Fighting back: Sa Sa to pilot experiential retail ‘zones’ as brick-and-mortar business continues to decline

The group’s retail sales in the Hong Kong and Macau dropped by 58.1% year-on-year, with same-store sales declining by 54.4% during the 2020/21 financial year.

While Sa Sa stores in Macau began to record profits from the second half of the year and recorded profits by the end of the year, its Hong Kong outlets remained in the red.

Two years ago, Hong Kong and Macau had a total of 118 retail outlets. However, the declining sales in Hong Kong forced the firm to shutter stores in the city over the year, leaving 100 stores across both markets.

In the new financial year ending March 2022, the group expects to continue closing down outlets. With 38 of its leases in Hong Kong expiring soon, it said it would shutter around 15 to 20 stores this year.

New retail evolution

However, the firm believes its brick-and-mortar stores will play a pivotal role in improving customer experience moving forward.

As such it has plans to develop ‘experience zones’​ in its stores where consumers will be able to try out products and enjoy more personalised services, said the firm.

According to the company, it is currently deploying pilot stores in Hong Kong and Macau, which will launch in FY2021/22.

It plans to take advantage of the decline in rents in Hong Kong and Macau so it can set up its experience zones in physical stores with adequate shop spaces at affordable rents.

The company hopes to combine the advantages of e-commerce and brick-and-mortar to improve both customer experience and its profitability, creating a seamless online-to-offline (O2O) customer experience

It said that it was committed to developing the O2O business “to its fullest potential” ​as it believed an O2O model would offer a more favourable gross margin and basket size owing to the element of personal service when compared to pure online sales channels.

At the same time, it can save rental and online platform fees, resulting in a more attractive profit margin.

In 2019, the beauty retailer announced the decision to shutter all 22 of its retail stores in Singapore as performance in the market had been unsatisfactory in the past few years.

The company re-launched in Singapore a few months later via one of the leading e-commerce platforms, Shopee.

Silver linings

While its offline stores struggled over the year, the company’s online business, rose by 45.4% to HK$501.3 million thanks to an outstanding performance in the second half of the year, which countered the losses from the first half.

According to the firm, e-commerce sales now account for 16.5% of its total turnover, up 6% from the previous year.

The company said it would continue to develop its online business to further improve on its positive profit contributions and help it reduce its reliance on brick-and-mortar stores.

“Online business has become the new focus of the retail industry. We are dedicated to expediting development in the new retail landscape by investing more resources in our online business, unceasingly strengthening our brand and adjusting our product portfolio,”​ said Dr Simon Kwok, chairman and CEO of Sa Sa International.

Aside from e-commerce, the company also sees growth potential in China, where same-store sales increased by 5.4% and total revenue increased by 15.9%.

The increased consumption during the post-lockdown period fuelled positive sales growth in the third quarter and supported 13 new store openings, bringing China total retail store number to 57.

The company said it planned to progressively increase its market coverage in China moving forward.

Overall, the company recorded a net loss of more than HK$350 million for the fiscal year ending March.