Succeeding online in China’s cosmetics market in 2020
Chinese consumers’ appetite for foreign and domestic cosmetics brands has stoked impressive growth in an industry that includes makeup, skincare and haircare.
In 2014, China’s cosmetic market was the third-biggest in the world, valued at $26 billion USD. Today, the size of the country’s cosmetic market trails only the United States and is projected to generate sales in excess of $60 billion USD by 2024.
Though COVID-related economic impacts and an increased prevalence of Chinese-owned companies have affected the market, the cosmetics industry is one in which foreign brands still reign supreme. Cosmetics also provide one of the clearest examples of why global brands must capitalize on lucrative key opinion leaders (KOLs) in the Chinese market.
The prowess of global brands like L’Oreal, Estee Lauder, and Japan’s Shiseido extend far into the Middle Kingdom. French giant L’Oreal continues to dominate the China cosmetics market with respect to skincare and cosmetics. The company’s sales in China reached a 15-year high in 2019, growing 35% from 2018. For its part, American company Estee Lauder expects double-digit growth in Mainland China to continue from March onward after abnormally weak Q3 results due to the global economic slowdown.
Executives at L’Oreal expect a return to normalcy in the China cosmetics market as pandemic-related lockdown measures continue to ease across the Middle Kingdom. While wearing makeup and lipstick becomes less of a priority when one’s face is veiled by a surgical mask, the company noted the cosmetics market has been resilient in the face of a global crisis in its Q1 update, as consumers focus on “personal care” purchases.
While pharmacies and drugstores saw reduced traffic during the outbreak, a doubling-down on online commerce have managed to buoy sales for L’Oreal and other leading brands.
Global brands that have an existing foothold in, or are looking to sell to China must also take note of increasingly popular domestic players in the cosmetic industry.
The re-opening of brick and mortar pharmacies and drugstores may have slowed the bleeding for some international brands in the market, but local cosmetics manufacturers that leverage e-commerce and Chinese social media platforms, while selling their products to the youngest generation of consumers at competitive prices, are definitely making their presence felt in the PRC.
Hangzhou-based company Proya Cosmetics and Guangdong Marubi Biotechnology, a local makeup brand, have posted impressive growth in 2020 amid a reality in which disposable income is harder to come by and leaving the house to shop is either restricted or forbidden. As the first three months of the year saw Shiseido report a net income decline of 96% and Estee Lauder post a $6 million USD loss, Proya and Guangdong Marubi experienced more modest declines, with the latter reporting a mere 1% loss in net income between January and March.
The recent success of these and other brands in the China cosmetics market (foreign and domestic) highlights at least four strategies global brands should look to emulate:
The first is an adoption of and commitment to an online-first strategy. International brands have heretofore looked to further solidify their physical presence in the China cosmetics market. Conversely, Proya started to shift its business online before the notion of a pandemic-related lockdown came into existence. According to its annual report, 53 percent of Proya’s revenue came from e-commerce in 2019, up from 44 percent in 2018.
Second, domestic brands have also been ahead of the curve in the China cosmetics market in establishing relationships with key opinion leaders (KOLs). The Chinese phenomenon of enlisting high-profile celebrities and internet influencers to sample and promote products lends itself especially well to cosmetics. Foreign brands need to be as active as their domestic counterparts in this space. Despite being unable to try out the products themselves, consumers can watch as well-known and trusted KOLs share their demonstrations in real time, allowing prospective buyers to understand how makeup and other cosmetics look and feel on a live human being.
Austin Li, appropriately dubbed the “King of Lipstick” is a KOL that has garnered a sizeable following on social media platforms thanks to his live-streaming events where he applies cosmetics like makeup and lipstick and broadcasts to his 40 million fans on Douyin (China’s version of TikTok).
He once managed to sell 15,000 tubes of lipstick during a livestream session on Taobao’s live-stream service; and broke a Guinness record by applying lipstick to four different models in 30 seconds. In another example of the power KOLs can have in a brand’s reputation and sales, Proya partnered with Chinese singer Cai Xukhun who counts over 30 million followers on Chinese social media platform Weibo.
Third, seizing opportunities presented by a consumer base habituated to a mobile-first, online shopping experience in combination with leveraging high-profile KOLs helps brands connect with the next generation of consumers.
Having a brand presence on the right social media channels to target Generation Z will serve to build brand loyalty with young consumers starting to spend disposable income granted to them by a burgeoning economy. Proya’s eponymous brand’s popularity among women between the ages of 18 and 24 in third and four-tier cities helped lift the company’s sales in 2019 and into 2020.
Last, foreign brands ought to also take note of the increasing importance of men’s cosmetics in China. Male consumption of cosmetic products in China was expected to rise by 13.5% in 2019, a number that dwarfs the global male cosmetic market. An evolution in Chinese culture vis-a-vis male appearance and traditional expectations of gender have started- and will continue- to present an opportunity for global brands looking to establish themselves in a competitive market. With the right KOL partnerships, brands can tap into an already existing ecosystem of male cosmetic stars who promote both male and female skincare and beauty products.
While domestic brands like Proya and Guangdong Marubi have created excitement from investors who observed that the Chinese companies’ predominantly online model would fare well during the coronavirus pandemic, global players in the China cosmetics market remain strong. Understanding the importance of an online, mobile-first presence; building partnerships with KOLs; and taking advantage of competitive pricing and the social media landscape in China is not impossible.
The right China marketing agency will be able to assess market opportunities that leverage all of these important factors and find the best way for your brand to establish itself in China’s fast-growing cosmetics market.
If your brand is interested in unlocking the power of online commerce and KOLs to drive your growth in the China cosmetics market, contact firstname.lastname@example.org.