According to Statista, revenue in the Beauty & Personal Care market amounts to over $55 million thus far in 2020. Moreover, the market is expected to grow annually by 7.1 percent through 2023.
Until recently, L’Oréal, Estée Lauder, and Shiseido were the prestige companies benefiting the most from recent beauty market growth. But gone are the days in China when local consumers were easily swayed by global beauty brands. Because of changes in consumer behavior/sales patterns and the greater proliferation of e-commerce, domestic players now have a shot at outperforming their big international competition.
This change didn’t happen overnight, nor is it exclusive to the cosmetics sector. Back in 2018, Zhou Shanshan wrote an opinion piece for People’s Daily expressing how locals were no longer “blindly pursuing foreign brands.” In it, the writer rightfully acknowledged that consumer missteps, such as Apple’s iPhone slowdown scandal, proved to Chinese consumers that foreign brands aren’t necessarily superior to domestic ones. And because of China’s industrial revolution, local manufacturers are now capable of designing globally competitive products. Consequently, Chinese buyers are replacing foreign goods with domestic ones.
Zhou highlights how “some popular foreign brands” suffer from the “princess syndrome,” stating that if these brands don’t cure their superiority complexes, they will risk losing market share. Harvard Business Review seems to agree, explaining how executives from international brands got a wake-up call in emerging markets like China, Indonesia, India, and Brazil, countries where “the alarm bell has been ringing for some time as they lose ground to smaller, more local brands — but responding effectively has proven difficult.”
“Small consumer brands are better built to create hyper-targeted products and distribute them locally,” said Sonia Gupta and Oliver Wright in the article. “Small companies are casting narrow research nets and gaining real-time, direct insight into (and feedback from) niche consumer groups. They quickly use this unfiltered information to develop and refine hyper-relevant products. Big R&D processes, built to assess mass need, are cumbersome by comparison.”
Bain & Co. is adding another nuance to this problem for big beauty brands. According to their China Luxury Report 2019, the demographics of luxury consumption plays a vital role in this development. As millennials and Gen Zers are the “contemporary” luxury consumers, they drag along new consumption habits. And since this consumer base is more experimental and open to new brands — as long as they come with superior and personalized service — local competitors can trigger positive emotions with marketing campaigns that feature nationalistic sentiment. Also, they can build trust naturally through projects that highlight the local community.
In the beauty industry, local indie brands have also won because of the “natural” appeal of their ingredients. In recent years, some small Chinese brands have become synonymous with natural, organic beauty. Some domestic cosmetics manufacturers even advertise secret ingredients as having been used by Chinese royalty as traditional herbal remedies. An association with the nobility doesn’t hurt a brand, especially in a time when TV dramas have revived interest in Ancient China.
Now let’s have a look at some of the top-performing Chinese beauty brands and see what makes them successful:
Established in 1931 in Shanghai, Pechoin grew over the decades until it became a symbol of Chinese success. Bruno Lannes, a partner at Bain’s Shanghai office, told China Daily that “Pechoin advanced by starting from smaller cities and expanding into larger markets with upgraded products and a premium brand image.”
The brand is widely seen as a pioneer of tailored digital marketing strategies, which opened the company up to a novel demographic and a younger consumer base. In fact, the brand’s repositioning on the market as a millennial-friendly brand was achieved by creating a successful visual brand identity with creative and memorable ads. From digitally-animated shorts to feminist ads featuring powerful women (Four Angry Beauties), Pechoin creates marketing campaigns that are “deeply rooted in Chinese history, triggering strong emotional resonance among consumers,” according to Cyzone Magazine.
According to Kantar Worldpanel, Pechoin was “the only local brand chosen more than ten million times.” In 2018, the research institute ranked Pechoin first on its list of China’s leading brands operating in the Health and Beauty market during 2018, followed almost entirely by international brands.
During the COVID-19 stay-at-home period on March 8, JD.com confirmed that sales of cosmetics and skincare products grew by 97 percent year-over-year, with SK-II, Lancôme, L’Oréal SA, Olay, and Pechoin, remaining its five best-performing brands.
According to Marketing to China, “the mask is the most consumed skincare product among women consumers,” and it’s become a must-have product for Chinese women. In 2017, the global mask market was worth $12 billion, and the total retail sales of the Chinese mask market reached 91 billion yuan (growth of more than 10 percent year-on-year).
Business Wire acknowledges that it took One Leaf only a few years to become a market leader in China because of its bestselling mask sheets. “Its natural message was highly appealing to Chinese consumers who seek both healthy and trustworthy products,” it stated. Meanwhile, China Brands adds that 35 percent of beauty users have re-bought these mask sheets after their first use.
As mentioned, One Leaf’s success was built on a hero product (their mask sheets), so the brand could focus its resources on this very targeted product instead of dispersing them between seasonal product launches and varied departments. This highly-targeted approach contributed to growth, while also developing a strong culture of research and development.
China Daily highlights how Jala Group, known for the brands Chando and Maysu, has been one of the most successful players in the domestic market. This was confirmed by Statista, which shared a list published by iiMedia Research analyzing the performance of the most popular Chinese cosmetics brands in China in 2019 that ranked Chando first with 94.91 out of a maximum possible 100 points.
Some of Chando’s marketing launches received high engagements, such as the Chando Love Lines campaign, which was launched for Mother’s Day and was reminiscent of Dove’s Real Beauty campaign. The ads encouraged women to embrace their “natural beauty” lines and marks instead of chasing cosmetic procedures. According to Ogilvy, the campaign reached 2 billion people with 160 million views on Weibo, while e-commerce sales exceeded expectations with a sales increase 15 times above average.
For the men’s skincare line, Chando partnered with the video game “Cross Fire” and integrated its cosmetics into the game “by offering customized character’s equipment and appearance,” according to Forbes.
Some of Chando’s best-selling products include Chando Pure Nutrient Eye Cream and Chando Aging Resistance Activating Eye Cream.
Mask Family·1908 is another Chinese skincare company that became a household name thanks to its sheet masks and sleeping masks. It’s one of those local brands that took the face mask from the prestige market to mass production. According to Happi, Mask Family·1908 has reportedly achieved a growth rate of over 50 percent over just three years of online development.
The line is available in specialty stores, cross-border e-commerce sites (Tmall, JD.com, Aliexpress), and apps like WeChat.
This premium cosmetics brand takes advantage of traditional medicines and natural ingredients and enhances the intrinsic characteristics of organic ingredients through innovation.
Considering how much Chinese consumers mistrust synthetic ingredients and chemical compounds, it’s not surprising that they want “safer” options. In fact, younger consumers have brought China into a “woke” era with a backlash against international brands that ignore sustainable practices. Consequently, brands like Herborist that have a “green” reputation are winning a greater market share.
To put its growth into perspective, in 1998, Herborist only had one shop in China, in 2005, it started selling its products in over 100 shops, and in 2011, it expanded to Hong Kong. Today, its products can be found at over 1,500 stores and counters.