The following is a re-post from China Skinny. It is here with permission.
The China Skinny Skincare Tracker has analysed foreign and domestic cosmetics brands’ performance in China to identify trends and characteristics from the category since China has bounced back from Covid in the second half of 2020.
The insights suggest that foreign cosmetics brands can increase their share through locally-resonant claims and messaging, bolstered promotional calendars to establish habit, and by developing more tailored products. Origin data indicates that foreign brands still hold gravitas, but need to tweak strategies to arrest the domestic brands’ overall revenue dominance. There are also misconceptions around sustainability and cruelty-free claims.
Pandemic Background and Outlook: China’s Beauty Category Was Hit Hard by the Lockdown, but Has Bounced Back Strongly Since
- Like many categories, beauty product sales were hit hard by Covid. Looking one’s best was less of a priority for people stuck in their apartments and not seeing anyone in person outside of their home
- When the lockdown ended, beauty products and services were among the first categories to see a bump as people wanted to look good back in public and feel good about themselves again - online sales for dental and cosmetic medical services rocketed 3,000% from March 18 to 27 compared to the previous 10 days according to Alipay data
- Some subcategories, such as lipstick, were slow to bounce back due to mask wearing. Eye makeup sales have remained particularly strong throughout, with foreign-branded eyeliners and eyeshadows growing 40% on Tmall in Q1 2020. New beauty products such as lotion to mimimise the impact of mask indents rose quickly
- Beauty product sales dropped 30% on Alibaba’s platform during China’s lockdown, however well marketed brands continued robust sales. Between Jan-Mar 2020, L’Oreal’s China revenue grew 6.4% year-on-year, with skin and haircare products doing well during the confinement period
- The outlook for the beauty category is strong. Euromonitor forecasts the skincare category will grow 9.8% CAGR from 2019-2024, following 10.1% CAGR between 2014-2019
- China Skinny has done numerous studies into youth spending over numerous years and it is consistently the second-top spending priority overall for youth after socialising
Here are some key China Skinny Skincare Tracker insights from H2 2020 tracking sales since things have returned to normal:
Foreign Skincare Brands are Being Lapped by Local Brands Most of the Year, But Dominate During the Big Festivals
Domestic beauty brands are fast eroding foreign brands’ market share as they claim to be tailored to Chinese skin, and are much more nimble than their foreign competitors, being run like lean startups who produce many SKUs and aren’t afraid to try something new. During a recent project, China Skinny spoke to a Chinese brand who had a new beauty product selling on the shelves and screens just three days from the original ideation. On the same project we spoke to a foreign brand who had taken three years to develop and launch a beauty product.
- Domestic brands now dominate sales revenue from the top selling brands on Tmall
- Outside of October and November when sales are skewed by the enormous Double-11 festival, domestic brands account for 66% of revenue of the top-selling brands on Tmall
- Interestingly, during the Double-11 festival, market share flipped with domestic brands just managing 29% of revenue
- Takeaway: “Foreign brands need to work on entertaining their target markets and making them feel like they are getting a deal outside of the big festivals to win back habitual usage and market share,” says Mark Tanner, MD of China Skinny
Foreign Skincare Brands’ Claims are Less Personal than Domestic Brands
- Top selling foreign brands’ functional claims are typically more vague than the specific claims from domestic brands
- Among the most common claims from foreign brands are ‘lifting/tightening’, ‘soothing’ and ‘anti-aging’
- The most common claims from domestic brands are more specific such as ‘pore shrinking’, ‘anti-acne’ and ‘oil control’
- Takeaway: “Foreign brands’ broader claims typically trade on their stronger brand heritage, whereas combining this brand recognition with more specific claims related to Chinese skin would make them more attractive to local consumers,” says Mitchell Burns, senior analyst and China Skinny
Foreign Skincare Products are Less Tailored to Specific Target Markets than Domestic Products
- A megatrend in China’s beauty category are products and messaging personalised for consumer’s specific skin type and beauty needs
- There is increasing [often gimmicky] hardware available in malls, pop-ups, shows, and for use at home, plus smartphone apps which evaluate individual needs. However a diverse range of need-specific product SKUs still service most beauty consumer’s individual needs
- Chinese brands typically have a much greater array of products, generally tackling more specific functional needs than foreign brands
- Chinese brands are more likely to have season-specific products than foreign brands
- Chinese brands are more likely to target different geographies with more relevant offerings than foreign brands. E.g. A consumer in winterless, humid Shenzhen/Guangzhou is likely to have different skincare needs than in dry, freezing/hot Beijing
- Takeaway: “Domestic brands ‘personalised’ product lines are often just small tweaks to the same skincare product, but dressed up with different packaging, claims and marketing, helping Chinese consumers believe that it is more aligned to their specific needs,” says Mark Tanner, China Skinny MD
Pricing
- Pricing and value remains important for most Chinese beauty consumers, with domestic brands typically 50-75% of the price of foreign brands.
