The business perspective for beauty business is getting better day by day as women are becoming conscious about “how they look?” Not only women, nowadays the male population have also started using beauty items to look good. Selling beauty item physically can’t fulfil the demand of the wider market. To cover that much area, a business needs good logistics or supply chain, people, finance and most importantly communication network. The concept of online trading has made this possible where an entrepreneur sitting in the USA is able to sell a product to a Hong Kong customer. This system can be applied in beauty care segment as well. [Yeung, H. W. C. (1997)]
This report is basically about a start-up organization in Hong Kong which will serve beauty products to both female and male customers of Hong Kong and nearby country (in future) online. The speciality of this online business platform is the sale of Herbal and Ayurvedic beauty items which are rare in Hong Kong market. In addition to selling of beauty items, the organization will provide a beauty class through its online channel and also in social media platforms. [Liu, J. L et.al2013]
TTT Beauty Shop
Mission- We offer the product and service to people which make them feel good, look good and be good.
Vision- We deal with high quality, natural and innovative beauty products that are friendly to user and environment which will guide us to be a leading brand and the first choice for the customers.
Values- We believe- Real beauty, honesty and trust, unmatched quality, user-focused, innovation, trend setter and socially responsible corporate citizen.
Company Goal- To make our product and service available in all parts of Hong Kong.
Objectives- 1.To be a leader of innovation in the beauty industry that will give a new dimension to beauty among female and male.2. To bring Herbal and Ayurveda importance to beauty care in Hong Kong. 3. To contribute in sustainable development in Hong Kong Society. [Tuli, S.,et.al2018]
Beauty Industry Analysis
Hong Kong is one of the largest and fastest-growing beauty markets. It is due to duty free import possibility from Hong Kong to China, the industry is getting better and better. By the end of 2015, Hong Kong witnessed around $2.5 billion USD sales which was mostly dominated through imports of cosmetic products. China is the largest supplier to Hong Kong. As the people are accepting personal care and beauty products more and more, the growth rate is also increasing from 2 to 3% by 2017. Even experts have predicted the emergence of whitening technology, as the people are using anti-ageing and other skincare products more.
China, USA and Korea are the 3 key players who are supplying beauty products into Hong Kong. As the Hong Kong customers are consisting of both premium and mass-market nature, these nation suppliers are trying to keep the price competitive in nature.
Why importing of beauty product in Hong Kong is so high than its domestic production? The clear reason is about the rules and regulations. There is no such import duties on cosmetics, toiletries and skin products in Hong Kong. Moreover, no registration is required for cosmetic items. This is why Hong Kong is a premier destination of this industry. World’s top 10 brands like L’Oréal Paris, HUL, Ponds, Lakme, P&G, TRESemme etc. are making 70% of total business in Hong Kong. There are some local producers like O’ slee skincare products, Whealthfields Lohmann and Walch brand who are doing here. [Frodey, C. A., et.al2008]
The market size of Hong Kong beauty market is around $2.7 billion USD. The demand is highly concentrated due to fact that Hong Kong receives a large number of tourists every year. The import is going to increase by 2-3% in the following years. The reason will be the increase in mass-market customers who are regular with such items.
Consumer profile- It is the age group from 30-49 which accounts 31.35 of total population are the biggest user of beauty products. Hong Kong is witnessing an increase in male population who use cosmetics and personal care product more than the female buying rate (male-3% growth and female-2.5%). It is also the visitors from China (around 45.8 million) which is positioning into the second spot of Hong Kong beauty products. This is so, because Chinese people are finding the product pricing is comparatively lower to what they have to pay in China.
The influencing factor- Hong Kong customers are mostly influenced by a wide range of fashion magazines, TV advertisements, Social media, blogs and other such media. Hong Kong people are preferring online shopping more than traditional or direct selling as they believe they can get more information, better option and competitive pricing on their purchased items. This is reflecting in Beauty industry as well.
With the increase in logistics service, many beauty product marketers are moving towards online marketing.
Product trends- There is a significant rise in demand of Korean beauty products than US, Japan and French brands. Facial mask that contains snail cream is among the most popular beauty product in Hong Kong. Korean products are popular in the makeup and hair colour segment. US and European sunscreen, BB (Beauty Balm) and CC (Correct and Cover) are popular here.
Mostly it is the diversity in Hong Kong population, the innovation of beauty items and the emergence of the use of natural ingredients are the key factors that are driving Hong Kong Beauty Industry.
Product and Service of TTT Beauty Shop
Aloe Vera Gel- This product is a skincare product which will help to remove any skin problems like rashes, pimples, oiliness, acne etc. It is 100% natural and no outside chemical is added to it.
Face Wash- This product is made of Neem (Azadirachta indica), basil, Ale Vera, orange peel etc. which will remove the dirt in skin and will make face brighter.
Moisturizer cream- This product will help in maintaining moisture of your skin and body throughout the day. The product consists of Shea butter, Chamomile and Olive oil that help in preventing dehydration and early ageing problem.
Face Scrub- This scrub will help in removing dirt, blackhead, whitehead, death skins etc. which will make your face look better. It uses apricot which helps in keeping skin softer, smoother and glowing.
Body lotion- As Hong Kong is facing pollution these days, thus the body lotion came with a motive to kill germs like bacteria, parasites, fungus etc. it includes turmeric and other rare category oil that will not only kill germs but also will keep skin smoother.
Anti-wrinkle cream- Protecting skin especially under eyes is essential. This product is meant to protect your skins and help eliminating aging signs which make you look older and dull.
