Sam China Welcomes a New President; Bosideng Achieves Counter-Trend Growth; Shiseido China Has Yet to Reverse the Situation | Brand Weekly Report
Organized by Peng Qian
Big News
Sam's Club China Gets a New Leader
After the change of COO in September, Sam's Club China has welcomed a new president.
According to Foodinc, on November 27, Walmart China internally announced that the Vice CEO and President of Sam's Club China, Andrew Miles, is about to retire, and the current Senior Vice President of Operations of Walmart International, Jane Ewing, will act as his replacement. Jane Ewing will report directly to the CEO of Walmart China, Zhu Xiaojing.
Andrew Miles has been managing the Sam's Club business in Walmart China for 12 years. In an interview, Andrew Miles said that the reason he was selected by Walmart is mainly because of his ability to expand the scale of the enterprise and his expertise in making small things big.
He joined Sam's Club China in 2012. At that time, Sam's Club China, which had been in China for 16 years, only had 8 stores. It was during his tenure that Walmart won the hearts of the Chinese middle class with the Sam's Club business in the era of affordability. The important decisions he made include, but are not limited to, introducing the retail membership model from the United States, introducing new products to transform the shelves, improving the quality of goods and the supplier management system, leveraging the power of JD.com, promoting the transformation of the omni-channel and creating a combination of "e-commerce + membership", and pushing for the first membership fee increase of Sam's Club China in 20 years.
This comes at a time when the 50th new store of Sam's Club China is opening, and the business is also aiming for a sales target of 100 billion yuan this year. Why did Walmart officially announce the change of leadership of the Sam's Club China business at this time?
Foodinc quoted sources from Walmart as saying that Jane, who has served in the international department for many years, has an in-depth understanding of the Chinese business and team, and has provided a lot of support for the Chinese business, including Walmart's transformation and the expansion of the Sam's Club business. Looking at her resume, Jane joined Walmart in 2012 and has served in several important departments such as purchasing, operations, and real estate in Walmart USA and the international department. When she came to China four months ago, she emphasized that the supply chain is the core advantage of Sam's Club.
Jane will officially take office in early 2025. Zheng Shuohuai, the Chief Operating Officer of Sam's Club China, and Zhang Qing, the Chief Purchasing Officer of Sam's Club China, will report directly to her. The arrival of this senior executive from Walmart headquarters also indicates that Walmart's emphasis on the Chinese market is still increasing.
Bosideng Sees Counter-Trend Growth, Earns 1.1 Billion in Half a Year
Although women's clothing revenue is dragging behind, Bosideng is still a brand that is doing well in the apparel industry.
Recently, Bosideng released its interim results for the six months ended September 30, 2024. Its revenue increased by 17.8% to approximately 8.804 billion yuan, and its net profit rose by 23.0% to approximately 1.13 billion yuan. The profit growth rate is higher than the revenue growth rate.
In the past two years, major platforms have launched lenient return and exchange services, causing women's clothing to be stuck in a quagmire of high return rates. The performance of this category for Bosideng is also not good. The semi-annual report shows that its women's clothing revenue dropped by 21.5% to 308 million yuan, which is the only category that declined. The management of Bosideng disclosed at the results conference that all brands under the women's clothing business, including Jessie, Bonpoint, and Cloverpost, have experienced significant declines. Based on this, Bosideng also clearly stated that it will not further increase investment in this sector, and the overall store network is also shrinking, closing stores of brands that are losing money.
Bosideng is also living in the era of affordability, but it is not blindly catering. This year, the consumption differentiation trend is obvious. Many consumer brands that follow the high-end route have chosen to reduce prices or transform into the cost-effective competition track. Against this background, the management of Bosideng also clearly stated at the results exchange conference that it does not support "blindly reducing prices" to win the market. Rui Jinsong, Executive Director, Senior Vice President, and General Manager of the Bosideng Division, revealed that compared to the customer unit price of 1,500 yuan and a 79% discount during last year's Double 11, this year's Double 11 down jacket customer unit price reached 1,740 yuan, with an 81% discount.
High-end positioning is indeed an important reason why it can achieve counter-trend growth in the mourning apparel industry. In particular, the revenue of its down jacket-related products increased by 22.7% to 6.07 billion yuan, accounting for 68.9% of the total revenue. Even though this year's warm winter weather lasted for a relatively long time, and the sales were lower than expected. The high-end down jackets of Bosideng, such as the Extreme Cold and Polar Series, have set new sales records.
In order to continue the high-end positioning, Bosideng has acquired the high-end skiing brand Bogner and strategically invested in Mussnera. In addition, it also stated that it will not reduce marketing investment.
One concern is that this year's warm winter weather has lasted for a relatively long time. Bosideng also stated at the results conference that the period from November to January of the following year is the most critical stage for the company, and it is currently in the most core stage of completing its entire annual target.
