Overview of the Chinese cosmetics market

China’s cosmetics performance in the global stage 

According to Euromonitor, China’s cosmetics market occupies 12.7% of the global cosmetics market, becoming the second-largest market after the US.

Data source: Euromonitor, Top 10 cosmetics markets globally

Even after several years of market expansion, the market still seems to have a fine potential for growth in the future. According to Euromonitor, the CAGR of the Chinese cosmetics market is the highest in the world.

Data source: Euromonitor, Top 10 cosmetics market ranked by CAGR

Based on data from the National Bureau of Statistics, the yearly growing pace is remaining at about 10% since 2013 and the total retail sales reached 299.2 billion RMB in total. Hence, investing in such a large and consistent growing market can bring high revenue to the company.

Source: National Bureau of Statistics, Total cosmetics retail sales in China

Chinese domestic cosmetics brands are prospering

Cosmetics comprise a wide range of products like skincare, makeup and perfume. In the Chinese cosmetics market, skincare products are the main consumption force, and makeup products increased its market share year by year. Skincare products consistently accounted for over 50% of the Chinese cosmetics market. On top of this, makeup products have been continuously increasing since 2014.

Data source: Euromonitor, Cosmetics market distribution by category

Seven of the ten top cosmetics brands in China sare Chinese domestic cosmetics brands. The attention rate of Perfect Diary is far higher than other brands, meaning that a lot of cosmetics fans in China follow Perfect Diary.

Data source: QuestMobile New Media, Which Chinese domestic makeup brands are the most popular

Among the top 100 most popular cosmetics brands in China, 37% are Chinese domestic makeup brands.

Data source: QuestMobile New Media, Regional Distribution of top popular 100 brands

There are two cosmetics categories where Chinese domestic cosmetics brands have a strong position. These categories are essential skincare related products and eye make-up. Essential skincare products like hand cream, mask and cleanser have high daily consumption. Chinese domestic cosmetics brands could use price advantage to compete, through controlling the supply chain to lower cost. Besides, unique design helps Chinese domestic makeup brands make eyeshadow and eyebrow pencil hot products.

Data source: QuestMobile New Media Database, Origin of brands dominating China’s cosmetics market by product category

The rise of Chinese domestic makeup brands is correlated with sales promotions. According to Askci, 2 of the top 5 sales brands were Chinese domestic cosmetics brands during 618 shopping festival in 2020. Perfect Diary and Florasis ranked first and fourth respectively.

Data source: Askci, Cosmetics brands sold most during 618 shopping festival

Chinese cosmetics consumers portrait

According to data on Tmall and Taobao, consumers under 30 years old place most of cosmetics orders. Most of them are post-90 or even post-00. Students aged 18–22 made up over 25%, but their market share has decreased.

Data source: Tmall & Taobao, Chinese cosmetics consumers distribution by age

However, the share of consumers over 30 years old has an overall increase. This increase might because people aged over 30 gradually build and wake up the awareness of using skincare and makeup. Therefore, the demand for cosmetics among them goes up.

What Chinese domestic cosmetics brands consumers purchase most

According to the skincare top sales, Pechoin harvested 1,733 million RMB in sales, ranking first, followed by Chando and WIS, with 1,653 and 1,515 million RMB respectively.  

Data source: Tmall & Taobao, Top Chinese skincare brands

In the makeup market, top brands are different from top skincare brands, although some makeup brands provide cosmetics products. Perfect Diary maintained its performance and ranked first, with 2,762 million sales.

Data source: Tmall & Taobao, Top Chinese makeup brands

What makes Chinese domestic cosmetics brands different

Compared to foreign cosmetics brands, Chinese brands seem to put their eggs in more baskets. Their marketing efforts are spread through much more variety of activity and spread across many more platforms.

Creating a KOL marketing feedback cycle with short video apps, live-streams and KOLs

The rise of most Chinese domestic cosmetics brands attributes to social seeding through KOL marketing and cooperations. This feeds a feedback cycle where consumers give feedback on open platforms, where brands can then apply to their product development.

Data source: QuestMobile, Online marketing mode

Leverage traffic of multi-channel, post content in different forms

Traffic in multi-channel is other boost for the development of Chinese domestic cosmetics brands. It is common to market on Douyin, Kuaishou, Weibo, Wechat and Red, but each social platform has its own marketing strategy. On Douyin and Kuaishou, where people post short videos, brands cooperated with KOL to post makeup try-on, makeup tutorial and unbox testing. On Weibo, brands normally implement celebrity endorsement. On Wechat official account, brands post deep introduction of products. On Red, brands and KOLs post products-related tutorial.

Data source: QuestMobile, Online marketing in different forms

Launch cross-over products in big e-commerce promotion

Co-branding is more a strategy to get hold of targeted audiences who have complex behaviors. Through cooperating, brands can find a connection between consumers and brands. For example, Chando’s cooperation with Bilibili is a new try for its marketing strategy. As a place attracts most young generation, Bilibili provides a platform for Chando to increase consumers base.

Source: Chando, Chando X Bilibili

Unique marketing strategies for each Chinese domestic cosmetics brand

Perfect Diary, a textbook case for private traffic

Perfect Diary, established in 2016, is one of the young Chinese domestic brands. It targets 20-35 year old women, which is a high spending power group. In March 2017, it opened an online store on Taobao and Tmall. Half a year later, Perfect Diary opened on Red, WeChat store and hosted three Pop-up stores in Shanghai. In 2018, It established a Douyin and JD store. On January 19^th, 2019, it owned the first offline experience store in Guangzhou and expanded to 40 offline stores now.  

Behind Perfect Diary’s bold IP collaborations

IP cooperation is becoming a popular marketing method for domestic Chinese brands. Perfect Dairy cooperated with lots of IPs to launch new products. The most popular IP cooperation is with the Discovery channel.

Source: Tmall, Perfect Diary X Discovery

The history of Perfect Diary’s IP cooperation consists of three stages. In the first stage, Perfect Diary started to explore the market and launched fashion week related products. It reached celebrities, who have high credibility and cultivate the trust in the market. In the second stage which is the explosive phase, Perfect Diary cooperated with cross-over IP and KOLs to promote a single product. In this stage, it cooperated with makeup KOLs and reached to the followers, which increase the influencing power of brand. In the third stage where the brand continuously grew, it cooperated with mass and trendy IP. This cooperation helps to expand customers group, including people make-up beginners. 

Perfect Diary implements private traffic to build brand-owned traffic pool

Perfect Diary builds private traffic in two ways and uses two virtual BA (Beauty Advisor) to manage different types of consumers. Xiaowanzi (小完子) is in charge of consumers, who purchase online and joined through a lucky money card. Xiaomeizi (小美子) maintains the consumers who attracted from offline pop-stores or give aways. The source of customers is different, which requires two virtual BA to communicate customers in different tactics.  

Data source: Maoshihu, Process to reach Xiaowanzi

Florasis redefines the oriental cosmetics

Florasis’ sales performance is rising

Florasis was founded in March 2017 and opened its Tmall flagship store in August 2018. Although the sales for 2018 were only 43.19 million RMB, Florasis’ sales reached 1.1 billion RMB in 2019, rising nearly 25-fold. 

Florasis also presents an excellent in its first Double Eleven promotion. According to Mktindex, Florasis gained 220 million RMB sales and ranked fifth among the top 10 Chinese cosmetics brands that gained most sales.

Distinctly Asian makeup

As a chinoiserie cosmetics representative, the idea behind Florasis brand is ‘the Oriental makeup, using flowers to nourish the makeup look’. It includes everything from product ingredients to package design. Product ingredients highlight to use nature grasses and flower, and nourish the skin mildly. Package design and product name also filled with chinoiserie. For example, Florasis’s carved lipstick replicates the ancient Chinese carving technique and carved flowers on the lipstick, creating a precedent for the three-dimensional texture lipstick in China.

Source: Taobao, Florasis’s classical relievo

Pregnant woman friendly

Florasis gives people a safe and harm-free impression. It emphasizes that its products contain zero alcohol, zero-hormones and contains no harmful ingredients. An actor (Jiani Zhang) in Story of Yanxi Palace, which is a popular Chinese drama, recommended Florasis’ CC cushion. Zhang posted her using experience as a pregnant woman on Red, which drew most followers’ attention and discussion.

Source: Red, Jiani Zhang promoted Florasis’ product

Picking right KOL and spokesman

According to Baidu Index, the spokesman’s effect can be observed. On 3^rd March 2019, search word ‘花西子’ peaked because Justin Lee promoted Florasis’ loose powder. Another peak on 18^th May 2019 is because Florasis announce Jingyi Ju as spokesman. Jingyi and Florasis is a perfect match, because Jingyi owns high traffic and was known as the oriental beauty.

Data source: Baidu index, What increase the search of ‘Florasis’

Little Dream Garden, a black horse in the body care market

Targets ingredient-oriented consumers

Little Dream Garden is a Chinese cosmetic, focusing on developing body care products. It targets customers who care about the ingredients. Therefore, it emphasizes the ingredient and efficacy, naming product by main ingredient, such as Shea Butter body scrub and Ceramide body lotion.

Source: Taobao, Shea Butter body scrub

Posts testing video to build trust

Little Dream Garden leverages KOLs and KOCs to post product testing videos on Red, guiding users to join in the discussion. The opinion of KOL and KOC can increase trust rate and prompt consumers to buy the products.

Source: Red, Products testing video

How WIS involves celebrities on Weibo

WIS is a Chinese domestic skincare brand, created in 2011. It aims to provide scientific and effective products. It does not have any offline store so far. The brand targets consumers aged 18 -35 who have the strong social ability. For brand positioning, low-price capture lots of post-90 and post-00’s interest.

Source: Wechat, WIS products

Weibo is WIS’ social marketing asset

The popularity of WIS results from social marketing on Weibo. For example, a member of Happy family, Weijia Lee, recommended its product on Weibo, which attracted more than 240 million readers and brought around ten thousand followers for WIS. At the same time, celebrities, such as Jiu He and Na Xie, reposted the Weibo and reinforce the marketing effect.

Source: Weibo, Weijia Lee promoted WIS

What can brands learn from the success of Chinese domestic cosmetics brands

Although foreign cosmetics brands represented more than half of the cosmetic market in China, the rise of Chinese cosmetics cannot be overlooked. In fact, they can provide a learning opportunity on how to effectively appeal to Chinese consumers.

• Listen to the customers

Under short video App + Live Broadcast + KOL marketing mode, brands not only promote their products but also listen to the feedback from customers. Upgrading products according to the feedback is an important strategy to maintain brands’ sales performance.

