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HK dames are toddlers in China

Tim Metcalfe

HEALTH AND BEAUTY retailers pouring into China from Hong Kong are coming to terms with an entirely new set of shopping norms.

The mainland has obvious attractions. A vast consumer market fuelled by unparalleled economic growth is leading growing demand for imported products. The retail market is estimated to be worth US$500 billion a year, and is growing by 10per cent annually.

The floodgates opened with the signing of Hong Kong's Closer Economic Partnership Arrangement (Cepa) with China two years ago, allowing Hong Kong-based retailers to open wholly owned ventures in the mainland.

'But the market is still a challenge,' said group health and beauty director for Dairy Farm Caroline Mak, who has led Mannings' drive into the mainland.

Mannings, which has been in Hong Kong for more than 30 years, is one of the city's top two health and beauty chains, with 225 stores. But, said Ms Mak: 'In China we are still new entrants and very young retailers, which means putting a lot of effort into trying to understand the consumers.'

One major challenge is deciding where to go in China. The market is so vast that retailers can easily overextend their supply chains. Therefore, they are all initially testing the waters in familiar cities.

Global brands are settling for just Beijing and Shanghai - the main target for 70 per cent of the world's top 50 retailers establishing footholds in China.

Mannings decided to keep its early network closer to home, pushing into southern China with five shops in Guangzhou, three in Shenzhen and another three in Dongguan.

'We have chosen a cluster strategy for the China market. If you go for one store in one city you confront a lot of logistical and management problems.'

While ultimately planning to open more than 250 shops in China, Mannings is taking a steady approach. This year it will open another five or 10 outlets, but it will remain in its three initial 'beach-head' cities.

'We are still learning about the market and going back to retailing basics,' Ms Mak said.

'It means changing our merchandising mix to suit local tastes and shopping behaviour, and sharpening our head office skills in retailing, merchandising and supply chain operations.'

Mainland consumers are different from their Hong Kong counterparts.

'It is a very practical market and not as aspirational as Hong Kong. People don't dream of having high-end beauty products. They are down-to-earth and look for value for money. Even though the economy has improved, office workers still only earn about $2,000 a month so they don't have a great deal of disposable income,' Ms Mak said.

'This is reflected in their purchasing patterns. In China, we are selling a lot more small-sized products. [People] prefer to buy small bottles of shampoo rather than large ones, as they usually do in Hong Kong. It means they are not out of pocket so much.'

Another drawback of China, for now at least, is the absence of a high street culture.

'The shopping culture is not as mature as in Hong Kong, where many shops are concentrated in urban shopping districts and high street retailing is well-developed,' she said.

'Until recently, most people in China did most of their shopping in very low-priced hypermarkets.'

Lianhua Supermarket, the largest retailer in China, operates more than 2,700 outlets in 20 provinces. Even modern shopping malls are a relatively new concept. Mannings made its mainland debut in Guangzhou's Teemall and is focusing its expansion in malls.

While most vacancies on the mainland will be filled locally, Mannings is on the lookout for experienced retailers and graduates or recruits for its retail management training programme to manage mainland operations.

'China lacks retail professionals. Retailing over the border is only just taking off,' Ms Mak said.

Another health and beauty chain embracing the mainland market from its Hong Kong launch pad is Japanese-owned FANCL, famed for its skin-whitening and preservative-free products. In just two years the brand has opened nine cosmetic counters in Shanghai, Beijing and nearby cities. It plans about 22 more openings this year, including in Guangzhou, Hangzhou, Wuxi, Nanjing and Tianjin.

FANCL (HK) executive director Michelle Ma said the brand was targeting 300 outlets in the next five years. The group is on the lookout for a China-based retail operations manager to oversee the expansion.

Ms Ma said: 'Cosmetic sales in China are blooming, with annual growth of 20 per cent. So we are certain there is tremendous potential for the market and management staff who work there.'

Career advancement in such an energetic, growing market was likely to be rapid, she said.

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