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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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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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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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.

Full transcript below:

Matthieu David: Hello, everyone. I’m Matthieu David, the founder of Daxue Consulting, and this China marketing podcast, China Paradigm. Today I am with Charles Bark. Charles, we had met a long time ago already, about 5 or 6 years ago, even before you started your current business HiNounou that we are going to talk about today. You are a true serial entrepreneur in China, at least two businesses and a lot of other initiatives, being co-founders or you had been involved with.

You have begun with ChinPass, a language solution to learn Chinese. Now you are the founder and CEO of HiNounou, a solution-based device to provide healthcare in China for the elderly. So, you provide a Home Wellness Kit, including a scale and other devices to understand the health of the seniors and an app as well to provide any kind of Chinese elderly care. HiNounou is already more than five years old. You have been endorsed by President Macron and active within the ecosystem of entrepreneurs in China like the French Chamber of Commerce in China, also overseas. You have been very active on media, at the same time as you build your company with a lot of rewards. I’d like actually to understand how you have been able to manage all this, both the PR and building your product and software. Thank you very much,, Charles, for being with us. I am very excited to know more about HiNounou. I realized when I went to your website to prepare the interview, what I saw two years ago when we met next to my office has changed a lot. The product has changed and evolved a lot. The first question is where this stage is now? Where do you stand in terms of revenue, the size of the team, and product? Could you give us an idea to the audience where you are in terms of your development?

Charles Bark: First of all, thank you for your interview. It’s really a pleasure to be interviewed with this China marketing podcast, China Paradigm. It’s a privilege and an honor because you have good visibility in China. We are really happy to share our experience in your podcast. HiNounou is a result of twelve years, four countries in the world, America, Canada, France, and China. Officially, we launched our headquarter in Hong Kong in 2016, a branch in Shanghai in 2017, and another company in Singapore. Today, we officially register in three regions, Hong Kong, Mainland, and Singapore. We also had two rounds of fundraising. Our market capitalization today is 25 million dollars. We have a team of 15 employees, most of whom are located in Shanghai, where we are the most active because we are mostly based in the Mainland China, but we also have remote colleagues in Canada and Italy and of course in Singapore and Hong Kong.

The main vision of HiNounou is to help seniors in China not only live longer, but also healthier and happier with a nursing home in China, and bring the peace of mind to their children who live far away from them. It started with my own issue of China’s aging population. You said I’m a serial entrepreneur in China, and when I look at the basics of my companies that I founded, it was always based on problem-solving that I had to face personally. Six years ago, I was calling my mum, a retired doctor living alone after my father passed away. She is living far away from me in the other country. When I called her and asked how she was doing, she said “I am fine. Don’t worry.” But then, my older brother called me and said that she fell down and went to the hospital. Then I realized I don’t have any visibility of her health at home, and how is it possible to take care of our seniors in China when we are not living close to them, as an expat worker living in Shanghai? Because our loving parents don’t want to give us any burden, so they will not tell the truth about their health. But when in the future we are going to have the visibility, we have to rush like a fireman to see what we can do, but it will be too late. I didn’t want to be at that stage because I had to face the situation myself first in 2013 and I didn’t want to get another bad experience. When I was thinking of my situation, I am not alone. We have more than one million expat workers in China like you and me. When we think even deeper, we have half of the people living in Shanghai are not from Shanghai. They are immigrant people, mostly from different provinces of China. If you think around 25 million Shanghainese, it’s a big number, more than 12 million people coming from other cities. Beijing is almost the same, and you think of Shenzhen, 100% coming from outside.

When we think of these issues of seniors in China when we think Macau, we have around 200 million seniors over 60 years old, and when we look at those numbers, we think that it’s very predictable because 30 years from now in 2050, those 200 million will become half a million. And I know that you know very well those numbers because Daxue Consulting already had this wonderful research paper on aging and the problem that we solve in China. When we look at those numbers, the scariest fact is not only that we will have a growing number of elderlies that will become half of the population within 30 years, but also that most of the seniors in China already today among the 200 million, are living alone, like 60%. When we are not Chinese, we think Chinese and Asian families are very closely-bond and live together, which is true. But due to the new lifestyle and urban migration, most of their children are in different cities, not only for study but also to get work. So, the matter of fact for today is that most of them live alone. In Chinese, we call that “empty-nest seniors,” and the big question is how is it possible to take care of seniors in China when we are not close to them? Now when we think of the solution, today there is already a lack of 10 million professional givers for Chinese elderly care.

As you already know, healthcare in China is not mature at all. We are in infancy in China for one major reason is that this entire Chinese elderly care is not like a language. It’s the Chinese way of thinking of the family, like culture. You don’t want to take your parents, send them to the nursing home. It’s completely against the way the traditional Chinese think about the family.

Matthieu David: In Chinese culture, they would have it at home.

Charles Bark: Yes. The westerners are more independent in terms of generation and western countries have a much more advanced maturity on this solution on the way to take care of the seniors. But here we have an incredibly new market of Chinese elderly care to address, and the question is in terms of the number of professionals, there is a big shortage today of 10 million.

Now the question is, how is it possible to cope with this shortage of professional human givers of Chinese elderly care? Is there a way to rethink about the usage of the connected device with biotech in China, what we call IoT Medtech? From the IOT Medtech, is there a way to bring the hospital at home, because you have a specific situation in China where you don’t have a family doctor? All the healthcare in China is centralized in the hospital with three categories, and many people are rushing to the best one, level three. We cannot have any medical meetings in advance and schedule any doctors in advance, so we lose around 4 or 5 hours per day to get a diagnosis from a doctor. In the end, when we look at the situation, the healthcare in China as a whole is not adapted to help the seniors in China live longer and healthier at home. It’s not HiNounou; it’s not Charles Bark telling that, if we download the report of China’s aging population from the World Health Organization, it’s written black and white that the existing professionals working in healthcare in China are not adapted to solve this issue of China’s aging population. Because healthcare in China in the past was only addressing a situation when it’s already too late, it is purely treatment-based, but we cannot wait that these massive seniors in China are coming every year on the market of healthcare in China. We cannot wait until they have an issue, otherwise, it’s demanding in terms of professional Chinese elderly care, and it’s also very costly because you wait until they have a chronic disease. So, the whole question is, is it possible to reshuffle the game? Using more digitalization, robotics and AI to cope with the lack of shortage of human professional Chinese elderly care providers, we have to think carefully because we are talking of human beings, fragile people, families, and at the end, happiness.

So, we should be very careful on the way we deliver the solutions for China’s aging population. We believe that it should not be a black and white solution. We know that there are some professionals who are really facing to face, nurse, doctor, or other professional Chinese elderly care providers. On the other hand, all these kinds of biotech in China want to digitalize healthcare in China with a value proposition, which is using digitalization. HiNounou more believes a Yin and Yang between these two worlds. We don’t want to get opposition.

Matthieu David: You mean human being and also artificial intelligence in China and tech basically?

Charles Bark: Exactly, so what we decided is first, the gravitational center should be human. There is a shortage of human professional Chinese elderly care providers, so we cannot just count on human providing services. There will be a bigger gap in the future when every year there are millions of seniors in China coming in healthcare in China. Now doing a Yin and Yang with MedTech, ensure tech, and biotech in China, all in one, connected in an AI-based preventative platform, should help us more align with the needs of the seniors in China. There is also a Yin and Yang between the way we address the medicine. We have two schools of medicine in the world, the western school, which is more cure-and-treatment based, post-accident, and Chinese traditional medicine, more orientated in prevention. Because I am the third generation working in healthcare in China, my mother went to France for a .D.Ph.D. and became a doctor in a French hospital, and her father has the biggest pharmacy in Busan, Korea. So, my childhood was in-between these kinds of Yin and Yang, Western medicine in France with this family background and traditional Chinese way of thinking in terms of the prevention. 

As an engineer from France, I was trying to think of how is it possible to bring this biotech in China, the best technology that we have in the western world and combine all of them with more Chinese traditional way in prevention. Because as we learn on the report delivered by the World Health Organization, I was very surprised to learn that 60% of the chronic diseases and 40% of cancer can be preventable if we trigger the risk factors. When we look at chronic diseases and cancer, the main risk factors are our lifestyle, nutrition, fitness, and sleeping habits. Most of the chronic diseases, for example, diabetes type II, is just because we eat too many calories. We are not doing as much fitness as we should do, like a few thousand steps a day. In the past, when the society was much more in an agricultural mode, people were more physical, but today we are more white collars, and we don’t practice that much. All those variables bring more and more chronic diseases that can be preventable. How can we have this data? How is it possible to collect as much as data possible, that will give us visibility of what happens to our fragile seniors in China when we are not living with them?

Matthieu David: Before we go more in depths into the solution, I’d like to go back on what you said about the size of the business in what you are already doing. You said value of 25 million US. But to produce what you do, which is IOT-linked to devices, it requires money. How much money did you raise? 

Charles Bark: I raised so far more than millions. I cannot go too much on the detail, because we are now in the third round of investment. Our lawyer asked us to be cautious because we are under due diligence in China.

Matthieu David: More than one, less than five?