• Pick the right brands for collaborations

Most Chinese domestic cosmetics brands implement cooperation with brands in different fields, celebrities and etc. to launch limited products. This campaign can bring the brands more consumers, strengthen brand image and increase brand volume.

• Promote in an appropriate form

Chinese cosmetics brands promote their products in different forms according to the character of a product. A testing video will gain more trust for a product that emphasizes its harmless ingredients. 

Learn more about the Chinese cosmetics and personal care market

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This article The rise of Chinese domestic cosmetics brands: Florasis, Little Dream Garden, WIS, and Perfect Diary is the first one to appear on Daxue Consulting - Market Research China.

History of Marie Dalgar

In December 2006, Marie Dalgar ((玛丽黛佳) created its first grafted mascara, which completely overturned traditional view on mascara. It achieved an amazing sales performance: Marie Dalgar claimed that they sell one mascara every 15 seconds. In May 2008, the Chinese cosmetics brand formally established Shanghai Feiyang Cosmetics Co., Ltd., the marketing center. The brand has followed the rapid development path based in Shanghai and expanding to the whole country. In the same year, it launched its official website, providing consumers with a comprehensive information platform. 

In January 2010, Marie Dalgar opened its’ international factory in Shanghai Fengxian Industrial Park, covering an area of ​​20 acres, which is the largest mascara production base in Asia. Besides, it won the “China Cosmetics Annual Best Single Product Award” at the 2010 China Cosmetics Industry Conference.

In March 2011, Marie Dalgar won the 2010 “Best Makeup Brand” and “Best Single Product” awards in China’s cosmetics industry. In the same year, the brand joined hands with the well-known fashion women’s website Kimiss, and organized makeup contest with international brands such as Armani, Bobbi Brown, and MAC.

Currently, Marie Dalgar is one of the most promising cosmetics brands in the Chinese market.

Marie Dalgar’s brand concept

As the brand claims, besides the perfect effects, makeup is also an artistic master piece. It enhances confidence and it is a factor for different life expression. Marie Dalgar represents the spirit of modern woman’s personality and the attitude of women in this era.

Focusing on young consumers

From the user portrait, Marie Dalgar’s target group is 18-24 year old college students, and 25-35 young white-collar workers in China who have just started work.  Brand has a strong focus on young consumers and builds products that are easy for them to use on different occasions. The youthful brand naturally attracts young consumers through its product innovation and engaging cross-over marketing in the ‘new retail’ environment. Having its own research and development centers and manufacturing bases allows Marie Dalgar to innovate and meet changing demands quickly.

Data Source: NetVoices, 2018 Top Cosmetic Brands in China Report, Marie Dalgar’s consumers by age

Marie Dalgar’s marketing strategies

The domestic brand embraces the “New Retail” concept, taking a unique approach to increase the consumer experience and build brand awareness. On top of this, it has been a pioneer in collaborations.

Cooperating with third parties for campaigns

Co-branding is a key marketing strategy. These collaborations are through co-branding, such as collaboration with KFC and Heineken, and through collaboration with social media platforms like Douyin.

Co-branding rather than embassadors

Every year, Marie Dalgar holds Crossover Art Project. The brand invites artists to express themselves by using its make-up products. For example, fashion photographer Paco Peregrin chose the theme ‘Facing’ in 2015. The following year, photographer Damien Dufresne opted for ‘Through your eyes’ . For its products packaging, the brand also calls on artists, like the young Chinese artist JINLE, invited to celebrate the year of the pig. Out of a limited edition run of 3,000 units, Marie Dalgar sold 1,000 units within 10 minutes. The campaign reached 62 million consumers online, with a total of 50 million engagements.

Source: Marie Dalgar, Wechat, Year of the pig campaign 

Cooperation with KFC

The young makeup brand decided to take advantage of the expanding retail ecosystem by cooperating with third parties for special campaigns. Marie Dalgar outsourced sales efforts and found other ways to use partners’ e-commerce platforms in China. In 2017 Marie Dalgar cooperated with KFC on campaigns and advertising, pulling in traffic from KFC’s huge consumer base.

Source: Chinessima, Marie Dalgar’s cooperation campaign with KFC

Marie Dalgar and KFC created the “Pink is Cool” theme cross-border lipstick gift box. “Pink” and the shared target audience became the basis of this cross-industry cooperation. Marie Dalgar used this collaborative lipstick to create a cool makeup look, and attracted the attention of makeup consumers through the sharing on the Weitao platform. KFC used stores and offline resources to create a cross-border offline theme store to promote this cooperation. The campaign helped the brand win 1.4 million visits on Tmall’s official store and make over RMB 12 million in sales. Most of visits were from selling limited edition gift sets, which included both KFC coupons and lipsticks.

Cooperation with TikTok

In April 2018, Marie Dalgar and TikTok jointly launched challenge event. Being the first collaboration of its kind in the beauty industry, the video challenge had a maximum number of participants of 75,000. The event and related advertisements reached approximately 288 million people.

Cooperation with CCTV

Marie Dalgar partnered with the CCTV documentary series “National Treasure” for a limited-edition lipstick. It helped to build a well-earned reputation among consumers for championing Chinese heritage. Collaborations don’t even need to be in the realm of high culture as long as it will reach the masses in popular spaces.

Cooperation with Heineken

Marie Dalgar teamed up with brewing giant Heineken and Tmall in 2019 to release a “forgiveness” gift box. The gift box was released on Tmall’s “Fans Day” to coincide with the European Champions’ League soccer final, which Heineken sponsors. The hook: soccer lovers could give their partners a gift box to beg “forgiveness” and apologize for ignoring them while watching the final. “Wearing a green cap” in Chinese means “to cheat on your loved one”–in this case, with soccer. Two boxes were offered in “his” and “hers” editions. One box featured green lipsticks and green tea flavors, while the other contained limited-edition Champions’ League bottles of Heineken.

Marie Dalgar uses AR to attract customers

Marie Dalgar and Ali jointly launched the “unmanned color vending machine” and the beauty unmanned store “TO GO “ combined with the platform’s big data to reach more potential consumers.  Marie Dalgar’s “TO GO” store features an augmented reality (AR) mirror to link offline consumers’ experience with their online purchase. This application of AI in beauty  boosted both offline and online sales.

Source: Chinessima, Marie Dalgar’s “TO GO” store in Shanghai

WeChat and Tmall are key platforms for brand’s retail and marketing

Marie Dalgar established the “Playing Color Academy” on WeChat. They use this mini-program to make more customers to reach offline channels. On top of this, Marie Dalgar uses WeChat database for analysis of user portraits and then send it to product development department.

Marie Dalgar actively uses Tmall and gained popularity among its users. In 2018 its rating there was even higher than such cosmetic giants as Armani, Estee Lauder and YSL. Besides, brand’s live streaming on Double Eleven was equally astonishing, with a total of nearly 100 live broadcasts for 300 hours and 1.3 million views. 

Data Source: NetVoices, 2018 Top Cosmetic Brands in China Report, Make-up brands rating among e-commerce users in China

Marie Dalgar is one of the leading cosmetic brands in China

Marie Dalgar is one of the fast-growing brands in the make-up market in China. Such foreign cosmetics brands in China as YSL, Dior and MAC are on the top of ranking.

Data Source: Kantar, Top-5 fast-growing make-up brands in China

Innovative products push Marie Dalgar’s sales in China

In its early stages, Marie Dalgar attracted attention thanks to its “grafting” mascara, especially adapted to the relatively short and sparse eyelashes of Asian people. “It lengthens eyelashes by 300% and increases their density by 700%”, according to Jumeili.

Marie Dalgar’s Innovative products:

• The world’s first grafted mascara
• The first micro-vibration electric mascara in China
• The first domestically baked eyeshadow and blush
• The first mascara with retractable brush in China
• The first vibrating mascara in China
• The first domestic mascara with adjustable thickness and variable extension brush

Pioneering projects:

• The first domestic mascara with 360° rotating brush
• The first custom-made DIY eye shadow in China

Marie Dalgar was the number one domestic makeup brand during the 2018 Double Eleven festival

On Double 11 shopping festival in 2018, Marie Dalgar’s online flagship store was on the Tmall’s Top Beauty brands list. Its mascara also was in TOP 3 hot single products. The daily turnover of offline shopping mall channel stores increased by 414% year-on-year during 11.11 festival. Marie Dalgar participated in Tmall Double Eleven many times, and won the “New Retail Outstanding Contribution Award” from Tmall. The relationship between Marie Dalgar and Tmall are complementary.

Marie Dalgar expands to the Asian market

All of these steps helped to make Marie Dalgar one of the best-selling local brands and advanced the company onto the global stage. It became the first Chinese brand to sell its products in Sephora stores outside of China.

Expansion to Singapore

At the end of 2018, the brand entered Singapore via Sephora. To Mary Dalgar’s CEO, Chen Haijun (陈海军), Southeast Asia is only a preamble before Europe and the United States. “Worldwide markets will represent 20% of the brand business within 5 years”, he said.

Because of it’s strong innovation power, and collaborations to expand it’s consumer base, Marie Dalgar is one Chinese brand that is worth learning from.

Learn more about China’s cosmetics market in our report

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China is the second largest cosmetics market in Asia and the fifth in the world. It has been a profitable paradise for foreign cosmetics brands for a long time. Foreign cosmetics brands in China own around 70% of the market. In 2018, P&G and L’Oreal had the biggest market share in China, with 25.8% and 21.5% accordingly. The American Procter & Gamble, the French L’Oreal, The Japanese Shiseido, the Anglo-Dutch Unilever and the American Estee Lauder are the key players in China’s cosmetic market.

Data Source: qianzhan, China’s cosmetic market share 2018 (foreign brands)

Chinese consumers’ behavior is evolving very quickly, due to the huge economic growth. Hence, the middle-class in China are more sensitive to their life quality and health-awareness. Therefore Chinese consumers have been more interested in using overseas products which have a long history and more refined products.

Marketing strategies of foreign cosmetics brands in China

L’Oreal is a huge success among foreign cosmetics brands in China

L’Oreal shows rapid growth in Chinese e-commerce

The French brand has grown ten-fold on e-commerce since 2011. It is the leader on e-commerce in China, which is the fastest growing channel for L’Oreal. In 2020 e-commerce already makes up 50% of L’Oreal’s China sales.

Data Source: L’Oreal Group Annual Reports, Percentage of Loreal China sales from e-commerce

The next step for L’Oreal is new retail: the combination of the offline and online channels. It includes such technologies as augmented reality, virtual reality, and artificial intelligence. Today L’Oreal in China already provides skincare diagnostic supported by artificial intelligence for Vichy on Tmall.

Foreign cosmetics brands actively use KOLs in such online platforms as WeChat and Weibo. For example, many celebrities like Li Gong, Zhilei Xin (Famous Chinese actresses) promote L’Oreal cosmetics among Weibo users. 

