The cosmetics market is currently experiencing a moderate recovery and progressive growth, with both new store openings and closures happening simultaneously. At the same time, in the financial reports of international beauty companies that have been released, CHAILEEDO has noticed that many enterprises have mentioned the phenomenon of weak growth.
These collective signs reveal a profound insight: the entire market is undergoing a crucial transformation period and is facing multiple pressures from consumer habits, channel development, and technological changes. The industry urgently needs to explore new growth models and business strategies.
Facing a weak consumer market and an environment where consumer confidence needs to be restored, Watson has achieved notable results through continuous innovation in consumer experiences and deep exploration of user interests.
According to the performance report for the year 2023 released by CK Hutchison Holdings Limited, the parent company of A.S. Watson (Watson), Watson China achieved a revenue of HKD 16.453 billion ($2.1 billion), and the EBITDA (earnings before interest, taxes, depreciation, and amortization) recorded approximately HKD 1.042 billion ($133.3 billion), representing a 2% year-on-year growth in RMB. The EBIT (earnings before interest and taxes) also recorded double-digit growth.
In addition, Watson’s financial report disclosed one of the important indicators measuring store profitability, showing a 1.8% year-on-year growth in store sales, achieving a positive turnaround once again.
CHAILEEDO’s analysis of Watson’s recent actions reveals that behind the growth in store numbers, this retail enterprise focuses on innovative product selection and store layout, creating trendy shopping environments and enhancing the consumer experience, which greatly attracts new and existing customers.
It is reported that by the end of 2023, Watson reached a new high in membership with over 65 million members. This change in key data reflects the effectiveness of store adjustments and experiential revitalization, providing strong evidence to support steady profit growth.
Watson has made various efforts to enhance the consumer experience and, through its OptimO brand, empowered and supported partners in their growth. It has provided a sustainable development model that differs from relying solely on the traditional approach, thus becoming one of the driving forces behind its stable and profitable growth.
Insightful members have maximized the sense of experience
The 11th generation of brand-new stores is launching!
In the past year, consumer enthusiasm has changed like the seasons. During the summer heatwave, the cosmetics and fashion market was ignited by “dopamine dressing,” as people pursued the joy and vitality brought by colors. As autumn approached, “gray girl” became the new favorite on social media. The release of a certain movie led to “hot and spicy” discussions and experiences becoming a common topic for the masses…
According to the iResearch Consulting “2023 China Consumer Insight White Paper,” 65.2% of consumers agree with the concept of “spending money on things that greatly improve their quality of life.” As pointed out by an industry expert, when “ultimate cost-effectiveness” becomes the absolute keyword in consumption, providing consumers with experiences, services, and products that go beyond what they pay for becomes the key to winning the market for brands.
Various signs indicate that while online platforms are engaged in price wars, the healthy and sustainable development of offline consumption formats requires providing additional value beyond retail and products. Based on keen insights into consumer experience needs and emotions, resonant emotional experiences are provided to consumers, making consumption a form of enjoyment.
So, in the current era of increasingly “emotional marketing,” how can brands truly revitalize consumer enthusiasm? Watson has achieved significant growth in members through revitalizing experiences. Currently, the amount spent by members who consume both offline and online is 3.1 times that of in-store only members, and their frequency of consumption is 2.3 times higher. The series of measures behind this provide some inspiration and reference for the industry.
In the current consumer environment, young consumers are increasingly pursuing emotional healing and a quality lifestyle, seeking both emotional value and functionality. By innovating consumer scenarios, Watson has added trendy makeup zones, fragrance zones, upgraded health and wellness zones, and completed upgrades for over 100 stores last year, revitalizing the consumer experience from multiple angles.
Take the “Trendy Makeup Zone” in Watson’s Shanghai Century Link store as an example. Watson drew inspiration from artist Mondrian’s classic style and used dopamine-popular colors such as magenta, bright yellow, and sea blue to create a vibrant “makeup playground” for young people. Additionally, Watson incorporates “trendy experiences” into its products and services, offering nail and wig experiences, among other styling services, creating a social space that is not only enjoyable but also fun to explore.
