Creating room for Norwegian quality: in the competitive Shanghai skin care market

Abstract

This thesis summarizes the work completed on an explorative research study of the Chinese hand cream market. It has been written on behalf of the Norwegian company Lilleborg, with the aim to find a suitable position for the company`s new hand cream in this market. The thesis gives recommendations regarding the Shanghai market as the primary findings, due to limited resources, concerns this city only. The findings are not to be generalized as this is not in the scope of the thesis. The Shanghai skin care market is growing and it is highly fragmented. The many different players, both foreign and local, are generally positioned as either luxurious; utilizing high- end distribution channels like exclusive specialty stores, pharmacies and department stores, or positioned as medium- to low- end; conveniently placing the products in a broad range of super and hyper markets. Moreover, the competition is fierce and the industry is extremely brand driven. Chinese young, urban consumers are getting more affluent and constitute the main force of the beauty economy. They are becoming more discerning in their tastes and making greater efforts to understand the heritage of individual brands. Many high- end consumers in Shanghai perceive quality as the most important element regarding hand cream, followed by price and brand. A high price symbolizes high quality, as do a foreign branded product. Additionally, many consumers have a relatively low brand loyalty towards their preferred products. Lilleborg should enter the Chinese market by establishing a representative office in Shanghai and tie up with a local distribution partner. The main focus should be on brand building by creating a story behind the company and product, based on a Nordic lifestyle and a “made in Norway” signature. Lilleborg should utilize alternative, low- cost media channels and encourage to a positive word of mouth effect.