China Duty-Free Surge Convinces Cosmetics Brand Pola to Open 20 More Stores

(Nikkei Asia) — Japanese cosmetics companies are opening duty-free shops and enhancing name recognition in China as they prepare to capture the country’s big-spending tourists when international travel resumes.

Pola Orbis Holdings debuts a Chinese subsidiary on Jan. 4 that will bring its duty-free operations across different brands under one roof. The main pillar will be Jurlique, the Australian natural skin care brand with a global network of 73 locations including 29 in China.

The company hopes the new Hong Kong-based unit will lift duty-free sales fourfold or fivefold in three years, tapping Jurlique’s experience to increase locations for the Pola and Three brands.

Pola Orbis aims to add about 20 duty-free sites in China by the end of 2023 to bring the group’s total to around 50, up roughly 70% from the present. Negotiations have begun with operators of duty-free facilities.

Pola, the flagship brand that drives 60% of the group’s sales, is popular among Chinese visitors to Japan but has no duty-free presence in China.

Consumers can buy cosmetics, many of which are high-priced products costing more than $100, at duty-free shops for 10% to 25% less than at ordinary stores in China.

“Duty-free shops will serve as a major entry point for customers, including those who have never bought a Pola product before,” Director Akira Fujii said.

Pola will look for shops in Chinese airports, gaining exposure to travelers going anywhere, not just those visiting Japan. International tourism is expected to rebound sooner in China than elsewhere, and these shops would let the Japanese company tap demand sooner as well.

Before international travel resumes, a popular destination within China provides opportunities to boost name recognition. Hainan Island, a tropical resort, offers duty-free shopping even for domestic tourists.

Pola intends to open a location on Hainan by June, with a company official calling the island “a big business opportunity for now.”

Kanebo Cosmetics, a unit of Japanese household goods maker Kao, also plans a Hainan debut with high-end products in the spring.

Kose, which already has a presence on Hainan, began boosting promotions last spring. The cosmetics maker places more messages about limited-availability products on the official WeChat account of the island’s duty-free facilities, seeking to increase the brand’s recognition among travelers before their arrival.

The strategy appears to be working, with Kose reporting a drastic rise in sales on the island.

China’s skin care and makeup market is on track to grow 3% to $44.9 billion in 2020, according to Euromonitor.

This article was originally published by Nikkei Asia

Contact editor Yang Ge (geyang@caixin.com)

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