Sa Sa International Holdings Ltd, Asia's largest cosmetics retailer, plans to step up its expan-sion on the Chinese mainland, which is expected to become its key growth driver.
The mainland market will be a priority for Sa Sa in the next two years, with outlets expected to number 32 by March, and 100 in two to three years, Sa Sa's spokeswoman Macy Leung told the Global Times Tuesday.
Hong Kong-based Sa Sa currently has 23 retail outlets on the Chinese mainland, according to Leung.
Market watchers said the move is aimed at boosting market share in the lucrative mainland market, where Sa Sa has so far struggled to turn a profit.
Sa Sa has a much smaller share of the mainland cosmetics retail market than Watsons and Sephora, said Feng Jianjun, a cosmetics marketing expert.
"The firm's sweeping success in Hong Kong cannot be easily transplanted into the mainland market. While many Sa Sa brands are high-profile in the US and Europe, they are not well-known on the mainland," Feng said, pointing out that mainland consumers prefer heavily advertised brands. Sa Sa also loses points because of its high prices, he added.
The firm's mainland sales grew 42.1 percent to reach HK$60 million ($7.72 million) for the six months ended 30 September 2010, but it is still in the red, according to its interim results released November.
"The Group has decided to switch its strategic priority in this market (mainland market) from time to breakeven to faster network expansion," it said in the interim results statement.
"Our number one priority in the mainland is to accelerate our network expansion," Chairman and CEO Kwok Siu-ming said in the statement. "We will open more stores in existing cities to increase market penetration and enter new cities within our current operating areas."
Analysts noted that online business would be a key market trend in the future, with hot competition over online cosmetics sales.
Online retail will surge at the expense of the brick and mortar business, which is constrained by rising rental and labor costs, said Si Wei, an analyst with Cinda Securities Co.
Feng believes online sales will give Sa Sa an opportunity to add glitter and boost market penetration.
Sa Sa will reportedly launch a website for mainland consumers in the near future.
Shares in Sa Sa jumped 6.5 percent to HK$4.89 ($0.63) Tuesday.