Crack Heal Cream- This cream will repair cracked heels within a few days. It will reduce discomfort due to cracked heels. It will not only cure cracked heels but also will keep it away from any infection chances.
Shampoo- The shampoos are 100% natural and only herbal ingredients are used. For ex- use of myrtle, Neem, acadiaconcinna etc.
**The speciality of above mentioned products are that both male and female can use these items without any fear.
Apart from that the company will offer foundation, eyeliner, lipstick, mascara etc. for the Hong Kong women. For men, beard cream made of natural ingredients, fitness and body growth powers etc. are there.
Service- Most of the beauty product suppliers are not demonstrating or explaining the use and significance of product but TTT will do it for all its customers. TTT will have a video tutorial on its own website, application and social media platform regarding use, its significance, harmlessness of use, result of real customers. This will be only $2HK for customers to access anytime and even they can provide feedback and suggestions in the comment box below so that in future, TTT will come with better product and service option.
|Particulars||Amount (in $’000HK)|
|Preliminary Expenses (Registration and other legal proceeding)||600|
|Shopify SEO and Analytics||650|
|Human Resource Management||350|
|Product procurement (Strategic business partners)||1030|
|Branding and promotion||1400|
|Logistics and Supply Chain- Payment vendors||970|
|Commercialization (up to 3 years)||1300|
|Particulars||Amount (In $’000HK)|
|Purchase and vendor cost||450|
|Salary and other administration||250|
|Selling and distribution||395|
|Cash collection from sales||(142)|
|Cash used in operating activity||943|
|Fixed assets and investment||425|
|Cash used in Investing Activity||425|
|Issue of shares and other debts||(395)|
|Cash flow from Financing Activity||(320)|
|Net cash used in 1st year||1042|
[Helfert, E. A. (1994).]
Breakeven point :-
So from the above we can see that in 4th year of the business, TTT will reach its break even. Thus exactly we can’t say, it may reach earlier if sales grow at higher rate or may delay. [Helfert, E. A.,et.al2001]
• Skin and body absorbs what we put on them, so natural products won’t harm or skin and body.
• Expose to different chemicals which cause harm to skin and body.
• Natural beauty items are no allergic nature.
• Organic products keep skin and body element balancing.
• Healthier body and mind
• Chemical products cause pollution thus natural product is better.
• Traditional wisdom- History, culture, tradition etc. influence.
Talking about online acceptance then annual growth rate of 8.9% in e-commerce selling with 59.8% (expected in 2018) user penetration are the significant indicator of how Hong Kong people are accepting e-retailing. 70% of people think online shopping convenient and around 64% of women would like to shop online. Near about 16% of online shoppers are buying personal care items. These all statistics can prove that selling beauty items online in Hong Kong is a good business opportunity for TTT. [Chen, Y.,et.al2018]
The TTT brand will display organic or natural flavour of business with the beauty product it is offering to customers in Hong Kong. It is going to target mostly from the age of 18-60 years both male and female in Hong Kong. TT would like position itself as the 100% natural beauty product in minds of customers. To promote brand and product, it will go for TV ads, posters and classified display in newspaper and magazine. More focus will be on social media platforms. The logo will be two Neem Leaves and tagline is made from nature. From second year onwards, majorly the brand promotion will focus on word of mouth strategy. [Yeon Kim, H et.al2011]
Demographic factor- TTT shopping is for both male and female falling under the age group of 18-60 years. The price of the product will be comparatively lower to what the foreign brands are offering. Basically women segment is going to be the major market.
Psychographic- This product will be acceptable by almost all categories of people. As the product is ensuring no side effects and health problems, it will in regular use for most of the people. Those who like nature related products and chemicals will certainly like the brand. As the number of natural product users increasing, it shows a good sign for TTT to start operations soon. The concept of online shopping is making it cooler. [Wang, J. (2018).]
Behavioural- Those who like to buy value for money for them it is a good option. Once customer use the product, they will repeat it and also become loyal to this brand. It is the benefit that TT products will give brand loyalty and personality to it. [Malarvizhi, J.,et.al2018]
• Natural product dealing
• Being first in market
• Logistics support
• CMS solutions
• New concept natural product selling
• 100% online operation
• Dependence on supplier and logistics provider
• Emergence of natural product demand
• Support from government
• E-commerce rising
• High revenue prospects
• Existence of foreign brands and their popularity
• Change of their marketing strategy
• Uncertainty of natural product demand and buying online
[Sengar, A et.al2017]
Porter’s 5 Force Analysis
Bargaining power of buyer- Natural beauty products are not much available or limited here. We are among the few which will provide 100% herbal products. Customer expects a lower price to natural products and also a perception of new brand should not charge much. This will put pressure on setting price for TTT. (Moderate)
Bargaining power of supplier- As the products are natural and made of some rare ingredients which may or may not be seasonal cultivation, thus TTT needs to be highly dependent upon its supplier and to pay the amount they need. TTT has gone for strategic partnership in 4-5 countries which will help to reduce the impact of price still dependency will be there. (Moderate to High)
New entrant- As the demand for natural product and online shopping is growing, in near future more and more players will jump into this market and will affect the business of TTT. Even the foreign company can come up with own natural brand (for ex- HUL indulekha) to compete with it. (Moderate to High)
Substitute product- At present, TTT product is going to be substitute for the chemical beauty care thus in near future no such substitutes are available. May be making beauty items at home can be clubbed as substitute to this business. (Low) [Ghoshal, S.,et.al2018]
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