Personalization and co-branding are the key cosmetics marketing strategy in China for L’Oreal

More and more companies focus on offering personalized experiences for their customers. To create a more customized digital experience, L’Oreal has integrated technology to let people “try on” lipsticks by pointing their smartphone camera at themselves. The L’Oreal-owned Giorgio Armani make-up brand became the first luxury line to use the technology on WeChat. WeChat users can order them from Giorgio Armani Beauty’s mini-program shopping site. Users also can screenshot, save and share images as well as view before and after images to elevate the consumer shopping experience. 

Source: Cosmetic Design Asia, Loreal Group has launched of its Augmented Reality (AR) make-up try-on application ModiFace in China

L’Oreal’s quick rebound after COVID-19

The French brand reported that its China sales have seen signs of recovery since the COVID-19 outbreak. Despite overall sales for the quarter shrinking globally, L’Oreal China achieved high growth in March 2020. The CEO of L’Oreal Group, Jean-Paul Agon highlighted that the company’s performance in China was “remarkable”.​ “China was able to close the quarter at plus 6% which is pretty amazing when you think about the difficulty that they had due to the pandemic.”​ L’Oreal China recovered quickly due the early restoration of operation and wide usage of the online-to-offline model. Additionally, during the Women’s Day Festival on March 8^th, 2020, L’Oreal group launched an online shopping event in China to trigger sales.

In March 2020 sales of L’Oreal Group in China became positive again. That proves that using of online-to-offline model and social networks promotion were successful marketing strategies for L’Oreal in China, and especially boosted their sales through the tail end of the pandemic.

Estée Lauder tops the list of 100 most prestigious cosmetics brands in China

Estée Lauder targets young Chinese millennials

The beauty brand targets young millennials to tap into China’s booming cosmetics and personal care industry. Its shift away from older consumers is part of its long-term investment strategy in the country. Estée Lauder’s cosmetics marketing strategy in China is to position itself as millennial-focused. It quickly identified that tapping into the high spending ability of young Chinese consumers with specialized luxury lines is essential for its success.

To gain a clear, competitive edge over its rivals, it redesigned its marketing campaigns. For example, Estee Lauder in China increased digital engagement, leveraged social media platforms such as WeChat and Weibo. Additionally, like many other foreign cosmetics brands, it collaborated with the local celebrities.

Estee Lauder focuses on digital strategy

E-commerce in China has developed rapidly and is a popular way to shop for most Chinese. Thus, it took a specialized online strategy to adapt to the Chinese market. E-commerce represents approximately 30% of Estée Lauder’s business in its top markets. In 2014, the brand became one of the first high-end cosmetics brands to enter Tmall. They built a professional team with 50 persons to focus on the brand’s Tmall store and independent e-commerce shop. In 2017, the sales revenue of Estee Lauder Group in China had 40 percent growth. Notably, e-commerce accounted for 50 percent of that increase. Also, as a part of its cosmetics marketing strategy in China, Estee Lauder opened online stores for its sub-brands. It helped to bring more consumption to the Group.

Data Source: WalkTheChat Analysis, Evolution of Tmall flagship sales between March 2019 and March 2020

KOLs and special products push the sales of Estee Lauder in China

Estee Lauder invests heavily in digital marketing, social media, and KOLs. For example, Yang Mi, a famous actress in China, is Estee Lauder’s brand ambassador. Her first cooperation with Estee Lauder in February 2017 earned over one million shares on Weibo and brought over 500 percent more sales. Meanwhile, some popular KOLs in China helped to increase consumption. In 2019’s double 11 presales, Chinese actress Li Jiaqi sold over 0.4 million Estee Lauder’s Advanced Night Repair in a short time.

Estee Lauder’s matrix covers almost all categories of cosmetic products and price ranges, reducing the risk that customers switch brands as their preferences evolve. Notably, Estee Lauder Group launched a brand called Osiao in Hong Kong in mid-October, 2012. This brand is specially designed for the skin of Asian people.

P&G’s cosmetics marketing strategy in China highlights premium innovation and product mix

P&G launches a premium skincare brand in China

Unlike other top foreign cosmetics brands in China, Procter & Gamble (P&G) decided to put focus on the premium segment. In 2019 this American company brought a premium skincare brand called Oriental Therapy to the Chinese market. Chinese herbal medicine inspired the company to create this cosmetic line.

What makes it especially unique is that it meets skin’s different needs during the four seasons. According to Oriental Therapy’s Weibo post, the beauty line focuses especially on Chinese women.  The brand is now available via Tmall, WeChat, and Xiaohongshu shopping platforms. P&G believes that Oriental Therapy will fill the gap P&G has in its beauty offering in China. One of its key products, Springtime Hydrating Essence costs 450 RMB or 65 USD. The brand’s skin-care sets cost between 740 and 1140 RMB, or 107 to 165 USD.

Source: Weibo, Premium skin-care brand Oriental Therapy for China

However, P&G faces a lot of competition among foreign cosmetics brands. For example, companies like Estee Lauder and Shiseido are also upping the ante through launching new brands including DARPHIN and D-Program.

P&G uses Alibaba to sell in China

To expand its e-commerce P&G has turned to Alibaba Group, which operates the country’s largest online marketplaces. Alibaba also offers digital marketing solutions and access to a huge audience via its media ecosystem, including  Alibaba-related companies such as video-streaming site Youku and the Twitter-like Weibo microblogging site.

“E-commerce also plays a significant role in brand building, which is changing P&G’s century-long brand-building model.” – says Jasmine Xu, the company’s vice president for Greater China e-business and branding. Oriental Therapy has also opened a flagship store on Tmall, where it offers products in different combinations.

China is the second biggest market for Shiseido

Shiseido adopts cooperative cosmetics marketing strategy in China

In 2020 the Shiseido Group opened its first Beauty Innovation Hub outside of Japan at its flagship space in Shanghai.  Shiseido Beauty Innovation Hub represents a new way of working to drive consumer-centric solutions in China. At this space, Shiseido plans to collaborate with Chinese startups and disrupters, and create innovation which will deliver true value. Cooperation and localization, rather than head-on confrontation, is the strategy Shiseido takes. The Beauty Innovation Hub aims to work with local startups in the extended beauty space. On top of this, Shiseido in China plans to experiment and create new businesses. The hub serves as an open innovation platform for Chinese startups, opinion leaders, area experts, media and scientists.

Source: Medium.com, Shiseido Beauty Innovation Hub in Shanghai

Shiseido in China joins Tmall to promote online sales

In 2018, Shiseido revealed their New Retail strategy. A part of this strategy is a platform they developed called the “Shiseido Official Beauty Star Product Hall”.

In 2019, Shiseido signed a partnership with Tmall. It helped to develop new products based on what Chinese consumers are searching for on Tmall. The first co-developed products, a ‘mild and refreshing scalp shampoo’ and an ‘essence oil for split ends’ will launch on Tmall under Shiseido’s hair and body care brand Aquair. Shiseido said it expects e-commerce to generate 40% of its China sales by 2020.

“Without a doubt, whether it be e-commerce or digital innovation, Alibaba is the leader. Alibaba is one of the most important strategic partners for Shiseido China as well as for the entire group,” said Fujiwara, Shiseido’s CEO.

Data Source: Shiseido Annual Reports, Percentage of Shiseido China sales from e-commerce

Mary Kay uses scientific innovation in China

Mary Kay China targets young consumers

As Chinese consumers are more and more informed about beauty, Mary Kay is facing the challenge of developing interesting products. “In China​, beauty consumers demand for products and services are constantly increasing.

The current consumer trend of skin rejuvenation in China is strengthening, and the purchasing power of the 18 to 24 age group is rising,” said Katherine Weng, general manager of Mary Kay China. To cater to younger consumers, the company’s cosmetics marketing strategy in China is to create “bold and interesting” ​products. In 2019, it launched Pink Young brand in China. As company claims, “It’s the answer for today’s woman who wants to show her femininity along with her fierceness.”

In 2018, the company invested around $50 million in the Mary Kay Science and Technology Center, located in Shanghai. Additionally, the company sees the need to increase its online presence. It has launched a new channel which enables consumers to use WeChat to place orders with independent beauty consultants.

Mary Kay focuses on direct sales in China

Mary Kay is one of the world’s biggest direct selling enterprises of skin care products and cosmetics. Within a short time, Mary Kay China established its name among Chinese consumers and experienced steady growth in the country’s first-tier cities. Now, it has set up 35 branch offices across the country. When the company first began expanding beyond China’s big cities, its direct-sales model was new to consumers in China’s second- and third-tier cities.

Mary Kay has three key strategies. First, it drew up strict rules on how beauty consultants should conduct themselves and present Mary Kay products. Second, it developed advertising campaigns in a variety of regional print and broadcast media. Third, the management team established special training programs for consultants.

The sales force represents a competitive advantage. Consultants know their customers well. Such personal networks are vital because Chinese consumers tend to trust people with whom they have a good relationship. Their close relationships with relatives and friends would ease making follow-up visits to get feedback and introduce new products.

Summary of the marketing strategies of foreign cosmetics brands in China

Co-branding

Not many foreign cosmetics brands use co-branding as a key strategy. Co-branding helps brands “exchange” customers, and effectively expand their consumer base. As competition in the Chinese cosmetics market is fierce, such giants as L’Oreal or P&G have not shown interested in involving other brands for cooperation. Shiseido has another approach. It has its Innovation Center in Japan, where it also cooperates with other local brands. Thus, cooperation with the Chinese start-ups was a natural marketing strategy for this company.

KOL marketing

KOLs are popular social media users who can influence a wide audience. In China they usually post on WeChat or Weibo, but other platforms like Xiaohongshu can be considered depending on the target audience. Many foreign brands cooperate with them to expand their audience, especially among millennials. To gain new consumers and increase sales, L’Oreal and Estee Lauder chose this cosmetics marketing strategy in China.

Direct sales

Direct sales are a traditional channel for all foreign brands in China. However, as of 2020 most brands consider e-commerce as a key sphere for development. During the COVID-19 outbreak direct sales showed its vulnerability. Mary Kay is the brand which always had its special strategy of creating personal relations between beauty consultants and customers. Nevertheless, now Mary Kay in China is also considering using digital technologies to promote its products.

E-commerce

The target audience in the cosmetics industry is the post-80’s and post-90’s generations. They always keep up with the latest trends and care a lot about their appearance. One of the most effective ways to approach them is to find where they spend most of their time: online platforms and social networks. Most foreign brands widely use online methods to expand their influence in the Chinese cosmetics market.