CHAILEEDO observed that by continuing this trendy and fashionable concept, Watson further expanded its market practices and recently launched the 11th generation of stores in cities such as Beijing, Shanghai, Guangzhou, Wuhan, Chongqing, and Chengdu. From a store layout perspective, Watson cleverly designed large immersive experience zones at the entrances, constructing three-dimensional display windows with periodically updated themes, fully leveraging their social interaction value as “photo-worthy landmarks.” Continuing the core concept of “fun experiences,” the 11th generation stores provide fun interactions such as claw machines and pinball machines, offering a coherent and rich experience throughout the shopping journey.
During a visit to the 11th generation store, CHAILEEDO discovered a unique and intimate corner—a dedicated area for men. It is understood that Watson’s innovative initiative stems from a keen insight into the hidden needs of male consumers in the beauty and personal care field. Many male customers often feel overwhelmed by the wide range of products and desire an independent space for exclusive experiences. Responding to these characteristics, Watson carefully set up this men’s area, not only featuring a selection of numerous men’s brands and products but also providing an environment where male customers can deeply and freely explore and experience the products.
In addition to creating functional store layouts and upgrading experiences to meet consumers’ emotional needs when shopping offline, Watson also emphasizes high cost-effectiveness, uniqueness, and attractiveness in product selection. In its stores, Watson has added exclusive brands and products, including not only well-known brands but also many novel niche and Chinese streetwear brands, such as Shancuanyihao Texture Clay, Guan’er Brother Styling Wax and exclusive gift sets, Meishangxuan girl group bubble dye, Sanshenghua small bubble hair care series, and more.
To further enhance the authentic experience, Watson provides warm in-store services such as makeup, spa treatments, and skin testing, as well as innovative “light services” that offer diverse personalized services such as moisturizing and nourishing, hairstyling, fragrance touch-ups, quick spa treatments, oil control for men, head, shoulder, and neck relaxation, hand care, and quick makeup, all completed within 10 minutes.
Observing Watson’s revitalization of experiences and services through store upgrades, it is evident that their operational philosophy has shifted to a greater focus on a “customer-centric” approach, aiming to enhance the customer’s lifetime value. Through this shift in operational thinking, Watson not only maintains closer connections with consumers but also advances its own value,establishing a strong brand image and loyalty among its customer base.
In conclusion, the retail industry is undergoing a transformation where providing exceptional experiences and emotional value to consumers is key. Watson, through its innovative store upgrades and focus on customer-centric approaches, has successfully revitalized the consumer experience. By incorporating trendy and fun elements, creating immersive and photo-worthy spaces, and catering to the hidden needs of different customer segments, Watson has managed to attract and retain customers, resulting in increased spending and higher frequency of consumption. Additionally, the inclusion of unique and exclusive products, along with personalized services, further enhances the overall shopping experience.
This approach serves as an inspiration for other brands in the industry to explore ways to go beyond retail and products, and instead, focus on providing meaningful and enjoyable experiences to consumers. By understanding consumer needs and emotions, brands can create resonant experiences that not only drive sales but also foster long-term customer loyalty and brand advocacy.
Stores, Scenes, and Services Innovate in Turns, Unleashing Cross-Category Growth Potential
CHAILEEDO has found that Watson implements an operational mindset focused on “people” by revitalizing consumer “experiences,” significantly increasing its membership base. Its OptimO brand creation and growth center has unleashed cross-category brand growth potential, which is also a crucial tool for maintaining a large-scale and sustainable profitable business.
In the context of the expanding domestic market in China in recent years, brands’ offline presence is no longer simply about sales and promotion but has shifted from “quantity-focused” to “quality-focused.” By opening stores in prime locations and improving the profitability of each store, brands solidify their foundation for growth to cater to the vast consumer base.
From a fundamental perspective, Watson diverges from a strategy solely focused on store size, quantity, and sales per square meter. Instead, it emphasizes a “people-oriented” approach by providing attractive “products” and refreshing “scenes,” fostering mutually beneficial partnerships with more health and beauty brands.
As the market environment rapidly changes, brands need to go beyond traditional channel strategies and integrate online interactions, content marketing, user engagement, and other operational methods. In this context, Watson leverages the advantages of channel integration, media communication, and private domain operations through OptimO to create an empowering engine, offering end-to-end solutions for brand building throughout the customer lifecycle.
For example, by launching IP marketing projects like the Super Category, Super Tornado, and the “Qu Qi Pavilion” for empowering established brands, Watson effectively guides customer flow to the brand’s private domain, establishing sustainable communication and operational mechanisms. This approach further enhances customer loyalty and extends their lifecycle.
