Who still goes to Watsons?

Zebra Consumer, Zhang Wenxi

The less you've visited Watsons, the dimmer its prospects appear.

Recently, CK Hutchison Holdings disclosed its full-year 2025 results. While the retail segment (primarily Watsons) showed overall growth, a noticeable divergence has emerged in the operations of the health and beauty products business between China and Europe. Total revenue in China decreased by 2% compared to 2024, same-store sales fell by 1.8%, and the number of stores declined by 7%, whereas Europe maintained growth.

Given the same business model, both rooted in physical stores, why are the operational outcomes so starkly different?

The operational divergence of Watsons between China and Europe is not merely a fluctuation in performance; it more profoundly reflects the differences in consumption habits, shopping scenarios, and store functions that offline health and beauty retail faces in different markets.

Pressure in China

The pressure on Watsons China cannot be fully explained by changes in skincare or makeup demand alone. A more critical background factor is that Chinese consumers are increasingly prioritizing online channels for making purchase decisions across stages like selection, price comparison, ordering, and repurchasing.

According to industry association data, the total omnichannel transaction value of China's cosmetics market in 2025 was 1104.245 billion yuan, a year-on-year increase of 2.83%. Online channel transactions accounted for 721.773 billion yuan, up 4.45% year-on-year, representing 65.36% of the market. Offline channel transactions were 382.472 billion yuan, a slight decrease of 0.08% year-on-year, accounting for 34.64%.

This data does not mean offline consumption is disappearing; its importance in the transaction process remains, but the role it plays has changed.

For Watsons, whose business is based on physical stores, the impact of this shift is quite direct. Watsons stores used to comprehensively fulfill consumers' in-store needs for screening, comparison, trial, and purchase. However, when online platforms have already completed product seeding, price comparison, review filtering, and promotional outreach in advance, the advantages of physical stores in certain consumption stages become diluted.

Accenture's 2026 China Consumer Insights report mentions that 43% of Chinese consumers are accustomed to browsing and buying online, higher than the global average of 32%. Simultaneously, 51% of Chinese consumers prefer an integrated online and offline shopping experience. This shows that Chinese consumers have not abandoned offline channels but have shifted more purchase decision-making online.

For Watsons China, the overall weakness in multiple metrics stems not only from changes in foot traffic but, more importantly, from the evolving role of its stores within the entire transaction chain.

To adapt to market changes, Watsons has begun establishing "dark stores" for online orders. This move indicates that the function of its China stores is no longer limited to serving in-store customers; new responsibilities like online order fulfillment, instant delivery, and sorting are being integrated into store operations.

In other words, stores still hold value, but the sources of that value are more dispersed. The relationship between store count, same-store growth, and profit contribution is no longer as stable as before.

It's worth noting that Chinese women are not unwilling to buy cosmetics offline; it's that Watsons' appeal to them is waning. According to Cosmetics News data, Sam's Club sells at least 10,000 units of over 40 beauty products each month, with these bestsellers alone generating nearly 100 million yuan in monthly sales.

Growth in Europe

Compared to China, Watsons Europe continues to grow, which cannot be simply attributed to weaker online competition locally.

NielsenIQ's "2025 State of Beauty Report" shows that over the past 12 months, the growth rate of online beauty product sales was nine times that of offline sales, with online beauty sales in Europe also achieving 10% growth.

However, the online growth in the European market has not fundamentally altered the operational foundation of offline health and beauty stores. Physical stores still fulfill consumer needs in many scenarios.

Another NielsenIQ research report mentions that under inflationary pressure, European consumers will buy discounted goods and switch to lower-priced brands but are unwilling to make significant compromises on quality. This point has practical significance for health and beauty retail chains.

Local consumers' in-store purchases are not just about completing payment; they also involve comparison, selection, and immediate access to products and discount options during the store visit. As long as this type of demand remains widespread, physical stores will continue to be important venues for driving sales and growth.

According to CK Hutchison's 2025 annual performance data, multiple metrics for Watsons Europe are still rising. Total revenue in Western Europe increased by 10%, same-store sales grew by 3.9%, and the number of stores grew by 2%. In Eastern Europe, total revenue increased by 20%, same-store sales grew by 4.1%, and the number of stores grew by 7%.

This means the divergence between Watsons' China and Europe operations is not merely a simple difference in business performance between the two regions. It more closely resembles stores serving different consumer functions in different markets.

The role of China stores in display, fulfillment, instant delivery, and online synergy is beginning to emerge, while European stores can still, to a large extent, concentrate the processes of screening, price comparison, discounted purchasing, and immediate takeaway within the in-store scenario. The varying degrees of completeness of stores within the consumption chain naturally lead to different operational results.

Industry Resonance

The pressure on Watsons China is not an isolated case of business fluctuation. In fact, China's offline beauty retail sector has generally faced significant operational pressure in recent years.

In its 2025 annual report, Shanghai Jahwa disclosed that Sephora (Shanghai) had operating revenue of 5.501 billion yuan last year, with a net profit of -352 million yuan; Sephora (Beijing) had operating revenue of 1.035 billion yuan, with a net profit of -147 million yuan, making the operational pressure evident.

Sephora is a global premium beauty retail chain originating from France and belonging to the LVMH group, covering all beauty categories including makeup, skincare, fragrance, haircare, body care, and beauty tools. It has thousands of physical stores and flagship stores in over 30 countries worldwide. Shanghai Jahwa is a joint venture partner of Sephora Shanghai/Beijing.

Facing similar pressure, Sa Sa International, a leading one-stop beauty retail group in Asia, has adopted a more decisive approach. According to relevant announcements, its online business in mainland China already contributes over 80% of its turnover. Consequently, it has decided to close its remaining physical stores in mainland China and exit the offline retail market there.

The different performances of Watsons in China and Europe cannot be fully explained simply by strong online and weak offline trends. What aligns more with current operational reality is that its China stores are undergoing a faster reassessment of their functions.

For Watsons, this divergence is no longer just a year-to-year performance fluctuation. It also reflects that the operational environments faced by offline health and beauty retail in different markets have already diverged significantly.