"Core Tips"
International beauty brands such as Benefit, KOSÉ, and BY TERRY have announced their contraction in the Chinese market, or even left the market. Why did the former "top stream" of foreign capital become the "tears of the times"?
Author | Gao Yuzhe
Edit | Liu Yang
Since February this year, related topics such as "Yang Di's explosion reform" and "Jin Jing's explosion reform" have been on the hot search several times. From celebrities to ordinary people, behind the "explosion change" wind sweeping the Internet, local beauty has become the protagonist of this wave of dividends, Huaxizi, Tangerine, Red Earth, etc., as the main products in the series of videos out of the circle, attention and sales have risen.
At the beginning of April, the latest data released by Tmall and Douyin verified the growth rate of some local beauty products: from January to March alone, the cumulative GMV of Han Shu and Proya on the dual platforms exceeded 2 billion, with Proya increasing by 54% year-on-year and Han Shu increasing by 450% year-on-year.
Judging from the data, the domestic beauty market is at a watershed: on the one hand, the rapid development of local beauty products, with the revenue of some brands increasing by more than 30%, and many brands entering the "1 billion" mark in a stepwise manner, on the other hand, foreign beauty products shrinking or even leaving the market in the Chinese market, according to incomplete statistics from C2CC Media, 22 overseas beauty brands will withdraw from the Chinese market in 2023.
Recently, even Procter & Gamble's SK-II has been frequently rumored to be "withdrawn". According to a number of SK-II users, SK-II counters have been removed from many shopping malls in Shanghai, including those located in the core business district of downtown Shanghai. According to public data, the number of SK-II counters in Shanghai was 18 before, and only 10 are currently open for business.
On April 17, SK-II responded to the rumors that "Interface Fashion" said: "Frequent cabinet withdrawals", "nationwide cabinet withdrawals" and "1/3 of recent cabinet withdrawals" are all false information, and "China has always been a very important market for SK-II".
Despite this, it seems that the situation of foreign brands taking over the Chinese beauty market is being broken.
1. The beauty giant can't bear it
With the rapid development of local beauty products, some foreign brands have encountered difficulties in the Chinese market, and even the former "top stream" has not escaped and has become the "tears of the times".
At the end of 2023, Benefit announced the closure of the official flagship stores of Tmall, JD.com, and Douyin, leaving only Sephora as a sales channel. LVMH, one of the most profitable beauty brands in the past, recorded its highlights on its website: "every two seconds, an eyebrow product is sold" and "every 14 seconds, an anti-hole elite primer is sold".
This progenitor beauty brand has closed stores and shrunk significantly after entering the Chinese market for 17 years, which has also sparked heated discussions on social platforms.
On March 5 this year, the news that "Benefit was revealed to be withdrawing from the Chinese market" appeared on the hot search, and some users said that multiple brand members received a notice from Benefit eyebrow trimmer, reminding customers to use membership benefits as soon as possible, and the brand will withdraw from the Chinese mainland market at the end of June and early July 2024. "Leopard Change" asked Sephora staff about the matter, and the other party said that there was no clear notice for the time being.
Under the fierce competition, there are not a few overseas brands that have been "swept away". Although Benefit's "departure" is embarrassing, it is also full of helplessness. And this year, the tide of foreign beauty cabinet withdrawal continues.
Recently, the American brand Petrov and Kose, one of the three major Japanese cosmetics companies, have successively announced the closure of the brand's official flagship store on Tmall. In response to the official Weibo account, KOSÉ responded that the closure of the Tmall flagship store was a strategic measure based on the channel concentration of some KOSE products in China.
As an early foreign brand in the Chinese market, KOSÉ has been in the Chinese market for 36 years, and its Tmall flagship store has been operating for 14 years, accumulating a total of 885,000 fans. Among the 31 products on sale in the Tmall flagship store, there is only one setting spray priced at 89 yuan, which is purchased by more than 10,000 people, while the other main products have obvious faults, and most of them are sold within 100. Although KOSÉ's official micro-mall and offline counters are still operating normally, the closure of the Tmall flagship store shows that the long-established cosmetics brand is not able to cope in the Chinese market.
In fact, KOSÉ's adjustment in the Chinese market was not sudden.
