The first of the Ecuadorian franchises will be established in the new phase of the Mall Del Rio Shopping Centre, in Cuenca, a city with a population of nearly half a million people located in the middle of the country.
First step into South America
The company, which specializes in color cosmetics and anti-aging products, says that the move is a good first step into the South American market, which should help the company expand into neighboring countries and throughout the continent.
Evidently Faces Cosmetics is aiming to break into smaller less developed markets in an effort to ride the wave of economic and retail growth that is currently sweeping the region.
The South American region has posted the highest cosmetics sales growth in the world, with figures exceeding double digits overall. Indeed experts forecast that the region will continue to attract international cosmetic manufacturers bidding to capitalize on the increased opportunities for growth.
Brazil demonstrates remarkable growth
In particular Brazil has demonstrated remarkable cosmetics growth, which Euromonitor believes will be sustained in coming years, eventually leading it to usurp China as the fastest growing world market.
However, Faces is also targeting other developing markets, having announced a number of franchise networks in both Central America and in India, where market growth has also been particularly high.
Likewise, it is also focusing on expansion in the US market, having recently announced a new store franchise in Columbia, Maryland and with construction under way on another store in Fairfax, Virginia.
Franchise expansion crucial but costly
Faces' move to establish franchises in new markets is a crucial one, but it is also increasing its costs significantly, a fact that has hit its bottom line.
In its full year financial results, released in February, net sales increased 10.6 percent to $CAD4.4m for the year ending July 31, 2007 but high administrative costs led to an operating loss of $CAD2.3m.
Faces Cosmetics said the causes of the heavy losses included restructuring costs, written off stock and the raising of pre-IPO funds necessary for its expansion plans.
