Change more than cosmetic in Shenzhen

Authenticity vital to success

Yang Zhiliang, investment director of chain shopping mall Maoye Commercial Company, said the company's store on Huaqiang North Street is one of its largest in southern China, dealing in about 39 cosmetics brands, and the number is expected to reach 50 next year.

The store has registered a 50-percent growth in sales so far, said Yang, shrugging off competition fears from Ming Tong and other rising distribution centers across the street, explaining they are targeting different segments.

Zhang Yi, chief analyst at consultancy iiMedia Research, applauded the street's transformation. "It could be a new path for Huaqiang North, allowing it to take off again," he said.

With rising living standards in China and consumers of various age groups with a penchant for beauty, demand for cosmetics is reaching a crescendo, especially for foreign brands, he said.

Besides, e-commerce plays a crucial role in cosmetics sales nationwide, and Ming Tong is a key supplier for small - and middle-sized e-retailers. A survey showed that cosmetics items accounted for 45 percent of the entire consumption of goods purchased through cross-border e-commerce, while about three quarters of overall cosmetics retail was conducted online.

But Zhang warned that fake products have surfaced due to high-profit margins, and tough measures to curb smuggling have been taken by customs authorities.

He argued that a brick-and-mortar store can provide some degree of guarantee of product quality. This is also one of the reasons for the success of Huaqiang North Street's transformation.

Nevertheless, he warned that the key is whether managers on Huaqiang North Street could maintain the authenticity of their products in the market.

One media report claimed that although Ming Tong Commercial City has offered assurances that all its products are authentic and pledged to pay compensation 10 times the value of any counterfeit product sold, many stores there have failed to produce official authorization certificates.

As a supplier to many daigous - cross-border personal shoppers who buy products overseas and resell them in China - vendors at Ming Tong go out of their way to provide special delivery services by sending products directly to daigous' clients from Huaqiang North, but alter the consignor address to whatever is required in order to avoid association with the cradle of shanzhai products.

There are also seemingly authentic stores bearing names of well-known chains and it is difficult for customers to distinguish the real ones from the fakes, which is something electronics markets were notorious for in the past.