Sa Sa International Holding Limited

Sa Sa International Holding Limited, a Hong Kong leading cosmetics retailing group in Asia. Sa Sa has approximately 220 stores and retail counters across different regions in Asia. Together with it owns brand and other international brands; Sa Sa offered over 600 brands of skin care, and fragrance, make-up and hair care products. In 2005, in order to track the fast growing trend of China Cosmetic industry, Sa Sa International Holding Limited decided to enter China market with 2 new retail store opens in Shanghai.

Up to now, Sa Sa China has launched 69 retail location across different areas in China. Market prospect: Chinese customers still prefers to purchase their cosmetic products in department store. This should be a major challenge for most of the Beauty specialist retailers.

Current situation According to the interim financial report on 30th of September 2011, it has shown that Sa Sa is performing well in its core market “Hong Kong and Macau” area; however, Sa Sa has experienced a loss of HKD 19.

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75 million in 2011. The management team of SaSa claims that the recorded loss in 2011 is caused by expense increases in recruiting new staff members, logistics and new store establishment. Including the record of losses in 2011, Sa Sa China has experienced losses for 6 consecutive years.

Exploratory research is conducted to understand the underlying problems of Sa Sa China - “Asia Pacific Equity Research by Elsa Yang from JP Morgan , and莎莎大陆遇阻：四大原因导致内地业务发展缓慢 by李欣 from华夏经纬网. The poor performance of Sa Sa China is believed to be caused by several factors. Firstly, High import tax in China has been affecting the low price strategy that Sa Sa has well-practiced on.

Secondly, the competitive cosmetic market in China has weakened the Sa Sa’s high products varieties strategy. Thirdly, the selling strategy of Sa Sa is lacking of supports from most of the major labeled brands. These problems might able to resolve by re-positioning the brand of Sa Sa International Holding Limited in China.

Value of this analysis: To provide Sa Sa China an evaluation of it current brand positioning and provide recommendation base on analysis of customers perception toward different attributes of Sa Sa (China) and its competitors; which could help and assist Sa Sa China to make correct decision on its future positioning strategies.

Management problem: How to increase sales and profitability of Sa Sa China? Marketing Research Problems: It is needed to determine the current position of Sa Sa China, in comparison to the other cosmetic retailer brand in China.

Objective of this analysis: - To determine customers general preferences level of each individual brands - To determine customers perception on different attributes among each brands. - To find out the characteristic of different customers group (segments) - To determine the best suit segment for Sa Sa China to market with its re-positioning strategy

Questionnaire Design: An online questionnaire is designed to collect information on how do people in cosmetic market (China) perceive the Sa Sa China Brand compared with its competitors.

Screeners: Screening question has set up to block out respondents that is neither Chinese citizen from Mainland nor it has shopped in Sa Sa (China) and its competitors. Screening questions are queried to test:

-Whether respondent are from mainland China -Whether respondents have ever shop in Sa Sa China and its competitors

Preferences of brand: This section is designed to determine individual-level preference on each brand, respondents were asked to rate their preferences on each individual brand on a 9-point semantic differential scale.

Perception on different attributes of brands: This section is designed to determine individual perception on various attributes among different China Cosmetic retailer brands. Respondents will rate each attribute on a scale from 1 to 9 points (semantic differential scale).

Demographics and observations: demographic and observation information of respondents such as gender, monthly income, cosmetic expenditures and credit card usage habit are collected for further analysis on segmentation.

Data collection A total of 129 respondents have reached, 100 of (77.5%) them are qualified for the survey after filtering by the screening questions. Nevertheless, this number is not representative enough in real case. The sampling size of this report is small compared with normal research, which require over 300 respondents.

Analysis

Our analysis procedures include two layers: The first layer is positioning analysis, the second layer is segmentation analysis.

First layer: For the positioning analysis, 2D Position maps – Perceptual and preference map are generated to get an idea of how each brands are performing among different attributes, and how do customers rate different in terms of individual preference. Most importantly, is to understand the current position of Sa Sa China; as well as its direct competition.

Second layer: In order to make proper decision on re-positioning direction for Sa Sa, it is necessary to identify the potential target segment after repositioning. Cluster analysis is generated to find out the target segment, individual preferences on different brands are selected as the segmentation variables. Then based on the segments acquired from the analysis, we drew the perceptual map with clusters’ preferences, to find out the target segment’s view on different attributes and its preference towards brands. Finally we conducted the discriminant analysis, to find out the characteristics and demographic information of the target segment.

Positioning

In accordance to the location of various attributes on the perceptual map (Exhibit 1). , we summarized the beliefs and perceptions of attributes into smaller number of dimensions. Dimension X - horizontal axis is summarized into good reputation ---- bad reputation; while Dimension Y – vertical axis has collapsed into “Affordable & convenient” ---- “expensive and inconvenient”

In terms competition, maps shows that Watsons and GiaLen are in a relatively advance position; since they do not have any direct competitors. Sa Sa and 1000colors compete with each other, while Sa Sa is also competing with Sephora in some extend (indirectly).

As illustrated on the perception map, Watsons is having good performance on both convenient and high variety attributes, and Sephora is having good performance on the following attributes: product attractiveness, prestige, good services, good environment and famous.