According to the 2023 annual results of KOSE Group, the group's total revenue was about 14.33 billion yuan, a year-on-year increase of 3.9%, but the operating profit fell by 27.7% to 760 million yuan, and the net sales in the Asia-Pacific region (excluding Japan) fell by 34.7%, of which the sales of the travel retail channel were about 1.269 billion yuan, which was almost halved.
Regarding the sluggish performance, KOSÉ pointed out in the 2023 financial report that the decline in performance in the Asia-Pacific region was mainly affected by the Chinese market, which was attributed to the impact of "sluggish consumption in China's travel retail market and nuclear sewage", which led Chinese consumers to choose Japanese brands cautiously. The performance of Japanese cosmetics in China may be affected by nuclear wastewater, but it is undeniable that as one of the four major cosmetics groups, KOSE is the one with the largest decline in China.
In addition to established foreign beauty brands, high-end niche brands are also facing challenges in the Chinese beauty market. Recently, the French high-end beauty brand BY TERRY was rumored to be about to withdraw from the Chinese market. Some netizens found that BY TERRY is sold at a 50% discount on Sephora's official website. In response to this situation, "Leopard Change" consulted Sephora staff in Suzhou and Beijing, and was told: "It's the same all over the country, the BY TERRY of Sephora stores will be withdrawn, and the offline counters in shopping malls have been withdrawn since last year." ”
The official WeChat public account of BY TERRY has not been updated since December 7, 2023, and the content of the official Weibo account has also been released on December 8, 2023. AT PRESENT, A NUMBER OF CABINET BROTHERS AND SISTERS HAVE POSTED BY TERRY'S CLEARANCE NEWS ON SOCIAL PLATFORMS. On Sephora's official website, the original price of 795 yuan for the three-dimensional firming essence primer is now priced at 398 yuan, and many fans are grabbing or hoarding goods, and most of the products have been sold out and off the shelves.
Under the news of the brand's "suspected withdrawal", many fans "shouted injustice" for it. However, some beauty practitioners believe that BY TERRY's positioning and price are too high, and there are too few marketing actions, so it is difficult to sell in the domestic market.
REGARDLESS OF THE TRUE SITUATION OF BY TERRY, THE "DISCOUNTED SALE" OF THE ENTIRE PRODUCT LINE AND THE "STAGNATION" OF MULTI-PLATFORM ACCOUNTS SEEM TO SUGGEST THAT IT MAY BE UNDERGOING A CHANGE. From giants to niche high-end brands, foreign beauty is experiencing unprecedented turmoil in the Chinese market, and the challenges ahead are likely to be even more severe as local competition intensifies.
2. Local brands "fill the position"?
When foreign beauty products encounter "unadaptation", local beauty products are occupying the minds of more consumers.
Open social media and live broadcast rooms, KOL promotion and purchase links of local brands are overwhelming, and back to the younger consumer group, more and more people cherish the popular products of local brands. From questioning to acceptance, domestic "Ping" has put more people's makeup tables.
"In the past, they were all big-name Internet celebrity products, a bottle of essence cost about 1,000 yuan, and the cheap ones were hundreds of dollars, and I was worried about buying fakes. When domestic products first came out, they also had a wait-and-see attitude, and later found that some domestic facial cleansers and makeup primers within 100 yuan were easy to use and cheap, and there was no need to spend so much money on skin care. In the view of Li Qian, who is in her 30s, many big-name products can find substitutes in China and buy them at a higher cost performance.
There are not a few consumers like Li Qian who feel that local products are "really fragrant".
In fact, the rise of local beauty is largely due to the fact that it is in line with the purchase needs of mainstream consumers under the trend. According to iiMedia Consulting statistics, Chinese consumers are the top three concerns when buying cosmetics: product effect, cost performance, and product ingredients.
When local beauty products are given consumers a wider range of prices and product choices at better prices and rapid iterations, more and more consumers are disenchanted by the noble lady products that have crossed the ocean, as the so-called "it's not that big brands can't afford to love them, but that domestic products are more cost-effective".
In this context, local beauty has risen rapidly. According to the brand record on the first day of early purchase in the beauty industry on Tmall Double 11 in 2023, Proya surpassed L'Oreal for the first time and topped the list in one fell swoop. Going back a year, the top three on this list in 2022 are still firmly occupied by L'Oreal, Estee Lauder, and Lancôme, and since 2019, these three giants have been firmly in the top three of the Tmall beauty list.
