Chinese beauty brands are taking a bigger slice of the cosmetics pie in China, fuelled by the digital and e-commerce surge that the pandemic created, according to a new report from market research company Euromonitor International.
However, they face numerous challenges, including short-life cycles, perceptions of cheapness, and competition from established international businesses.
“To jump from ‘affordable product’ to ‘powerful brand’ is still a challenge,” says Yang Hu, Insight Manager for Health and Beauty in Asia at Euromonitor International. “It’s time to tear off the dupe label. Through premiumisation and exploring new beauty sectors, C-beauty brands can develop solid competitiveness, lengthen their lifecycle, and expand beyond China.”
On the up
The study, launched on Tuesday this week, points to a strong upward trend in demand for C-beauty. Among the top 20 brands in skincare and color cosmetics in China, C-beauty’s share doubled to 28% in 2022 from 14% in 2017. This comes amid a steep decline in overall beauty sales last year (see chart) when the retail value of the top 20 fell back below 2019 levels after several years of growth.
A ‘digital first’ mentality boosted C-beauty’s growth – an easy win given that the e-commerce penetration rate of beauty and personal care products in China was 42% last year, reports Euromonitor. From traditional brick-and-mortar brands to those that rely on social selling, a large chunk of C-beauty sales is generated by online, live commerce using top influencers, including some virtual ones.
The days when Chinese consumers perceived C-beauty as no more than a cheap substitute or ‘dupe’ for international brands seem to be over, and those latter brands are now having to think more carefully about how to engage Chinese consumers, for example with more local tie-ups, to avoid losing market share to homegrown labels.
In the past five years, multibrand C-beauty companies such as Jala or Proya have shown potential through new product development and marketing strategies targeting younger age groups.
During this year’s 618 shopping festival, Proya Cosmetics saw its key brands Proya and Timage generate 73% and 138% sales growth, respectively; the latter was the only C-beauty brand to make onto Tmall’s top-10 cosmetic brands’ sales ranking for 618.
Meanwhile, emerging brands have differentiated themselves through innovating ingredients and product formats. For example, Winona launched its first luxury anti-ageing and digestive beauty brand, Aoxmed, in 2022 (with the range retailing at $200 on average).
Trends and challenges
While C-beauty brands strengthened in recent years, “the obstacle of short-life cycles remains a challenge,” says Euromonitor.
The research firm’s Voice of the Consumer: Beauty Survey 2022 indicates that Chinese consumers have significantly lower brand loyalty compared with the world averages for skincare, haircare and cosmetics, which makes for a much more competitive market.
The survey shows that only 11% of respondents always buy the same brand/product when it comes to colour cosmetics products, for instance. This is a significant challenge for C-beauty businesses because to maintain their performance and position, marketing clout is required, and this is where international brands have the upper hand.
“With many affordable alternatives in the market, consumers easily switch to other options once the brands suspend advertising or livestreaming shopping promotions,” states the Euromonitor report.
The report indicates that Chinese consumers most want skin brightening functionality, regardless of generational groups. This is followed by anti-blemish, propelled by Gen Z’s social media addiction in China, and many top players are at the forefront in this.
China is a cut-throat market for beauty, and some C-beauty brands are taking a leap outside their domestic market, going overseas in search of new opportunities.
In recent years, Perfect Diary expanded in Southeast Asian markets – Vietnam, Singapore, and Philippines; this year, Florasis is opening its first counter in a high-end Japanese department store and plans to enter the US market; and Yumee is in talks with international luxury retailers for international expansion.
The problem is that global awareness of C-beauty is low at just 13%. This compares with 30% for K-beauty and 22% for J-beauty.
Compared to brands from Japan and South Korea, C-beauty’s image among consumers is still a bit fuzzy (or non-existent), and it’s not helped by China’s image as a place for manufacturing cheap products. This stereotype is reinforced by the vast array of Chinese ‘copy’ products on Amazon.
Moreover, to overcome C-beauty’s lack of impact on Western retailers’ shelves some C-beauty companies have gone for ‘affordable pricing’ online, further confirming the idea of C-beauty as a cheap option.
C-beauty brands are mainly offered at mass price points (under $30). However, in China, the mass beauty and personal market is forecast to expand at a CAGR of less than 1% to 2027. It remains to be seen whether homegrown labels will be able to maintain their current momentum.
How to premiumize?
Exploring the market potential in a new category is one of the solutions to these challenges, according to Euromonitor. The research group says that premium fragrances will become the next sector to see more C-beauty brands thrive, which will “ride on China’s young middle-class consumers craving a richer expression of sophistication in daily life.”
China’s fragrance market is expected to grow at a CAGR of 15%, from 2022 to 2027, the highest across beauty categories.
Some C-scent brands have already gained attention from global beauty houses. In September last year, L’Oréal China bought a minority stake in Documents, and in May this year, Shiseido and ToSummer collaborated to create a new fragrance called Convallaria, and a signature diffuser stone, inspired by Shiseido’s Future Solution Night Cream.
Additionally, C-beauty brands must double down their efforts in research and development. The era of heavy marketing promotions to rapidly gain market shares is gone, now domestic players need to cement their reputation with patented formulas and unique ingredients.
This may take some time, but when it happens and C-beauty becomes an influential global force in beauty, it will open the door to many more Chinese brands.