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Sasa Moves Deeper Into China

Sasa International Holdings aims to be the definitive one-stop cosmetics specialty shop servicing all of Asia.

Sasa International Holdings aims to be the definitive one-stop cosmetics specialty shop servicing all of Asia.

Today, the company has more than 110 wholly owned stores and counters selling more than 400 beauty brands (with 15,000 stockkeeping units) in Asia, including Hong Kong, Macau, Mainland China, Singapore, Malaysia and Taiwan. The firm’s sales for the financial year ended March 31, 2007 were approximately $370 million, of which Sasa’s brand management division operating in Asia as a sole agent for many international cosmetics names generated some 35 percent.

The company reportedly commands 30 percent of the Hong Kong cosmetics market, and it was considered to be the largest cosmetics specialty store in Asia, according to a recent industry ranking.

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Meanwhile, Sasa has its sights set on additional expansion, including further into Mainland China, said Guy Look, Sasa’s chief financial officer and executive director of Sasa International Holdings.

“It is a very interesting market and one with a lot of potential for us,” he said. Already, Sasa has lots of experience with the Mainland Chinese consumers, since they ring up about 40 percent of the company’s business in Hong Kong. “But China itself has its own challenges, which include product registration,” he said. (Whereas in Hong Kong, it’s not necessary to follow such formalities.)

“And for a multibrand retailer like ourselves, offering a broad product range, it’s more challenging in that it takes a lot of time and effort to bring those products to the market and also in sourcing those products locally,” explained Look.

Another hitch is that store productivity in China is not as high as it is in Hong Kong.

“The rental cost relative to sales is actually quite high,” he continued. “So over the past couple of years, we have initially started with bigger store sizes and, as a result, we incur more rent. We have higher [capital expenditures] and, therefore, high depreciation. And we have to pay for more labor costs as a result of a bigger store size.”

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Sasa has begun speeding up its store openings in Mainland China, where it has 12 locations, including a recent debut in Beijing. Sasa’s strategy in Mainland China for the brands it distributes is to retail them in doors including department and multibrand stores. That’s a change from Hong Kong, where it generally stocks them only in Sasa’s own locations.

Through its existing doors, the company has built up savoir faire about Asian women’s beauty habits.

When it comes to skin care (which makes up about 65 percent of the company’s business), for instance, Look said it’s common that face masks are used daily and sometimes in succession for different functions. He added the use of serum is widespread, too, and that some consumers apply different types for various needs. Once more, trips to the salon — once or twice a week — for facials are commonplace for many Asian women. Particularly in Hong Kong and Taiwan, such services are given in state-of-the-art facilities for an affordable price.

Asian women tend to begin visiting beauty salons at a young age, generally when they get their first job or even when they are still in school, said Look.

“As a result, Asian women are quite aware of salon brands,” he added.

As in the West, the antiage trend is growing stronger in Asia. Consumers use skin care products well into their 70s and beyond, he continued.

Look explained the Asian beauty industry is affected by numerous trends at once. Organic and natural products are gaining in popularity, as there’s a heightened awareness of the environment. There’s also an uptick in the use of products with a lifestyle positioning, which tend to recruit the young and trendy set.

“The aesthetic medicine industry is also thriving, with procedures involving the usage of Botox, placenta extracts and growth hormones,” said Look, adding breast implants and liposuction are also popular among people of all ages.

“All these trends and changes are charging up the beauty industry, feeding on its growth and, in turn, driving its growth,” he continued. “We can look forward to faster and faster changes of products and consumer preferences down the road.”