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Why Fancl’s retail closures may not be a bad thing

Skincare brand Fancl will be closing its stores in Singapore and Taiwan from March 2014.

Citing losses in both countries, the company has made a statement to the press that it will pull out of both markets, telling local customers that they have until the end of February to redeem their loyalty points.

However, it said it still has plans to re-enter the Singapore market as a wholesaler after April 2014. It will also be expanding into the US market with some of its brands.

As part of its future strategy, the brand will target the middle aged to elderly customers and raise its brand loyalty by further expanding its Mutenka (additive free) cosmetics market. It also plans to build on its mail order sales channels and online.

The press statement from the company said: “In order to overcome the rapid change in the market and competitive environment, and to make progress towards globalisation and renewing corporate growth, we believe that further reinforcing our fundamental customer-focused approach and developing strong connections with customers around the world is a top priority.”

Local contacts at Fancl could not be reached at the time of writing.

Struggling with its Singapore audience

According to Simon Bell, executive director strategy, Southeast Asia & Pacific at Landor, after moving away from its “Less is more” tagline in celebration of its 30th anniversary, the brand has been struggling with its Singapore audience.

He added that marketing alone will never guarantee the success of a brand – instead a single compelling idea that resonates with the consumer is required.

He said that the brand did not differentiate itself. “Whilst the Chinese consumer seeks brand attributes of esteem and knowledge in the skincare category, Singaporeans search for brands that are relevant yet differentiated from the competitor set, and that’s what Fancl overlooked,” said Bell.

Not a bad thing for Fancl?

However, the shift from retail to digital for its businesses may be a smart move for Fancl.

Lawrence Chong, CEO of Consulus said: “I think the brand should have taken the last two years to build its mobile platform to strengthen its following. Fancl is a great brand and it has a lot of equity so it should have built a customised platform to gather personalised preferences and develop products meant for the Southeast Asian environment.”

Also, he added that the move had less to do with a marketing problem and could be better attributed to a shift in the way people buy their cosmetics.

The trend for retail brands?

Cheong added that with the growth in this region, having a presence in Singapore is necessary.

Reentering the brand as a wholesaler will help the brand cut the costs associated with having physical stores, the constant issue of staff turnover and the need to provide good service while keeping costs low.

All these aspects are often too much for retail brands, said Cheong.

Also, moving to online means the brand will have plenty of data.

“The battle ahead is about personal preferences and no longer about brick and mortar where you wait for the customer to come to you. It is about being there, all around the clock and about building lively communities online,” he said.

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