The Unstoppable Evolution and Growth of New Retail in China’s Cosmetics Sector
The number of cosmetics retail chains in China has been increasing over the past few years, and new physical stores are popping up one after another. Most recently, is the surge in “new retail” stores that leverage technology — some of these are completely unmanned, without even a beauty counselor.
Meigu Meigou New Retail; situated in a special beauty and health zone
In November 2020, Meigu Meigou New Retail was opened in the Meigu Meigou Plaza shopping mall in The Oriental Beauty Valley, a special zone for the beauty and health industry in Fengxian District, Shanghai.
The Oriental Beauty Valley, operated by the state-owned Oriental Meigu Enterprise Group, was established in 2015 and is home to research centers for cosmetics and food manufacturers. In 2020, Shiseido also moved in to set up a research and development base. Meigu Meigou New Retail is a cosmetics retail store directly operated by the Oriental Beauty Valley Enterprise Group.
The store uses a variety of technologies to automate store. It is not a completely unmanned store, but it has a self-checkout system and a touch panel with a QR code scanner. It is also possible to have products delivered to your home by entering your address.
Inside the store, there is a skin diagnosis machine that analyzes the condition of your skin based on indicators such as sebum, moisture, sensitivity, pigmentation, and pore cleanliness. It also suggests ways to improve it and provides recommendations for suitable skincare products. There is also a smart mirror that allows you to do virtual makeup, simulating the use of lipstick, eye shadow, mascara, color contact lenses, and foundation, prior to purchase.
As for lipstick, you can choose the ingredients, fragrance, and color to create your own lipstick on the spot. A lipstick-making machine developed by the popular Chinese brand “Mariedalgar” is on-site, and a robotic arm can create a customized lipstick in just six minutes.
Perfumes can also be tried out through the special machine. After selecting a product from the touch panel, the user inserts the tip of the provided mouillette (sent strip) into the machine, and the perfume is applied. Moreover, customers collect sample products by themselves via a dispensing machine.
Oriental Beauty Valley Enterprise Group also claims to have traceability (production control process, lot number, transportation route, etc.) for all products, even though it handles a variety of brands from emerging Chinese brands to famous foreign brands. The platform, developed by Shanghai Bopu Information Technology, a subsidiary of Oriental Beauty Valley Enterprise Group, combines IoT and mobile technology to manage and track the production and distribution process using QR codes and RFID tags.
Apart from The Oriental Beauty Valley, the stores of Meigu Meigou New Retail are located in Shanghai and Hongqiao Airport. According to Chinese media, Oriental Beauty Valley Enterprise Group has signed a strategic partnership with Changshu City Xinzhubao Development in Jiangsu Province, which is close to Shanghai, to open a store in Changshu City by December 2021, and is also considering setting up a research base in a smart city that is scheduled to be developed in the city.
Xiqiqi; Costco model warehouse store
Hefei Quan Bai Electronic Commerce opened a new store in Hefei, Anhui Province in December 2020, called Xiqiqi, which does not have beauty consultants on site. It is a chain of stores specializing in skincare, and the interior is reminiscent of a Costco-like warehouse, with sturdy shelves stacked high with products. The store sells its products at low prices, and by using its sales floor as a warehouse, it reduces logistics costs. They also purchase products directly from the brands to eliminate intermediate costs and achieve reasonable prices.
It is a membership-only store, and you need to scan your membership card at the entrance gate to enter the store. The annual membership fee is 199 yuan (US$30), and up to two other people can enter the store with you. There is also a 9.9 yuan (US$1.50) trial card that allows you to enter the store only once.
The store carries both domestic and foreign brands, but the criteria for selecting products is that they must have sold consistently for more than five years or have sold more than 500,000 units.
Chinese consumers tend to be concerned about fake products when it comes to low-priced products, but the store allows customers to return products without any reason within 99 days of purchase. If the product turns out to be fake, the store will compensate five times the purchase price.
According to the official WeChat account, Xiqiqi currently has seven stores, mainly in Anhui Province, which is adjacent to Jiangsu Province and aims to open 50 stores by the end of 2021.
Beauty Choice; store management based on community-based and meticulous data analysis
There are other stores that advocate ‘new retail’. One of them is Beauty Choice, operated by Shanghai Cotton Grain Network Technology. Its predecessor, East West Beauty, was launched in 2018 and changed its name in the summer of 2021. Local media reported that the company’s CEO, Zhang Hao, had served as marketing director of P&G and vice president of JALA.
The company targets consumers who live within a 2 to 3km radius of its stores and considers its stores as “communities” where users gather. In fact, purchases made by users participating in group chats on social networking sites account for more than 35% of its sales.
The store closely analyzes the data of purchased products and utilizes it in its operations. In August 2021, the company raised 50 million yuan (US$7.7 million) in a Series A+ round. With the funds, the company plans to enhance interactivity with users through social networking and live-streaming.
Fewer beauty consultants in urban stores
On August 24, 2021, China’s Ministry of Commerce announced guidelines for the development of shopping streets and invited public comments, in which it intends to encourage smart stores and unmanned stores. Under the government’s grand decree, unmanned stores are expected to become more and more widespread in various industries.
According to China’s beauty media, Pinguan, third- and fourth-tier cities emphasize the presence of beauty consultants, while first- and second-line cities tend to downplay the services provided by staff. The media believes that this is because users living in metropolitan areas are more literate about cosmetics, while those living in rural areas, where cosmetics are still used infrequently as a social custom, do not have as much knowledge about cosmetics and therefore require explanations and advice from beauty staff.
Among China’s younger generation of social network users, non-professionals who hold more expert cosmetic knowledge than store staff are emerging, and they have a significant impact on product sales as micro-influencers or KOCs. New retail stores that provide services in line with their thinking and lifestyles are likely to become mainstream in urban areas, and eventually be able to expand into rural areas.
Text: Ching Li Tor
Original text (Japanese): Team Roboteer
