"Hearing and Witnessing"
As a long-established Japanese premium brand, there have been a lot of rumors about the SK-II in the market recently. On the one hand, there are many media reports that SK-II is being withdrawn on a large scale and its products are rising in price one after another, while on the other hand, Procter & Gamble has repeatedly mentioned in its financial reports that SK-II's sales are declining and revenue is dragging down the group's overall performance.
In response to the rumors of "cabinet withdrawal", Qingyan immediately asked Procter & Gamble China for verification. SK-II responded, "The information spread on the Internet is false, and the coverage of SK-II brand counters is stable." So, what is the current business status of the SK-II brand, and where will the established Japanese brands represented by SK-II go in the Chinese market?
SK-II's response is false information
Recently, a number of media reported that "many SK-II counters in Shanghai have been withdrawn. In this regard, Qingyan immediately asked Procter & Gamble China for verification. In response, SK-II said that the claims about "frequent cabinet withdrawal", "nationwide cabinet withdrawal", and "recent cabinet withdrawal" are all false information.
"China has always been a very important market for SK-II, and SK-II is committed to providing consumers with excellent products and consumer experiences. In the past three years, SK-II's counter coverage has been stable, and the online and offline consumer service experience has been continuously improved. SK-II will regularly update the layout of stores and counters to provide consumers with a more advanced and superior skincare retail experience. SK-II also said.
As we all know, as one of the most international cities in China, Shanghai is a must for many international brands as well as domestic top brands. According to SK-II's official data, Shanghai is the region with the most SK-II counters with 10, while Beijing and Chengdu are second with 9 counters each, and the rest of the regions have fewer than 6 SK-II counters. Therefore, the business status of the Shanghai brand counter also reflects the offline performance of SK-II to a certain extent.
So, what is the current offline business situation of SK-II?
In response to many media reports about the brand's withdrawal, Qingyan visited some SK-II counters in Shanghai during the peak flow of people from 6 pm to 8 pm on the 18th. Qingyan observed each counter for about an hour and found that although the SK-II counters visited were all open for business, there were generally only a few consumers who entered the brand counters to shop and consult. Qingyan saw at the scene that there are no promotions, price reductions and other signs in the SK-II counter, and the main products are mainly classic "fairy water" and "big red bottle".
▍Photographed at the SK-II counter of Shanghai Oriental Commercial Building
It is worth mentioning that Qingyan also learned at the scene that not only the SK-II brand counters, but also most of the beauty and skin care counters in the mall do not have much foot traffic. For example, there are a number of high-end beauty brand counters on the first floor of Shanghai Oriental Commercial Building, including SK-II, Helena, La Mer, Lancôme, etc., but even during the peak shopping hours at night, there are few customers lingering in the mall, and almost no one enters the store to consult.
In fact, a staff member of the SK-II counter told the media before, "The withdrawal of the counter is not a problem of the brand, but the business of the mall." In addition, "Southern Metropolis Daily", "Daily Economic News" and other media also reported that "like Shanghai Paris Spring Pujian store, the business of the shopping mall is not good, and all the first-line cosmetics have been withdrawn." This undoubtedly also reflects that the flow of people and positioning in shopping malls will become a major market factor in determining whether a brand will set up counters.
During the on-site visit of Blue Eye, some beauty consultants said that SK-II's business status is still ahead of other brands overall. The beauty consultant of the SK-II counter of the Southern Friendship Mall told Qingyan that the news of the withdrawal of the cabinet on the Internet was a false rumor. "How can the brand be withdrawn if it sells well?" said the beauty consultant, "The SK-II brand is the brand with the best sales and foot traffic in this area, and it is still very popular with consumers." ”
▍ Photographed at the SK-II counter of the Southern Friendship Mall
At the same time, Qingyan learned that SK-II is also innovating to attract consumers to offline counters through many ways to further enhance offline channel traffic. It is understood that in all SK-II counters, consumers can make an appointment for free offline skin ageing services, and beauty consultants will help consumers analyze their skin condition through the test results and recommend corresponding products. At the same time, members can also receive SK-II product samples for free at offline counters through registration, sign-in, etc. In addition, SK-II will also establish a private domain link between the brand and consumers through beauty consultants to strengthen the connection between the brand and consumers, so as to guide consumers to the store.
Undoubtedly, the above measures are also SK-II's reform strategy in the current environment of declining offline counter traffic.
performed poorly and was named by Procter & Gamble many times
It is true that what Qingyan saw in the field visit can only reflect one aspect of SK-II's offline performance, but from the perspective of online performance, as a high-end skincare brand that established a brand mentality in the hearts of Chinese consumers earlier, SK-II's performance in recent years is indeed not the same as the peak period.
As we all know, compared with the Douyin and Kuaishou platforms that users prefer domestic brands, high-end foreign brands have always had a competitive advantage on Tmall. However, according to Qingyan intelligence data, since 2023, the overall performance of SK-II on the Tmall platform has been much worse than before, and in the past 15 months, 11 months of sales have shown a negative growth trend, and few have entered the top 5 on the list, such as November, September and July 2023, and even ranked outside the top 10. In the Douyin platform, SK-II has been ranked outside the top 20 many times.
You must know that as an ultra-high-end skin care brand under Procter & Gamble, SK-II has single-handedly carried the growth of P&G's beauty and skin care division, and is also a sword for P&G to enter the high-end skin care market and a "lonely brave" with strong combat power. Even, Procter & Gamble once said in a publicly disclosed financial report that "SK-II is a pillar brand for P&G's performance growth in fiscal year 2019." And for now, this old Japanese brand is dragging down P&G's overall performance.