Shiseido China Has Yet to Turn the Tide
Shiseido's situation in China remains unchanged for the better.
Shiseido recently released its performance data for the first nine months of fiscal year 2024, showing that net sales decreased by 3% year-on-year to 722.8 billion yen (approximately 33.5 billion yuan), remaining the same as the previous year. The profit performance is not good, with the core operating profit decreasing by 26% year-on-year to 27.4 billion yen (approximately 9.9 billion yuan).
After the financial report was released, Shiseido's stock price dropped by 7% to 2,959 yen (approximately 14.3 billion yuan), the lowest stock price this year, and the current market value is approximately 1 trillion yen (approximately 48.3 billion yuan).
By region, the revenue of the Japanese market increased by 5% in Q3, the revenue of the Chinese market dropped by 13%, the revenue of the US market dropped by 9%, the revenue of the EMEA market dropped by 7%, and the revenue of the travel retail market dropped by 38%.
Regarding the overall poor performance, Shiseido explained that it is mainly affected by the high-profit travel retail business, especially in the Hainan Island of China and the South Korean market. The Hainan duty-free channel has always been an important position for international cosmetics companies to layout the travel retail business. From January to September this year, Shiseido's related business revenue in Hainan Island of China decreased by more than 30%. Shiseido believes that this is due to the changes in Chinese consumers' purchasing behavior and the weakening of consumer confidence.
China is the only market that has experienced a double-digit decline in Q3, and from the performance of the first nine months of this year, the Chinese market has also declined by 8%. The Chinese market accounts for a quarter of Shiseido's overall sales.
From the perspective of its major brands, the main reason for the decline in sales in the Chinese market is the poor performance of the main brand Shiseido (SHISEIDO), whose sales in the first nine months of this year decreased by more than 20%; while the high-end brand Clé de Peau Beauté and the makeup brand Nars still achieved a mid-single-digit year-on-year increase in the first nine months of this year.
Therefore, Shiseido is still promoting more of its brands, such as the luxury brand The Ginza, to enter the Chinese market and open stores on online channels such as Tmall. In April this year, the high-end skincare brand Drunk Elephant also officially announced its entry into the Chinese mainland market, entering 250 Sephora stores in the mainland, and targeting first- and second-tier cities.
Facing the pressure of performance growth, Shiseido plans to announce a new structural reform at the end of November. In Japan and China, from 2024 to 2025, costs will be reduced through layoffs and closing loss-making stores. Currently, the offline store networks of brands such as ISPA and SHISEIDO under Shiseido in China have been reduced, which has also led to a 20% decline in the offline channel revenue in the Chinese market in Q3.
With significant changes in channels, brand aging, and outdated marketing, Shiseido has had a difficult time in China in recent years, but it has not left itself any room for retreat. Shiseido recently stated at the China International Import Expo: "Shiseido has been based in China for more than 40 years and has never wavered in its confidence and determination to invest in China."
GAP's Performance Improves
After being sold to Baozun, GAP's situation has improved.
Recently, GAP and its Chinese operator have successively released the third-quarter results of 2024. The financial report shows that GAP's performance is clearly recovering both globally and in China.
It has achieved year-on-year growth in revenue and net profit for four consecutive quarters, with an adjusted earnings per share of $0.72, exceeding the market expectation of $0.58. Among them, GAP China's net income reached 2.1 billion yuan, with a year-on-year growth of 12.8%, and the operating loss narrowed significantly.
GAP was born in California, USA in the late 1960s and quickly became popular with its low-priced, full-size jeans and basic clothing. With the expansion of its multiple brands, GAP Group has gradually become one of the largest clothing companies in the world. Once, GAP had a presence in important traffic entrances of well-known business districts such as Huaihai Middle Road and Nanjing West Road in Shanghai. However, with brand aging and intensified price wars, GAP's design is not localized enough, and GAP, which is lagging behind in all aspects, has been rumored to be sold several times in China. Eventually, it sold its Chinese operating rights to Baozun E-commerce.
How did Baozun E-commerce transform GAP? It transformed GAP from a brand that focuses on discounts and cost performance to a consumer-centric brand and plans to achieve a profit turnaround by 2025.
In November 2023, Baozun China reduced GAP's discount intensity and promoted its high-end fast fashion positioning. Thanks to these adjustments, the operational efficiency of GAP China's new stores has significantly improved, with a 50% year-on-year increase in efficiency compared to old stores, and a 19% increase in same-store sales.
However, GAP has not yet fully recovered. It is not easy to change the discount brand image that GAP has accumulated for a long time, and Baozun's offline operating experience is still insufficient. Although trying to reduce discounts, GAP still cannot escape discounts in the short term. For example, during the "Double 11" in 2023, some GAP stores launched an event of "Selected products with a direct discount of 50% off", and the discount intensity even exceeded that of Zara and H&M.
