At Causeway Bay, Hong Kong's busiest commercial area, eager crowds armed with long shopping lists and wads of renminbi bills are an everyday sight as they flock to the flagship store of SaSa Cosmetics.
These are mainland tourists who come to SaSa for its wide selection of products and big discounts. For some, shopping at SaSa is the only reason to visit Hong Kong.
They are greeted with smiles and a nihao at the door, while young sales ladies, themselves wearing only light makeup, speak in standard Mandarin, providing basic information or answering questions about specific needs, guiding shoppers to the exact shelf before they are overwhelmed by the thousands of items available.
Ironically, 1,200 miles to the north in Shanghai, SaSa's four stores have much lighter customer traffic, even though the first one opened in March, 2005 and is also the largest in Asia, covering 400 square meters. Despite store's relatively large size, revenues and profits on the mainland have been low. By comparison, business at its HK stores from mainlanders has risen from 40 percent of the total to 45 percent in the past two years.
The seemingly bad news is instead a good signal for Kwok Siu-Ming, the 54-year-old entrepreneur and founder of SaSa International Holdings Ltd.
"This is just one experience and opportunities must lie ahead," says Kwok in a calm but firm tone.
Currently, there are 95 SaSa stores around Asia 53 in HK and Macao, 13 in Singapore, 14 in Malaysia, 11 in Taiwan and four on the mainland.
Long he has planned more aggressive moves on the mainland.
"The mainland market will be SaSa's most important in the long run. My biggest dream is to win this one," he says.
Kwok already has a clear timetable in the later half of 2007, the first SaSa store in Beijing will open and its hundredth store is also expected to be in the capital. He says that within two years, it will break even and within five years the company will have about 100 stores on the mainland, accounting for 41 percent of its total number of outlets in Asia. The expansion will require an investment of HK$15 million. Both mainland revenues and profits are projected to be 50 percent of the company's Asia total, he says.
His eyes sparkle as he talks of the plan.
Kwok's composure and confidence originate from a crisis that hit SaSa in 1989, which he believes to be a turning point that changed the company's life and reshaped his own.
In that year, after SaSa had grown from its humble beginnings in a 4-square-meter booth, Kwok and his wife suddenly found themselves in a desperate situation when the owner of the President Shopping Center, where SaSa had been for 11 years, precipitously ended their rental contract.
There were two choices giving up the business or moving to another location. After turning the issue over and over again, they chose the latter, taking the risk of moving to an outdoor market that they knew little about. To their surprise, it generated greater business opportunities, leading SaSa to where it is today.
Whenever SaSa is confronted problems, from financial crisis to SARS, what motivates Kwok is the knowledge that "there are no reasons to give up, and there is always the possibility that business could take a turn for the better."
Yet there are some explainations for SaSa's embarrassing performance on the mainland .
According to its interim financial report ending last September, SaSa's sales throughout Asia grew by 14.6 percent year-on-year, reaching over HK$1.3 billion, while profits increased by 41.3 percent year-on-year. HK and Macao showed 12.9 percent revenue growth, Revenues in Singapore and Malaysia rose by 40.2 and 19 percent .
But on the mainland, revenues for the company's first two stores have declined. During the same period, the company lost HK$8.7 million.
But Kwok brushes the loss aside, saying it "is within our expectations".
It is well known that SaSa's biggest draw is its wide selection, especially international brands that are exclusive and beyond the reach of other cosmetics retailers. In addition, enticingly lower prices are made possible by HK's status as one of the world's biggest free ports.
But things are totally different here.
To sell on the mainland, SaSa has to apply for product registration approval for international exclusive brands, and the registration fee for each brand is as high as 10,000 to 15,000 yuan. It has so far spent over 3 million yuan on fees for 200 products. It is applying for 550 more. In total, it will sell 2,000 exclusive products here, at a cost of 30 million yuan for registration alone.
"This is a huge investment," he says.
Higher import duties and value-added tax (VAT) are also headaches. Although lowered, tariffs on cosmetics on the mainland still range from 10 to 20 percent and VAT stands at 17 percent.
"That is why the same product is often priced 10 to 15 percent higher on the mainland than in Hong Kong," explains Kwok.
More troublesome is the long waiting period for the approval process, usually eight to 12 months. "This is a challenge. Mainlanders are becoming more fashion sensitive, and would probably fly to Hong Kong or elsewhere before they could patiently wait for long," he says.
In spite of these challenges, the cosmetics retailer claims he is "upbeat more than ever, and as China has entered into the WTO, the environment here will be more business friendly. And SaSa is trying to gain competitiveness to win local customers."
"SaSa will not be successful until it succeeds on the mainland," he emphasizes.
Kwok expects SaSa shops on the mainland in the long run could impress consumers with two things: a wider range of exclusive international brands and more professional services peronalized advice and assistance.
In HK, each SaSa shop has 15,000 products and 400 brands, one-fourth of which are exclusive names like Suisse Program, Beauty Formula, Dcor and La Colline. On the mainland, in five years, there will be 2,000 exclusive products on sale at SaSa, accounting for one-fifth of the total, but projected to contribute one-third to total revenues.
As for services, SaSa's proudest boast is its well-trained beauty consultants, Kwok says.
The beauty consultants, as the name suggests, help customers know more about skin, body or hair, and help the most appropriate portfolio of products, instead of blindly persuading them to buy certain branded products as do salesgirls serving in department stores.
But they are carefully selected. They must take an intensive 150-hour training program on topics covering skin analysis, function and usage of various products, and the way to recommend products. Afterward, they will serve as shop interns for six months before they can go on duty, putting what they learned into practice.
SaSa follows the same steps in selecting beauty consultants on the mainland. "We appointed beauty supervisors here to impart the knowledge as there is no training center, but we will have training centers in Shanghai and Beijing soon," he says.
There are also beauty salons in each shop where customers can enjoy free beauty services if they buy exclusive products. There are testers and trial products available for customers to use or take away as well. All are free.
"The experience tells me most of them (trying trial products) will come back for some purchase," Kwok says.
But compared with those in HK, the beauty consultants or candidates on the mainland are less experienced and knowledgeable about cosmetics, he admits.
"Time and education will improve the situation," he says.
(China Daily 03/26/2007 page12)