Charles Bark: Yes. It came first from the benefit that I had from my first company, Chin Pass. 

Matthieu David: So, you invested yourself. It was not external rounds of investment. 

Charles Bark: At the beginning, most of the investments were personal. Then at a certain extent when I didn’t have that many resources, I need to go to chase some investments. So, we got two rounds so far.

Matthieu David: You talked about some sales volume. Would you be able to share with the audience, where you are in terms of the sales volume, types of the contracts you have, types of way of selling? Can we buy HiNounou online? Is it more for hospital or companies? Could you elaborate a bit more and give us a sense of volume? An idea of what’s going on?

Charles Bark: Officially, we launched last year in China, after all those years of preparation.

Matthieu David: When you say officially, what do you mean? You ship the product, or does it mean that you were able to have a prototype?

Charles Bark: Officially, we were able to sell, to release our product.

Matthieu David: To deliver the product.

Charles Bark: In the market of healthcare in China. Last year we signed our first deal in B2B in China, because our business model is B2B, not B2C. The Bs are distributors that are either insurance or players in healthcare in China or companies in the biotech in China. Last year we signed a deal of supplying 3000 packs with a turnover of 21 million RMB, which gave us around $2.5-3 million. This year, we have more deals flowing on our pipelines, not only in China but also in different countries, southeast Asia, and even in Poland, Europe. We have a multi-million dollars deal flow currently for our packs. Today, we have around more than 100,000 orders of packs.

In the pack, we have three different components inside based on the evaluation of the top ten risks for the seniors in China based on the World Health Organization data. So, we have a DNA test pack here. This is DIY at home; we collect here from the saliva. You put saliva in the container and ship to us. After we get the report of the top ten risks for the seniors in China like cardiovascular disease, diabetes type II, Alzheimer’s, and Parkinson. Once we get the evaluation of the top ten risks, we go to the mobile-connected device with IOT connected with healthcare in China. We have a mobile phone here, a dedicated phone for seniors in China with an SOS button to ask for help. Instead of looking for numbers of my son, you just press this button, and it will connect directly to three caregivers. You don’t even need to say where you are, because they will automatically receive your geo-localization. This phone has bigger icons as well. We partner with the third largest telco in China, who produced this phone called ZTE, and they preload our app directly in their factory. Everyone who buys this phone will have our app already built inside. We have 20,000 preloaded apps that are already in the market of biotech in China. We have a different function, the devices connected with healthcare in China like blood pressure, oximeter, connected scale. We also have this kind of ECG.

Matthieu David: What is ECG?

Charles Bark: Electrocardiogram. We have not only the ECG but also the glucose meter, for those who have diabetes type II. All these kinds of devices connected with the healthcare in China have the same quality as the hospital because they are all medically certified by China’s CFDA as well as a CE mark. We collect the data at home, which nobody has done before, and then the data goes to the cloud. Every caregiver of these seniors in China, including the family wherever they are, is able to receive and look at the data.

Matthieu David: How many devices in the kit?

Charles Bark: We have six devices. Three are devices connected with biotech in China, with the mobile phone it will be four, and we have an optional glucose meter and the ECG.

Matthieu David: So, four to six devices in a kit. Because with $1 million or even $10 million, you’re not able to build all of them, you have to find partners for a startup in China. Could you tell us more about how you assemble this solution? Actually, you are bringing a lot of values to healthcare in China by interconnecting all those devices and assembling them. Some people say that Elon Musk, most of his job is to assemble existing technology and make SpaceX more accessible and cheaper. Actually, there’s a lot of values and innovation in it. So, could you explain to us about how you have been able to find partners for a startup in China and work with them? If someone in your team would like to do something with factories like a product that is too expensive to develop but already existing, how should he do?

Charles Bark: As an entrepreneur in China, the most important thing to understand is what is our value proposition and what is already existing in order to avoid reinventing the wheel. Because when we are clear on our value proposition, which is this AI, preventative platform that combines different devices like the DNA testing with the biotech in China together, we need to think about what is already existing in the market. In term of this connected medical device, HiNounou, we didn’t want to recreate the wheel. The challenge we had to face was to identify the right partners for a startup in China, the right factories that are able to provide that and to avoid the go-between as much as possible. Once we get the screening properly and we identify the right partners for a startup in China, the challenge for me was how to convince them to work with me when I didn’t have any MOQ, Minimum Order Quantity at the beginning.

Matthieu David: How much is the MOQ? How many should you produce to be able to work with them? 50 – 100 – 1000?

Charles Bark: It depends on the factories and the size of their volume production per year. Some said 1000 and some said lower, for example, this ECG is not as popular as the weight scale connected with the biotech in China, which is massive and popular in the healthcare in China. But they can reduce this MOQ of this ECG device, a niche device, too much lower, like a 100 – 200 devices. Then my challenge was, a partner for a startup in China who has this, is it possible for me to you to work together and avoid all those go-betweens? Because the factory doesn’t want to waste a lot of time with different small players like us, it prefers to relocate us to its distributors. The first is into the negotiation, meeting those people face to face and saying that, “I know you don’t want me to work with you because you don’t want to waste time for small quantity. You want me to work with a distributor. When I increase my volume, maybe you want me to work directly with you.” This is the number one challenge that we have, and I don’t have any secret recipe to do that.

Matthieu David: How did you find partners for a startup in China? Did you go on Alibaba?

Charles Bark: Alibaba was one of the sources, but the problem that I had with Alibaba is many are cheating. They pretend to be the factory, and you think you’re talking directly with the factory, whereas it’s not the factory. It’s a distributor who pretends to be a factory to attract more people. We found Alibaba by experience that it can be a good way to screen partners for a startup in China, but a lot of time wasting because at the end it’s just a phone call and we have to rely on what they said, which is not always the truth.

Then, we need to go to the ground. The number two solution was to go to the biggest event where all those partners for a startup in China are exhibiting their products. One of the biggest advice that I give to your audience is to go to CMEF, China Medical Equipment Fair in Shanghai. We went there, and we spent a few days there. We went booth by booth and asked only two questions, “Are you CFDA-approved,” and because many of them are not devices connected with biotech in China, “What is your technology behind that.” If with the first screening of the first question, you can remove around 90 – 95% of them. It took just five to ten seconds.

We then focus on the only ones who have this medical certification. Because if you want to be professional and collect the data, all those professional givers of the healthcare in China, doctors, insurance, they will ask, “How much can I believe those numbers?” So, we have to be straight, and we need to be professional, making sure all those equipment is FDA approved or even better, CE Marked in Europe. Then these partners for a startup in China will help us because on our prospection we were also thinking, of course, to move to Europe. Once we selected those partners for a startup in China that match our criteria, we have to visit them in their factories. Most of them are located in Shenzhen, where you find a lot of production there. We visited one by one, talked to them, and gauged them on our dream. The way to convince these big partners for a startup in China to work with a small potato like us is only to drive them on our dream. The reason why these partners for a startup in China accepted to work with us is because of our dream, to make a better society.

Matthieu David: Did you speak in Chinese with them?

Charles Bark: Yes.

Matthieu David: You were speaking yourself in Chinese. So, do you think it was a game changer?

Charles Bark: Yes, definitely yes. Because speaking in Chinese in China is the best way to touch their heart and emotion.

Matthieu David: I think that’s what an asset you had, to be able to speak Chinese. A lot of foreigners cannot do that when they go to China. They cannot go to Shenzhen to sell the dream, because they are not able to communicate in Chinese. At the end of the day they have their P&L statement, and they need to be careful of the cost. Do you think there was another factor for your ability to develop your dream? They believe in you being backed by the event and all those people who endorsed you. Do you think that played a role?

Charles Bark: Yes, this is very correlated because my dream is to have the seniors in China to live longer, healthier, happier. In Shenzhen, they are all liberal people.

Matthieu David: Yeah, young people.

Charles Bark: Young people and those owners of factories all have their seniors in China. When I talked to them about my issue of taking care of my mother, who lives far away, it might be the same case for you. They all say yes this is my case because my hometown is far away and I said, we have the same issue. If you want to correlate with healthcare in China, you think of China’s aging population. Everybody knows that China’s aging population is growing. It’s very predictable. The number of China’s aging population is massive, and everybody knows that this is an important issue to solve. Those partners for a startup in China of medical devices know that what they produce will have a bright future in healthcare in China that we are in, which is the silver economy. They were touched personally because this is what they face. The prospection of the market of healthcare in China is an incredible opportunity. The question for them is, how can I be players in this growing market of healthcare in China with a very good future in terms of  perspective?

Matthieu David: The factories may not lose money with you by being partners for a startup in China, but they may actually waste time because there is less scalability. Am I correct? So, you have to convince them that the future of healthcare in China is bright, but then you begin with a very low margin with me, not making a lot of money, but the scale could be big afterward. Isn’t it that, that we are also seeing?

Charles Bark: Yes, exactly.

Matthieu David: Because even if these partners for a startup in China believe the product, they won’t sponsor your product, because they won’t make a profit out of the prototypes and they don’t see the scale in the future. But you were able to sell the future, to sell the story, so they could project themselves in a higher world for the future and are willing to waste a bit of time in the beginning but believe in the product.