Special products

Some foreign brands focus on a special approach to the Chinese market. They create products and sub-brands oriented on the Asian audience. It could be skincare products created specifically for Asian skin or inspired by the Chinese traditional medicine. That helps to increase customers’ loyalty and increase sales in the Chinese market.

Author: Valeriia Mikhailova

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Meanwhile, Estee Lauder Group launched twelve brands into the Chinese cosmetic market, enabling China to be its No.2 international market. In 2019, Estee Lauder Group’s net sales in the Asian-Pacific region reached 3.6 billion USD. In contrast to the American region’s negative change, the Asian-Pacific area earned a 21 percent increase year-over-year.

Data Source: JUMEILI.CN, Regional Net Sales of Estee Lauder Group

History of Estee Lauder

Mrs. Estee Lauder created Estee Lauder in New York. Now, it is the world’s biggest company for skincare products, cosmetics, and perfume. Its products are available in over 13,000 outlets in over 130 countries around the globe. One of Estee Lauder’s strengths is R&D and product development. Also, it keeps a harmonious relationship with its customers, making it possible for the company to acquire more growth in the future. Mrs. Estee Lauder had always insisted that a woman can always be beautiful and fashionable. Thus she injected her lifestyle and sensitivity to fashion into the brand.

The layout of the Estee Lauder Group in China

Estee Lauder Group launched many well-known brands, promoting its whole layout in the Chinese cosmetics market.

Estee Lauder Group in China desires to provide a wide range of cosmetic products to Chinese customers

When Estee Lauder initially entered China, it focused on high-end product sales. In 2005, however, it launched six new brands into the Chinese market. Estee Lauder assigns its brands to different target customers. It hopes every customer can find suitable products from Estee Lauder Group. M.A.C highlights the personal style, looking more fashionable, while Estee Lauder is a typical high-end brand. Now, all-around brands’ matrix almost covers all categories of cosmetic products and price zone, reducing the risk that customers change their preferences. Notably, Estee Lauder Group launched a brand called Osiao in Hong Kong in mid-October, 2012. This brand is specially designed for the skin of Asian people.

Brand matrix of Estee Lauder Group in China

Now, Estee Lauder Group has many famous brands. Its top brand is LA MER. Then Estee Lauder follows as the first tier brand, and Clinique and Origins follow as the second-tier brands. Smaller brands also include Aramis, Prescriptive, Tommy Hilfiger Toiletrie, Kiton, Darphin, Michael Kors Fragrance, and Bobbi Brown. Currently, only parts of its brands are in the Chinese market. However, Estee Lauder Group never stops its expansion in the Chinese market. On June 16th, 2020, two luxurious fragrance brands from Estee Lauder Group, BY Killian and Editions de Parfums Frederic Malle, initiated in Shanghai International Finance Center.

Source: JUMEILI.CN Original Brands of Estee Lauder Group in China

Source: JUMEILI.CN Acquired Brands of Estee Lauder Group in China

Strategies of Estee Lauder in China

Through decades of development, Estee Lauder has a big market share in the Chinese cosmetic market. Fan Jiayu, the general manager of Estee Lauder China, shared that Estee Lauder paid attention to what they do now and looked forward to the future’s business environment. Estee Lauder China always keeps its awareness of possible crisis to evaluate its position and prepare for potential risks. That allows the brand to strengthen its brand awareness in China and customer stickiness.

Estee Lauder established an R&D center in China to better satisfy Chinese customers’ needs

According to the CEO of Estee Lauder in Asian and Pacific Districts, Fabrice Weber, Estee Lauder contended a keen interest in the Chinese market. He hoped that Estee Lauder could merge into China market instead of being a ‘foreign’ company. In 2005, Estee Lauder set up a team to research Asian skincare needs. In 2010, Nutritious Super Pomegranate series appeared that were designed for Asians to improve dehydrated skin. On June 2^nd, 2011, Estee Lauder announced the establishment of its Asian R&D Center in Shanghai.

Estee Lauder China’s e-commerce sales boomed in 2020

Ecommerce in China has developed rapidly and is quickly becoming the main purchasing method among Chinese. Thus, Estee Lauder took a specialized online strategy to adapt to the Chinese market. E-commerce represents approximately 30% of Estée Lauder’s business in its top markets. In 2014, Estee Lauder became one of the first high-end cosmetic brands that entered on Tmall. Estee Lauder built a professional team with 50 people to focus on Estee Lauder’s Tmall store and independent e-commerce shop. In 2017, the sales revenue of Estee Lauder in China got 40 percent growth. Notably, e-commerce accounted for 50 percent of that increase. Also, Estee Lauder Group opened online stores for its sub-brands, bringing more consumption for the group.

After the COVID-19 outbreak spread through China, Estee Lauder’s March e-commerce sales spiked, with a 135% YoY increase. During this same period, Lancôme’s Tmall sales increased by 110%, and those of Perfect Diary’s by 29%, according to data from WalkTheChat.

Data Source: WalkTheChat Analysis, Evolution of Tmall flagship sales between March 2019 and March 2020

Estee Lauder builds close relationships with celebrities and KOLs

Celebrity endorsement marketing is also behind Estee Lauder’s success in China. Fabrizio Freda, Estee Lauder’s CEO, contended that 75 percent of investments were spent on digital marketing, social media, and KOLs, earning a high efficiency. For example, Yang Mi, a famous Chinese actress, is Estee Lauder’s brand ambassador. Her first cooperation with Estee Lauder in February 2017 earned over one million shares on Weibo and brought over a 500 percent increase in sales. Meanwhile, the cosmetics brand also engaged in  KOL marketing in China. In the 2019 double 11 presales, Chinese actress Li Jiaqi sold over 0.4 million Estee Lauder’s Advanced Night Repair in a short time.

Source: Weibo Estee Lauder, Estee Lauder announced Yang Mi to be its Asian-Pacific region brand ambassador, gaining over one million shares.

The cosmetic market is competitive, so Estee Lauder needs to prepare for potential risks

Estee Lauder received great results in the Chinese market due to its excellent strategies. However, Estee Lauder in China also meets tremendous challenges from both thriving domestic brands and well-known international brands. Particularly, L’Oréal Group, has an identical layout in the brand matrix that involves different levels of brands. Especially, one of its cosmetic brands, Lancôme, is the main competitor of Estee Lauder. One of their eye creams uses similar technology and has similar functions, triggering aggressive competition between them. Yet, although Estee Lauder won significant market shares in China, it still faces crucial competition. Therefore, Estee Lauder needs to maintain vigilance in case of potential risks.

Data Source: qianzhan, China’s cosmetic market share 2018 (foreign brands only)

COVID-19 impact on Estee Lauder Group in China

COVID-19 had a great impact on the cosmetic market. Travel retail channels could not function well due to decline in China’s inbound and outbound tourism.

In March 2020 Estée Lauder reported a 11% decrease in net sales from the same period last year. As a result, the company has implemented a host of measures to reduce spending in advertising, administration, and human resources, as well as furloughing part of its vast retail staff and cutting salaries of top management.

The short-term impact on Estee Lauder online business in China is roughly the same as that of physical channels, but e-commerce can play a leading role in business recovery in the future.

Authors: April Peng & Valeriia Mikhailova

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Learn how COVID-19 impacted China’s beauty sector by downloading our full report.

The beauty sector in China before the COVID-19 outbreak

China’s beauty market developed steadily before COVID-19

In the past five years, the beauty sector in China had shown a steady increase. China had become the world’s second-largest beauty market in 2019, and the size of China’s beauty market reached 425.6 billion yuan in the same year. China’s beauty market becomes one of the fastest-growing and most promising fields of business in the near future.

Source: 360 make-up, Total retail sales of the beauty sector in China

Three key trends in China’s beauty market before COVID-19

The high-end segment grew faster

Source: Euromonitor, data.iimedia.cn, Beauty market segment in China

As China’s resident disposable income rises, people are more willing to consume, and there will be higher requirements in terms of the quality of life. According to data, in 2013-2018, the growth rate of the domestic high-end cosmetics market is accelerating, especially in 2017 and 2018, the growth rate reached 25% and 28.1% respectively. In China’s beauty market, although mass brands still play a major part in the market, the high-end segment was estimated to grow fastest in the next few years. It is predicted that the CAGR (Compound Annual Growth Rate) of the high-end brands, mid-high-end brands and mass brands from 2018 to 2023 will be 18%, 14% and 5%, respectively.

The popularity of social e-commerce on the rise

With the use of social media in the context of e-commerce is gaining popularity, increasing numbers of Chinese consumers are making their purchases through social media platforms such as Xiaohongshu and WeChat. It is a trend that social e-commerce is increasingly welcomed by both sellers and buyers in china. The social attributes and sharable characters make social e-commerce more friendly for beauty brands. For the beauty sector in China, the social attributes and shareable character make social e-commerce more friendly, and social e-commerce is set to become one of the mainstream sales channels in the future.

Source: Youzan, Beauty market segments in China

According to Youzan, a 3rd party WeChat e-commerce platform in China, the GMV growth rate and purchase convenience of social e-commerce are much higher than that of traditional e-commerce.

Rising preference for domestic brands

Source: China Association of Fragrance Flavor and Cosmetic, Cumulative share of domestic brands in Top 20 list in the beauty market

Thanks to the development of e-commerce, domestic beauty brands have risen strongly in recent years. Leveraging social media marketing and living marketing, some Chinese beauty brands, like Perfect Diary and Lin Qingxuan, have seen rapid growth. In 2018, the cumulative share of domestic brands in the Top 20 list in China’s beauty sector was 14.1%, increasing from 7.6% in 2012, and the percentage has been estimated to gain more market share in the future.

COVID-19 impact on China’s beauty sector

General impacts of COVID-19 on China’s beauty market

COVID-19 had a strong impact on the beauty market in the short-term

Source: iimedia research, Predicted impact of COVID-19 on China’s beauty market by product category

COVID-19 impact on China’s beauty sector was clearly negative in the short term. During the outbreak, retail sales of beauty products in China dropped from 299 billion RMB in December 2019 to 37 billion RMB in the first two months of 2020. High-end brands were more affected than mass brands. For different beauty sector segments, COVID-19 has varying degrees of impact on different categories in the beauty market. Also, the epidemic had a more negative impact on cosmetics than skincare products, while personal care products were gaining more popularity in this period. According to the Beauty Consumer Behavior Survey on 1,000 Chinese respondents, around 50% of the respondents stopped using cosmetics during the coronavirus.

Sales of beauty products decreased during COVID-19

Online commerce events were also affected during the coronavirus outbreak. The sales performance of beauty products on Tmall and Taobao decreased by around 40% in January 2020 compared with the same time in 2019. Normally, shopping festivals on Tmall and Taobao might help to boost sales. However, in 2020, offline promotion activities on Tmall on Chinese New Year and Valentine’s day were all cancelled. The COVID-19 impact on China’s beauty sector was even more severe due to the cancelling of two commercial highlights.

