What’s new at Watsons’ — everything
Hong Kong-based pharmacy giant Watsons boasts around 6,800 stores worldwide, and recently the company’s new strategies have been materializing in rapid succession: joint-managing their stores with L’Oréal, partnering with Unilever for data sharing, incorporating YouCam’s AR technology and reforming their logistics with the help of CaiNiao. These are all in the name of “smartifying” their business.
A.S. Watson Group is the group that runs Asia’s largest retailer of health and beauty products, Watsons, and in August this year they announced their performance report for the first half of 2018. That period’s sales had reached HK$684.74, a 17% increase from the same period last year, and the EBITDA (earnings before interest, taxes, depreciation and amortization) was HK$71.04, a 10% increase. Behind this growth in sales was the group’s drug stores with their range of health and beauty products.
Though what’s particularly prominent within this data is the recovery of sales performance on the Chinese mainland. Sales in China for the period were HK$123.52, an increase in 16% from the previous year, and the EBITDA also increased by 13% — both an impressive show of double digit growth.
But just a few years back was a different situation. From 2015, the group’s performance in Mainland China was falling, with their sales revenue decreasing for the first time in 2016. How they eventually recovered was due to both flexible cost structuring in the Chinese market and their ability to maintain a 20% gross margin by being the exclusive distributor of particular goods — the majority of which are beauty products.
Watsons’ successful point program surpassed 130 million members, who were responsible for 62% of the revenue earned in the first half of 2018. Another big finding was that 34% of the revenue was of those products sold exclusively by Watsons. Since entering the Chinese market they’ve grown to around 3,400 stores on the mainland. Having conquered the larger cities for now, they’re currently expanding to middle and smaller cities in the rural and more inland areas, and are seeing success in procuring new consumers.
Not resting on its laurels, A.S. Watson Group has been working on a variety of new endeavors in recent years.
Within the Cheung Kong Center shopping mall on Hong Kong Island, they opened a new concept store called CKC18 in May this year. A combination of an electronics retailer and a supermarket, this hybrid store contains a section titled “Watsons Lab” which features unmanned cash registers. Thanks to next-generation RFID tags (Radio Frequency IDentification tags) attached to the products, the registers are able to identify them so accurately that the customer simply has to place their basket full of goods near the register and the full payment is processed automatically.
Also, from September, the group started their own payment system called “Watsons Pay” where payment is facilitated through the aptly named Watsons App. It was announced that they’d be utilizing the app for detecting customers coming in and out of stores, recommending products, managing customer health and for payment functions.
Their proactive use of “smart mirrors” is also noteworthy. These monitors-doubling-as-mirrors are set up in-store and run the AR makeup app YouCam Makeup from Perfect Corp. They allow you to virtually try on over 100 different types of cosmetics and in a variety of colors. Watsons first implemented the mirrors in their Shanghai stores in February 2017, and went on to incorporate them in their Taiwan and Hong Kong stores as well.
To top it off, in January the group opened a new concept smart store in Shenzhen, China called Colorlab by Watsons. This was in collaboration with the world’s largest cosmetics maker L’Oréal. Moving away from their traditional look, the store features a chic new design with a black and white motif. In-store, the latest cosmetics of many popular brands can be tried out via AR makeup, including those from L’Oréal, Watsons’ original brand, brands from Japan, South Korea, America, and also 20 different brands from China. Watsons plans to increase these Colorlab by Watsons stores to 50 within Mainland China.
For product distribution, the group announced in January that they’d teamed up with a number of logistics companies, including the major CaiNiao within the Alibaba group, to kick-start a same-day delivery service. Currently, they’ve already started a speedy two-hour-delivery service in five cities, including Shanghai and Guangzhou.
Watsons has also started utilizing the big data of its consumers, and announced in May 2017 their partnership with Unilever in this field. For Unilever to sell their brand in China, they’ll analyze Watsons’ customer data to use in judging strategically which products are best suited to specific regions, and they’ll also utilize it in their public relations work.
The Chinese market is in the middle of diving straight into a new high-tech era defined by O2O (Online to Offline) and OMO (Online Merges Offline), which fuses customer data with IT technology. In the field of logistics as well, we’ll see more implementations of unmanned warehouses and delivery by drones or other robots. Meanwhile, Watsons intends to stay one step ahead by increasing their store numbers in China, their main playing field, while also strengthening cooperation with logistics and beauty brands to deliver the future of pharmacies.
Translation: Ching Li Tor
Original text (Japanese): Team Roboteer