Charles Bark: Yes, exactly. I want to relate that to our contests in China and everywhere in the world. This is also part of the story that helps us convince them because the question is, why do we need to go through those contests. Why do we, as entrepreneurship in China, need to go everywhere like that? If you look at HiNounou and you go on our news and look at our milestones, you will see a lot of contests, and I want also to explain why. This is also kind of story that helped us convince those very huge partners for a startup in China to work with us. The big dilemma that I had think of HiNounou, we are not like Amazon, Medtronic, Philips Medtech, we don’t have any branding equity in healthcare in China. We have a big ambition to have the seniors in China to live longer, healthier, and happier at home. We want to be the game changer in the world. When they think of Chinese elderly care, I want them to think of HiNounou like when they think of electric vehicles, every people thinks of Tesla. The dilemma that I face as an entrepreneur in China is that our core business is all big data in China. The more we can collect using biotech in China, the more valuable will be our company HiNounou. When we think of the big data, the dilemma as entrepreneurship in China like HiNounou is how to engage as much as possible with A-level partners for a startup in China that have a big customer base in order to collect the big data. Because a small potato cannot collect a lot of big data, it will remain small and die at the end. When I look in our financial resources, we need to market and build our brand equity in order for the other entrepreneur in China to work with us and convince that we are the right partner even if we are small. The only way to achieve those branding equities was to apply those international or national contests. This is the best way for me to have brand visibility in China for free.

Matthieu David: When you went to the factory, in order to showcase everything, in terms of branding, contests and so on, did you use a PPT, a video, a brochure or just speak with them? How did you materialize this? What were your tactics? Could you be a bit more in detail? We understand selling the dream, selling the future, selling the scalability. But then during the meeting, what did you have?

Charles Bark: It’s important to have at least a working prototype. We had not just come with a PPT because those guys are really down to earth and you cannot come with ideation. It will not work just ideation with a PPT.

Matthieu David: Who made your prototype, if it’s not a factory?

Charles Bark: We made it with our team, and we also had a chance to partner with one of the fantastic engineering schools in Shanghai, which I was educated in France, UTC – University Technology of Compiegne.

Matthieu David: The students of this university helped you build a prototype. That’s very interesting. Because in my mind those products from the university most of the time don’t work because the students and the companies are not involved enough, but here in your case it worked actually, to partner with students and investors.

Charles Bark: Yes, it’s a fantastic story. I’m very thankful for those academia, the professors. Also those deans at the university, one of which helped us wonderfully called UTSEUS. If you go to my website, you will see them, the partnership between three engineering schools in France and the engineering school of Shanghai University. For many years they have provided engineering students for us to build our prototypes. We also partner with EDNA, a design college with a program in Shanghai. When you look at those designs, we had 10 students working in our UI and UX design, even the product design. We had a major business school helping us like HEC. It’s kind of give and takes. I’m a lecturer in the innovation and entrepreneurship major with a few of them, and in exchange, they also provide their resources as many as they can. We had also partnered with École Polytechnique. We organized a hackathon with them and HEC students, here in Shanghai. We also had SCP students and together with a big firm like Ernst and Young, AXA. We did this hackathon, mixing academia professor students, startups, a big firm like AXA and also other schools like marketing. We are not professional in marketing, so we have another school called MBA DMB with MBA students focusing on digital marketing in China.

Matthieu David: These connections with the university and students was useful, right. You got experience out of it and the students, of course. You got proof that the prototype worked. But I feel when you talk about it, it was also from the professors, not really the student and the product, but mainly the professors for the prototype. Then you had some hackathon for the software. Why did École Polytechnique do hackathon in Shanghai? Do they do it in Shanghai?

Charles Bark: Yeah, we organized a hackathon with polytechnic and HEC students here in our office.

Matthieu David: Okay in Shanghai. There are a few students from École Polytechnique, isn’t it?

Charles Bark: They come here on the modular program, and then professors were contacting us, because they heard about the innovation of HiNounou and they are really keen on bring their students in the most innovative companies like Alibaba, but also with entrepreneurs in China, to see what is the life of French entrepreneurs in China. Thanks to our innovation, we had a lot of demands from those brilliant professors who wanted to bring their students to our office. We don’t want to deliver boring PPTs to smart students, and the best way to understand what’s going on in China is to organize a hackathon. They will work with us for a dedicated problem solving, and we give students 12 hours. Believe me; they will never forget what they learn here.

Matthieu David: But students from École Polytechnique are not developers, how can they do a hackathon?

Charles Bark: They are engineers, and HEC is business schools, so we give them a topic that matches their skills. Because we are in the ICO, Initial Coin Offering, raising funds from our blockchain and developing this fundraising, the hackathon we deliver to École Polytechnique and HEC was, what are the do-and-don’ts to market ICO and there was much more financial related than engineering and product development.

Matthieu David: I see, so it’s not really a hackathon to code. It was a hackathon to find a solution to a challenge.

Charles Bark: The development of the product itself was more with the engineering school who brought these Megatronics engineers, developers with UTSEUS and Shanghai University.

Matthieu David: Going back to the factories, the dream you said, the future, the prototype, to come with a prototype, and certainly the fact that you had done a lot of PR, contests, but they had to trust you because you don’t come with a video, a PPT, you don’t come with proof that you did all this, it’s you telling them that President Macron, and so on right. You don’t come with a marketing kit right to the factory; you come with a prototype and a speech.

Charles Bark: Yes. And also, the fact that I’m based in Shanghai, I’m living in China. So, the value proposition that we bring in China is just written black and white. So, it helps seniors in China. I don’t come to them and say that I want your product and I will ship it to another country. I’m here, and you will be a game changer yourself. Our dream is to help seniors in China to live longer, and one piece that we don’t have is your value proposition with your factory. If you look at this story, you are a wonderful player that I need to make this story true. The question that I ask you is, do you want to be part of the Chinese elderly care? It’s down to earth, making a profit in helping the world become better. You are already delivering these products related to the healthcare in China. You already have this mind that you want to help the society and seniors in China because you are not producing bicycle or iPhone, you are producing biotech in China, so those people are already oriented in helping the world in a way. They are not just only money makers. This corporate social responsibility in China is why they choose to do the business in healthcare in China. Why not come with this dream? It’s aligned in some way with what they’re doing. So, it was not that challenging, frankly speaking. Their own issue is exactly the same as my issue, which triggers their interest because it’s based on their existing problem. The way to solve this problem using their own biotech in China to solve in some way their own issues and also million other people’s, was very appealing to them and resonated with them. Frankly speaking, it was not hard to convince them because they want to be part of Chinese elderly care, part of this dream and this dream team, to be a player and to say, “I’m not just factory 1.0. I’m a factory 4.0 walking in the future and making a better life for myself because, within 30 years from now on, I will be the one who will need Chinese elderly care. The best way to prepare the future is to do it now.

Matthieu David: It can be a very complex solution to provide healthcare in China or prevention as you said, for the elderly. We talk in business and in working with biotech in China, we talk about MVP, minimum viable product. I believe you have thought a lot about how to enter healthcare in China in a not expensive way, because its hardware is expensive, so you have to be careful and still remain your space in the market. What was your thinking of how to do brand marketing in China? We understand the reason why you thought about this product; you have a personal experience. We understand the use because the numbers also give you credit to say China’s aging population is going to be an issue. Seniors in China are going to be more and more. But then as an entrepreneur in China, how did you position yourself?

Charles Bark: The brand positioning was number one, being clear on the benefits that we want to solve and bring. We are not product-oriented like digital-oriented or AI. The most important thing to do brand marketing in China, is defining the right strategy, market segment, with the right value proposition. When it’s very clear, we come up with the tools.

Matthieu David: How do you know when it’s very clear? It makes sense in your head, or is it you validate topics? Did you have a specific process of experimenting?

Charles Bark: It was much more experimenting in business. Trial and error. I cannot claim that I just waked up and had the right answer for that. When we met at the beginning one or two years ago, in 2017, I was very involved in the robotics in China. My idea at that time was I really believed in this companion service robotics.

Matthieu David: Which is not in your pack now anymore, right? Is it not in your kit anymore?

Charles Bark: Yeah, because we invested a lot to do the working prototype. It’s also currently under invention-disruptive innovation patenting in China. We have to patent under registration. But I realized while launching that, it was crazy in terms of cost. Burning my cash made me realize that if we go on that way, we will die soon. In terms of MVP, the minimum viable product, that’s why we turned with this box and assembled different biotech in China, aligning with the same value proposition, which is helping seniors in China live longer, healthier, happier, but reducing the scope and ambition of the technology — downsizing from the intelligent robot to assembling that biotech in China in our pack. For me, there is no failure if there is learning at the end, but from this first experience and the fact that it will be bad if we continue in that way, we reduce our ambition with minimum viable product based on that, and then we shift the strategy into brand marketing in China, earning some money, being the first mover. From this revenue and also brand marketing in China, we will gain more attraction from the investors. From the new money that we raise, we will be able to go back to the previous intelligent robot HiNounou and then be able to do more brand marketing in China. First is to launch that and then after gaining some more traction and money from the market of healthcare in China, then we will be able to deliver on the second phase, the robot that will replace the mobile phone.