Source: iimedia research, Sales of beauty products on Taobao & Tmall by category

The beauty consumption after COVID-19 experienced a dramatic drop, and the sales of beauty device products and that of personal care products both had a nearly 50% year on year decrease in Jan 2020. Compared with others, the sale of hair care and the dying sector suffered the least.

COVID-19 impedes beauty consumption in China

Source: Qinyan information, Chinese beauty consumers’ behavior and perception during COVID-19

Also, the negative COVID-19 impact on China’s beauty sector reflected in the purchase intention. According to a Beauty Consumer Behavior Survey conducted by Qinyan information, purchasing demand on beauty products sharply decreased during the COVID-19 outbreak.  40% of respondents suggested that they didn’t have purchase intention, while 43% said they were unable to buy beauty products. Only 6% of consumers said that there was no impact on their purchasing experience in beauty products during the epidemic.

Major changes in the beauty sector in China

Skincare products are gaining popularity

One major change in beauty consumption after COVID-19 is that skincare products will be more welcomed compared to make-up. Cosmetics’ sales in China declined by 14.1% in the first two months of the year compared with the same period last year. During the outbreak, people consumed more and talked more about skincare products than cosmetics. Chinese netizens showed more passion for discussing and sharing their skincare experience at home. Also, due to the damage from wearing face masks for a long time, products with “skin repair”, “basic skincare” and “first-aid care” functions are increasingly needed during the coronavirus.

Health and safety have become keywords for beauty consumption after COVID-19

Source: Jumeili, What Chinese beauty consumers will care about after COVID-19

As society recovers from COVID-19, Chinese consumers are expected to pay more attention to the environment. This will be likely to inspire the beauty industry to focus more on products with natural and healthy concepts. For most beauty consumers, after COVID-19, they would only purchase necessities. Apart from the great concern of the cost-performance ratio, Chinese consumers also prefer beauty products with eco-friendly and natural ingredients.

Beauty brands are stepping into the disinfection sector

Source: Paidai, Sales growth of disinfection products on Tmall

Since Chinese consumers have an increased awareness of personal hygiene, disinfection products are expected to keep growing after the epidemic. The sales of disinfection products increased significantly during the 2020 Chinese New Year. Seeing business opportunities on disinfection products, many beauty brands stretched their category and started to produce hand sanitizers. For example, brands like CHANDO (自然堂), One Leaf (一叶子) and Geo skincare (纽西之谜) had started to produce and sell hand sanitizers.

DIY hairdressing is trending

Since most hair salons suspended service during the coronavirus outbreak, more people started to do hairdressing by themselves at home. In this case, hair dying products and related topics were gaining popularity. Specifically, Hairdressing products are mentioned more on social media platforms than before. Internet users in China showed great interest in learning how they can cut, dye and style their own hair. Some beauty brands adapted to this new trend fast, and promoted their hairdressing products. For example, L’ORÉAL collaborated with Tmall to promote their hair care products in early March 2020. In addition to meeting the rising demand for hairdressing at home, it also served as a women’s day promotion on Tmall.

Rising demand for doing SPA treatment and massages at home

Source: Robodata, Sales of massage chairs on Tmall and Taobao

As SPA and massage parlors suspended service during the pandemic, people showed great interest in trying to do massages by themselves at home. Topics about doing SPA treatments, like foot soaks and massages at home, are trending on social media platforms. Meanwhile, the sales of related products surged compared to that in last year. Taking the massage chairs as an example, the sales of massage chairs on Taobao and Tmall increased a lot during the coronavirus, especially in March.

Live streaming for beauty products is increasingly welcomed

Live streaming has become increasingly popular in China in the last few years as more consumers attach more importance to immersive experiences and personalized recommendations. The epidemic stimulated the dramatic growth of live streaming and made Chinese KOLs more important than ever. This trend can also be seen in the beauty sector.

Source: Taobao, ‘lipstick queen’ Li Jiaqi’s live streaming on Taobao

According to the data of one of the most famous influencers in China — Li Jiaqi, who first made his name selling lipstick on Taobao, his live streaming on Taobao attracted around 3.92 million views a day in March 2020, and the average daily sales volume approached 854 thousand RMB.

Beauty brands tend to attach more emphasis on private traffic

Due to the coronavirus outbreak, online marketing is blooming, which spots the light on private traffic. Realizing the trend of private traffic, beauty brands present a great passion for learning how to leverage private traffic. Some beauty brands in China transformed their business model quickly into the epidemic and started to put effort into private traffic marketing.

Jumeili initiated a social marketing online summit on April 28. The summit discussed how beauty brands in China could leverage private traffic and social marketing to gain traffic and increase conversion rates. The online summit had attracted more than 7,000 registers within 6 days.

Some brands take advantage of private traffic to boost sales during the epidemic. For instance, Cloris Land, an Australian brand that entered China in 2011, directed its offline stores to sell in the WeChat community and mini-program live streaming. From March 6 to 8^th, 1,057 stores joined in the live streaming sales event; the sales reached 6.3 million RMB.

Case Study: The impact of COVID-19 on Lin Qingxuan

Lin Qingxuan, a Chinese homegrown beauty brand, was severely affected by the coronavirus epidemic. In 2020 Chinese New Year, it had a year-over-year decline of 90% in sales, and lost over 10 million RMB as of January 31, 2020.

Source: Baidu Index; Pang Jing; Weibo, The impact of COVID-19 on Lin Qingxuan

Lin Qingxuan had made a quick response to the coronavirus crisis in early February, based on the changes in beauty consumption after COVID-19. Baidu index shows Lin Qingxuan has successfully improved its brand awareness by taking quick adaptation.

Responses of Lin Qingxuan during the crisis

Several timely measures successfully saved the brand from the crisis. First, It met consumers’ demand for skin repair products as people paid more attention to skin care and skin repair during the coronavirus outbreak. Specifically, Lin Qingxuan made more an effort to promote its skincare, especially skin repair products like the camellia oil.

Second, since offline stores suspended service during the coronavirus, Lin Qingxuan transferred its offline business to online channels at the very beginning of the epidemic.

Last but not least, Lin Qingxuan expanded its private traffic marketing. The brand has begun to build its private traffic pool on WeChat in 2018. Due to the coronavirus, Lin Qingxuan started to expand its private traffic pool from WeChat to Taobao with the collaboration with DingTalk. This helped Lin Qingxuan transfer rich public traffic from Taobao into private traffic, where it can manage its own consumer traffic.

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The skincare market in China sales volume reached 26.5$ billion, representing 50% of the total cosmetic market’s sales revenues in 2017 – twice as much as the world average. Skincare products in China are seen as essentials among Chinese women, and increasingly more so among men. In 2017, the sales volume of skincare products in China amounted to 50% of all sales in the Chinese cosmetics market.

How COVID-19 made skincare a focus of China’s cosmetics market

Data Source: NetEase Positioning & CTR; McKinsey, What Chinese consumed more of during the coronavirus

Skincare products are gaining popularity over make-up

The cosmetics’ sales volume in China declined by 29.9% in February 2020 compared to February 2019, but the skincare segment was impacted the least. Based on social listening, during the outbreak, people consumed and talked more about skincare products than cosmetics. Netizens enthusiastically shared their skincare experience at home during COVID-19. This social media listening combined with sales data shows upcoming trends in China’s skincare consumption.

Data Source: SCMP; sycm.taobao.com, Alimama.com, Sales volume of skincare products on Alibaba during COVID-19

So long as people wear masks, skin repair will be an important skincare function

Due to the damage from wearing face masks for a long time, “skin repair” functions had become a hot keyword among Chinese beauty consumers. The sales of skin repair focused products increased doubled in between December 2019 and February 2020. Some Weibo and Xiaohongshu users said they want to improve their skin condition and leave a good impression when they go back to work.

‘Sensitive skin’ is another keyword for brands

Also as result of wearing facemasks and frequently using disinfectants, many Chinese are finding they have sensitive skin, and desire products that can help with sensitivity. Brand messages even include ‘repairs damage from face masks’. For example, sales of Avène, a French skincare brand focusing on sensitive skin, grew in China. This includes an importance of anti-irritating and soothing properties.

Data Source: Taobao; Jumeili; Xiaohongshu, Sales volume of Avène on Taobao

Increased preference for healthy and natural ingredients

As China recovers from COVID-19, health and safety are now key concerns of more Chinese people. This will likely inspire the beauty industry to focus more on products with natural and healthy concepts. 22% of beauty consumers report being concerned with whether skincare products have natural ingredients, while only 12% report brand name being a concern.

Data Source: Jumeili, What beauty consumers will care about after the coronavirus

Changes in purchasing behavior in the Skincare market in China

For years, Chinese skincare consumers have traditionally been price sensitive and therefore focused on the mass market segment. This gave skincare market in China a pattern made of high market penetration (95% in 2016) and a particularly low spending per capita compared with other markets.

However, since the last few years, skincare in China has been going through declining market penetration. Since then, the skincare category has started to become more quality-driven vs price-driven.

Chinese skincare consumers are spending more

Chinese women have been paying more attention to their skincare habits over the past few years. Three main points can be highlighted for 2017 in the Skincare market in China:

1. 90 percent of female consumers increased their spending on skincare products in China.
2. 58 percent of Chinese female skincare consumers upgraded their purchasing habit by switching to the favorite brand’s premium product line.
3. 36 percent of Chinese female skincare consumers left their favorite brand behind and started purchasing more expensive brands.

The willingness to invest more money into better quality and, therefore, more premium products has considerably increased. Spending more money also goes along with sharpening product knowledge to ensure they choose the option that best fits their expectations.

Market trends and drivers in the Chinese beauty market

Skin care products in  China

Serums as a complex product that Chinese consumers have yet to master

Serums in China generates the largest number of Baidu search results. Baidu searches tend to focus on the role and function of serum, showing local consumers have limited knowledge but great interest in serums. Due to the complexity of such product (easily mixed-up with essence and boosters), Chinese skincare consumers seek to understand the product functions and how to properly use it in their beauty routine.

Face masks are an increasingly popular item among skincare consumers in China

The Baidu search for face masks comprises both sheet and cream masks, two popular products among the local audience. Results are composed of both product recommendations and product tutorial content, which demonstrates different levels of knowledge about the product.

Face cream is already well-known Skincare product in the Chinese beauty market

Search results for face cream in China are focused on product recommendations and face cream’s sales ranking, showing consumers select their products on a rational basis. Lancôme and Estée Lauder appear in the relevant search results for face cream, showing top-of-mind awareness among Chinese consumers on this product segment.