Asian Origin Cosmetics Most Desirable, But French Cosmetics Top Foreign Origin by Revenue
- China Skinny’s survey reaffirms that Chinese consumer sentiment is most positive towards Japanese and Korean skincare as they are considered high quality and formulated for Asian skin types
- However French and American skincare are top two foreign origins, buoyed by large brands such as Estée Lauder, Lancôme and L'Oréal
- France continues to have gravitas as an origin, as the third most-preferred origin, highest foreign revenue, and with many domestic brands trying to imitate French product names, products, ingredients, etc.
- NZ was the eighth-most mentioned foreign origin for skincare products, versus Australia at number five. Whilst fewer people mentioned NZ than AU, but those that ranked it better than those who mentioned AU.
- Takeaway: “Given many domestic brands dial up the ‘French’ or foreign characteristics, domestic brands still have some way to go before they have a genuine and authentic preference, and I believe that foreign brands can arrest back some market share by learning from domestic brands’ strategies to complement the perceived advantages of foreign beauty products,” says Mark Tanner
Flagship Stores Rule the Roost
- There are many different store types on Tmall for skincare products, many of which are specifically oriented around cosmetics and skincare such as Tmall Make Up
- Flagship stores are still dominant in terms of both presence and share accounting for 85% of the top listings and 96% of revenue, due to greater trust in the channel
- Different categories appear more attractive in different store-types, with the Tmall Global Supermarket commanding a significant premium male care than skincare overall
Sustainability Most Resonant Outside of Tier 1 Cities
- There is a common misconception that China’s sophisticated tier 1 consumers respond best to sustainability messaging, particularly as these cities were generally more international and the first to have recycling policy and others implemented
- Eco-friendly packaging, production and practices all ranked higher on average in Hangzhou, Chongqing and Xi’an than tier 1 cities Shanghai, Beijing, Guangzhou and Shenzhen.
Cruelty-Free Still Not Registering as Important for Most Chinese Beauty Consumers
- Cruelty-free/No animal testing is not regarded as an important feature for most Chinese consumers, ranking the lowest of features China Skinny tested with consumers, below vegan and CBD / Cannabidiol skincare
- No animal testing resonates much more with Shanghainese consumers than in other cities
- Takeaway: “Awareness and preference for cruelty-free cosmetics is likely to increase following legislation allowing foreign cruelty-free cosmetics likely to be implemented this year, which will bring new education campaigns as cruelty-free foreign brands vie for a point of difference in the competitive market,” says Mark Tanner.
About China Skinny: China Skinny is a Shanghai-based market insights and strategy agency. Kiwi Mark Tanner is its managing director. It was founded in 2011 and has worked with more than 200 brands including IKEA, Nike, IHG, Tourism Australia, Colgate, Reckitt Benckiser, Panasonic and SAIC Motors. More at http://chinaskinny.com
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