Matthieu David: I see, which is a typical tactic for entrepreneurs in China, like Jeff Bezos beginning with selling books on Amazon, where he had a much bigger vision from day one, which was to sell everything on Amazon. I’m pretty sure he had that kind of thing in mind, but he began with books. The same with Elon Musk who began with publishing on the Internet, disrupting the publishing industry to build something that was very much larger in the future. I understand now. You had begun with this MVP, but it was too hard to sustain, so you find another way to enter the healthcare in China, and it is successful with many orders in B2B, and you have one foot in the market. You talked on your website about Ping An, AXA. I recently talked with someone who used to be at Carrefour, and he told me a very interesting story that Carrefour actually never partnered with Tencent. They said they would partner with Tencent and literally, the contract was not finalized. They spoke too early. That’s the thing when I see those big partners for a startup in China, Ping An, AXA and all the names, how do you partner with them? How do you make it work? They are huge; they are big, you are an entrepreneur in China, is it a contract? Is it that you come into their pipelines, so you are one of the partners for a startup in China, one of the clients? How do you make sure that you are really taken care of by these partners for a startup in China?

Charles Bark: Okay. This is a signed a contract to answer your question. All the partners for a startup in China that you see on our website are signed contracts. The question is how to trigger their interest to partner with us. It’s based on the human, on those sides. I had the great privilege to meet these visionary leaders of those partners for a startup in China like the chairman of  Bayer, Selena Chu, the founder of AXA lab front division and other fantastic C-level players. They’re not only visionary on their new business solutions, but also want to shift the existing core business into a new business solution. Wherever you’re big or small, those c-level people in those large partners for a startup in China, for example, AXA told me that if they continue to run their business with the traditional way of selling the underwriting, they will be the next Kodak because it’s not matching the new needs and lifestyle of the Chinese millennials. They cannot continue on the same traditional way of releasing their core businesses in healthcare in China. Those c-level players or the board know that they need a new business solution, an innovation that can shift into a new business revenue and match more the demand for Chinese elderly care. So, insurance wants to shift into what we call dynamic pricing. They don’t have any clear vision of risk assessment. That’s why they need those digital startups to bring these fresh innovations, a new disruptive way to engage with seniors in China and collect more multi-touchpoint data than just signing insurance papers. Pharma industry knows that its existing business model is at risk because the new pipeline of molecules is almost dead. They have a hard time to find a new molecule, and the existing molecule in the pipe will become public, so the existing revenue will go dry when the molecule goes to the public. Those pharma industries also want to be closer to seniors in China as much as possible, not just selling peels. Seniors in China also have a broader knowledge of their health of the issue. They go to Google, and those big players in the healthcare in China also have new competitors, like Google Health, Amazon or other big companies are turning into health, also Alibaba turning into insurance themselves. They deliver this insurance  policy, so those existing traditional A-level players, they know that, first, they need to re-shift and do a game-changing on their traditional core businesses to adapt to the new lifestyle of the customers, and secondly, that’s why they need entrepreneurs in China if our value proposition is matching their strategies in terms of new brand marketing in China, they welcome people like us to partner with. The challenge is to come at the right moment and meet the right people. The only way for us to do that was contested. Those organizations are organizing contests, or even they create their own labs. For example, AXA has three innovation labs, one in Silicon Valley, Paris, and Shanghai. Bayer engages in grants4apps, its own innovation contest. Ping An has its acceleration program called Ping An Cloud Acceleration. This ecosystem of innovation is the right door to come through and meet those people where those game-changers in those large partners for a startup in China, and share our dream.

Matthieu David: It was not like contacting them directly on LinkedIn. It was contested where the key to access to them.

Charles Bark: This is the key. Number two is also our alumni. Before we were talking of the partners for a startup in China from our engineering school, business school, and this is also something we need to leverage. You, me, many entrepreneurs in China are graduated from Ivy leagues engineering’s schools, business schools, and we need as an entrepreneur in China to leverage as many as possible those alumni.

Matthieu David: But how do you reach out to them? You send an email across to them saying I’d like to talk about my product, to get some advice? How do you introduce yourself in those cases?

Charles Bark: To be as much active as on our alumni.

Matthieu David: To be at the events, so a bit informal and then you can talk about what you do. I see that you are a board member and advisors of other companies as well. How did you become a board member, and how does it work exactly? Do you have to go to the meeting every year? Every six months? Every three months? Are you paid for that? Are you asked to do something for them? On your profile, it’s a publishing company called LID Publishing that you are a board member, but you also have many advisors, including a lawyer from Baker McKenzie, other entrepreneurs in China from big companies like Sodexo.

Charles Bark: For myself, it is a way to share our experience. LID Publishing is one of the biggest publishers in the world, lead publishing in business books. Martin Liu, who is the GM of this organization, wanted me to join because he needs this kind of entrepreneur in China in innovation. This is a way to contribute to this organization by bringing this kind of expertise or sharing experience on innovation in one of the most promising businesses, which is a silver economy. This is the way we can share with other board members like academia related, like Columbia University or MBA DMB in Shanghai is more into innovation and entrepreneurship in China. Since HiNounou has now collected many most prestigious awards in biotech in China and the world, those organizations would like us also to be part of their board, to share our experience in innovation and entrepreneurship in China. Because in those Ivy League universities, they are also very concerned in teaching this innovation and entrepreneurship in China. Our advisors of HiNounou include, for example Anne Quenedey from the biggest law firm Baker McKenzie, Laetitia Daufenbach from Sodexo, a fantastic lady who’s working in silver economy in the world, Frank Desvignes, two fantastic entrepreneurs in China, Yaroslav Belinskiy and Alexa Busarov, who are our investors, a banker Philippe Torres from L’Atelier BNP Paribas and Professor Theodore Zeldin who used to be the dean of Oxford Saint Antony’s. He used to be my professor and mentor from 13 years ago when I was at Oxford University. The way to get those fantastic people on board in my dream team as an advisor, was just because of my dream, not because of me, frankly speaking.

Matthieu David: What do you do when you meet with them, and you tell them over lunch, would you like to become my advisor, and then they may say what do you expect from me, right? What do you expect from them? For example, the lawyer Anne, do you expect her to advise you on legal issues? Do you expect your professor to advice you on specific topics, what do you expect from them?

Charles Bark: I expect them to bring their own expertise in their own domain, that I don’t have. They are clever than me in what they’re doing, and this dream of helping seniors in China live longer requires a lot of expertise because it’s complex. If we want to be qualitative end to end, we need those experts and smart people. I cannot pretend to have all those expertise, but I need the best in my dream team. The way to engage them is not lying in what you’re doing. Look at my dream. The problem that I’m solving for me might also be your problem. That’s why you are involved in your expertise, and I would like to have this dream team together to find a solution. In Chinese, we have a saying, a hero is a product of three helpers. Could you be one of them? For the sake of bringing a better life to the seniors in China that we cherish, and by the way, you already in some way involved in bringing a better life with your existing core competency, a better society, a better life. Those visionary leaders are not just making money for the sake of money. We’re very enthusiastic about being part of Chinese elderly care. Because HiNounou is not about just delivering IoT’s, you know. It’s about bringing a better life. So, those humanistic leaders were all in.

Matthieu David: Do you offer some privileges to them as well, like access?

Charles Bark: It’s not about money, relationship.

Matthieu David: So, no shares, no privileges, no investment from them.

Charles Bark: It was all about are you aligned with our humanistic dream. By the way, if we talk at shares, money, and everything, we are not on the good track from the beginning. Because we are talking of entrepreneurship in China, you are not talking about Microsoft. I’m not asking you to be a board of Microsoft. It’s just about if we are fit together in this dream. Those corporate leaders are already involved in corporate social responsibility somehow, within those organizations, so instead of going in NGO type, why don’t we go also spending some time in these humanistic startups rather than NGO. They have two kinds of incentives, frankly speaking. One is if we go big, somehow HiNounou will contract with them. For example, Anne from Baker McKenzie, if we get some, why we should find another lawyer if she’s there. That might also be a good potential investment for the future. BNP Paribas could be the same. Now we are about to sign a fantastic contract with Sodexo because they are one of the biggest worldwide redeem coupon, so there could also be a profitable business for us if we go big too.

Matthieu David: I see. Okay, thank you very much for your time, Charles. You see we said that it would last 1 hour. I think it’s more like 1 and a half. Thank you very much for sharing that much. Congratulations on everything you achieved. I realized actually when preparing the interview how much you have achieved, you have changed as well your product, and I have to say, I’ve been very impressed when I was looking at the changes over the last two years. So, congratulations again and I hope everyone enjoys the show, thank you and goodbye, everyone.

Charles Bark: Thank you so much for your China business podcast, and thanks also for my dream team and my partners.

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.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article Podcast transcript #38: A vision-driven startup for the Chinese elderly care is the first one to appear on Daxue Consulting - Market Research China.

Online purchasing of cosmetics products in China: Cross-border E-commerce websites

For foreign cosmetics brands, cross-border e-commerce websites are commonly used to sell cosmetics to Chinese consumers directly, following the B2C e-commerce logic. Dominant cosmetics brands have continuously expanded influence through such e-commerce platforms among Chinese consumers.