The top Chinese skincare brands

Chinese skincare brands’ presence on the Chinese skincare market has significantly grown over the past few years. They are now gaining market share over long-established foreign players such as L’Oréal Paris and also boast a better market share growth. Local brands implement a more aggressive PR strategy involving brand ambassadors (Singer Jay Chou for Pechoin, TFBoys for Chando) and TV show endorsements (The Voice of China for Pechoin, If You Are The One for Kans, Street Dance of China for One Leaf) to quickly boost their awareness among their target audience.

Top 6 Chinese skincare brands in terms of market share in 2017:

1. Pechoin – 4.5%
2. L’Oreal Paris – 3.3%
3. Chando – 3.1%
4. Olay – 2.8 %
5. Kans – 2.7 %
6. One Leaf – 2.0 %

Male skincare: A promising market segment

The male skincare segment grew by 18.5% in terms of sales volume between 2013 and 2017. According to a recent study conducted by Weibo, male users’ interest in skincare products is growing so fast that male consumers nearly double their spending on skincare products every year.

Besides, for male skincare, face cream is the most popular SKU among Chinese men, but the face mask is quickly catching up.

Most common marketplaces to buy skincare products among Chinese consumers

In China, consumers tend to buy skincare products mainly from such marketplaces as an exclusive store, supermarket, online, or agencies.

Also, the information channels for skincare products in China shows that an increasingly complex purchasing decision process is basing on a plurality of sources. Product safety is a key concern for local consumers when it comes to purchasing skincare products. In fact, 90% of them admit going through extensive research before purchasing any product. As a result, they rely on an increasingly complex data collection process based on a wide range of online and offline channels.

Moreover, Chinese consumers tend to favor product reviews shared by market experts and other consumers. This is the reason why online channels, where consumers can access specialized KOLs reviews (e.g., BBS, official WeChat accounts) and other consumers’ comments (e.g., on social media platforms and 3rd party platforms like Tmall), have such significant influence on the Chinese consumer’s decision-making process.

Tighter regulations as the Chinese skincare market matures

On January 10th, 2019, the China National Medical Products Administration (NMPA) released a report tightening the supervision and inspection of cosmetic products with any medical-related terms. To avoid confusion between cosmetics and medicines/pharmaceuticals, any cosmetic packaging or specification is forbidden to bear curative effects, promoting medical effects, or using medical terms. Any product registered as “cosmetic product,” but presented as a cosmeceutical product will be considered illegal.

Digital marketing for skincare products in the China

Online promotion combined with social channels is essential for brands to achieve success in the Chinese skincare market

China has 1.39 billion people, with 820 million Internet users, accounting for 59% of the total population, and 788 million mobile terminals, accounting for 57% of the population. With a large number of internet users in China (more than half of the total population), online communication is becoming a necessary branding and promotional method for cosmetics brands in China. In recent years, the amount of internet users has grown steadily, and the amount of social media users has grown significantly. The online growth rate of the beauty industry is 11 times that of the offline growth rate.

What’s more, top Chinese social media platforms drive a significant amount of online traffic, such as WeChat and Weibo with hundreds of millions of active users per month. Online video platforms such as IQiyi, Tencent and Youku also carry huge traffic that can convey information to a large audience. Live-streaming and short video are new rising channels that are also effective. These platforms give brands a great opportunity to expose their brands and products.

Skincare market in China: development of Chinese social media and the rise of KOLs

KOLs play a crucial role in the marketing of beauty-related products in China. The interactive communication of mobile social platforms enables brands to establish a connection with consumers more effectively and pertinently, and KOLs serve as a bridge to guide communication among consumers in the Skincare market in China. When KOLs post on Weibo, consumers buy immediately at a conversion rate of 1.5%. 56% of the influence value in the Chinese beauty market is from KOLs and only 19% from Chinese social media.

Successful KOL promotion case in China, SK-II: A celebrity and fashion KOL crossover

Leveraging super topics (a specific section of Weibo which operates like a forum and allows brands to monitor the most popular hashtags and follow conversations based on topics) with the influence of celebrity and vertical KOLs is a method by which it is possible to greatly enhance brand awareness and generate large exposure to consumers, getting higher view volumes through deep interactions with social audiences.

SK-II’s promotion activity in 2017, the super topic “#Pursuit of beauty has no boundaries#,” got great attention, with 66.58m views and 56K discussions. Celebrity Chen Bolin, top fashion KOL Li Yilin, and gogoboi went to the “Devil City” in the desert, going far, challenging the limits, and led to high SK-II super topic forwarding rate and brand exposure.

WeChat strengthens daily communication between Chinese skincare brand and consumers

WeChat has a huge user base of 1.08 billion active users per month, and it tends to be more active in the information exchanged with consumers. As an important method of information publishing, WeChat public accounts reconstruct the relationship between enterprises and consumers.

Popular Wechat cosmetics KOLs case: A WeChat “celebrity” curating beauty-related content for her fans

Xiao manman xiao (小蛮蛮小) is one of the earliest bloggers to share their lifestyle and shopping products online in China. Through years of personal accounts operation, Xiao manman xiao has built a personal image, covering Xiaohongshu, Weibo, and WeChat platforms. On her public account, Xiao manman Xiao constantly shares her favorite and most useful products on her social media platforms, with detailed information and embedded purchase links. Thanks to her solid foundation in the beauty recommendation area and trustworthy image, her platform generates high sales conversion rates.

On Women’s Day, Xiao manman xiao held a sales campaign of Xiao manman xiao co-limited hair removal machine, which was welcomed by fans.

Promote your Skincare products in China with Weibo’s power

From 2018 to 2019, the number of Weibo users continues to grow. As of January 2019, Weibo monthly active users reached 320 million. For the younger generation of cosmetic consumers, Weibo has become one of the most important platforms for obtaining and exchanging beauty information.

Popular Weibo cosmetics KOLs case: A Korean cosmetics KOL influencing Chinese consumers

Coming from Korea, Pony started to write a beauty blog in 2008. Since then, she has been sharing the most trendy make-up skills, and fashionable makeup looks to the public. Her makeup techniques are famous for easy-to-apply, practical. By sharing online makeup tutorials and unique makeup techniques, she has become one of the most influencing cosmetics KOL in both Korea and China, In 2016, she opened an account on Weibo and attracted 2.5 million fans within just 8 months. In addition, she usually posts make-up tutorial video & lucky draw and product recommendation via video. Females born in the ’90s make up 90% of total followers.

Digital marketing in China for skincare products with the help of Xiaohongshu

Xiaohongshu, also is known as “Red,” is one of the largest and fastest growing social E-commerce apps in China.

So how Xiaohongshu leads to more brand discovery and impulse buying?

Customer randomly browses other users’ product reviews, then stumble across an interesting post or product, and lead to the product page, finally purchasing.

Popular RED cosmetics KOLs case: Celebrities sharing products as beauty bloggers is a new trend

Nana Ouyang is a Taiwanese cellist and actress born in 2000. She was born in a family of artists, learning cello since childhood, and is now a student at Berkeley’s music college, which helps her build a positive youth image. Best known for her TV and reality shows, she is ranked 100th on the list of the most commercially valuable celebrities of 2018. Thanks to her sweet appearance, lovely personality, and outstanding talent, she has now accumulated over 14 million Weibo fans and nearly 5 million fans on Xiaohongshu.

In her vlog, Nana Ouyang shares different aspects of her life, which is appealing to her fans. She also recommends her favorite products as an influential KOL on Weibo and Xiaohongsu. She has posted over 120 times on Xiaohongshu, forming an authoritative voice among her audience. The brands she recently recommended are Armani, Dyson, LA MER, CPB, TOM FORD.

Opportunities for international skincare brands in China

The skincare segment in China represents a particularly high share of the cosmetic market (50%). This well-established presence of Skincare products in China makes the market mature and the consumers savvy. China’s skincare market is going through a “premiumization” stage, in which local consumers are willing to pay a higher price for higher quality products.

Well-established foreign brands will benefit from this “premiumization” as the local consumers still consider them as trustworthy and reliable. International brands can, therefore, capitalize on its Western origins and expertise to establish their reputation and nurture consumer trust.

Also, the male beauty market is a promising niche. Chinese men have become quickly interested in skincare products. According to a recent study conducted by social media platform Weibo among its users, male consumers nearly double their spending on skincare every year, and the market segment grew by 18.5% in terms of sales volume between 2013 and 2017.

International brands need both to establish the brand in China in the right way so that it can communicate its positioning correctly, and to increase its brand exposure so that more consumers can discover the brand, understand it, and therefore purchase it.

Author: Zichun LI

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This article Business opportunities in the Chinese beauty market: Consumption upgrade of the Skincare market in China|Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Matthieu David interviews Matthieu Rochette-Schneider, Greater China General Manager at centdegrés. Building a brand in China might look like a very different process than the way brands are built in the West. But there are many businesses in China that were very fortunate to have the veteran brand builders from centdegrés on their side. They’ve been in China for more than a decade and if you ask anybody from centdegrés if they are a French agency or a Chinese agency you will get the inevitable response: “centdegrés is centdegrés”. Let’s find out why in this new China Paradigm interview.

• 0:15 Guest introduction
• 2:11 centdegrés – a company history
• 3:15 centdegrés – current company size in China
• 5:48 7 years in China – how many brands trust centdegrés their business?
• 7:47 An adventurous mind – branding came early to China thanks to centdegrés
• 9:19 China – a reasonable size of centdegrés
• 12:00 The centdegrés approach to branding
• 14:37 Managing the core of the business – Creativity
• 18:58 The centdegrés work process
• 24:02 Start and end point – the centdegrés brand building journey
• 27:22 The tools centdegrés provides their clients with to make them successful
• 29:58 How does centdegrés manage to stay competitive?
• 33:16 It’s never to early to start pitching ideas
• 36:19 Leveraging the heritage of China – examples of successful Chinese brands
• 42:40 Brand domination – is it China’s time to shine?
• 48:15 Case Study – what did centdegrés did for MG Mask?
• 53:27 Case Study – branding HAPSODE
• 54:32 Brands and politics don’t mix – setting up Chinese-Korean business link
• 56:35 Case Study – bringing Marvel to Sephora
• 1:00:00 What books have inspired Matthieu Rochette-Schneider in his career?
• 1:03:25 What does Matthieu Rochette-Schneider read to stay up to date with China?
• 1:05:00 What book or movie about China does Matthieu Rochette-Schneider recommend?
• 1:06:25 Should Matthieu Rochette-Schneider have extra time what other business would he pursue?
• 1:07:38 What unexpected success and failure has Matthieu Rochette-Schneider witnessed in China?

