Sa Sa's online business recorded a 3.4% year-on-year decrease in sales in the first quarter ended 30 June 2022, mainly due to the pandemic outbreak in Mainland China, which led to partial or complete lockdowns in different regions. The lockdowns had a significant impact on cross-border logistics and restocking at the Group’s eCommerce warehouses on the Mainland.
The slowdown in cross-border logistics also delayed the end-to-end delivery of goods from the Hong Kong SAR to our Mainland customers, particularly during the "618 Shopping Festival". Nevertheless, sales of online business in the Hong Kong SAR more than doubled year on year, driven by the Group's own online store.
The retail and wholesale turnover at the Group’s operations in the Hong Kong and Macau SARs decreased by 10.1% year on year in the first quarter, while same-store sales dropped by 4.2%. Despite the reduction in the number of physical stores and the protracted fifth wave of pandemic, the Hong Kong SAR market still managed to deliver double digit sales growth for the quarter, thanks mainly to the timely introduction of promotional campaigns by the Group to capitalise on the Government’s Consumption Voucher Scheme to attract consumers.
Same-store sales in the Hong Kong SAR registered outstanding performance in April, with a year-on-year increase of over 40%, and double-digit same-store sales growth was sustained in May and June. However, business in the Macau SAR was severely hit by the COVID-19 pandemic. Guangdong Province had an outbreak that started in March and local confirmed cases were later found in the Macau SAR in mid-June, leading to a sharp decrease in Mainland tourist arrivals and a substantial decline in sales in the Macau SAR for the first quarter.
In Mainland China, the Group's sales and same-store sales decreased by 16.2% and 22.1% respectively in the first quarter, mainly due to the pandemic outbreak and weak consumption. As part of the Group's measures to enhance profitability through rationalisation of its store network on the Mainland, it closed six loss-making stores during the quarter. However, Mainland China remains an important market for Sa Sa. In the near term, the Group will continue to optimise its store network according to the stores' operating performance and profitability, and strictly control overall costs to minimise losses, so as to retain resources to support sustainable development of its business in Mainland China for the long run.
The Malaysian government changed its strategies for fighting the pandemic, and the Group's business rebounded strongly. The first-quarter sales there grew 108.1% year on year, partly due to the extremely low base of June last year as a result of lockdowns amid the pandemic. The sales had returned to over 90% of the pre-pandemic level in the same period of the financial year of 2018/19.
Overall, the Group’s retail and wholesale turnover decreased by 4.6% year on year. Compared with the same period of the financial year of 2018/19 before the COVID-19 pandemic, the Group’s turnover declined by 61.2%. The decrease was 58.2% in the previous quarter.
Sa Sa said in its annual report on 30 March that it plans to build its own livestreaming team in the second half of the year as it aims to significantly strengthen its capability in livestreaming and video product. It also aims to expand its target consumer group of young generations in mainland China so that Sa Sa can better build a reputation for its brands and products, as well as support the development of its online and offline businesses.
This comes as the brand plans to continuously invest in its online business and actively develop each sales channel, and shift towards a more comprehensive online and offline operating model through O2O operation integration. It plans to continue collaborating with existing and new third-party platforms to expand its new customer base and boost sales.
Sa Sa explained that the O2O business model enables the Group to move towards a leaner cost structure and lower the breakeven point of its traditional retail business. "The adoption of O2O would accelerate the time it takes for the Group to return to profitability, reinforcing our overall competitiveness and profitability in the long run," Sa Sa said.
It will continue to pursue its long-term goal to increase the sales mix of businesses beyond brick-and-mortar stores in Hong Kong and Macau SARs to above 50% of the Group’s turnover. As local customers will remain its major customer base in Hong Kong SAR in the coming months, Sa Sa said it will adopt a multi-pronged approach involving both products and stores to better serve them.
The brand plans to will adjust its product portfolio in a timely manner in response to the changes in their preferences and the latest market trends, broadening the personal care, health and fitness product and beauty gadget offerings, launch attractive promotions and enhance in-store product display to stimulate sales. Meanwhile, it will also consider business opportunities to open new stores in residential areas to improve sales and gain local market share.
Staying true to its O2O strategy, the brand plans to develop a centralised customer reward system that can connect across its online and offline businesses. In Hong Kong SAR, the Group implemented a pilot launch of e-voucher programme in May 2021 subsequent to the launch of “click-and-collect” service, encouraging online customers to visit Sa Sa physical stores for repurchase. As the results were satisfactory, Sa Sa plans to roll out e-vouchers which could be used at both online and offline businesses with an aim to boost customer loyalty and repurchase rate.
It is currently seeking to expand its O2O services in mainland China where the adoption of O2O grows faster than in Hong Kong SAR, and to Malaysia in the longer run, to leverage the opportunities brought about by the fast-growing online shopping trend, and to offer its customers with seamless and dedicated O2O services.
At the same time, given that it is less likely for Hong Kong SAR to re-open its border with mainland China this year, Sa Sa said sales generated from mainland tourists in Macau SAR will more likely become an important element of the Hong Kong and Macau SARs, and would also be one of the important pillars to the Group’s journey to achieve breakeven in these markets.
If the pandemic in Macau SAR and cities nearby across mainland China are brought under control, the Group’s sales in Macau SAR are expected to grow steadily. In addition to the ongoing store rationalisation plan in tourist districts in Hong Kong SAR, Sa Sa also plans to centralise some administration and management functions at stores while expediting the progress of automation to further reduce the cost of non-selling staff in stores and enhance operating efficiency of retail operations, with a view to speeding up its profit and loss turnaround.
More time and internal resources will be invested to accelerate the integration of O2O business at the operating front. More training will be provided to Sa Sa's frontline beauty consultants to enhance their skills on social media livestreaming and online interaction with customers, aiming at cultivating a large group of Sa Sa online key opinion leaders. A commission and reward system will also be improved to encourage frontline staffs to actively drive O2O development.
In mainland China, Sa Sa is adjusting the target store number at the end of the financial year form 100 to 80. Its resources will be focused on expanding the Group’s core city clusters (especially in the Greater Bay Area) and other strategic regions, with a view to manifesting the effectiveness and efficiency of focused local management.
Alongside its store expansion plan, it has upgraded the in-store decoration and visual display for eight stores in the first half of the year. Sa Sa also aims to further enhance its overall brand image in the future. "Our product procurement team will continue to introduce strong domestic and overseas brands as well as top trending domestic products in Mainland China. We will also streamline our stock keeping units, so as to increase the competitiveness of our product portfolio and overall operational efficiency," Sa Sa said.
The Group also plans to double down on its O2O integration in mainland China by leveraging the cross-border eCommerce feature of WeChat mini programme. This will help attract new customers to Sa Sa’s customer base in Mainland China, enhance the repurchase rate and loyalty of existing customers, and boost the commission income of local beauty consultants, thereby strengthening the overall competitiveness of the Group.
Meanwhile in Malaysia, the Group believes that the government's move towards living with COVID-19 will support the recovery of the local economy and retail industry, while steady improvements in Sa Sa's business are also anticipated.
The Group said it remains prudent towards store opening in near term and continuously optimises existing store network. In addition to enhancing its local online shopping platforms, it will introduce new and popular items and adjust product mix in a timely manner, while also attracting customer traffic and boost sales with appealing promotions.
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