China travel retail woes trigger industry reset: L’Oréal cuts, Shiseido merges

For the latest on skincare, cosmetics, fragrances, wellness, emerging Chinese and APAC beauty brands, industry moves, and more subscribe to our weekly Jing Beauty Newsletter. L’Oréal China is implementing a major restructuring of its travel retail division amid broader industry challenges, with internal sources telling Chinese media outlet Caixin the reorganization could affect up to half of the unit’s staff. The beauty firm employs some 10,000 staff in China, but does not break out the figure for travel retail. When contacted about these changes, L’Oréal confirmed only that the business is “undergoing transformation to accelerate growth and strengthen market leadership.” The company declined to comment on specific staffing implications and refuted the reported ratio of affected employees, stating that the number is minimal and that staff are being reassigned within the group. This strategic shift highlights the mounting pressure facing global beauty giants as China’s once-booming travel retail market continues to lose momentum. The move follows similar restructuring efforts by competitors including Estée Lauder, Kosé, and Shiseido, all of which have cited sluggish travel retail recovery across Asia — with Hainan's duty-free sector showing particular weakness — as a significant drag on earnings. Shiseido merges operations under China leadership Last month, Shiseido announced a strategic merger of its China and global travel retail operations, placing both under the leadership of China CEO Toshinobu Umetsu. The company tells Jing Daily the decision is intended to “drive sustainable growth amid the changing market,” acknowledging that Chinese travelers continue to shape the trajectory of the global beauty industry. “In the global travel retail business, the majority of our global travelers are Chinese travelers, not only in travel retail China, but also in Asia, Japan, Europe and the Americas,” a Shiseido spokesperson told Jing Daily. “Their influence on the market is expected to remain strong. Therefore, maintaining competitive advantage with Chinese travelers is crucial for stabilizing the business foundation. To achieve this, it is important to strengthen collaboration across regions, while cooperating with the domestic market in China which led to this decision.” Why is travel retail losing shine? The broader reset underway within the travel retail channel reflects deeper cracks in what was once a crown jewel of prestige beauty sales. During the pandemic, travel retail provided a critical lifeline for many multinational beauty groups thanks to Chinese tourists flocking to Hainan. In 2020, Estée Lauder derived nearly 30% of its global sales from duty-free channels. That momentum has since reversed, as “daigou” (personal shoppers who buy luxury goods overseas and resell them in China) activity slumps and promotions surge within China. “Travel retail is gradually losing its allure among Chinese consumers, as its price advantage has significantly diminished due to the increasingly frequent and substantial promotions offered by prestige beauty brands in China, often on a monthly basis,” says Jacques Roizen, managing director at Chinese luxury consulting firm Digital Luxury Group. “Aside from very few exceptions like Chanel and Hermès, many prestige beauty brands now commonly provide discounts of 50% to 60% both online and offline, which is by definition cannibalizing a portion of travel retail revenues.” Roizen adds that while some brands have attempted to reduce reliance on daigou and elevate their image domestically, deep discounting across e-commerce and livestreaming platforms has diluted those efforts. “This ambition remains largely unmet as deep and frequent discounts on domestic channels have undermined those brand elevation efforts,” he says. Sector challenges are also reflected in the leadership churn with travel retail units. In December 2024, Estée Lauder announced Israel Assa, global president of travel retail worldwide to step down after 23 years at the American powerhouse and appointed Olivier Dubos to the leadership role. Shiseido Travel Retail’s president and CEO Philippe Lesné retired last month, just months after Fran Law was appointed vice president of commercial business development for APAC. The company’s latest mid-term action plan through 2026 targets a modest 3% CAGR for its China travel retail business — a telling shift from the double-digit growth once projected. Under Umetsu’s watch, Shiseido has closed lower-tier brands such as Senka and Tsubaki, refocusing efforts on luxury lines Shiseido, Clé de Peau Beauté, and Nars. This strategy appeared to gain traction in Q4 2024, when all three brands returned to growth: Shiseido saw mid-single-digit sales gains, CPB soared more than 20%, and Nars over 10%. Hainan duty-free sales slump drags beauty group earnings down But these green shoots come against a bleak backdrop. Shiseido’s travel retail revenue plunged 18.6% YoY in 2024, dragged down by a 30% sales decline in Hainan. Meanwhile, Kosé reported a 50% YoY travel retail sales slump in China in Q3, citing inventory backlogs and weak consumer sentiment. And Estée Lauder is being sued over alleged