Success is staying ahead of the market
A wave of activity hums through Watsons' mainland headquarters in Guangzhou. In the lobby, staff mingle with suppliers and on a red sofa sits a buyer with a woman laying out Disney accessories. They try on some bracelets and talk about what might work as merchandise in the stores.
Past reception and down a hallway is Ivor Morton, a 59-year-old Briton who some locals have mistaken as KFC founder Colonel Sanders. His real title is managing director of Watsons China.
Mr Morton is the engine behind the health and beauty retailer's ambitious drive to open 1,000 stores by 2011. He believes that as the mainland economy grows, more companies will join the market.'You don't wait for it to happen. I can predict it as sure as eggs are eggs,' said Mr Morton. 'So what you have to do is be ahead of the market. If I put 1,000 stores down by 2011 then I know I will be by far the leading health and beauty retailer with nobody being able to touch me.'
To house this growth, Mr Morton has built up a team of 35 people whose only job is to scout for sites to open Watsons stores. He has another team of 10 people which specialises in negotiating the maze of licences and permits needed to open each store. The company also holds recruitment road shows in hotels and shopping malls in target cities to find staff.
Since taking the reins of the China operations in 2004, Mr Morton has expanded the chain from 50 shops to 185. The 200th store will open in May and the target is 280 by the end of this year.
The company, which is part of Hutchison Whampoa's A S Watson Group , has been in China since 1989. It competes with Mannings, another Hong Kong-based health and beauty chain, and traditional mainland department stores and drug stores.
Mr Morton was reluctant to discuss mainland revenues but said it was profitable. Taiwan is Watsons largest market with about 400 stores.
The group has warehouses in Beijing, Shanghai and Nanhai, with another to open in Chengdu in 2007. Investment in information technology will be 60 million yuan this year and another 10 million yuan will be spent on warehouses.
'Could the economy slow down or speed up? It could, but so far economic information says that China will continue to grow at its current rate,' he said, saying that made it important to build on first-mover advantage.
'It's building your brand. It's keeping our distance ahead of the rest,' said Mr Morton, who joined Watsons in 2001 to oversee the company's operations in Thailand.
Prior to that, he worked at UK chemist chain Boots intermittently for 20 years, where his last post was director of property development. He had also been the company's director of sales for south England, in charge of 700 Boots stores.
Compared with his western experience, Mr Morton said mainlanders were more open to new products.
Watsons introduces 200 new products to its mainland stores every week, including Watsons-labelled items such as shampoo, hand cream, tissues and skin-care products. These make up more than 20 per cent of overall sales.
'What we're seeing in the early stages of this year is a rapid uptake,' he said. 'It all goes back to the consumer in China being a pretty smart shopper. In western economies you'd have to market very, very hard to get recognition on a new line. In China, you put a product out today and will have excellent sales within a week after marketing it only once.'
The problem with a market like that, however, is customer loyalty. To keep his customers coming back to the shops, Mr Morton said Watsons would identify brands with longevity and invest with the supplier in space and promotion. The key, he added, was striking a balance between the new products and brands that could last.