Risk and Assets of the Former Implation of Sephora in China
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RISK & ASSETS OF THE FORMER IMPLANTATION OF SEPHORA IN CHINA
With an annual turnover of around 2.5 billion euros, Sephora is a worldwide brand. Present in China since 2005, the company now has 135 stores in 47 cities. The brand has experienced a rapid development and do not stop there. The brand aims to open more new stores, particularly in the towns of 2nd and 3rd level. Indeed, cosmetic products in China are rapidly expanding. What were the risk and assets of an implantation in China?
I - RISK
1. Cultural rigidities
Traditionally, cosmetics, especially skincare and fragrances are reserved for women. Taking about caring of your body is not a major concern for men, especially in rural areas. However it develops in the cities…show more content… Health crises are indeed exogenous shocks having a significant impact on the turnover of luxury companies. In 2002, following the SARS outbreak, the company Richmont (n°2 worldwide luxury) saw its sales in East Asia and Southeast decrease over 8%. Indeed, in times of uncertainty, consumers buy less luxuries, and secondly, the SARS crisis has resulted in a drop in tourism in Asia, furthermore tourists are also privileged consumer products luxury because they have sufficient purchasing power and luxury products are comparatively cheaper in less developed Asian countries.
Financial risks appear more threatening on the Chinese economy. Needless to say that a financial crisis would have serious consequences for the Chinese economy and mainly the market for luxury products especially as the banking sector is the only way to finance the economy in the absence of actually active financial markets (socialist economy requires). There are two major factors of uncertainty: the overheating of the Chinese economy and the problem of bad debts. These two phenomena are related, since it is the increase of credit (+30% on 2003), which partly financed growth. However, the domestic national debt is already very high (190 % of GDP) as the amount of bad debts (estimated 104% and 139 % of GDP) thus raising the risk of collapse of the entire system if the