Page 26 - Sphere No.10 (Dec 2003)

SPHERE
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T he A.S.Watson Group has a highly successful manufacturing
division specialising in bottled water and beverages, but the
company has no plans to manufacture products for the
health & beauty market.
“My experience is that any businesses that are captive to each
other tend to develop inefficiencies,” says Group Managing
Director IanWade.
Instead, A.S. Watson (ASW) sources its products from far and
wide, choosing to buy the highest quality at the best prices from a
huge range of manufacturers.
When a new product is developed, the company will make its
selection based on quality, price and what the customer wants. If
such a product does not exist, ASW will initiate production, using
established manufacturers.
The packaging and marketing strategy is also crucial. For exam-
ple, “Own Label” products have become a market leader, with the
Watsons China operation serving as a telling example.
In the past two years, high-quality Own Label products have
struck a chord with Chinese consumers, particularly young women
aged 18 to 35, accounting for more than 21% of sales in the per-
sonal care category.
The benefits of high quality and low price (20-40% cheaper than
comparative branded products) are further reinforced by modern
design and packaging.
“One of the essential factors behind the great success of Own
Label brands in China is the total confidence staff have in the prod-
ucts,” notes Jurgen Schreiber, Director of International Buying.
“All Own Label products are first tested by our employees. In
this way, we know that we have quality products and guaranteed
staff endorsement, which helps create effective selling and word-of-
mouth awareness.”
Schreiber points out that the Watsons Own Label range is
ranked close to the market leaders for comparative products.
“Own Label products provide a unique proposition in stores,”
says Schreiber.“Customers now visitWatsons to buy both branded
products and Own Label brands. In the long term, the growth of
Own Label products will help balance and grow the company’s mar-
gins and counter the present retail trend of suppliers pressurising
retailers more and more on price.”
A key to achieving success is through constantly updating the
product portfolio.
The first step in new product development is market research.
Watsons analyses sales trends in stores and consumer preferences.
“We have a ‘model shop’ set up in the warehouse, where sales in
every product sub-category and stock keeping unit are analysed,”
says Schreiber. “Based on the data on how well a
product is selling, customer appeal and market research, a
road map is set up which covers the brand plan for the
next 1-2 years, including identifying which categories and products
to pursue.”
Once product areas have been identified, the profit margins for
Own Label production are examined. Should these margins prove
positive, Watsons competitively selects manufacturers to create
the product, based on stringent internal quality guidelines.
Development usually takes anywhere from two to six months
to complete.
The finished merchandise is delivered to stores where it is
prominently displayed in Watsons Own Label corner. When con-
sumers find that Own Label products represent great quality and
outstanding value, they come back for more.
C O V E R S T O R Y
Trekpleister was acquired by its former competitor Kruidvat Group (now part of A.S.Watson) in 1998.The chain operates more than 200 stores
and is on its way to becoming the No.2 health & beauty retailer in the Dutch market.Trekpleister’s private label was re-introduced in 1999-2000 and
is a popular choice among its low-priced health & beauty offerings and growing range of general merchandise. It has ambitious growth plans.
170,000 products lines …
LABELS OF L OVE