In average Watson group dominates on Affordable and convenient sectors (convenient here) and Sephora has the edge in terms of brand reputation.

Map also show that the horizontal dimension explains about 19.3% of the variance in the data, and the vertical dimension explains about 69.9% of the variance in the data.

Seen from the positioning map, we can find SaSa has shared some key attributes with sephora,“Good Environment” and “Famous”. But for the two attributes dominated by Watsons, “Convenient” and “Economical”, SaSa is totally negative. Consider SaSa’s characteristics in Hong Kong, “Convenient” and “Economical” are the key attributes of SaSa(HK). But according to the positioning map, we find that Sasa(China)’s position is far away from Wastons(China), so in mainland people totally don’t regard SaSa store as a convenient and economical brand. (The reason could be find in our reference .XXX news)

However, we can find that SaSa’s position is located near Sephora, and also shared the key factors as “Good Environment” and “Famous” with Sephora. It shows that in the view of mainland China customers, SaSa is perceived as a more elegant and high-end brand like Sephora, rather than the image of convenient and economical in HK. (This can be explained by the reference article, mainland SaSa shop areas are generally much larger than HK SaSa, with better decoration, and also higher in the product price).

But for SaSa China, (from the reference article) we find that it wants to copy the brand image from Hong Kong to mainland without any differentiation, but turns out that customers in mainland don’t regard SaSa China are the same as SaSa Hong Kong. Also Sasa China has tried to lower the product price to match SaSa HK, but its met great difficulties in cost such as much higher tax, increasing labor and rental cost.

Thus, we can conclude that the re-positioning for SaSa China is possible and necessary. We should re-position SaSa to the “good reputation and service” dimensions, move it near to sephora (See Exhibit x.), try to directly compete with Sephora and target those major customers of Sephora. This re-positioning can be seen as to re-position SaSa as a elegant and famous brand, abandoning the cheap and convenient impression of SaSa HK, to position SaSa as a more high-end and different brand in mainland.

Segmentation

Individual brands preference level is selected as the segmentation variables. 9 clusters and “standardized data option” are selected to generate the 9-clusted Chart (Exhibit 3). Base on the result of the chart, there are significant jump from 0.54 to 0.78, much larger than the other distance gap. Therefore, segment should be classified into 2 as group; where 1, 6, 5, 3, 9 are grouped into one cluster, and 2, 8, 7, 4 are grouped into another cluster. These 2 clusters are then used to generate another round of segmentation analysis (Exhibit 4).

In order to find out the general perceptions on each attribute of the two segments and their preference towards different brands, another round of positioning analysis is conducted with the two generated clusters’ and attributes variables. (Exhbit 5).

The generated positioning map (Exhibit 5), shows that the two segments have different views on different attributes. Segment 1, are uniquely in favor of the “Convenient” and “Economical” attributes, while segment 2, is in favor of the “Good Environment” and “Famous” attributes. Both segments are having similar favor in the other positive attributes. To be specific, segment 1 is more favoring in “High variety”, while Segment 2 is more likely to enjoy “Product attractive”, “High Prestige” and “Good Service”.

The different attributes preference level of the 2 segments means that they have different WANTS AND NEEDS: Segment 1: this segment can be perceived as people searching for convenience and relatively cheap products; also they want high variety of products. Thus we can name the segment as “Cost Effective pursuer” and “product-oriented buyer”.

Segment 2: this segment is more brand-conscience, and have higher requirement of shopping environment. Besides, Segment 2 are also favoring in “Product attractive”, “High Prestige” and “Good Service”, thus they are perceived as searching for good services, trusting in the prestige of a store brand. Thus we can name segment 2 as “Brand pursuer”, “Prestige follower” and “high-end service/products demander”.

In addition, on the perspective of brand preference, we can find that Segment 1 are more favoring in Watsons and Gialen, seen from the join-map (Exhibit 5) we can find that the two brands are doing good in“Convenient” and “Economical”, which are the major favored attributes of segment 1.

For segment 2 customers, Sephora is their most preferred brand. Sephora is the high-end store brand in the market. It has big name on brand, provides elegant shopping environment, better service and also charges premium. Thus Sephora matches the wants and needs of Segment 2, as “Brand pursuer”, “Prestige follower” and “high-end service/products demander”.

Also in Segment 2, SaSa is preferred by these customers to some extent, slightly better than Watsons in this segment. To be more specific, the most favored attributes for SaSa is still“Good Environment” and “Famous”, exactly the same of Sephora. Watsons also did a relatively good job in “Product attractive”, “High Prestige” and “Good Service”, and that’s why Wastons has some preference in segment 2.

Thus comparing the two segments, for segment 1, these customers prefer the “Convenient” and “Economical” attributes, which SaSa are totally negative, so it’s in great difficulty to target Segment 1. However, for Segment 2, they are mainly the customers of Sephora, preferring “Good Environment” and “Famous” attributes, where SaSa has already had some success.

In conclusion, Segment 2 is selected as the target segment, SaSa needs to enhance its “Good Environment” and “Famous” attributes, also in “Product attractive”, “High Prestige” and “Good Service”, to move to a better preference of Segment 2 customers and compete with Sephora.