Meizhuang.Tmall.com (天猫美妆)

As an online retailer in China’s Cosmetics market, Mei Tmall is a relatively independent E-commerce beauty review platform in China, with comprehensive types of cosmetics products. The homepage of the website provides several navigations for viewers to choose cosmetics products. Selling cosmetics in China needs categorizing products with brands, functions, skin care, makeup, perfume, and men’s beauty. Specifically, the website provides detailed information on each product page, with comments and reviews from its previous buyers.

Many renowned foreign cosmetics brands also opened their flagship stores on Tmall, such as Dior, La Mer, Clinique, L’Oréal, SK-II, etc. It represents a direct-operated online sales channel for top international brands for online purchasing of cosmetics products in China.

JD (京东)

Similar to Mei Tmall, JD is also a third-party website which can serve as a beauty review platform in China. According to the cosmetics consumption trend report by JD, the number of new users attracted by high-end brands in 2017 was 10.7 times that of the same period last year, and the average amount of new users’ online purchasing of cosmetics products in China was 11.1 times that of the same period the previous year.

In China, as the top two B2C retailers, Tmall and JD have combined a market share of over 85% in China’s e-commerce market.

Jumei (聚美优品)

Jumei is a large Chinese cosmetics website, with a share of 22.1% cosmetics sales in China. To further develop the concept of e-commerce business like Tmall and JD, as well as making a distinction with competitors, Jumei is dedicated to selling cosmetics in China with a lower price by offering a discount, in turn, to target more consumers who have limited consumption capacity.

Additionally, Jumei is not only functioning on online purchasing of cosmetics products in China but also provides sufficient information in terms of brands review, cosmetics recommendations in China, as well as makeup and skin care tips for Chinese viewers.

VIPshop beauty (唯品会)

VIPshop beauty is a Chinese website specialized in discount sales for cosmetics brands online. As one of the top three profitable B2C platforms in China, it has achieved success on cooperating with popular branded products, by selling the excess inventory at discounted prices.

For the first quarter ended in 2019, VIPshop’s unaudited financial report shows the total number of orders has increased to 116.5 million, while the number of active users has reached 29.7 million. VIPshop remains the dominant position in China’s online purchasing of cosmetics products.

Kaola (网易考拉)

Kaola is among the most popular websites for people aged 20-40.

Popular cosmetics and fashion brands regard Kaola as a gateway to the Chinese beauty market. Choosing cosmetics in China is shown that it has a preference in purchasing foreign brands online, especially French beauty and cosmetics giants like L’Oréal.

Kaola achieved its success due to effective collaboration with many foreign brands. It, therefore, can offer a surprisingly low price for Chinese consumers, using its executives of website and the ability to orchestrate logistics and delivery, as well as the efficient operation of the warehouse management system.

Lefeng (乐峰)

Lefeng was established in 2008. It is the main competitor of Jumei in the field of online retailers in China’s cosmetics market. Lefeng’s strategy of digital marketing in China is used to provide China’s cosmetics recommendation with luxurious brands. Due to the quality of products proved by luxury brands, Lefeng has been recognized and popularized by Chinese beauty consumers.

ShowJoy (尚妆)

ShowJoy was founded in 2013 and operates a cosmetics retailer website. It offers cosmetics recommendation in China with individualization of personal needs, based on the database of its users.

The slogan of Showjoy company in Chinese is “正品无需代言,” refers to the confidence of certified products sales on this website. Also, the quality of products is insured by PICC, the largest insurance company in China.

Lizi (丽子美妆)

Lizi.com was founded in 2009, aiming to provide professional cosmetics recommendations in China.

Lizi has been a cosmetics agent and e-commerce platform of more than 300 well-known cosmetics brands in domestic China and overseas. Since the establishment of a deep cooperative relationship with branded cosmetics companies and qualified user experiences, the total number of customers has exceeded 5 million, making it one of the fastest growing vertical e-commerce platforms in China during recent years.

Sephora China (丝芙兰中国)

Sephora.cn in addition to sales, also serves as a beauty review platform in China. Combined with widespread offline shops in China’s beauty market, Sephora.cn values for the authentic pricing and unbiased advice for the consumers who shop online currently with comprehensive cosmetics products and more convenient shopping experience.

Sephora has now expanded to 230 stores across 74 cities in China and is also sold through multiple online channels, including sephora.cn. Having the biggest market share, the disruptive and innovative e-commerce strategy has been implemented by Sephora to develop and collaborate with the various online platforms in China’s beauty market.

Sasa (莎莎网)

Since its founding in Hong Kong in 1978, Sasa has been a recognized and trustful beauty review platform in China, also an e-commerce website. The website of Sasa offers customers the ability to choose cosmetics in China, including Sasa’s own products and international brands. In this way, consumers can do online purchasing of cosmetics products in China while browsing, without the necessity to go to offline shops of Sasa.

Onlylady (Onlylady美妆)

Onlylady is a women’s high-class fashion lifestyle platform in China founded in 2002. With ten years of operation, Onlylady is deeply rooted in providing China’s female consumers with professional content and interactive services for cosmetics and beauty. It gathers the public opinion and in turn, to influence netizens about how to choose cosmetics in China. It also establishes a leading position in China’s beauty market with the unique and personal lifestyle of women.

Kimiss (闺蜜网)

Kimiss is a popular beauty review platform in China to reach trendsetters and influencers in China’s beauty market. It has a unique business model: first, the website’s users send products to the Kimiss community, then members of Kimiss write reviews and comment on the cosmetics brand or product. It turns to a distinct concept in which brands must pay to get these ratings. Hence, the authenticity and value of such positive reviews is often questioned.

Pclady (太平洋时尚网化妆品库)

Pclady is a digital platform which consists of E-shopping and network community, in terms of cosmetics products and female beauty market in China.

As a beauty review platform in China, Pclady website generally includes ranking lists of products in different categories. In line with it, articles about the information of makeup and skin care are offered as well, along with displays of particular comments, ranking and recommended collocation of each cosmetics product created by Chinese consumers.

Yoka (Yoka化妆品)

Established in 2006, Yoka Fashion Network is a vertical portal for high-end brands and high-quality beauty products, with target users of a relatively high income.

As a beauty review platform in China, the site partitions in Yoka also contain the E-shopping of cosmetics products, testing center, ranking, and reviews of particular cosmetics.

SMZDM (什么值得买)

SMZDM.com was established in 2010. It is an online shopping website including cosmetics recommendations in China, but also a consumption decision-making platform integrating with media, shopping guidance, and online community. It has built a good reputation among many netizens for its neutrality and professionalism. The central purpose is to tell consumers how to choose cosmetics in China.

Cosmetics Recommendations in China: Are beauty forums helpful?

Xiaohongshu / RED (小红书美妆社区)

Xiaohongshu was created in 2013, and it has reached over 200m active users as of January 2019, among them of 70% are post-90s generation. Both website and application of Xiaohongshu are getting extremely popular recently in China.

Users of Xiaohongshu share their in-depth feedback about purchasing experiences, in terms of long-form reviews, images, and videos. It has contributed to lead the consumers’ orientation in China among those younger customers. Distinguished with other beauty review platforms in China, Xiaohongshu does not include functions of sharing or forwarding. It can only be used via adding cosmetics recommendations in China as personal posts.

In addition to endorsing beauty recommendations, Xiaohongshu also has high engagement in e-commerce service and cultivates its quality both in its forum sharing and selling products in the Chinese beauty market.

Bilibili (Bilibili 美妆视频区)

Bilibili is a website for vloggers to publish original videos in China. Within the category of fashion and beauty, personal experiences in related to how to choose cosmetics products in China have been recorded and shared. Video contents usually include usage and evaluation of products to recommend cosmetics in China. Watching these videos may influence Chinese consumer’s orientation before or during consumption. The most popular video of beauty recommendations in China has gathered 477,000 views on Bilibili website.

CosDNA

CosDNA provides unique information related to beauty recommendation in China, which refers to the composition analysis of cosmetics products. Also, articles published on the website include the personal sharing of single or multiple cosmetics products.

Cosme CNV

Cosme CNV is a website that contains detailed information and reviews of selected beauty products, based on the result of The Best Cosmetics Award in Japan annually. It is believed to be an authentic and trustful source of beauty recommendations in China among cosmetics consumers.

Beauty review mobile applications

Meizhuangxinde (美妆心得)

Meizhuangxinde a Chinese word for “美妆心得”, which refers to experiences of beauty and cosmetics. Its main functions are regarded to the ranking list of cosmetics, cosmetics product library, testing, brand discount, makeup learning, as well as forums of cosmetics recommendations in China and feature articles to guide consumer’s orientation in China.

MOGU (蘑菇街)

MOGU mainly focuses on two business segments, in terms of creating contents about cosmetics recommendations in China, and providing the e-commerce platform of online purchasing of cosmetics products in China.

