Opening Up a Niche Market

December 01, 2014

In its most recent print edition, Forbes Korea focused on Proya CEO Fang Yuyou, a CKGSB EMBA alumnus and current student in the CEO class. As one of the leading Chinese cosmetic companies, Proya has seen tremendous domestic growth after targeting 3rd and 4th tier cities in China. Fang revealed that an eye-opening visit to view cosmetic firms in Korea in 2007 revolutionized his view on the importance of R&D.

Since most high-end cosmetic brands such as L’Oreal sell in department stores, middle-class or general consumers previously had limited experience to the brands. At this time, Jala, Proya, Osmun and other domestic cosmetic companies in China focused on 3rd or 4th tier cities such as Xian and Shenyang. They expanded their distribution networks by opening specialized shops. With the income level of millions of Chinese farmers increasing due to with government’s active support on consumption in rural regions, the volume of the cosmetic market greatly expanded. Where there was no dominant company in the cosmetic market, Chinese cosmetic companies strived to create world-class domestic brands.

Proya is one of these companies. When asked about its competitiveness, Fang Yuyou, CEO of Proya, answered ‘price’ and ‘position’. Proya was able to enter the most prestigious department stores in Beijing after it achieved high brand awareness after targeting 3rd or 4th tier cities and rural areas. Mr. Fang said, “Especially after local cosmetic brands led the innovation in design and service, the Chinese consumer’s preference for domestic brands has increased.” Although they still have some weak points such as low brand awareness and low credibility, the domestic cosmetic brands hold dominance in terms of their distribution network.

The rise of premium cosmetic brands has been outstanding. Due to increased income levels, many consumers tend to buy expensive products. Over the next five years, the growth level of premium cosmetics brands is forecast to be over 20%, higher than the growth level of mid-level cosmetic brands.

Proya is also targeting the high-end cosmetic market. In 2007, Mr. Fang visited research and development centers of Korean cosmetic companies and viewed their advanced facilities. He said, “Chinese companies have been busy simply selling products, but, from now on, they will devote themselves to research & development, design, packaging and other areas.”

Mr. Fang studied at CKGSB. He already completed the EMBA program and is currently studying in the CEO program. After the interview with Forbes Korea, he attended the UN Women’s Leadership Forum co-hosted by CKGSB and UN Women as a panelist. In the forum, Fang Yuyou emphasized that “women have more user experience in terms of cellphones and cosmetics, so they can be the innovation leaders in those fields.”

Read on Forbes website.

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