01. Fine segmentation

The northwest market in China was the first stop of the “Strong Regional Store Driver Concept”. Currently the northwest region is in a catch-up stage in the field of global retail, it has reasonable layout and is self-sufficient.

Although these regional stores present different store characteristics, “segmentation” has become a key commonality. From consumer group segmentation to location segmentation, they are not limited to “full” segmentation, but “precise” segmentation of markets and operations. It can be said that “fine segmentation” has run through the development of retail formats.  Each strong regional shop have their own unique talent, building monopolies through segmentation, and forming differentiated competition in a certain region.

Mall stores in northwest China such as MIZHUANG, Leji Beauty, Powder Harbor and SE7EN SHOW taps the spending power of middle and high-end consumer groups and young people in small towns. These strong regional stores have their own business districts and target consumers. CACA Beauty Chain in Chenggu County, Good Image in Sanyuan County, Su’s Beauty in Zhouzhi County and so on have become well-known regional stores based on their services and goodwill accumulated over the years in their respective counties.

02. Site selection

Where there are people, there is business. However, due to the variation in consumer targeting, store locations are also different. There are generally three types of stores, mall stores, street stores and community stores.

Survey data shows that more than 40% of owners prefer mall store if they have the resources; nearly 40% of owners choose community stores that are convenient and close to consumers. Both type of stores meet consumers’ demands for shopping pleasure and convenience respectively, so they become the best choice for owners in the northwest region.

In addition, the traffic in the surrounding areas of the business district and the sales of competitors' products are the other two elements to consider. For example, the business district of Xi’an High-tech Zone can absorb the flow of people from surrounding office buildings, and the business district of Qujiang District covers consumer groups with high income and high spending power. In the opinion of the manager at SE7EN SHOW, under the same unit turnover-to-area ratio, SE7EN SHOW has high category coverage and high store sales volumes, which will create higher value than ordinary brands compared to well-known international and domestic brands.

The above three elements of site selection show that SE7EN SHOW reaches high-end consumers to the greatest extent, selects products according to their needs, and adheres to the path of high-end brand.

03. Audience Differentiation

At present, the transformation of “consumers-products-setting” in retail formats is intensifying. New beauty retail stores such as HAYDON, ONLY WRITE and HARMAY, as well as several strong regional stores surveyed all regard “people” as the principle and core of this transformation.

Community stores such as CACA Beauty Chain, Good Image in Sanyuan County and Su’s Beauty are convenient and have high consumer loyalty.  These stores mainly target consumers in the surrounding communities and their friends. For example, Good Image in Sanyuan County has a complete range of home cleaning and personal care products including mosquito repellents and laundry detergents and is deemed closer to the people compared with mall stores in the business district.  They are like the mom-and-pop store in the community.

If the community stores target the consumer groups in the county market, then the consumers reached by mall stores are more diversified and more differentiated.

Leji Beauty under Baili Group focuses on tapping the spending power of young people in small towns, takes root in prefecture-level cities and counties, and reaches surrounding large supermarkets. A manager at Leji Beauty said that the level of consumption in villages and towns is not high, and the price per customer transaction in the store is about 100 yuan, of which 30% are domestic products.

In addition, MIZHUANG is positioned as a one-stop lifestyle store for consumers between 20 and 35 years old. Its core market is below third-tier cities, and it takes makeup products as a starting point to grab the market share that other chain stores have not yet entered.

As mentioned above, SE7EN SHOW targets high-end consumers, while Powder Harbor targets middle and high-end consumers. Due to the segmentation of target consumers, benign differentiated competition has been formed. In order to adapt to the consumption upgrading, the stores of Powder Harbor have been upgraded to version 3.0, and are constantly adjusting and developing according to the market. “With each upgrade, the image, operations, consumption and other aspects of Powder Harbor will become more and more fashionable and convenient, more in line with the needs of current consumers”, said the manager of Powder Harbor.

The more difficult times are, the more CS channel needs catch up. As the “blood bags” of the industry, strong regional stores build monopolies through segmentation and promote regional market development in differentiated competition without vicious competition. They are blossoming in both the CS channel and the Chinese cosmetics market with greater vitality.