lack of transparency about the risks in its travel retail business — the company posted a $580 million operating loss last quarter. CEO Fabrizio Freda pointed to a more than 40% decline in Hainan sales alone. “The strength of prestige beauty in Asia did not return in the fourth quarter,” he said. “Ths was most pronounced in Hainan.” Once touted as the “new Hong Kong” for duty-free shopping, Hainan has become emblematic of travel retail’s troubles. As daigou networks unravel and price competition intensifies, many brands are stuck with bloated inventories. The Chinese government’s tightening oversight of daigou activity has further squeezed the gray market. Roizen says that price transparency — amplified by livestreaming and comparison apps — has made it harder for travel retail to compete. “The travel retail price edge is now mostly theoretical,” he says. Silver lining: From savings to storytelling Still industry experts caution against writing off the channel. Wang Yilin, founder and CEO at Yilin Consulting, says that travel retail still holds value for brands targeting affluent outbound Chinese travelers. “The disenchantment of big international brands on Chinese social media, coupled with China’s economic slowdown, increasing daigou activities, numerous e-commerce shopping festivals, and the prevalence of livestreaming with significant discounts, presents various options for Chinese consumers to ‘stock up’ on beauty products at attractive prices,” she tells Jing Daily. “However, the target audience for travel retail global beauty brands — especially outbound Chinese travellers in 2025 — comprises middle to upper-income groups, business travellers, family vacations, silver-tourists with large pensions, Gen-Z willing to spend money on travel. Their potential purchasing power should not be overlooked, and the allure of travel retail persists,” she adds. Wang believes the key for global beauty brands is to reposition travel retail not as a discount hub, but as a platform for unique, emotionally resonant experiences. “Travel retail remains a relevant channel for purchasing beauty brands for Chinese travelers, but it must provide something more value-oriented and authentic than mere savings, which was the primary draw pre-Covid,” she says. In the face of a decentralized market and increasingly sophisticated Chinese consumers, global beauty brands should adapt by positioning travel retail as a unique experiential touchpoint that fosters emotional connections with Chinese travelers. Wang points to the emotional psychology of shopping while traveling — feelings of excitement, novelty, or even insecurity — which can prompt spontaneous purchases. That, combined with culturally relevant guidance and in-store storytelling, can create meaningful encounters between brand and traveler. “Travel retail should capitalize on its unique advantage: The in-store experience that online channels cannot replicate,” she says. “This involves leveraging destination storytelling and focusing on authenticity of the ‘sense of place,’ allowing travelers to take a piece of their journey home.” L’Oréal, P&G, and Shiseido’s travel retail upgrade That shift is already underway. Shiseido’s midterm roadmap includes flash stores, art collaborations, and experiential upgrades in hubs like Hainan to boost interaction. Enhanced inventory systems like Focus are also being rolled out to better align supply with real-time demand. Amid sector turbulence, L’Oréal is positioning itself not as a discounter, but as a luxury innovator. Next month, the company will unveil its “Airport Lounge of the Future” at TFWA Asia Pacific 2025 in Singapore, a first-in-Asia-Pacific concept that reimagines in-transit beauty as a wellness-driven, immersive journey. The space brings together 22 luxury beauty brands, including Prada Beauty, Valentino, Takami, and YSL. Travellers will be greeted by AI consultants and invited to reset with nano-ionic steam pods, cryotherapy facials, and artisanal grooming experiences inspired by brand fragrances. In September last year, SK-II, Procter & Gamble’s premium skincare brand, opened its first-ever global duty-free flagship store at the CDF Sanya International Duty-Free Shopping Complex in Haitang Bay. The following month, luxury beauty brand EviDenS de Beauté launched its first duty-free flagship store in Asia at China Duty Free Group’s Haikou International Duty-Free Shopping Complex. With a focus on immersive retail environments and experiential innovation, both brands are sharpening their edge in the competitive duty-free market. The moves signal how more high-end beauty players are doubling down on differentiated experiences to capture the attention, and wallets, of affluent Chinese travelers. For brands like L’Oréal, Shiseido, P&G, and Estée Lauder, how this transformation unfolds in China could set the tone for the rest of Asia. What’s clear is that travel retail, once a high-growth machine, must now prove its relevance in a market shaped by digital convenience, consumer skepticism, and shifting cultural expectations.

China travel retail woes trigger reset: L’Oréal cuts, Shiseido merges

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China travel retail woes trigger reset: L’Oréal cuts, Shiseido merges