 China Paradigm website

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We believe, that China, with 20% of world population and as the second world economy, is impacting every single business, small to big. That is why it is a new paradigm. How does China impact your business is the ultimate question we will answer through those podcasts.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

This article China Paradigm 106: The design agency behind the rebranding of iconic Chinese cosmetic brands is the first one to appear on Daxue Consulting - Market Research China.

China’s cosmetics market is the largest in Asia

In 2013, China overtook Japan as the world’s second largest cosmetics market, and in 2017 the market size of Cosmetics in China accounted for 11.5% of the global market, second only to the United States’ 18. 5%. In the era of people paying more and more attention to their own image and face value, cosmetics are rapidly growing in demand. According to the China Food and Drug Administration (CFDA) statistics, more than 5,319 enterprises are qualified to produce cosmetics in China, which has relatively strict cosmetics regulations.

With an increasing demand for healthy products, China has now become a new outlet for organic cosmetic brands to develop themselves and expand globally afterward. Hence, organic cosmetics in China are also becoming more and more popular.

Organic cosmetics: A fast-growing global market

The use of natural and organic products has become a global trend. Grand View Research, a U.S. market research firm, predicts that the organic skin care market will reach 110 billion yuan globally and 20.6 billion yuan in the Asia Pacific by 2020. From a global market point of view, the United States, Europe and Asia-Pacific region have more room for development. In the United States, the market value of organic personal care products is currently $2.95 billion and is expected to grow steadily at around 9.8% over the next few years; In Europe, organic personal care accounts for 30% of the market, with a compound annual growth rate of between 9.6% and 10%; the market value of the Asia-Pacific region is $2.01 billion, with a compound annual growth rate of 9.3%.

In 2012, many leading retailers began investing in organic cosmetics, and British supermarkets began using their own trademarks to sell organic cosmetics. However, most of the retail investment agents were in Germany, where even Parity Supermarket had launched certified natural cosmetics. Large cosmetics companies have been focusing on the scope of the global natural cosmetics industry mergers, acquisitions and investments.

Organic cosmetics in China: Driven by young consumer

Driven by the concept of domestic consumers, natural ingredients have become the top priority of consumer concern in China. In recent years, the discussion of moisturizing ingredients has changed from the previous “laboratory-developed ingredients” to various types of “natural extracts”. Consumers talk the most about plants, extracts and other factors in terms of the social platform’s discussion of moisturizing ingredients. It is worth noting that current users’ concern about the natural composition of moisturizing products has become a trend. 

At present, consumers purchasing organic cosmetics in China usually choose foreign organic brands, such as France’s L’Occitane, America’s Origins and Germany’s Jurlique. However, there are few well-known organic cosmetics brands in China. On the one hand, because organic cosmetics originated in foreign countries that have developed a mature sales system, technology and raw materials supply are more developed than domestic. Thus, the product is more trusted by consumers. On the other hand, China has not yet had organic certification of cosmetics, so consumers have difficulty distinguishing authenticity, which also affects the development of domestic organic cosmetics brands.

Chinese certification for organic cosmetics

High quality organic cosmetics have complex formulas and processes, short shelf lives, and easy deterioration. In order to increase preservation, anticorrosive ingredients and chemical compositions are often added into cosmetics. Therefore, it is difficult to break through the bottleneck of preserving pure organic cosmetics. This is a challenge for Chinese manufacturers in the short-term. As the production and use of organic cosmetics have stringent technical requirements, ordinary cosmetics will likely continue to be the main product consumed for a long time. However, when the techniques of producing and saving organic cosmetics mature, the market will dramatically change.

Lack of a single organic certification agency

In China, certification for organic cosmetics was canceled by the state certification and accreditation administration on July 1, 2012. There are now no regulatory agencies or standards to do organic cosmetics certification. The brand itself often finds organic raw materials to make products, but there is no third-party agency screening nor any strict market regulation management in China.

Therefore, Chinese consumers are also more in favor of organic brands with the European Union organic certification, German natural organic certification or New Zealand Natural Organic Association.

Since 2017, several of these certification bodies have been integrated into new certification body called Natural. Among the current organic certification bodies, Cosmo and NaTrue are recognized as the strongest. It is these organizations and institutions that have maintained the orderly development of organic cosmetics in Europe.

Most popular organic or natural cosmetics products in China

Franic法兰琳卡: Franic has been looking for a closer approach to natural skincare, so it is working hard to study the world’s organic skincare trends and move closer to the international concept of advanced skincare. Nearly half of Franic’s natural skincare products are developed and produced in accordance to the EU organic formula standard.

Saselomo 三草两木: Saselomo is a natural skincare brand. It gets amazing energy from nature and develops sustainable, healthy and safe skin care products. Its organic ingredients have been certified through the ECOCERT. It has its own international standard production plant and international process management to ensure the quality of its products.

Chando自然堂：From the selection of raw materials to market sales, all need to go through at least 60 different safety and efficacy verifications to ensure that the product provides safe, trustworthy, functional and high-quality products.

Pechoin百雀羚：The company is committed to creating natural and gentle quality skin care products for consumers. Their company ethics are the perfect interpretation of “China Legend, the beauty of the East.” Their main productions are skin care supplies, shampoo supplies, personal cleaning supplies, dew water and beauty cosmetics.

Organic cosmetics in China: a fad or long-term trend?

Many Chinese preferences for organic or natural ingredients is not only rooted in a desire to be eco-friendly, but also for personal health. Chinese consumers tend to be very cautious of using polluted ingredients. Since the COVID-19 outbreak, our research on beauty consumption shows an even higher awareness of natural ingredients.

Author: Celeste

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This article Organic Cosmetics in China: Natural ingredients gaining popularity is the first one to appear on Daxue Consulting - Market Research China.

Sephora is a world-famous chain cosmetic store. It was established in 1969 in Limoges(里摩日) France. The name “Sephora” comes from Moses of the Holy Bible, a beautiful, wise, brave and generous young man, standing for elegance, joy, and freedom. Moses’ ideals match perfectly with the operational strategy of the company. At first, people could only buy cosmetics at the desks of department stores. Mr. Dominique Mandonnaud, the founder, did not like this and designed a new method to serve his customers that allowed them to be free to look around, to consume, and to explore beauty. Customers found it more convenient and in year 1997, the world’s No.1 luxury brand company LVMH acquired Sephora. Now, it has stores in 33 different countries. Sephora in China has localized their marketing very well.

Sephora’s development history in China

Sephora first explored the Chinese market in April, 2005, when it opened its first brand shop in Shanghai. The interior design and decorations of its stores reflect the newest global standard. The interior arrangement of its stores is always changing to meet the latest trends. However, the goods sold in China are not simultaneously sold in European shops. There are also products that are unique to China such as SkinVital, Fusion Beauty, and For Beloved One.

Sephora’s ambitious exploration of China’s market now has effect. Up to 2020, it has over 230 shops in 74 big cities like Beijing, Chongqing, Tianjin, and those in the Pearl River Delta.

[Source: sephora.cn, location of Sephora shops in China]

Today, e-commerce in China is developing very rapidly. Sephora is looking to take advantage of this trend, and created an official website for online shoppers in China. Compared to the prices in its retail stores, prices of the same goods on the online store are often lower. Besides, there are occasionally additional discounts for online shoppers. The classification of goods on the website is clear and easy to understand, and customers can see comments and reviews of products from previous customers.

Sephora’s new retail concept in China

According to a survey of the “White Paper on China’s New Generation Fashion Consumption 2018”, store atmosphere has become the first option for the brand to have a good impression on customers.

[Data Source: luxe.co ‘White Paper on China ’s New Generation Fashion Consumption 2018’, what affects Chinese consumer perception of cosmetics brands]

The launch of the concept store is an important measure taken by Sephora in the Chinese market in response to the changing demand and consumption habits of Chinese consumers. Nowadays, the new generation of consumers is more rational and independent. 

Sephora China has always been at the forefront of technological innovation in beauty. In recent years it has launched a series of pioneering attempts in store innovation. The new concept store in Shanghai continues the digital development of Sephora. Using digital technology to empower retail and create a differentiated in-store experience has become one of Sephora’s core strategies.

First in Asia concept store in Shanghai

[Source: luxe.co, First Sephora concept store in Shanghai]

In 2017 Sephora in China opened its 200th store in Shanghai. It introduced the new Beauty Studio, bringing the experience of an exclusive makeup room to Chinese consumers. The super large mirror in the middle of the concept store is very eye-catching. In fact, this is a high-tech mirror with “Ecommerce Wall” function. Sephora hopes to bring consumers a refreshing beauty shopping experience from store image, brand category, service to technology interaction.

The whole process is almost the same as that of regular online shopping, which is very simple. Customers can find all products owned by Sephora on the “Cloud Shelves” through manual search or voice search. Then customers can place a single order to receive the goods at home. If the customer does not want to pick up the goods, he can also try the product in the store and place an order directly on the “cloud shelf”.

In addition, the new concept store introduces electronic shelf labels instead of traditional paper price labels. It is not only more environmentally friendly, but also eliminates the situation of manually changing price tags.

AR makeup technology

The Beauty Studio of the new concept store has placed an AR makeup device. This is a “virtual makeup mirror” that Sephora and Meitu created to provide customers with a cross-brand makeup test experience.

It allows to test makeup on face, eyes, lips and eyebrows using blush, foundation, eye shadow, eyeliner, eyelashes, lip gloss and eyebrow pencil. Customers can choose various types of products according to brand, texture or color system. Sephora in China also displays various makeup tutorials through the electronic screen.

In recent years, beauty retailers including Sephora and many other cosmetic brands in China have embraced the virtual makeup technology. It has become a key force to promote beauty brand sales and consumer participation.

Sephora in China: key to success

The key to Sephora’s success in China is its attitude to provide customers with the best service. The size of its target market is not great, but it receives almost 100% praise and approval from its customers. The shops are highly professionalized and people are comfortable knowing that they are going to receive a quality product if they make a purchase. Also, it provides free beauty advisory services to customers.

Creating an all-channel social retail experience in China

Sephora in China has a very comprehensive multi-channel e-commerce strategy. It uses multiple online channels to sell products, such as sephora.cn, WeChat, Tmall, and JD.com.

Sephora.cn offers an amazing opportunity for customers to learn about beauty, while WeChat provides some special offers. It also enables Sephora in China to capture more potential users. User WeChat authorization helps Sephora to accumulate user data and analyze their portraits to conduct more accurate marketing. In addition, the small program has created a closed loop of WeChat’s internal e-commerce ecosystem. Sephora in the Chinese market uses WeChat’s social interaction function to guide traffic and even achieve sales conversion. For example, users can share their favorite products with WeChat friends, who can further shop in Sephora.

