The Hong Kong-listed provider of beauty and health-care products (www.bonjourhk.com) as well as operator of beauty and health salons across the SAR and Macau has yet to truly enter the massive and adjacent PRC market, with its 1.3 bln potential consumers.
That is because mainland shoppers arrive by the busload to patronize Bonjour’s 35 shops across the de-factor border.
Mr. Alan Chan, the company’s executive director, told NextInsight and Aries Consulting that nearly one-third of its total revenue came from PRC residents doing some shopping in Hong Kong, and that in “touristy areas” like Kowloon’s Tsim Sha Tsui, the ratio approached 50%.
"We are not export oriented so the recent global downturn didn’t really hit us. As a retail firm we mainly serve locals and tourists so we’re okay. Actually, the 4.5 trln yuan China stimulus package is helping keep their economy going and that’s great news for us as most tourists in Hong Kong are from the mainland,” Mr. Chan said.
Despite Hong Kong’s much higher average per capita GDP than its massive neighbor to the north, Bonjour also saw mainland shoppers open their wallet’s wider than their SAR counterparts.
"Shoppers from China spend an average of around 400 hkd per purchase at our stores,” he said, adding that this is more cash than local Hongkongers typically shell out.
"We would be happy to sell more within China itself, but there are major problems with importing parallel products into China, and merchandizing and certification issues in the PRC are much less transparent and smooth than in Hong Kong.”
This helped keep margins strong for both of the companies major operations.
For its retail business which accounts for 85% of total turnover during the period and enjoys nearly 40% profit margins, the firm sells cosmetics and beauty products as well as healthy foodstuffs like baby milk powder formula from Japan.
He said, sales of the imported powder took off last year after thousands of babies in the PRC were sickened by tainted formula and new parents began to pay more attention to product safety and quality for this staple product.
It other major business, beauty service centers such as massage facilities and nail bars, margins are much higher at around 90% as staff payrolls are the major expenditure which helps keep overall expenditures to a minimum.
"This margin differential means that our beauty service business actually contributes around 33% to our bottom line,” Mr. Chan added.
But he said that the company would remain retail focused because of the faster relative growth of the business.
"Our retail growth rose strongly in the first half of last year, and we will soon add two new shops in Hong Kong to reach the 35 mark. Ideally, we plan to add four to five new shops per year in Hong Kong going forward, but this all depends on rental rates, as this is how all of our commercial properties are managed.”
On average, each of Bonjour’s retail shops required an average 2.5 mln hkd investment, while its beauty salons needed between 4.5 to 5.0 mln hkd.
"This is because the salons need much more in the way of decorative considerations and furniture,” he said.
When asked to project where the retail/salon revenue contribution ratio would be in five years (currently at 85%/15%), he said it “depends on the market.”
Also, it would seem that as staff costs were the major expenditure for its Hong Kong-based salons, Bonjour would be tempted to aim lower in terms of seeking cheaper talent.
"We do provide some on-site training for some of our salon staff but this is not meant to be one of our major focuses. We prefer to hire experienced staff even if they come with higher salary requirements. We could also import labor from the PRC, but this would be mainly ‘unskilled’ and we don’t want to compromise our brand name in this way,” he said.
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Customer loyalty, word of mouth
Bonjour Holdings was not particularly interested in designating significant chunks of its Advertising & Promotion (A&P) budget to attracting celebrity spokespersons to stand behind its many wares.
Instead, Bonjour was happy to lets its products and services stand on their own merits and let satisfied customers keep coming back for more, as well as being de facto marketing fireplugs via their word of mouth accolades.
"We do some celebrity promotions for the salon side but generally speaking this is too expensive a strategy and not financially feasible. After all, once you sign up a celebrity or supermodel for, maybe, five mln hkd per year, you still need a considerable media budget to allow him or her a platform to promote our name,” Mr. Chan said.
Therefore, he said Bonjour was doing quite well while only allotting around 1% of its revenue to A&P.
And as for this year, he provided the following forecast: “I think a 25-30% increase in turnover is possible.”