Another example is Watson, the advocate of “New Health Aesthetics,” which combines health and personal care products through the OptimO “Super Category” project. Leveraging the advantages of channel integration, media communication, and private domain operations, Watson attracts and accumulates a significant amount of brand traffic, further unleashing cross-category growth potential. Through the creation of unique promotional formats, Watson innovatively extends category education, not only popularizing topics such as beauty and skincare, weight management, and nutrition but also utilizing meaningful forms like health runs at the beginning of the year. This effectively transforms traditional hard advertising into consumer-driven health education, narrowing the gap between the brand and consumers and establishing a stronghold in category education.
It is evident that Watson combines the power of channels, media, and private domains to comprehensively promote and practice the “New Health Aesthetics,” not only unleashing the potential for cross-category growth but also providing consumers with a seamless experience across multiple touchpoints. Moreover, through precise data analysis and personalized communication strategies, Watson builds stronger customer relationships, transforming incremental interactions into long-term brand loyalty.
In the trend of channel integration, Watson provides valuable experiences and insights for the entire industry, demonstrating how to promote healthier and sustainable development for brands and businesses through innovative consumer scenes, in-depth exploration of user interests, and cross-industry collaborations.
“Segmenting Stores” Takes the Field
Even Big One Can Run Fast
“Online ignition of brands, simultaneous empowerment offline, complementing each other, is the best state for brands today.”
“Offline reach and experiential impact are irreplaceable. Long-term brand building requires broadening the breadth and depth of business reach to help brands achieve more robust development.”
“In offline settings, people can engage in face-to-face communication, which is one of the charms that online shopping cannot provide. It not only conveys the dimensions of the five senses to customers better but also showcases the essence of the brand.”
In recent interviews regarding “offline restructuring,” more and more brands have recognized the irreplaceable experiential impact possessed by offline channels.
It can be affirmed that as consumers’ demand for personalized services continues to rise, standardized store layouts have gradually faced certain challenges. When consumers seek more personalized and exclusive shopping experiences, overly standardized scenes often struggle to fully meet their needs.
In this predicament, the industry has reached a consensus: “people” are always the most important presence, especially for Watson.
CHAILEEDO has learned that Watson has started to segment its stores specifically for students, young mothers, tourists, and white-collar workers. It focuses on scene design and product selection to be closer to consumers’ personalized needs and provide more meticulous services.
For example, in stores primarily serving students, Watson introduces IP displays and hair dye categories. For stores targeting white-collar workers, it provides more scene-driven and service-oriented features such as fragrance tables, makeup areas, and men’s grooming. Stores aimed at young mothers highlight health concepts and establish health areas, children’s centers, and oral care zones. Through such examples, Watson achieves more targeted segmentation in scenes, product displays, and category combinations based on the interests and demands of its core consumer groups, while adapting the category focus to different stores. Furthermore, by fully leveraging its vast ecosystem advantage, Watson is expected to continue reshaping the public’s perception of beauty and healthcare stores.
The advancement of Watson’s store segmentation model means that consumers can experience vertical and specialized experiences. It allows consumers to obtain comprehensive and precise satisfaction according to their specific needs. This segmentation strategy deeply explores consumers’ layered demands and forms an intimate relationship that connects with consumers on a heartfelt level.
For partner brands, it also means more accurate market positioning and more efficient resource allocation. Through Watson’s platform, each brand can more accurately reach its potential customer base and achieve precise promotion of products and services.
It can be said that Watson’s scene and shelf displays tailored to the demands and positioning of segmented consumer groups provide consumers with a “differentiated and personalized” shopping experience that goes beyond the limitations of traditional stores. This not only demonstrates Watson’s deep understanding of consumer needs but also confirms the evident advantages of fine-tuned scene creation in enhancing customer satisfaction and expanding brand influence in the context of offline and online integration.
By successfully embracing change in a rapidly evolving market environment, even in the face of challenges and uncertainties, Watson not only achieves steady and profitable growth for the enterprise itself but also comprehensively enhances the customer lifecycle value. In the future, it will concentrate its advantageous resources, explore store segmentation models, always stay at the forefront of trends, and achieve the feat of “big one running fast.”
