Insatiable appetite: Strong customer demand in China pushing A.S. Watson Group to open more stores

The newest store is located in Kunming, the largest city in the Yunnan Province. Its launch marked a significant milestone for the company as ‘3’ and ‘8’ are considered to represent liveliness and prosperity in Chinese culture.

Malina Ngai, CEO of A.S. Watson Asia & Europe, told CosmeticsDesign-Asia ​that the company plans to launch another 450 Watsons stores in China in 2020 to meet the insatiable consumer demand in the region.

“Our new store opening plan has been one of the fastest in the world of retail for several years, with one new store every seven hours. If we look at the return on capital investment in China, it takes about less than a year to pay back – this is our customers telling us their demand,”​ said Ngai.

She added that all beauty related categories, including derma beauty, colour cosmetics and hair care were key drivers of Watsons’ growth, fuelled by its core base of 18 to 25-year-old consumers.

Merge of online and offline

One of the most significant reasons why Watsons has been continuously growing in the past few years amid the retail slump is its success in merging the online and offline space.

“We’ve been building digital presence and customer engagement since 2012 and we’ve invested in integrating our offline and online platform; and promoting multichannel shopping to customers. This approach brings us new customers as well as incremental sales,” ​said Ngai.

As Chinese millennial and gen Z shoppers continue to flex their spending muscle, Watsons has rejuvenated its business model to best meet the demands of this rising segment.

This includes equipping stores with StyleMe 2.0, an Augmented Reality try-on experience and a Scan & GO service, which allows customers to save time by simply scanning a QR code with their mobile phones to purchase the products directly through the Watsons mobile application, eliminating the need to queue at the cashier counter.

Watsons’ new Kunming outlet has pioneered the One-on-one Beauty Consultation Service. A personalised service that connects them with staff via the Watsons China WeChat account.

The service was subsequently rolled out across all stores in China.

Additionally, the company also recently launched an in-store Spa service which Ngai said has been receiving very positive response from customers.

She added that the company may consider expanding this service to other parts of Asia as well, but that would have to depend on consumer demand in the specific markets.

Tapping into VIP members base

This year, Watsons China launched its VIP membership, a programme which focuses on the store’s top 10% of spenders. These big spenders can spend up to eight times more than average members, said Ngai.

“We make them feel special and valued by offering premium privileges such as complimentary make-up and skin care services, exclusive invitations to meet celebrity KOLs, and even accommodation and culinary offers at a five-star hotel. These are very well received by our VIP members,”​ Ngai explained.

Watsons China plans to continue enhancing the membership and upgrade its exclusive VIP offers to engage this vital group of consumers.

Ngai said: “Customers want to feel unique. So, we have also offered a three-month trial VIP membership for them, and we just launched a facial mask subscription club too. Customers can pay to receive a surprise box monthly for six months. Excellent response has been received from our customers.”​