Some Products of Three Squirrels Are Quietly Price Increased
In the snack track that competes on price, there are also "exceptions" that are doing well.
Three Squirrels recently issued a "Price Adjustment Notification Letter", stating that from December 1, Three Squirrels will adjust the ex-factory prices of several nut gift boxes, involving 7 products such as canned nut gift boxes and New Year gift products, with an increase of 10%.
Currently, this price increase by Three Squirrels is still in the exploratory stage. Three Squirrels responded to media such as Foodinc that this price adjustment is only for some low-price gift boxes, not all gift boxes are to be priced up. This year, the demand for low-price gift boxes is relatively stronger, and this part of the orders slightly exceeds expectations. Overall, the price of the overall nut gift box is stable; secondly, based on demand and capacity, the price adjustment is also to balance the overall capacity and adjust the supply.
The notification also emphasizes that the ex-factory price of the above products has increased by 10%, due to "the increase in nut raw materials and labor costs during the peak season of the New Year". Whether this price increase will continue is still uncertain.
With the popularity of affordable snack brands such as Zhaoyiming Snack and Snack Busy throughout the country, established players such as Three Squirrels and Liangpinpuzi that focus on higher customer unit prices have been under considerable threat. "Competing on price" has become the "main theme" in the snack industry in the past period. However, after some sorting and adjustments, now Three Squirrels and affordable players are not in a zero-sum game, but in a differentiated competition. The main brand of Three Squirrels and the sub-brand Little Deer Blueblue, which focuses on children's snacks, both adhere to high-end cost performance, open stores in first- and second-tier cities, and increase marketing investment; Zhaoyiming Snack and Snack Busy are more focused on lower-tier cities, targeting lower price bands.
Thanks to the in-depth implementation of the "high-end cost performance" strategy, the company achieved revenue of 7.169 billion yuan in the first three quarters, with a year-on-year growth of 56.46%, exceeding the entire previous year; the net profit increased by 101.15% to 341 million yuan; the non-net profit after deduction was 267 million yuan, with a year-on-year increase of 211.55%.
This year, its target sales are to return to 10 billion yuan, and the price adjustment of some product lines is also to add more certainty to this goal.
In order to better participate in the competition without damaging the main brand, Three Squirrels also released a series of investment plans in September this year. It is expected to invest no more than 660 million yuan by the end of 2026 for加码 retail terminals, supply chains, and sub-brand investments. Through this investment, it will directly acquire 1,800 discount snack stores. In the discount snack track, Three Squirrels will compete with brands such as Snack Busy and Hao Xianglai.
Marketing Matters
KFC Sponsors "Goodbye My Lover"
After the "Smoked Chicken Incident", KFC really went to advertise in "Goodbye My Lover".
The term "smoked chicken" was originally a hot meme created by a netizen who was dissatisfied with the selfish behavior of a reality show guest, but it unexpectedly drove the sales of smoked chicken, milk crust, and other foods, and the guest who created this meme, Mailin, also started to promote products for sale.
KFC originally has the "Crazy Thursday" discount activity, and "Goodbye My Lover" is updated every Thursday. When the smoked chicken meme became popular on social networks, many netizens called on KFC to create a "Crazy Smoked Chicken Thursday" to take advantage of the heat.
Now KFC has really come, and the advertising copy is also in line with the positioning of the program and the product itself: "Love is a lifelong topic, and the whole chicken accompanies you to learn", "KFC whole chicken, share the deliciousness, and resolve the heart knot". A qualified brand advertising copy is to learn to catch the overwhelming traffic brought by such sudden event marketing.
China Li-Ning X PLEASURES Collaboration, Paying Tribute to Rock
China Li-Ning and the Los Angeles streetwear brand PLEASURES have launched a retro rock collaboration series.
This series is inspired by the posters from the rock scene, interprets individuality through full-print or cutting methods, combines the distressed stitching and torn style to restore the trend of American streetwear, and pays tribute to the passionate and unrestrained rock era.
In recent years, in order to get closer to young people and increase the brand's cultural style, Li-Ning has tried to collaborate with multiple trendy fields. Recently, Li-Ning also launched a collaboration shoe with the Japanese trendy brand BILLIONAIRE BOYS CLUB & ICECREAM, which has sparked discussions on platforms such as Xiaohongshu and Dewu.
New Products, Brands
OATLY Targets Boutique Coffee-Related Products
OATLY accelerates local product innovation.
Recently, OATLY announced the development of boutique bean customized oat milk. This means that after launching Coffee Master and Tea Master, the Chinese team of this oat milk giant has innovated again.
In recent years, the Chinese team of OATLY has been trying to find a connection with the booming coffee track. From the initial "testing the waters" in boutique coffee shops to gradually entering multiple sales channels such as coffee chains, catering services, convenience stores, and e-commerce platforms in China, the oat latte made