According to Procter & Gamble's latest financial report, organic sales of skin and personal care declined in the third quarter of fiscal 2024 (Q1 2024), mainly due to the negative impact of lower sales of SK-II. In fact, this is not the first time that SK-II has been publicly named by Procter & Gamble in its earnings report. According to P&G's financial reports in recent years, the decline in sales of SK-II has become an important factor in the decline of P&G's beauty and skin care department in the past two years, and has experienced dynamic changes from "decline in travel retail channels" to "decline in Greater China" and then to "decline in the overall brand".
For example, P&G's financial report for the second quarter of fiscal 2024 (Q4 2023) released earlier this year showed that the organic sales of skin and personal care in the beauty and skincare division declined, mainly due to the "decline in sales of the SK-II brand", and P&G's financial report for the first quarter of fiscal 2024 (Q3 2023) mentioned that although the price increase had a certain positive impact, it was offset by the decline in SK-II sales.
So, what is the reason for the decline of the SK-II, and how will it be salvaged?
In this regard, Procter & Gamble has publicly stated that "in the second fiscal quarter ended at the end of December last year, the sales of its high-end skin care brand SK-II in Greater China fell by 34%, due to the boycott of this product line produced in Japan due to the discharge of nuclear sewage into the sea in Japan." "In fact, the discharge of nuclear sewage into the sea from Japan has greatly affected the sales of SK-II in the Chinese market. According to statistics from Qingyan Intelligence, the GMV of the SK-II brand fell by 50.45% one month after Japan discharged nuclear wastewater, making it the only brand among the top Japanese cosmetics brands whose GMV fell by more than 50%.
And how to reverse the decline? Procter & Gamble did not disclose more in its earnings report. However, from the perspective of overall strategy, in addition to product research and development and construction, price increase may become the most direct way to drive brand performance growth. In the public financial report, Procter & Gamble also mentioned many times that the increase in prices offset the negative impact of the decline in performance to a certain extent. Just recently, the price of #SK-II has risen again due to the impact of Japan's sea discharge#, which also appeared on Weibo's hot search, which shows that "SK-II's frequent price increases" has become a default fact for many consumers.
Withdrawing cabinets and closing stores, daily makeup is hard to support?
SK-II's market performance is not what it used to be, in fact, it is only a microcosm of the business situation of Japanese brands in China, and to a certain extent, it also reflects the decline in the combat effectiveness of Japanese brands in the Chinese market.
Prior to this, many media reported that IPSA, a subsidiary of Shiseido Group, was reducing offline counters on a large scale. According to Qingyan's previous investigation, IPSA has at least 8 counters withdrawn in the past two years alone, involving Shanghai, Nanjing, Huai'an and other cities. In addition, the IPSA Shanghai Lujiazui Center store, which is Shiseido's first pilot site for personalized customization services in China, will also be closed, and customized services will also be undertaken by other counters (for details, see Qingyan's article "The Tide of International Beauty Brands Withdrawing Cabinets is Coming!").
In fact, Shiseido Group also mentioned in its 2023 annual report that "overall sales fell by 8.84% due to the weak Chinese mainland market and the decline in travel retail performance." In response to the new round of market challenges, Shiseido China also announced that it will implement a new brand portfolio strategy from 2024, and it is also building a more integrated and agile organizational structure internally.
Coincidentally. At the beginning of this month, the "Tmall KOSE Cosmetics Official Flagship Store", which has been in operation for 14 years and has accumulated 885,000 fans, announced that it will close its stores, and consumers can go to the WeChat mini-program - KOSE official micro mall or KOSE offline stores to buy the brands sold in the store. When talking about the reason for the closure of the store, KOSÉ responded that "KOSE will adjust the scale and development focus of its business in Chinese mainland."
Many analysts blame the gradual decline of Japanese cosmetics on the global negative impact of Japan's discharge of nuclear-contaminated water, and this change in the external environment even affected the raw material side for a time (for details, see the article "Nuclear Sewage" Affects a Large Number of Raw Material Suppliers!). In addition, SK-II's performance can be seen from the above review of the performance of the company, and the March, July, and September months of last year, which were highly discussed about Japan's discharge of nuclear-contaminated water, were also the months in which SK-II's sales fell the most.
However, some industry insiders who are familiar with the operation of the channel revealed to Qingyan that the external environment of Japan's discharge of nuclear-contaminated water is only one aspect, and from a further point of view, the decline of Japanese brands has actually begun to appear long ago.
"SK-II, as a long-established Japanese brand, has indeed shown a downward trend in overall sales in the Chinese market. "In fact, not only SK-II, but also many Japanese brands, including Shiseido and KOSÉ, are declining, and their performance in the brand counters is very average." In addition to Shiseido's cleaning and care products, which are still selling well, many major Japanese brands are struggling to hold on, and other Japanese brands are also shrinking one after another. ”
In fact, the import of cosmetics announced by the General Administration of Customs in recent years can also confirm this from the side. According to official data, since 2021, the amount of cosmetics imported from Japan has begun to decline significantly.
▍Data source: official website of the General Administration of Customs
Overall, Japanese cosmetics companies are currently undergoing an important wave of transformation in the Chinese market, and who can ultimately reverse the decline and regain the Chinese market depends on who can best understand Chinese consumers.
Note: In the "SK-II brand sales on the Tmall platform since 2023", sales = order amount - return amount