[Source: chozan, Sephora WeChat Account]

With the launch of the mini-program, Sephora implemented new retail functions such as social interaction, membership center and gift card. With the development of mobile e-commerce, it has created a multi-scenario social shopping experience.

• All products on the Sephora app are set up for external link sharing, including WeChat, Weibo and QQ friends.
• WeChat public account sets the “shopping” option in the lower menu bar, which can directly reach the Sephora app.
• Official Weibo account currently has more than 1.26 million followers, and each original push will link to Sephora’s official website.
• Sephora’s official flagship stores opened on Tmall and JD.com – online Chinese giants

The launch of this small program represents Sephora’s in-depth promotion of the image of the global cosmetics retail authority. It also opens the business module of Sephora’s omni-channel marketing community operation.

Introduction of high-value exclusive brands in China

In the face of fierce competition in the cosmetics market, Sephora in the Chinese market continues to strengthen its own brand product line. Sephora’s strategy in China is to attract more beauty brands to enter an exclusive partnership. Currently, Sephora’s exclusive brand covers the whole category of skincare, make-up and other products, for both female and male beauty consumers in China.

The new generation of Chinese consumers is more knowledgeable and sensitive to beauty trends. Therefore, make-up retailers must invest in differentiation to capture this more sophisticated generation of consumers. Exclusive brands are becoming the backbone of Sephora’s strategy in China. For example, Skin Inc., a Singapore-based customized skincare brand officially entered the Chinese market through Sephora in 2018. The proportion of Chinese local beauty brands in Sephora is increasing every year. In addition to the high-end lines of WEI (蔚蓝之美), Marie Dalgar (玛丽黛佳) and Color Studio, several new Chinese local brands, such as LEANON (两两) have also settled in recently.

Sephora in China: further brand development

Sephora’s plans in China: integrating beauty shopping, education and entertainment

Benjamin Vuchot, Sephora’s President in Asia, claimed that Sephora’s Chinese customers expect to experience beauty shopping, beauty education and entertainment. In fact, Sephora has been working on beauty education for years, and it hopes to share its expert knowledge on trends and skincare with consumers via teaching and sharing.

Recently personalized customization and styling services have become the greatest demand of young consumers. Daily make-up trials and make-up classes have become an important way for Sephora to deliver beauty make-up education. Beauty Advisor program has become its key driving force. Sephora is a great educational space. For example, many Sephora clients come in and consult a beauty advisor for the latest product or make-up look. It’s all part of experience retailing, not just a business transaction.

Sephora in China plans to use KOL marketing to attract customers

Establishing a cooperative relationship with Chinese Beauty KOL has become an important part of global beauty marketing. In China, social media platforms have great influence and provide a huge space for the discussion of beauty topics. Sephora in the Chinese market is also planning to constantly establish contacts with the KOL. It hopes that KOL can receive content through marketing activities, so that they can spread Sephora’s voice to fans.

[Source: Photo courtesy of Sephora, Z.Tao poses with Benjamin Vuchot, Sephora President in Asia in Shanghai on August 31, 2018]

Sephora ’s strategy in China is to cover the major fields of the beauty industry, lifestyle, and fashion. With the rise of social media, brand owners see high potential in “new KOLs” such as “Internet celebrities and talents”. In 2017 the average price of transaction orders of KOL customers of WeChat  beauty and makeup increased by nearly 360% from the previous year.

In 2018 Sephora in China invited four KOLs to promote a Christmas marketing activity. According to Sephora ’s official data, within the first 7 days of campaign, more than 10,000 people have participated in the online live broadcast, with a total of nearly 40 million views.

Sephora’s strategy in China is a great example to learn from. In 2018, Sephora selected 10 beauty bloggers for KOL marketing worldwide. To promote this new development, Sephora signed a contract with Chinese artist Huang Zitao. The former, Exo boy band member became famous as a solo artist and actor. The signing of Huang Zitao also brings Sephora closer to young consumers.

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This article Sephora in China is the first one to appear on Daxue Consulting - Market Research China.

China represents one of the most dynamic and untapped cosmetics and markets in the world. The last several years have proved highly beneficial for the market since it has undergone a rapid expansion phase. The Chinese cosmetics market was the 2nd largest in the world after the United States in 2018. It increased by 4.2% sales year on year to RMB261.9 billion. Although the Chinese cosmetics market registered an impressive growth due to urbanization and higher income in China, the country still has high growth potential which is far from its saturation level. Relatively low penetration level and a vast consumer base are two key factors of cosmetics market in China.

Skincare dominates China’s cosmetics market

Skincare dominates the overall cosmetics market in China. In 2009, China’ s skincare segment acquired almost 40% share and showed no signs of slowdown, even in a recession. Other segments like hair care, color cosmetics, fragrances, etc have also experienced double digit growth over the recent years. 

The cosmetics market in China provides opportunities to both homegrown and international players. However, international companies like P&G and L’Oreal are currently leading the Chinese cosmetics market, with an 86% share of the total retail sales. Only 3 domestic Chinese brands, CHICMAX, Shanghai Pechoin and JALA Corporation, ranked among the top ten cosmetics brands in 2017. Foreign brands generate a majority of the industry revenue and are preferred by the consumers over the local companies. Wide product lines along with aggressive marketing strategies are considered the success mantra adopted by these international cosmetics giants. 

The penetration rate of online cosmetics shopping has exceeded 70%

The penetration rate of online cosmetics shopping in China has risen from 53.4% in 2014 to 74.2% in 2018. Online platforms have become the most important channel for Chinese users to buy cosmetics. International brands mainly occupy the high-end cosmetics market. Although their sales account for 60% of the overall Chinese cosmetics market, sales revenue accounts for 90%.

[Source: 16pic, Double 11 online shopping festival]

38.8% of Chinese cosmetics consumers who are willing to buy cosmetics online are from first-tier cities. 30.6% from second-tier cities, 15.6% from third-tier cities, and 15% from fourth-tier cities and other cities.

According to the analysis of the online popularity of the keyword “cosmetics” in different regions of China, netizens in Guangdong province are following cosmetics-related information the most frequently, followed by Zhejiang, Shandong, and Hubei. As for the purchase channels of cosmetics, 47.4% of Chinese cosmetics consumers prefer to buy cosmetics on integrated e-commerce platforms. 42.2% of consumers buy cosmetics at cosmetics specialty stores, and 39.7% of consumers directly purchase cosmetics at department stores.

Demographics of Chinese skincare consumers

Although women are the primary consumers of cosmetics, men’s skincare consumption in China is on the rise. The proportion of Chinese cosmetics consumers between 19 and 25 years old tends to buy skin care products; make-up and hair care products are 33%, 28% and 17% respectively. Consumers between 26 and 30 years old tend to buy skin care products. The proportions of bath products and hair care products are 33%, 13% and 22% respectively; consumers between 31 and 40 years old tend to buy skin care products, bath products and hair care products at 32%, 24% and 17 respectively.

Overall, the product preferences of online consumers of different ages for different categories of cosmetics are not obvious. However, Chinese cosmetics consumers aged 29 to 25 years old have a higher demand for online shopping.

Customer segments of cosmetics market in China

According to the analysis of Chinese cosmetics consumers, people born between the 1970s-1990s have the strongest consumption power. They account for nearly 90% of cosmetics consumption in China, of which nearly 40% is from those born in the 1980s alone. Cosmetics products, especially lipsticks, have become a new trend for gifts, which increases the sales volume by 76.5% year on year.

[Source: Shengri, AFU magic lipstick gift box]

As Chinese cosmetics consumers born between 1995 and 2000’s, also known as Gen Z consumers, start to enter universities and society, they increase their demand for cosmetic products. Hence, this group might become the new leading force of the Chinese cosmetics market.

Gen Z consumers have the following characteristics:

• They are addicted to online shopping and have diversified brand preference with changing demands.
• Culturally, they are nurtured by mixed culture of both China and western influence. Their Chinese culture gives them a sense of pride.
• They are more willing to try new products.

New opportunities for Chinese cosmetics market development and future hot spots

From 2014 to 2018, the scale of China’s social commerce market showed a rapid growth trend, and by 2018, the scale of the social e-commerce market reached 1,139.78 billion RMB. 61.0% of Chinese consumers indicated that social media platforms have become an important place for them to “plant grass (种草)” cosmetics. Chinse cosmetics consumers born after 1995 or 2000 stated that the probability of “pulling grass (拔草)” due to social e-commerce recommendations is 76.6%. Cross-border e-commerce companies such as Xiaohongshu, Princess Pea, and Koala Haigou provide power support for cosmetics consumption.

[Data source: data.iimedia.cn, drivers for online shopping in China]

In the Chinese cosmetics market, companies should pay more attention to makeup products which continue to gain popularity, like lipstick. On the other hand, the facial skin is still the main focus of skin care, with a large market foundation. In addition to the basic needs of moisturizing and using sunscreen, consumers will also have increasing demand for functional skin care products such as color-evening and anti-aging.

Three growing skincare categories

The explosive products in China’s skin care market are mainly divided into three categories: One is the long-term hot-selling products, usually some products of major international cosmetic brands, such as Estee Lauder‘s “small brown bottle” essence, Lancôme “Pink water” toners, etc. Second is a category of niche new products that have only appeared in the Chinese market in the past two years, such as the Spanish MartiDerm ampoule essence that was hot last year. Third are certainly innovative or interesting products, this year’s new “Black Sea Salt Bubble Mask” by Pleja. With the help of social networks, the latter “grown grass” and quickly became the first place in the “Douyin Beauty Skin Care List”, with monthly sales exceeding 100 million.

[Source: Baidupai, Lancôme Tonique Confort (pink water)]

Although the Chinese cosmetics market has become highly competitive, there is still a plenty of room for new entrants. Provided, they adopt appropriate market entry strategies, find right manufacturing or distribution partners, use effective marketing strategies, and make suitable products for various customer groups at reasonable price points. 

With increasing disposable income, a surging working population (especially women) a appearance-conscious approach and strong promotional strategies, we anticipate that cosmetics market in China still has huge potential that can be unlocked.

The Chinese cosmetic market has a lot of untapped potential

The cosmetics market in China is still growing at full speed. To get a piece of the large Chinese cosmetics market, we suggest you start with consumer research and a digital strategy.

This means:

• Build yourself good brand awareness in China. No brand awareness means that you don’t exist in the Chinese business world.
• Knowing the right distribution channels for your brand
• Have a clear brand positioning, a strong identity
• Be active on digital platforms

Contact dx@daxueconsulting.com to start your project in China’s cosmetics market.

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This article Cosmetics market in China is the first one to appear on Daxue Consulting - Market Research China.