With the rise of new beauty collection stores and the impact of e-commerce channels, Watson's play space seems to be more and more limited.
Source | Poly beautiful
The author | Poetry
Yesterday (March 17), Watsons parent company Cheung Kong Hutchison Industrial Co., Ltd. announced its annual financial results for the year ended December 31, 2021. According to the report, the company's EBITDA (EBITDA) and EBIT (EBITDA) increased by 15% and 20% respectively from the previous year, with the increase mainly due to the improvement of operations in the port and retail segments.
As mentioned in the financial report, the retail division of Changjiang Hutchison Industrial Co., Ltd. mainly includes Watsons, Kruidvat, Trekpleister, Rossmann, Savers, Superdrug, Drogas, ICI PARIS XL and The Perfume Shop. Among them, Watsons claims to be the world's largest international retailer of health and beauty products.
Revenue in China was 18.5 billion yuan, sales increased but gross margin declined
It is understood that Watsons was founded in 1841, is an international retail and manufacturing organization, operating in 24 countries around the world. Its products mainly include health care products, beauty products, perfumes, cosmetics, daily necessities, food, beverages, electronic products, foreign wine and airport retail business.
According to the financial report, as of December 31, 2021, Watsons operated a total of 12 retail brands and 16,398 stores in 28 markets around the world, an increase of 1% over last year.
In 2021, Watsons' global sales were HK$173.601 billion (approximately RMB144.095 billion), up 9% year-on-year. Among them, the Health & Beauty Products segment accounted for 84% of the retail sector revenue in 2021.
Screenshot from the 2021 financial report of Changjiang Hutchison Industrial Co., Ltd
In the Chinese market, Watsons' annual revenue from health and beauty products reached HK$22.77 billion (about RMB18.5 billion), up 14% year-on-year and the largest increase in nearly five years.
It is worth noting that while revenue has increased, compared with 2020, the EBITDA and EBIT gross margins of A.S. Watsons China health and beauty products have declined. Among them, EBIT (EBIT) was HK$1.808 billion (about RMB1.46 billion), and the gross profit margin was 8%, which was lower than the HK$1.952 billion (about RMB1.585 billion) in 2020, and the gross profit margin was 10%.
Watsons said in its earnings report that China's health and beauty products business achieved satisfactory performance during the stabilization of the epidemic in the first half of 2021, with EBITDA (profit before interest, tax, depreciation and amortization) increasing by 53% year-on-year, and profit declines in the second half of the year due to regional outbreaks and national tightening of public health measures.
The earnings report also mentioned that Watsons' goal in 2022 is to achieve high double-digit digital sales growth. In terms of exclusive product sales, Watson expects exclusive product sales participation to increase by 1 percentage point to more than 37%, health and beauty products segments (particularly in Europe) are expected to continue to perform well, while Chinese mainland and Asia businesses should recover further in 2022.
In addition, they will continue to expand their sustainable products, committing to the use of sustainable raw materials in products and packaging, adopting a circular economy approach, and launching a diversified and inclusive beauty product range.
The transformation to a new retail mode has been repeatedly complained about and complained by consumers
According to the report released by the Prospective Industry Research Institute in 2022, the market size of new beauty collection stores in China in 2020 will be 1.41 billion yuan, accounting for 2.9% of the overall market size of beauty collection stores. It is estimated that by 2026, the market size of the new beauty collection store will reach 44.22 billion yuan.
Since 2019, the development of new domestic beauty collection stores has begun to develop, and innovative brands represented by colorists and talking plums have emerged one after another, which has had a certain impact on traditional beauty collection stores.
In contrast, the new beauty collection stores have higher door traffic, lower entry thresholds and more attractive to young consumers, coupled with the lack of offline retail channels, traditional beauty collection stores such as Watsons have to seek transformation to form a new retail method that combines online and offline.
From online official stores, Watsons cloud stores, to "store pick-up" and "lightning delivery", Watsons is trying to integrate channels. In 2018, Watsons began to promote the "O+O" strategy, using digital technology to better understand user consumption preferences. In addition, in recent years, Watsons has also settled in the live broadcast platform and opened the road of live broadcasting with goods.
However, in the process of transformation, Watsons received many consumer complaints. According to radar finance statistics, as of March 14, 2022, Watsons' complaints on the black cat complaint platform reached 7330, ranking second in the list of cosmetics categories.
Two months ago, Watsons could not pick up the goods because of the "1 cent mask promotion", and consumers were insulted and blocked by the anchor in the live broadcast room, and they were collectively complained about. This matter also once rushed to the Weibo hot search, causing many netizens to complain, and finally Watsons issued an apology statement to calm the public anger.
Watsons apologizes
Despite the negative public opinion, the number of Watson stores is still increasing. According to the report data of the Prospective Industry Research Institute, the industry is still dominated by traditional beauty collection stores at this stage, of which the number of Watsons stores accounts for 80% of the number of stores in the industry.
According to the 2021 financial report, the number of A.S. Watsons stores operating in China was 4179, an increase of 2% over last year, and the year-on-year store sales increased by 1.9%. In terms of the number of stores, Watsons added 168 stores in 2020, compared with the average number of new stores added in previous years of more than 300 stores per year, which has slowed down.
In addition, the financial report also mentioned that Watsons has expanded its customer base by integrating offline stores and online platforms, and this "O+O retail model" has become an important factor in its resumption of sales growth.
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