SINGAPORE — Last year saw the demise of more high-street brands here as traditional brick-and-mortar retailers struggle in the changing consumer climate. One major Singaporean retail casualty was Hong Kong beauty brand Sasa, which wasn’t able to keep pace in the hotly contested beauty market. As traditional retail models flatline, “smart,” “new retail” models are coming to the fore in the tech hub of Singapore.
Last year, beauty and personal-care products generated sales of $172.1 billion in the Asia-Pacific region and $1.3 billion in Singapore alone, according to research by Euromonitor International. Asia-Pacific accounted for one-third of the global industry value in 2018 and is anticipated to generate over half of the total $68 billion in absolute growth over 2018 to 2023.
The ASEAN region continues to develop, with increasing levels of disposable income and access to the Internet. Mobile Internet is transforming South East Asia, according to a Google, Temasek and Bain & Co. study. Just over a decade ago, almost four in five South East Asians had no Internet connectivity and limited access. Now South East Asians are the most engaged mobile Internet users in the world, with 360 million users in the region, 90 percent of them connecting primarily through mobile phones.
New retail, a phrase coined by Alibaba’s Jack Ma to describe combined online and off-line retail experiences, has taken the neighboring region, China, by storm over the past few years. The concept has now reached South East Asia, to the benefit of companies that are willing to make technological advancements and to the detriment of those that don’t.
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Last December, Sasa International Holdings Limited said its plans to close all 22 retail stores in Singapore. In a statement on the Singapore closures, the Hong Kong beauty brand noted that this move was in order to concentrate resources on its markets in Hong Kong and Macau SAR, mainland China and Malaysia, as well as its e-commerce business. The group’s performance in Singapore had been “less than satisfactory for many years, and has recorded losses for six consecutive years,” according to the statement.
Since the news was revealed, local shoppers have been flocking to the store, for discounts of up to 70 percent on a range of beauty products. With eager shoppers elbowing their way to the best deals, shelves are being quickly emptied.
In recent years, the brand had attempted to restructure the local management team and to enhance store displays and product mix with a view to driving sales and improving the company’s performance within the Singapore market. However, this did not prove fruitful. The brand seemed to acknowledge its missteps, writing that, “The group strives to integrate its online and off-line businesses for providing better customer experiences and laying a solid foundation for the development of a new retail model in the future.”
Experts have cited reasons such as stiff competition with Sephora, which focuses on promotional material, member exclusives, highly trained staff and a solid e-commerce site. Sasa’s original USP in Singapore was selling at a cheaper price international products that weren’t available at many other stores in the city-state. As cross border sales rise, thanks to e-commerce, this advantage melted away. Sasa also failed to create a unique shopping experience or blend off-line with online for its customers.
“I think a lot of people are talking about Sephora being hip and fun, but when they talk about Sasa, they probably imagine some very traditional sales associates who are chasing after them, and the customer service is not to their liking,” said Samuel Tan, course chair, diploma in retail management at the Temasek Polytechnic School of Business.
Tan does not believe that this closure sounds the death knell for all traditional beauty retailers; rather that they should keep their off-line presence but modernize and create, or enhance, their online presence for the digitally savvy shoppers of today.
“I feel Sasa may be lacking in the way they provide product promotions, especially whether enough information is communicated to the shoppers on both online and off-line platforms. I think they are going to face the same kind of challenges in all the countries they have business operations in. Therefore it is important for them to realign their business strategies for both online and off-line marketing,” Tan said.
Sasa’s struggle and closure in Singapore have also been put down to the fact that it did not bring in the brands that were on trend, failing to stay relevant to the consumers. “As the beauty scene is constantly evolving, with new brands and products introduced frequently, consumers would find it the most efficient to purchase it online than waiting for a traditional beauty retailer to bring it in stores,” said Euromonitor International Research Analyst, Clare Lee.
Sasa failed where other traditional beauty retailers, such as Sephora, have succeeded. The company didn’t meet the needs of modern-day consumers, who value convenience but are also in search of experiential shopping from physical retailers. “Sephora has recently started providing personal beauty shopper service for their gold members, which is a one-on-one guided shopping experience apart from their makeup and skin-care services as well as brow bar. In a competitive industry, traditional beauty retailers are moving toward providing consumers with value added services and experiences beyond product offerings. Retailers are also establishing their online presence to compete with brands’ direct-to-consumer business,” Lee said.
