Page 19 - Sphere No.25 (Aug 2009)

SPHERE 17
RETAILERS TRYING TO CRACK the notoriously difficult China market look with envy at the way Watsons
make it seem so effortlessly simple: the company has more than 450 stores spread throughout the vast nation, a
figure that is continuing to rise rapidly.
Watsons has long had an entrenched presence in the major first and second tier cities of China and is
now expanding into the third and even fourth tier, ready to take advantage of the increased spending
power and brand awareness among consumers in the less developed provinces.
Despite the phenomenal expansion figures of the past few years, Watsons is no overnight success
story. Experience, based on some 20 years of trading in the country, has played a major part in
knowing just what Chinese customers want and need; like other major international retailers,
there were difficulties along the way, inevitable in a nation that had no culture of consumerism
until two decades ago.
In fact it is only the last decade that has witnessed a major surge in retail consumption, with
virtually all the major European and American brands sizing up China as a potential market
for their clothes, cars, wines, perfumes, beers and bags. Many is the retailer who has been
seduced by the figure of 1.3 billion potential consumers but failed to do enough detailed,
on-the-ground research about levels of disposable income.
Exhaustive research, focused customer service and the right range of quality products
are the ingredients that go into the Watsons recipe for success. Its clientele consists largely
of affluent young women with plenty of money to spend on make-up, skin care and per-
fume. They are a discerning breed, totally familiar with the big-name brands of the west-
ern world and also enthusiastic users of Watsons own-label products.
“They might not be able to afford a Mercedes-Benz or an expensive overseas vacation,
but they can do something to make themselves look better by spending money on qual-
ity products that are luxurious,” said Christian Nothhaft, Managing Director of Watsons
China. “Our research has shown that using these products makes them feel good about
themselves; they are able to indulge, but at the same time Watsons is seen as having a
good price perception image. A lot of it comes down to being in the business a long time
in this country. We have the experience of how to get things to work in China and have a
track record of learning about China.
“We have introduced many brands into China and people have a relationship with us. Our
brand is hot in China. We have 2.5 million customers per week – twice the amount of customers
per store as our other outlets in Asia. They don’t spend as much, but that is still quite an impres-
sive figure. In fact, by the end of this year we anticipate it will be up to 3.1 million a week.”
Watsons now has stores in 69 cities in China. The company’s strategy is to look well ahead and
decide when the less-developed cities are likely to be ready for a Watsons store; as soon as that mo-
ment comes, advance-planning staff target a prime retail spot and set up shop.
The strategy has worked to great effect so far. The vast array of international beauty brands makes Wat-
sons a place that young trendy women instantly recognise as somewhere they want to browse – and spend.
“Having previously lived in Hong Kong for seven years, I viewWatsons as a store that I can count on, a place
where I can be sure of getting quality products, whereas other pharmacies in China are not consistent,” explained
Chris Baker, General Manager in China for the Eight Partnership, a company that advises retailers on marketing
in China. “The service and product experience at Watsons in Mainland China is very closely modelled on the one in
Why Watsons is the store of choice for beauty products in China
By Mark Redvers
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Fujian Liaoning Jiangsu Tianjin Yunnan Zhejiang Jilin Shandong