Differed in other applications, MOGU innovatively concentrates on creating various sections of professional contents in its Chinese beauty review platform. MOGU launched a Live Stream sector in 2016, with a shopping bag added below the live studio interface. Users can click and see the products mentioned in the live broadcast, choose to join it in the shopping cart, buy immediately, or share the product to a friend

via WeChat program. Also, the updated homepage of the application sets the “Dynamic Posting” button to provide an entry for user-generated content sharing.

Miaoxuan (秒选APP)

Miaoxuan is an application to serve as a cross-border platform for selling cosmetics in China. It acts as an intermediary agent to contain 40 to 50 international e-commerce websites, including British, Japanese, American, etc., which are all real-time discounts for various brands and products.

Aoaola Meizhuang (凹凹啦美妆)

Aoaola is a community-based sharing platform focusing on beauty and skin care reviews. Users of this application will depend on those consumers who are similar to their own conditions when they are considering how to choose cosmetics in China. As a Chinese beauty review platform, this application provides authentic reviews, beauty information, as well as effective interactions between users.

Bevol (美丽修行)

The core function of Bevol is to query cosmetics ingredients, and match products according to the user’s skin quality. It leads consumer’s orientation in China to those cosmetics products with safe and skin-friendly ingredients. As of January 2019, the total number of downloads is estimated to be 2.3 million. Daily active users are about 200,000 while the monthly is about 1 million.

The skin quality testing, makeup information, discussion forum, and other services have made Bevol unique. Up to now, it has dedicated to interpreting cosmetics with ingredients, accurately matching 16 skin types and support researches with more than 700,000 kinds of cosmetics ingredients, also synchronize records of the Food and Drug Administration in China. It provides professional solutions for beauty.

Meiya (美芽)

Meiya is operating as a forum for beauty recommendations in China, also a media platform for professional makeup artists and KOLs to share their cosmetics information via videos and articles. Users can apply for the testing of new products via sharing and promoting this application in other mobile applications. In addition, the specific discussion community in Meiya is also offered for users to publish personal experiences of China’s online purchasing of cosmetics products and then to have interactions.

Red Line (红线)

Red line is a beauty review platform in China used for querying the date of production and the batch number of a particular cosmetics product. Users are able to establish a list to manage their own cosmetics. Currently, 380 brands can be queried within the database.

Also, the function of inquiring about cosmetics ingredients is added recently. Details of ingredients of 400,000 kinds of cosmetics products can be found and studied to avoid the mismatching between products and Chinese consumers.

The Beauty Influencers in Chinese Social Media

In addition to specialized mobile applications for China’s beauty market, how to reach the increasing number of social media users also becomes the consideration of new strategies of digital marketing in China, within the cosmetics market in China. Particularly, the leverage of Key Opinion Leaders (KOLs) is the most popular way to promote brands in Chinese social media, Weibo, and WeChat.

KOLs are capable of influencing numerous individual users who regarded them as specialists and trustworthy information resources in connection with fashion and beauty recommendation in China. As the driving force to impact on vast groups of people and achieve potential customers, KOLs are selected by cosmetics companies to faithful brand promotion in Chinese social media. Thusly beauty recommendations in China, posted by KOLs, can reach millions of potential Chinese consumers and offer them a primary impression on certain brands, finally influence their decision on choosing cosmetics in China.

Sina Weibo

As one of the principally community-based social media in China, the number of active users in Weibo has exceeded 300 million presently. The daily reading volume of beauty influencers is more than 1 million. Weibo provides users as a Chinese beauty review platform for direct communication and interactions; besides, a large number of user groups enable the information to spread effectively and quickly.

Example of a KOL on Weibo: @Kakakaoo~

With over 9.7 million followers on Weibo, the account of @Kakakaoo (aka AQin, “阿沁”) is operated with the beauty recommendation, vlogs of her daily life, as well as the advertising with branded products. Plenty of filtered and lively posts have depicted herself with an elegant and glamorous image, therefore, attracting a huge fanbase.

Her growing popularity has led to being more influential and trustworthy on her beauty recommendations and cosmetics product reviews. Simultaneously, she now works as the professional representative of MAC lipsticks, which also indicates the powerful leverage of KOLs in selling cosmetics in China and branding promotion in Chinese social media.

Example of a KOL on Weibo: @李佳琦Austin

@李佳琦Austin. Li Jiaqi is an acclaimed celebrity in multiple Chinese social media platforms recently, with continuously increasing number of followers. Instead of alluding persuasion in posting texts or pictures, the main form of his beauty sharing to attract Chinese consumer’s is live videos. He streamlines the processes that contribute to saving the audience’s time cost for choosing cosmetics in China. All his videos on the homepage are in a unified mode, that is, take a set of lipsticks from a certain brand, compare the color testing, describe their characteristics separately, and finally summarize the most recommended ones. Another important factor in Li’s significant influence is his gender performance to act as women’s friend, as well as the brainwashing repetition of “oh my god” during his beauty recommendation.

WeChat

As one of the biggest social media platforms in China, WeChat is both a messaging tool and an outlet for brands’ official accounts to publish information.

KOLs and celebrities are capable of promoting brands on Chinese social media, through WeChat official accounts. According to Tencent’s statistical data, the total number of WeChat cosmetics accounts exceeds 18,000, with an average 62 million daily readers. Due to the direct impact on users, in particular, the post-80 and post-90 generations, KOLs’ customized contents of cosmetics recommendations in China can effectively contribute to promoting branded products sales. The following statistics of wxb data shows the top ten WeChat official accounts of beauty recommendation in China ranked by average page views.

Apart from official accounts, individual retailers in WeChat online shopping platform are also known as “Weishang” (微商). Such kind of retails has become a common-place to sell cosmetics in China since around 2015. Product sales for individual uses and companies are conducted on the WeChat, which have more than 100 million Monthly Active Users. The Chinese government has implemented the ‘E-commerce Law of the Republic of China’ to regulate micro-commerce businesses.

Author: Yufeng GUO

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Duty Free shops are retail outlet stores that are exempt from paying all local or national taxes. This tax exemption is on the basis that the goods sold in these stores will be sold to travelers who will carry them outside of the country. Inside of duty free shops, products ranging from high-end luxury brands to skin care to specialty food and beverages are sold, at drastically cheaper prices. The products, which would otherwise be highly taxed in stores inside a country’s regular territory, are cheaper because there are no added taxes to them. Duty free shops are generally located inside airports as they target tourists and travelers. Although they are located in airports, not everyone can shop at them.

Using Zhihu, Chinese consumers have expressed that in order to be able to shop inside duty free shops you must:

• Be a traveler. More specifically, a tourist passport holder;
• Have a departing international flight or arriving by an international flight. If you are a passenger on a domestic flight, you cannot enter duty free shops. You have to be going abroad;
• For foreigners, you must register your passport.

You should also:

• Sign up for a duty free membership provided by the operator.

Chinese consumers attitudes towards Duty Free shopping

As China’s economy was developing, the living standard of its individuals improved as well. Chinese people are now choosing to enjoy life more through traveling, choosing to travel as a way to “enrich their knowledge.” When traveling to foreign countries, Chinese tourists purchase a lot of products. This action is the reason behind individuals believing that Chinese tourists are wealthy. However, the majority of them may not be rich and purchases a lot of products because they frequent duty free shops. Chinese consumers specifically look for duty free shops when traveling because they are perceived to provide high-end quality products for cheaper prices than their home countries. The products sold are also perceived to be genuine since countries, including China, strictly control the goods.

 Taking to Zhihu, Chinese consumers have inquired about which duty free shops are the best to shop at and what kind of products are worth buying.

Travel destination such as South Korea, Japan, and Sanya seem to be the three most popular destinations for Chinese tourists and duty free shopping. These are the top destinations because of the quality of the skin care and makeup products and the number of high-end brands provided.

Another reason behind Chinese consumers liking duty free shops concerns the term Daigou. Daigou are known as shoppers who make money by buying products outside of the mainland and then selling them when they return. They mainly specialize in luxury goods but also in everyday items such as groceries, because they cost less and are of higher quality.

Digital platform promotions of Duty Free shops in China

On Weibo, Duty free operators promote their shops and products in numerous ways. Lotte Duty Free and Shilla Duty Free, both Korean duty free shops, have Weibo accounts that have acquired over 8000000 and 5000000 followers, respectively.

Along with the promotion of their products, the accounts also feature services such as giveaways and activities to obtain free products.

These two big Korean duty free shop operators have their websites in Chinese that caters to Chinese tourists.

For Shilla’s website traffic, a percentage of 1.93% comes from social media. Among this 1.93%, Weibo accounts for 1.51%. This means that inside of China, Chinese consumers who visit the website are mainly coming from Weibo.

For Lotte Duty Free Chinese website’s traffic, 1.58% of traffic is drawn from social media. Among this 1.58%, 2.22% is from Weibo.

Thus, Chinese consumers mainly access the site from Weibo, among all the Chinese social media sites.

Online searches for both of these brands of duty free shops in China have displayed constant cycles of highs and lows. Lotte Duty free started to see a decline in searches in early 2018 and continued to decline until early 2019, while Shilla Duty Free witnessed constant growth until early 2018 before seeing a decline. By 2019, it’s searches started to increase again.

