Yue Sai Kan is in love. "Isn't she pretty," she croons, gazing at her `Red Millennium' Yue Sai Wawa doll. The doll, slightly larger than your average Barbie, wears a strapless ball gown in signature red fabric with the characters for Yue Sai's name artfully woven into the pattern. The Red Millennium is one of a new line of dolls launched this year by the Chinese cosmetics diva. The Wawa (Chinese for doll) are flying off the shelves at the rate of 2,500 a week, and the buyers aren't just little girls. "Everyone is my customer," claims Kan.
Launched in January, the Wawa is already available in 23 cities in China, at 70 counters. Prices range. from Yn49-388 and there are plans to launch a collector's item doll for Yn2,880. On October 15, the Wawa is expected to debut in New York, at the huge Toys R' Us in Times Square, and will be sold in 65 Toys R' Us stores nationwide, as well as in 25 FAO Schwartz stores. "I made this into an international brand in one year," boasts Kan, who also plans launches in Hong Kong, Singapore and London this year.
Asian beauty concept
Kan is a masterful marketer of an ethnic concept. "I'm involved in two things: image and Asian beauty," she says. The Mainland-born Kan, who holds a US passport and resides in New York and Shanghai, first latched onto Asian culture as a marketing concept in the late 1970s in New York with her television programme Looking East, which featured shows on Asian cultures and customs for an American audience.
Years of trying to look good in front of cameras while using make-up formulated for non-Asian skin tones inspired Kan's next venture, Yue Sai Kan Cosmetics. Launched in 1992, the brand was immediately popular. But it needed infrastructure to grow. So, in 1996, Yue Sai Kan Cosmetics took on a strategic partner, Coty Co, and together they built a US$20m plant in Shanghai. Yue Sai Kan Cosmetics recorded US$42m in sales last year, up around 15 percent on 1999, says marketing director Vivian Ko. The cosmetics are sold only in China now, but will be launched in the US next year.
Even with a gimmick like colors created by and for Chinese women, fighting for sales in China's competitive cosmetics market is tough. More than 150 companies had an annual turnover of more than Yn100m in 2000, says the Hong Kong Trade Development Council. Foreign giants such as Proctor & Gamble, Johnson & Johnson, Unilever and Shisheido manufacture in China for the domestic market, where cosmetics sales should top Yn33bn this year and average 12.9 percent annual growth through 2010, says Tiger Fu, director of new business development at advertising firm JW Thompson's China operations. Counterfeiting is a major problem for all companies.
China's cosmetics consumers can be segmented into three groups, says the Trade Development Council: young and middle-aged high-income earners in medium and large cities, who make up one percent of the urban population and are the main buyers of imported brands; medium-income middle-aged to old people, who make up around 2.5 percent of the urban population and buy local brands; and rural residents, who prefer low-end domestic brands and make up around half of the rural population.
Yue Sai cosmetics offer something for each group. The signature Prestige line includes skincare products and color cosmetics. Priced from Yn80-300, the Prestige line is sold only in department stores, at around 900 counters nationwide. The target market is 20-35 years old, with an income of around Yn 1,500 a month. The skincare range, especially the skin-whitening products, are the best sellers at several department stores in Shanghai, but Kan has high hopes for her color cosmetics line. "We haven't even started scratching the surface there," she says.
Targeting the mass market
The mass market is where Kan sees future color cosmetic sales taking off. In January of this year, Yue Sai Kan launched the Ma Promisse line of color cosmetics aimed at the mass market. Priced from Yn29-50, the line is being sold in hypermarkets such as Carrefour and Lotus. Kan aims to be in 6,000 locations by the end of the year and is spending Yn 10m on a national campaign that includes advertisements, brochures and point-of-sale displays. "We will do close to US$10m in sales this year," she predicts. Also waiting in the wings is the Remell line of color cosmetic products, which will be sold in supermarkets for Yn29-100.
Foreign brands are Yue Sai's main competition. Even colors specially formulated for Asians aren't always enough to retain consumers like 25-year old Shanghai resident Vicki Chow. She's spending more than Yn80 of her Yn2,500 monthly salary to buy a Yue Sai Kan facial mask. "The price is okay," she says. "It's sure cheaper than getting a facial in a professional spa."
But Chow buys a foreign brand of colour cosmetics, Aupres, because she prefers the colour selections. In Yue Sai's own market research of more than 200 major department stores, Aupres consistently ranked second to Yue Sai in sales. However, a survey by the Beijing-based China Mainland Marketing Research Co found that in at least one area, lipstick, 34 percent of those surveyed preferred Maybelline. Christian Dior came in second at 10.3 percent, with Yue Sai trailing in third at 7.7 percent.
Looking to hold on to its customers, in 1999 Yue Sai launched the ?Yue Sai VIP Club.? For a one-time fee of Yn300, members earn points redeemable towards products with each purchase. They are also invited to special beauty seminars held around the country several times a year. Yue Sai Kan herself attends the seminars occasionally. "It's a reward for loyal customers," says Ko.
Club members, who are mostly in their late 20s, receive a twice-yearly magazine filled with beauty and health tips. The club is kept at a "manageable" 30,000 members in 18 cities, Ko says. Besides breeding brand loyalty, the club is a valuable source of market research. Yue Sai also tries to motivate its sales women, who work on a salary plus commission basis, by funding an annual trip for the top performer. This year, Thailand was the destination. The sales force also receives a Yn400 bonus for the Chinese New Year holiday.
Yue Sai will need loyal customers and enthusiastic sales people to hold on to market share after China's accession to the World Trade Organisation. Tariffs on imported cosmetics will fall from around 35 percent to 10 percent after five years. By then, Yue Sai Kan Cosmetics hopes to be an international brand, and less dependent on the China market. For a woman who made a Chinese Barbie doll and international brand in one year, it doesn't seem like an insurmountable challenge.