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Produced by | Bullet Finance

Author | Wenhua

Editor | Lightning

Art Editor | Qianqian

Review | Songwen

When was the last time you visited Watsons? Many consumers say they can’t remember, which reveals the current embarrassment of Watsons: declining performance, aging brands, and a wave of store closures.

What happened to the former pioneer of offline beauty retail stores?

Public data shows that Watsons' operating income in mainland China was HK$20.914 billion in 2016, the first decline in performance. At the same time, EBITDA, which is used to measure the ability of a company's main business to generate cash flow, also fell by 4.21%. Although there was a slight rebound in 2019, the overall performance is still in a downward channel, and it continued to bottom out in 2022 and 2023, setting new lows.

Combining public data and analyzing the root cause of its unfavorable development in mainland China, the essence is that it is no longer selling well.

As early as 2015, Watsons' crisis had already emerged. At that time, the Internet traffic dividend hit, and many beauty brands began to transform online, which increased the pressure on Watsons. Although this figure rebounded to 2% in 2019, it was soon hit hard by the epidemic.

Although the situation will stabilize after returning to normal in 2021, Watsons will face new competitors that will spring up like mushrooms after a rain.

They cannot compete with new retail beauty stores in first- and second-tier cities, and they cannot compete with the gradually penetrating e-commerce platforms in the sinking market.

As a result, the large offline stores that Watsons once prided itself on were caught in a wave of store closures. According to data disclosed in the financial report of its parent company, Cheung Kong Hutchison Holdings Limited, in 2022, a year that can be regarded as a watershed year for Watsons' development in mainland China, the number of its stores in mainland China decreased by 343, falling below the record of 4,000 stores in total.

(Photo/Jiangmeng News Gallery)

On average, Watsons will close one store in mainland China almost every day in 2022. By the first half of 2023, the number of stores in mainland China will be further reduced to 3,780.

There are signs that Watsons is heading downhill. Moreover, this former retail giant is caught in a situation of "internal and external difficulties".

Internally, the company was frequently punished for chaotic management, and due to its harsh system, it suffered from continuous exodus of partner brands, missed online opportunities, and poor development of offline stores.

From an external perspective, the development of online beauty and the impact of emerging beauty stores are two major reasons. New beauty stores such as HARMAY, BC, GINKGO-X, WOW COLOUR, Xiaoshan Beauty, THE COLORIST, and Xiran are making great strides and have been favored by well-known investment institutions.

Relying on the power of capital and the enthusiasm of consumers, new-type beauty and cosmetics stores have begun a sprint to grab market share. They continue to open new stores, grasp the minds of consumers, and form a siege against old-brand beauty and cosmetics retailers such as Watsons.

(Photo/Photo Network, based on VRF protocol)

In a sense, it is not that the times have abandoned Watsons, but that Watsons' practices have deviated from the market track.

*The title image in the article comes from: Interface News Picture Library.