MING FAI International Holdings Ltd (HK: 3828), one of the world’s top suppliers of travel amenities such as shaving kits and customized hair care products to hotels, plans to expand its recently-acquired 7Magic franchise network in the PRC to 2,000 shops from around 1,400 now, with significant help from US retailer Wal-Mart in the Chinese market.
Executives from Ming Fai unveiled to a large group of investors and reporters on Monday seven new cosmetic and skincare product series designed for 7Magic by the Hong Kong-listed parent.
Ming Fai is hoping to capitalize on the fast-growing retail industry in mainland China after first acquiring 7Magic in August with its well-established cosmetics and accessories chain of stores, having franchised shops and dealers covering nearly all regions of the PRC.
7Magic told a large conference room of investors and reporters at the Futian Shangri-La Hotel in Shenzhen that it was bolstering its self-branded product line with the new products series.
The luxurious five-star hotel was a fitting venue for the gala event as all of the 528 guestrooms are generously stocked with amenities including Ming Fai’s shampoos, soaps, shaving and sewing kits, slippers and a wide range of other custom-made products.
Ming Fai Chairman Mr. Ching Chi Fai said the five-month old acquisition was proceeding seamlessly.
“Following our purchase of 7Magic, we have optimized logistical synergies, combined management strengths and maximized our software merging campaign. And along with today’s new product launches and growing cooperation with Wal-Mart, we are confident of adding around 700 new 7Magic shops this year if China’s economy continues to perform at current levels.”
Another Ming Fai executive was also very bullish on the ability of 7Magic to bolster Ming Fai’s retail performance.
“With the rise of China’s economy and the fast growing consumption power in third- and fourth-tier cities, the Group sees great potential in the cosmetics and accessories retail industry. Knowing that there had been a lack of local cosmetic and skincare products with internationally approved quality yet reasonable prices, Ming Fai took the initiative to develop self-owned labels and distributed through 7Magic’s extensive network in China,” said Mr. Liu Zigang, Executive Director of Ming Fai.
He said the new series of products would target the more fashion-conscious, brand-savvy younger demographic.
“Together with the very first skincare series ‘QQ Tomato’ launched last year, which enjoys strong recognition among local youngsters, Ming Fai currently has eight self-owned labels. We believe that the positioning of our products as being of premium quality but with reasonable pricing will allow 7Magic to stand out from the peers and satisfy the gradually growing demand of the younger generation.”
Mr. Liu added that 7Magic was an important vehicle for retail sales growth in the PRC via its expensive chain of franchised shops.
“Along with the continuously expanding network of 7Magic, we expect that the self-owned labels will soon penetrate the mass teen market, and will become another growth driver of the Group and further improve our profitability.”
For Ming Fai, an exciting new facet of the product launches and expanded cooperation with 7Magic is the new collaboration with Wal-Mart, a large one-stop retail chain with over 280 outlets in China, designed to further promote 7 Magic’s retail business nationwide by opening counters in Wal-Mart stores.
The goal was to expand the 7Magic distribution network to over 2,000 POS (point of sale) locations in China by the end of 2011.
7Magic General Manager Ms. Wu Jie said: “This year, in addition to the existing franchise network, we are proactively cooperating with the retail giant Wal-Mart to expand into the premium retail outlets, in order to penetrate into the mass cosmetic market and eventually make 7Magic as a ‘must-go’ shopping paradise for the younger generation.”
She said this clearly benefits 7Magic by allowing the cosmetics and skincare products retailer to build a solid foundation for further growth down the line.
“Our parent company Ming Fai not only brings in new product designs and development, but also reinforces our operational management by upgrading the supply chain system and implementing the in-store ERP (enterprise resource planning) and POS systems in the franchise network. As a result, our brand management is greatly strengthened and the inventory control and management efficiency are significantly improved.”
Mr. Anthony Leung, Chairman of All Team Group -- a member of the Ming Fai Group -- told NextInsight on the sidelines of the product launch that the seven new series unveiled by 7Magic were proof that Ming Fai Group understood the price of doing business.
“The retail cosmetic and skincare products sector never stands still. The only constant in this industry is change itself, as consumer tastes are constantly shifting and evolving. We understand this and are fully committed to remaining flexible enough to not only anticipate consumer demand trends ahead of time, but have the capacity to meet new production requirements,” he said.
I asked him if the concept of brand recognition in the sector was driven more by R&D/quality control, or was dictated more by a company’s marketing campaign and public relations savvy.
“Both,” he replied.
“We have found that our peers neglect either at their peril. Generally speaking, the younger consumers respond more to advertising and promotions in getting to know a brand, whereas the more mature customers put more emphasis on proven quality. However, one cannot exist without the other for long, and a ‘premier brand’ must be able to stand on more than a platform of ‘brand recognition.’ It must also be of high quality,” Mr. Leung said.