Whiff of trouble? China’s fragrance sector under strain

China’s fragrance market, once considered a rising star in the country’s beauty sector, is now navigating turbulent waters. While the segment previously offered hope for both domestic and international beauty brands seeking new growth avenues, shifting consumer attitudes and broader economic headwinds have significantly tempered expectations. Data reveal an industry at a crossroads, facing mounting challenges but also brimming with opportunities for those willing to adapt. From January to September 2024, Taobao and Tmall Group (TTG), Alibaba’s core e-commerce division, along with Douyin, reported declining sales for perfume and related products. TTG, the larger platform for beauty sales, saw sales decline 14.6% YoY to 48.2 billion RMB ($6.58 billion). Meanwhile, unit sales barely changed, slipping 0.24% to 45.55 million units. A more striking data point was the fall in average selling prices, which decreased by 14.4%, from 123.68 RMB ($16.88) to 105.84 RMB ($14.45). The decline in average unit price underscores a critical issue: while consumers continue to purchase personal fragrances, their preferences are increasingly skewing toward lower-priced products. This shift is putting significant pressure on global and domestic premium brands that have invested heavily in the market over the past few years. Recent data from Douyin describe this trend. Despite a 14.1% increase in perfume unit sales between January and September 2024, which reached 45.7 million units, revenue declined by 8.4% YoY to 25.1 billion RMB ($3.43 billion). This suggests that, similar to Taobao and Tmall, the average price per product is decreasing. Platform divide: Luxury struggles, local brands surge The contrasting performance of brands on these platforms paints a vivid picture of a bifurcated market. On Taobao and Tmall, luxury brands such as Chanel, Dior, and Jo Malone maintained their dominance in the top ten rankings from January to September. However, even these titans felt the impact of market shifts: Chanel’s perfume sales revenue declined by 2.34%, while Dior’s revenue dropped by 6.74%, despite being the third-best performer. The most dramatic decline came from Jo Malone, whose fragrance sales plunged by 51.63%, highlighting the vulnerability of high-end players in a price-sensitive environment. Hermès, however, proved to be an outlier. Its sales revenue rose by 30.38%, supported by a 32.25% increase in unit sales, demonstrating that some luxury brands can still capture consumer loyalty with the right strategies. Douyin tells a different story, where the market dynamics favor emerging domestic players. Caoben Haiyang (草本海洋) led the way with 1.65 billion RMB ($225 million) in sales, reflecting a YoY increase of 149%. Im Sole, another standout domestic brand, achieved an impressive 475% revenue growth, driven by its ability to appeal to Douyin’s younger, value-conscious audience. Beyond e-commerce, the offline landscape also reveals shifting dynamics. While the pace of expansion has slowed compared to previous years, physical retail remains a cornerstone of the fragrance business. In July, the launch of Wuhan SKP attracted over 40 perfume brands, including both international icons and emerging players, underscoring the continued importance of offline experiences in building brand presence, particularly in inland cities. 2025: Challenges and opportunities China’s perfume market is at a crossroads. While it faces several challenges – such as declining average prices, low penetration rates, and shifting consumer priorities – the market’s long-term growth potential is undeniable. According to Frost & Sullivan, the perfume segment is expected to grow from 22.9 billion RMB ($3.14 billion) in 2023 to 44 billion RMB ($6.04 billion) by 2028, representing a compound annual growth rate of 14%. This projection highlights the vast potential for expansion, particularly as consumers become more familiar with and open to incorporating fragrances into their daily lives. Several key issues are at play in China for global personal fragrance brands. Price sensitivity remains a major barrier for high-end players, who will need to find ways to justify their premium positioning through storytelling, innovation, and emotional resonance. At the same time, expanding brand penetration will require a diversified approach that includes entry-level options to attract first-time buyers. The increasing personalization of consumer preferences also demands greater variety, as Chinese shoppers seek scents tailored to specific occasions and moods.

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Whiff of trouble? China’s fragrance sector under strain