The H.E.A.T is on with the trailblazing growth of China’s cosmetics retail chain newcomer
Cosmetics retail chains in China had been expanding their footprints rapidly in recent years before the pandemic hit in 2020. However, despite this, new chains have emerged and are currently growing. We take a look at one of these chains, H.E.A.T, and how it became a hit.
As the proportion of online channels in China’s cosmetics market has gotten bigger, the proportion of previously mainstream channels — such as department stores and general merchandise stores (GMS) — has correspondingly declined year by year. Although, among the latter group, brick-and-mortar cosmetics retail chains have been acquiring a growing share of the market.
Despite the pandemic, some newly emerged retail chains have actually increased their number of stores. NOISY Beauty raised a pre-series A round of funding of over 10 million yuan (US$1.5 million) at the end of February 2020, and the parent company of The Colorist, KK Group, raised a series E round of funding worth a billion yuan (US$150 million) in August.
According to research by Reuters, 86% of Chinese cosmetics users see purchases at traditional offline stores as their first choice, and this is because they seek an immersive shopping experience. In other words, they want the fun shopping experience of real stores where they can be surrounded by lots of products, and leisurely browse before making a careful decision, and try out different items. This desire for shopping in real stores seems to have gotten stronger as a reaction against the lockdown lifestyle of the pandemic, and the retail chains that are currently doing well have particularly won over younger generations who have this desire.
For this as well as other reasons, we’re seeing new chains emerging among the existing chains. One such newcomer that has been increasing its number of stores at a rapid pace is H.E.A.T.
H.E.A.T allows visitors to test any of their products
H.E.A.T, run by Guangzhou Yiran Daily Necessities, opened their first store in Guangzhou city in July 2020, and then went on to expand further to 10 stores within a mere six months. Their stores are spacious and clean with picture-perfect interior designs for posting about on social media.
H.E.A.T’s target demographic is post-95s (or those born from 1995 onwards). They handle over 300 brands and over 4,000 SKUs worth of items and mainly focus on new Chinese brands, such as Perfect Diary, and niche brands from overseas.
The label lays importance on three areas when selecting products to sell. First is the trustworthiness of the product itself. The second is whether the product has reached a certain level of popularity and recognition online. Lastly is the package design and the brand philosophy.
While their average sales per customer are around 200 yuan (US$30), their average monthly sales per store are over 800,000 yuan (US$117,500) and they have over 300,000 shop members. One reason for H.E.A.T’s success has been how they’ve allowed all of their products to be tested by visitors.
As the majority of new cosmetics brands mostly sell online, H.E.A.T stores are becoming places invaluable for trying out products first hand before making a purchase. Along with a spacious testing corner, its stores also have full body mirrors that allow visitors to select cosmetics to match their overall fashion. They also have hand-washing spaces set up that additionally serve as measures against viral infection.
H.E.A.T founder and CEO Gary Qiwei Shi was previously in charge of brand marketing and the e-commerce division at social media-style e-commerce platform RED. This previous experience has led him to put emphasis on digital marketing and social media management. Indeed, H.E.A.T runs its own accounts on RED and WeChat.
When they open a store, H.E.A.T promotes it by advertising the opening to over 1,000 groups that show potential interest via the RED accounts of over 30 influencers from the area. As a result of this promotion, over 1,000 RED KOLs (key opinion leaders) will visit a newly opened store.
The company secured an angel round of funding in December 2020. In 2021, they plan on opening more stores in 50 Chinese cities, focusing on the larger tier 1 and 2 cities. CEO Shi has told Chinese media that “what’s important for offline channels is to not only provide the opportunity to try out products but to also provide a place where a relationship is established between brand and user and be a platform for emotional connection.” In this way, Shi is trying to create real user experiences for brands that mainly sell online, and at the same time, he’s creating opportunities for visitors to his stores to discover new brands and niche overseas brands.
Meanwhile, the company is also running an e-commerce business, having set up an online store as a WeChat mini program in November 2020. The aim is to improve user stickiness. Through e-commerce, customers can purchase the same products as in the real stores and they also make available such Japanese brands as KISSME, Kracie, DR. Ci:Labo, and Cocochi Cosme.
With H.E.A.T stores offering ‘user experiences’ and being boosted by the many consumers craving brick-and-mortar shopping, it’s likely that we’ll see similar cosmetics retail chains pop up from here on. As many of the new retail chains are emphasizing treading Chinese DTC brands, they’re unlikely to go head-to-head with the existing major cosmetics retailers, leading to the compartmentalization of the two types. It can also be predicted that this new emerging force of retailers could ride the wave that is the expanding market share of Chinese cosmetics brands and grow to a size more in line with Watsons or Sephora.
Text: Ching Li Tor
Original text (Japanese): Team Roboteer