Beauty purchases are increasingly going online in Singapore and the South East Asian region, as e-commerce players such as Lazada and Shopee increase their dominance over all things retail.
Singapore-based Shopee, one of the leading e-commerce platforms in South East Asia, has seen tremendous growth in the beauty and personal-care category, which consistently emerges as one of the top sectors during major campaigns such as 9.9 and 11.11, according to Tiger Wang, head of marketing at Shopee Singapore. While the company did not share figures, Wang did reveal that male shoppers are increasingly shopping for beauty products online and that shoppers in general are increasingly purchasing beauty products from overseas.
Last year, Shopee teamed with L’Oréal to roll out artificial intelligence and augmented reality powered tools; Shopee BeautyCam by ModiFace and Effaclar Spotscan by La Roche-Posay. The brands utilize AR simulation to allow users to digitally try on different shades of makeup products and AI technology to offer consumers instant, personalized and professional acne analyses. “The partnership demonstrates our commitment to continuously innovate and power South East Asia’s beauty and skin-care categories into the future, as we continue to create a more personalized and seamless shopping experience for our users,” Wang said.
“Smart,” “new retail” models are also coming to the fore, and this has translated to the beauty sector, where traditional retailers are having to increasingly compete with online stores that are connecting their consumers’ shopping experiences to an off-line setting.
Lazada, South East Asia’s other biggest e-commerce player, in which Alibaba has a controlling stake, also prioritizes beauty sales, using innovative new concepts to drive growth. Beauty is one of the top-performing categories on Lazada, with year-on-year growth of 97 percent.
New retail concept store, Amore Store x Lazada, which opened in December 2019 at Funan shopping mall, blends online-to-off-line and focuses on K-beauty. It is also Lazada’s first foray into a permanent off-line space and its first “new retail” concept store. It is a partnership between the e-commerce platform; real estate developer CapitaLand, and South Korean beauty and cosmetics conglomerate Amorepacific. The new O2O concept introduces brands that have yet to launch in Singapore, curated based on their popularity in South Korea and the trends and preferences of Singaporean consumers. It also allows brands to test consumer appetite and address nuances in consumer preferences, according to Lazada. All payment transactions are via the Lazada app, and customers can choose to bring home their purchases on the spot, arrange for in-store pick up or have the goods delivered to a chosen address.
“Especially for a category like beauty, it is important for consumers to experience the product using their sense of sight, touch and smell before they make a purchase either in-store or in the comfort of their homes,” said James Chang, chief executive officer of Lazada Singapore.
Lazada has added more than 400 beauty brands on LazMall since its launch a year ago in an effort to position themselves as a go-to beauty shopping platform.
“We will also strive to bring on board the best and most innovative brands to win the hearts and minds of beauty shoppers, as well as forge partnerships with local merchants and established retailers to grow our strengths as the go-to beauty shopping destination,” Chang said.
Lazada is now looking to expand its new retail footprint in other categories beyond beauty.
New retail isn’t just restricted to beauty in Singapore — Funan is also home to Alibaba’s first Taobao Store in South East Asia. Fashion retailer Love, Bonito, which started its business online, has also opened its largest physical store at Funan.
“CapitaLand is collaborating with online retailers to launch creative omnichannel concept stores in our malls to enhance their brand presence and generate sales to new consumers,” said Chris Chong, managing director of retail at CapitaLand Singapore. “To date, more than 50 stores — making up over 40 percent of Funan’s 133 retail stores — have both online and off-line presence.”
“There is indeed a trend towards consumers purchasing beauty products online in South East Asia and internationally. The main key driver for the trend would be the growing variety of brands and accessibility for consumers to purchase beauty products that are not available, or slower to reach, in local traditional beauty retailers. Furthermore, the online space often offers more steep discounts as compared to traditional retailers, thus making it more enticing for consumers to purchase online,” Lee said.
The digital development of the beauty industry is not only localized to the Asian region, but is perhaps being driven here by rising demand from the growing middle class, influence and investment from Chinese companies, and traditional retailers not being able to keep pace with the changing demographics of the region.