa. However, due to the constraints of the objective conditions in the Mainland, Hong Kong SARS cannot temporarily replicate its operating model in the Hong Kong market. But this may not be a bad news. Although Salsa pioneered Hong Kong's cosmetics retail chain model, in Hong Kong, Sa Sa route is not only salsa. Hong Kong's other cosmetics stores, including Bonjour, Yasushi, Angels, etc., are trying to cut more of the cake. With the increasingly fierce competition, in recent years, low prices have failed to bring continuous performance growth to Sa Sa. This time into the mainland market, the low-cost strategy is blocked, it may become an opportunity for the transformation of the high-end Sasa.

In addition, with the background of Hong Kong salsa and Sephora, it is clear that there will be a lot of difficulties in the high-end market. Using its own advantages, it will be the best strategy to compete with others. Therefore, the introduction of more professional beauty brands and exclusive agency sales brands is likely to It is an important development direction for Hong Kong Salsa in the Mainland in the future.