The search frequency of Lotte Duty Free Shop on Baidu from 2016 to the present, the highest peak was in at the end of February 2017.

The search frequency of Shilla Duty Free Shop on Baidu from 2016 to the present, the highest peak was at the end of February 2018.

On the official websites, both operators use Korean celebrities to endorse their products, assuming the role of a KOL. They feature the celebrities holding the product, on the promotional materials for the product, and other activities. Lotte Duty Free even utilizes Chinese video platform Youku, to promote their products and to do some KOL marketing. The videos are featured on their website.

Duty Free in China Case Study: China Duty Free Group

China Duty Free Group (CDF) is the only state-owned monopoly company that is authorized by the state-council to carry out duty free business nationwide. They are one of the top three duty free distributors in the world, the largest duty free retailer in China, and have established over 240 duty free shops in the airports of multiple cities. The group has nine duty free types. In the tourism retail business, China Duty Free set-up L’île du Luxe stores that offer top international brands of products such as perfume, cosmetics, clothes, jewelry, and watches, and high-end stores in airports. Currently, there are shops in airports in Guangzhou, Hangzhou, Nanjing, Xiamen, Shenzhen, Dalian, Xi’an, Chengdu, Guiyang, Shenyang, and Changsha, along with shops offshore. The group also established Chinese Specialty shops that are targeted at the market of high-end and high-valuable Chinese specialty souvenirs such as toys, stationery, clothing, bags, food, and household supplies.

In 2016, China Free Group Sanya International Duty Free City won the CTF Travelers Conference “2016 Chinese Tourists Favorite Shopping Shop” Award. Sanya Duty Free City is the world’s largest tax-free commercial complex located in Haitang Bay, Sanya City in Hainan Province. The duty free city has the theme of tax exemption, integrating business, catering, entertainment, and leisure and shopping. It features around 300 internationally renowned brands, five major divisions of national specialty products, Hainan specialty products, outdoor sports, food, customer service, entertainment, and recreational areas. Providing a one-stop shop for customers and enjoyment for the family.

Sanya Duty Free City utilizes Weibo for promotion. The account has attention of 300 and over 270000 followers. KOLs are not frequently used in the promotional materials of the products and mainly include visuals of just the products.  The account also features articles on products and topics related to the shopping experience such as articles about things that customers/fans of the location are most concerned about. These kinds of articles function as a kind of “frequently asked questions” section where the business provides answers to the consumers’ concerns through the articles.

Duty free shopping has become a large part of Chinese tourists’ traveling. With duty free shops, they can obtain goods that are otherwise too expensive in their homeland. These shops offer a way to enjoy luxurious lifestyles within their financial means.

Author: Shyaiah Mitchell

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Single Chinese women and“leftover women” in China

“Leftover women,” or sheng nu is a term used in China to describe unmarried women in their late 20’s – early 30’s perceived to have passed the ripe years for marriage. For many of today’s generation, this concept has become a reality. In recent decades, China’s economic boom has created a generation of educated, independent, and career-driven women. Yet cultural mindset has not caught up to the pace of economic change, as traditional Chinese parents still hold extreme expectations of their daughters marrying off by their late 20’s and starting a family.

Consequently, many single women in China now dread going back home for Chinese New Year, in hopes of avoiding questions related to marriage, and further pressures to start a family. While it is the most culturally significant holiday of the year, facing suffocating and painful criticism on boyfriends, marriage, dating, and even children is enough to drive them away from coming home, often during the only holiday that enables them to. As previous installments of the campaign demonstrate, these women have approached the “expiry date” of their timeline that Chinese society has imposed upon them. Yet as independent and intelligent individuals, they must choose between abiding by society’s rules or redefining themselves – and others like them – in what it means to be an empowered woman in today’s fast-paced China of multiple economic, political, and social transformations.

The older generation’s attitude towards marriage in China

The first installment of the #changedestiny campaign, Marriage Market Takeover (2016) emphasizes the attitude of the older generation towards marriage. It is centered around the famous Marriage Market in Shanghai in People’s Square Park, where parents share profiles of their sons/daughters taped onto umbrellas for public viewing, with goals of finding a partner for their child. The market demonstrates the deep traditional family values of the older Chinese generation, further illustrating the generation gap that many Chinese millennials are experiencing between their parents. Traditional Chinese values are very family oriented. Thus parents want to see their children begin a family of their own by a reasonable age. Marrying and having children is even a sign of respect towards parents as a demonstration of their stability, and to give them peace of mind in their old age. The older generation shares a similar attitude towards the role of women, as parents still believe women should not work very hard in their jobs, and their focus should be more centered on domestic matters such as cooking, cleaning, and taking care of children.

Translation: “I think Chinese women should be more traditional and bear children.” [Source: Adquan]

Insights, criticism, and mixed response from Chinese Social Media

This latest installment of the #changedestiny campaign was overall well-received, but there are some varied responses on Chinese Social Media sites both supporting and criticizing the content. On adquan, a Chinese media and information service platform for the Chinese advertising industry, the following comment was posted in response to the commercial: “The story in the commercial is real; unfortunately the ending is fake.”

[Source: Adquan]

[Source: Weibo]

On Sohu, a Chinese internet platform, users have posted articles discussing the commercial from different perspectives. One post pointed out that the topic has been exhausted, and the population is no longer as sensitive to this old topic. Another pointed out that while the “leftover women” topic isn’t new, SK-II’s campaign has added new elements into its discussion. This includes highlighting the current difficulties these women face in the dating scene as a “leftover woman,” and a heart-rending parental angle showing the long tradition of starting a family as a prominent demonstration of filial piety. Finally, what Meet me Halfway clearly communicates, is the next step for such women, “to voluntarily take the first step, and face this generation gap between parents and their children. Only this way, can take a firm hold of our ‘destinies’ and finally take action to change it.” On Weibo, a similar discussion is taking place with comments praising the installment for its aesthetic attraction and storytelling production, yet many users find the targeting of this segment of women overused and cliched.

Changing socio-cultural dynamics of Chinese consumers: Marketing takeaways

While the videos are well-received by the public, marketing to the middle-aged female segment using the concept of “leftover women” generally seems to be an exhausted topic for Chinese consumers. A better way to approach marketing towards this segment might be to focus on empowerment through emphasizing their independence and happiness in their fast-paced lives; to highlight their pride towards being a part of the group that are newly redefining Chinese women rather than showing their melancholy depart from tradition in a comparative discussion of “what they should be”. It’s also important to note the shifting trend of individualism in Chinese society that this particular segment also demonstrates. Mainly in tier-1 cities, wealthier millennial generations are showing more individualistic characteristics, such as chasing unconventional goals, pursuing personal interests, and taking risks that they believe might propel them closer to their visions. These changing socio-cultural dynamics of urban Chinese society are vital to the understanding of Chinese consumers in the 21^st century.

How COVID-19 is changing the dating scene

With the emergence of a global pandemic and the resulting lockdowns, singles have turned to online dating platforms being stuck at home and social distancing. The top users of Tantan during the outbreak are those born after around 1995 and 2000, with more than a 20 percent increase in messages sent and daily matches. What used to be a quick swipe-and-go on the apps is now a longer and more careful screening of a user’s profile. Users are more likely and willing to engage in a meaningful conversation with another user as lives at home have become less busy. Some would even start a conversation by sending a heart-warming message such as “how are you holding up” to check in on the other person’s well-being, rather than a blunt “hey” as was common before. As most of the population is staying home during the outbreak, suitors have become more creative with connecting with the other person. For instance, it has been common amongst the younger generation to go on virtual dates, in which a potential couple would video call over a shared activity such as cooking or playing online games. These virtual dates do help pass the time and strengthen the bond with someone met online, yet it is uncertain as to whether couples are able to meet in person in the near future with the outbreak. With the shift of the dating scene going online especially with a world pandemic, “leftover women” may be on the rise and marriage may no longer be the first priority amongst modern women.

Author: Julia Qi

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Overview of China’s cosmetics and personal care market

Cosmetics and personal care are fast growing sectors within Mainland China. Spanning across a wide variety of industries including makeup, skin care, hair care, personal hygiene, fragrances, etc, the cosmetics and personal care market in China all around has experienced positive growth.  The rise of the millennial generation has largely contributed to higher consumer demand, as well as the rapid expansion of the middle class.

Both domestic and international brands, particularly in the makeup and skincare industry, have taken great advantage of the digital landscape, penetrating the online environment with a combination of strong social media presence, e-commerce platforms, as well new Chinese reviewing and shopping platforms like Xiaohongshu (“little red book”). With an obvious advantage in the market share, international brands have made exceptional use of social media marketing and KOL influence, demonstrating the importance of building a digital platform in this new age of marketing.

Impact of Covid-19 on cosmetic sector in China

During the coronavirus 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 in 2020. High-end brands were more affected than mass brands. Moreover, COVID-19 has different degrees of impact on different categories in the beauty market. The epidemic had a more negative impact on cosmetics than skincare products, while personal care products were gaining more popularity in this period. Indeed, people spent more time at home and they could focus more on their skincare.

