What: Concept stores selling lesser-known brands took off in China, particularly among young customers, however, pandemic challenges have forced many to close their doors or change strategy.

Why it is important: Post-pandemic operational distress has caused many Chinese beauty retailers to close causing surviving brands to compete for customer retention in a landscape that can no longer rely only on experiential retailing or travel to increase traffic and sales.

Some regular challenges for these concept stores include their size as smaller concept stores lack the bargaining advantage of bigger retailers. In addition, there is a challenge to obtain brand authorization while official channels are still monopolised by well-established stores such as Sephora and Watsons. The source of goods for many beauty collection stores is still regular purchases from department stores or from agents. This creates doubts about product authenticity, makes the margin of prices uneven, and creates competition within the brands they carry. As customers are determined to go where they can find the products, loyalty is a serious challenge.

A wide range of brands and a high number of SKUs have been a common trend among beauty collection retailers that have survived the pandemic. One example is Harmay which has more than 400 brands and more than 9,000 SKUs with a selected range of products that includes well-known international first-line beauty brands as well as exclusive authorisation of well-known international boutique brands.

These mid-to-high-end positioned beauty collection stores have also adopted a conservative expansion strategy, typically following a "one store in one city" approach. With core competitiveness remaining in brand selection, beauty buyers can improve the selection by scouting trendy brands only available abroad and focusing on the local aesthetics and needs of their Chinese customers. For consumers, mid-to-high-end brands are most worth revisiting.

Affordable collection stores need a clearer brand positioning, with more tactical spending on store investment and marketing. While the concept store model was effective in acquiring customers, retention will be vital for longevity.

Beauty concept stores shift strategy in China