The fierce offensive of local beauty has shaken the market dominance of international brands for many years, and at the same time, many local brands have stepped into the "billion" mark.
The GMV of the head brands represented by Proya, Winona, and Han Shu in 2023 will reach 7.541 billion yuan, 4.963 billion yuan, and 4.228 billion yuan respectively, with a year-on-year growth rate of 44.49%, 20.74%, and 120.91% respectively; 3.454 billion yuan, with a revenue of more than 3 billion, and in the third echelon, the revenue of the local makeup brand Tangduo in 2023 will be 1.67 billion yuan, breaking through the 1 billion mark.
From the perspective of market share, the rebound of local skincare products will be reflected in 2023. According to the 2023 China Cosmetics Yearbook, the sales of domestic beauty products increased by 9.96% year-on-year last year, and the market share reached 50.4%, surpassing foreign brands for the first time.
With foreign and local market shares accounting for half of the market, China's beauty market has reached a delicate juncture. With the rapid growth rate of local beauty, it may only be a matter of time before it captures a larger market share.
3. Is the big-name "Ping" really fragrant?
Local beauty is struggling to catch up, but can it really become a "replacement" for big names?
According to the statistics of Qingyan Intelligence, in the list of the top 20 corporate brands in China's cosmetics sales in 2023, domestic brands account for 7 seats and foreign investors account for 13 seats. Behind this, there is not only the brand influence accumulated by foreign beauty products for many years, but also the R&D and production standards of international beauty brands that have been verified by the market to ensure the safety and effectiveness of the products.
This also determines that foreign beauty has a large number of fans in China, and even at the moment when cost performance is king, there are still a large number of beauty consumers who are willing to pay for big brands. Liu Lu is one of them, in her opinion: "When choosing skin care products such as essences and creams, I prefer big brands that have been tested in the market for a long time, although the premium is higher, but the ingredients of big brand products are more safe and credible, and there is still a gap between domestic products and big brands in this regard."
In contrast to the R&D and efficacy of big-name beauty products, due to the late start of domestic cosmetics, independent R&D and raw material innovation have always been a major pain point in the industry.
Since 2019, when the traffic east wind ushered in the "first year of domestic beauty", many consumers have doubts about the reliability of local brands, and many domestic brands have been criticized for product homogenization and backing to foundries.
Taking the representative local beauty brand Huaxizi as an example, it was pointed out in the past that more than half of the 177 patents applied for were product packaging designs, and after the boiling "eyebrow pencil" storm in 2023, Huaxizi was even revealed to have no own production factory, and all products are produced by foundries. Due to the fact that most of its products are produced in ODM mode, resulting in serious homogenization, Huaxizi brand is actually only responsible for promotion and sales.
This situation is not uncommon among domestic beauty brands.
Some netizens found that many domestic brands of lipsticks such as kaleidoscopes, leavened colors, UHUE, and GIRL CULT came from the same foundry. In this regard, some consumers defended it, "OEM is common in the industry, and the brand can control the quality of the product in the production process." However, domestic beauty and skin care products with weak independent research and development capabilities are still questioned by consumers, "Lipstick is thrown around during the production week, the packaging is very large, and the capacity is a little bit, and it does not squeak when you buy one", "There is no light of domestic products, it is just OEM"......
Behind the rise of domestic products, "cost-effective" is the most impactful keyword, which also makes it a well-known "replacement", but the idea of focusing on marketing and light research and development is difficult to ensure a long-term foothold. In this case, once foreign beauty products, especially international brands, keep up with the pace of domestic marketing, make up for the shortcomings of slow new products and high prices, it is easy to make a comeback.
Foreign beauty seems to be losing ground, but China, the world's second largest cosmetics consumer market, is still a huge attraction for it. A beauty practitioner believes that the high cost performance of local brands leads to the low competitiveness of foreign brands, and the cost of offline channels is too high.
In the context of the rapid change of wind direction, foreign beauty has to show weakness in the pursuit of high cost performance, and the rising domestic production, although good at marketing and seizing traffic, needs to focus more on products and research and development itself.
As the Chairman of L'Oréal said, China has become one of the most discerning markets in the world. Whoever can go longer in the future, the market will give real feedback.
(At the request of the interviewee, the names of the people in the article have been changed)