In the past several years, live streaming has become increasingly popular as more consumers attach more importance to immersive experiences and personalized recommendations. The epidemic stimulated the dramatic growth of live streaming and made KOLs more important than ever, this trend can also be seen with the cosmetic sector.

Skin care products have the highest market penetration in China

The market size of the cosmetics industry in China has been steadily rising in recent years, growing by 21% since 2014. Increasing income of the Chinese population, as well an increase in beauty consciousness and awareness has largely contributed to continuously increasing demands for cosmetic and personal care products in China. More people have started to pursue aesthetic trends, specifically honing into Western fashion and beauty trends.

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Portrait of the consumer in the cosmetics and personal care market in China

Consumers 30-35 years of age have been the largest consumer group due to their strong purchasing power. Consumers in the 25-29 years old range make up the second largest group, as this younger, more tech-savvy generation is much more exposed to social media and its proliferation of beauty-related content. This group is experiencing the most growth in terms of buying potential and willingness to purchase. As the middle class continues to grow, higher disposable income in the millennial generation is also expanding the market potential for cosmetics and beauty care in China.

Effectiveness, Brand, and Price are most important to Chinese consumers

As of currently, China’s competitive landscape is very dense with a large presence of domestic and international players releasing high-quality products.  Online discussion among consumers is thus very high. On Zhihu, the most frequently asked questions relating to cosmetics and beauty products in the Chinese market are: advice on picking products based on need, how to use certain products, and comparing different brands. On Wechat, the popular discussion is along similar lines, in addition to market share related questions. On Weibo, consumers and KOL’s share information of popular cosmetics brands in China through pictures and videos. Amongst the discussion, international brands are most popular.

The most significant qualities that Chinese consumers look for in their products are effectiveness, price, and brand name. However, a 2018 survey from the Ministry of Commerce revealed that 75% of Chinese consumers claimed that skincare products in China’s domestic market did not fit their needs. Thus, this indicates an enormous potential for imported products as international companies can seek to fill this unmet demand in the Chinese market.

Cosmetics and beauty care in China: International brands show an obvious advantage

Among the top cosmetics players in the Chinese market, international brands show an obvious advantage. Among the top 10 cosmetics players in China, only 3 were domestic, with international markets dominating a significant market share of 61.5%. Among fragrances, international brands have a larger variety of product series, better product design, and a more well-received reputation.

As for makeup, the top seller price of international brands is higher than domestic brands, but both domestic and international brands are commerce on e-commerce platforms which demonstrates consumers are willing to pay more for brands that are better perceived. The biggest quality associated with international brands is its effectiveness, as its overall effects and benefits are thought to be higher than those of domestic brands. However, Chinese domestic beauty brands were gaining popularity in the past few years. They had been estimated to gain more market share in the future.

Data source: data.iimedia, 360 cosmetics, daxue consulting report. The share of domestic brands in China’s beauty market is increasing

Cosmetics industry in China: What are the main distribution channels?

Supermarkets and hypermarkets are the main winners in the battle for distribution share of beauty and personal care goods in China. Concerning the online sales, in 2018 Alibaba’s e-commerce platform Tmall accounted for nearly 49 percent of the total online cosmetic product retail revenue in China, followed by JD.com with 29 percent of the market revenue share. Online distribution channels accounted for almost 40 percent of the total cosmetic product retail sales in China that year.

How can international brands attract the attention of Chinese consumers?

For all cosmetics and personal care brands, social media and e-commerce platforms have been very effective approaches to branding in China. These online channels have successfully built trust and reputation among Chinese consumers. Cosmetics and beauty products are a thriving market for an online landscape in today’s social media proliferation.

Social media platforms are essential to international brands in order to engage with local Chinese consumers. Many cosmetics and personal care international brands have already created Wechat and Weibo accounts, as well as stores on e-commerce platforms. On Weibo, beauty/fashion KOLs can engage with fans and audiences, enabling them to easily affect consumers’ purchasing decision.

WeChat is often used as a channel for brands to quickly engage with consumers as well as collect personal feedback from them.

Moreover, some brands offer personalization to their client through mini-program. For example, Dior cosmetics and fragrance created an exclusive mini-program with a gift box that can be personalized with a little note (“我爱你”：I love you, “谢谢你”: thank you, “生日快乐”: happy birthday) while customer is buying a product. The large social engagement in the cosmetics and beauty care industry demonstrates its popularity in the online landscape.

Clinique WeChat Account

Cross-border e-commerce also makes international brands easily accessible to the Chinese market with fewer barriers such as tax. Tmall, JD, and JUMEI are the main platforms in the Chinese market for purchasing cosmetics and getting detailed info of products. The most popular brands have all built official offline stores on these platforms. On the Baidu Index, Dior showed the highest search frequency, Estee Lauder had the second highest search frequency, and Max Factor showed the lowest search number during the past year. Many of these brands also launched discount activities for the double 11 shopping carnival.

Cosmetics and beauty care in China: KOL’s as a driving force

For international brands, KOLs are a huge part of modern Chinese product promotions. Consumers of this sector are highly influenced by shared opinions and experiences of KOL’s. Many of these KOL’s have a tremendous following in Chinese social media. In the cosmetics and personal care industry, they mainly consist of fashion writers and models, makeup artists, brand founders, and cosmetic formulators.

Dior: Adverting and digital landscape in the Chinese market

Diorsnow Campaign

Dior is a very popular foreign luxury cosmetics brands in China with a strong online presence both in e-commerce and social media. Its Chinese name 迪奥 is merely a phonetic translation of its English name. In October of 2018, Dior had the highest sales revenue with 72,280 items, despite the price of its top-selling item also being one of the highest, at 619RMB.

Dior’s advertising campaign for its Diorsnow line specifically for Asian skincare is a great example of how Dior has made use of its digital landscape within China. The content of this video clearly demonstrates localization to the Chinese market by appealing to the beauty standards of Asian women. The video describes a micro infused lotion, emphasizing its effects on skin brightening and whitening, which is a highly valued beauty trait for Chinese women. In addition, the brand is also very effective at engaging Chinese consumers by posting fashion news, videos, and pictures about its new products and arrivals on their Dior Weibo and WeChat accounts.

Xiaohongshu shaping online consumer discussion

Xiaohongshu 小红书 is a popular new social media and e-commerce platform. As of June 2018, the crowd-sourced review site has over 100 million registered users, 30% of which are under 30 years of age. It allows users to post and share product reviews, lifestyle blogs and articles using photos and short videos. It is also a very popular site for celebrity and KOL endorsement, thus attracting many users looking for recommendations in the cosmetics and beauty care industry China in China. The platform is especially popular amongst Chinese women as well and is a great way for brands to promote their products. By using mainstream social media and e-commerce platforms such as Xiaohongshu, brands can effectively build a good relationship with Chinese consumers by increasing trust and exposure within the Chinese community.

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The male beauty market is one of the booming sectors of the increasing cosmetics market in China

The data collected on Vipshop.com (唯品会) found that 96% of males purchased cosmetics. Moreover, the sales volume of skincare product purchased by men almost doubles every year. For the majority of Chinese men who have just awakened their skincare awareness, skin care awareness is no longer at the stage of “washing their faces clean”. Chinese men’s knowledge about cosmetics is constantly developing and improving, and the awareness of “facial care” is increasing. It is evident that facial masks rank first. BB creams, lips and eyebrow pencil also become the primary choice for most men. Therefore, the diversification of products is an important factor in the development of men’s product  Chinese male consumers are more confident and willing to purchase and use beauty products, including both skin care and cosmetic products.

According to information released by L’Oreal, 16 brands are stationed in T-mall, and online sales in some business units account for more than 20%. Male may have more confidence in shopping online because they might feel freer and can choose what they want carefully.

Fast beauty in the Chinese market: Contract manufacturers have competencies to adapt to fast beauty

Recently, the influx of fast-beauty players is making its mark on the beauty industry. Fast beauty, by definition, refers to quickly on-trend products launch with the help of agile supply chain capability as well as digital marketing. In terms of its significant characteristic-fast adaptive, upstream segments of the beauty value chain like materials, packaging, Original Equipment Manufacturing (OEM), Original Design Manufacturing (ODM), Own Brand Manufacturing(OBM) and manufacturing equipment are also cashing in on the make-up boom. Winky Lux, for instance, aiming to quickly bring quality, affordable, on-trend products to the market, in its very early developing stage the founder Natalia Mackey decided to cooperate with a Chinese manufacturer.

Having convinced its contract manufacturer to invest equipment as well as some research and development, Winky Lux, due to this alliance, is capable of its dedication on fast turnaround times, and at the meantime guarantees the quality of products. The innovations conceptualization and the audits can be operated within 48 hours and then, are seamlessly delivered to the Chinese manufacturer to achieve quick aggregation and mass production. One of South Korean’s biggest contract cosmetic manufacturers, Cosmecca, has been expanding China production to meet surging demand, a third factory already in its plan. Even though the fierce competition of Chinese cosmetic landscape, these contract manufactures can gain stable earnings via effective and efficient production.

With more people than ever using the internet and other digital products, digital strategy in China is considered a major development direction for any company. Daxue Consulting works on the projects involving digital strategy and digital identity in the main cities as Shanghai and Beijing as we.

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