Watsons is Penalized Once Again!

In January 2022 Watsons triggered negative public opinion twice.This included Watsons staff insulting consumers in the live streaming studio, and questionable customer traffic attraction activities. Watsons was resultantly penalized for suspected deception of consumers with false pricing. In February, Watsons was penalized again, triggering negative public opinion a third time at the beginning of the year.

Recently, Shanghai Watsons Daily Use Articles Co., Ltd. was fined 6,540 yuan by Shanghai Huangpu District Market Regulation Administration for its misleading promotion. Specifically, the company was clearly aware that "Unicute niacinamide essence" is an ordinary cosmetic product, and the company still marketed the product as “sun tan prevention”, which is untrue, and put the advertising board on the right side of the cosmetic product to mislead consumers.

It is fair to say that Watsons has been in trouble.Since beginning of 2022. In January, consumers were rejected from picking up their online orders in offline stores after participating in Watsons “Facial mask for 1 cent” promotion event. When consumers expressed their dissatisfaction in Watsons live streaming studio, the host insulted consumers as “mad dogs”. Watsons officially apologized for this incident eventually. After that, a Watsons outlet was warned and fined 50,000 yuan by the relevant departments as it was involved in deals that deceive consumers with false prices. After less than 20 days, Watsons was fined again for false advertising.

In February 2022, Watsons was not the only company that was penalized for deceptive advertising in beauty advertisements.

Shanghai Municipal Market Regulation Administration issued an administrative penalty letter to Estee Lauder (Shanghai) Trading Co., Ltd. on January 21. On the morning of January 31, the case handlers found that Estee Lauder (Shanghai) Trading Co., Ltd. was suspected of violating the relevant regulations of the Advertising Law of the People's Republic of China for publishing advertisements publishing "Youth Index +77%", "Tenderness +17% Smoothness +20% brightening +15%" through various channels. The company was ordered to stop publishing illegal advertisements, and eliminate the influence within the corresponding scope, with a fine of 2.381671 million yuan.

Since the implementation of the new cosmetics regulations, the penalties for exaggerating the efficacy of cosmetics and false claims in advertisements have been detailed. At present, for exaggerating and falsifying the efficacy of cosmetics, if the efficacy claim is made through labeling it violates the relevant provisions of the "Regulations on Supervision and Administration of Cosmetics", and the drug regulatory department will impose a fine of 10,000 to 30,000 yuan or 3 to 10 times the value of the goods on the cosmetic registrant or filer. If false claims are made through advertisements, the market regulation department will order the advertiser to stop publishing advertisements and eliminate the influence within the corresponding scope in accordance with the provisions of the "Advertising Law", and impose a fine of 3 times to 5 times the advertising cost, or a fine of 200,000 yuan to 1 million yuan.

Admittedly, behind Watsons troubles is the market downturn, especially the slowly declining young consumer groups. Brand aging, outdated scenes, no sense of experience, rigid service and social phobia... are gradually becoming the main discussion topics about Watsons on Xiaohongshu and Zhihu. Among them, the topic of "over-enthusiasm" of shopping guides is the most frequently-discussed one on the Internet. Compared with the over-enthusiastic shopping guides of Watsons, young people still seem to prefer Austin Li from the live streaming studio.

However, under the pressure from both online and offline sectors, Watsons is also actively seeking transformation. Watsons retrofitted outdated stores that had few beauty brands, introduced brands such as LUNA, the SAEM, I'M MEME successively, decorated and transformed stores with more trendy makeup elements, and gradually replaced the previous blue and white store theme. Watsons claimed that it will reshape the image of its shopping guides and improve their service level through training.

In addition, the "Watsons Official Cloud Store" applet was officially launched. It is said that within six months after its launch, sales exceeded 500 million yuan. On February 28, 2021, Watsons officially announced that KUN (Cai Xukun) was the brand spokesperson. At the same time, Watsons also focused on online shopping malls, and launched activities such as winning posters with likes and comments to attract more customer traffic.

It is worth mentioning that after a series of operations the same-store sales of Watsons increased by 17.8% in the first half of 2021. Specifically, the sales in the Chinese market increased by 32% year over year, but it has still not recovered to the pre-pandemic level.