Singles’ Day price war: Why beauty brands may suffer

Subscribe to our Jing Beauty to get the latest on China's world of beauty and wellness. As China’s Singles’ Day shopping festival gears up for its most competitive iteration yet, fierce discounting could pose a long-term challenge for global luxury beauty brands. Tmall released its first round of sales data for the retail bonanza on October 14, revealing some impressive numbers: 20 beauty brands topped sales of 100 million RMB ($14 million) in just 30 minutes. Notable products, such as Kefumei’s collagen sticks, Guerlain Abeille Royale oil, and L’Oréal’s hyaluronic acid ampoule masks were among the top performers, each exceeding 100 million RMB ($14 million) in sales. However, a closer look at the figures reveals a shift in market dynamics. In 2023, domestic brands dominated Tmall’s Singles’ Day presales beauty rankings, occupying 10 of the top 20 spots; this year, that number has dropped to just five. Foreign brands have regained their footing, now occupying 15 of the top 20 spots, a clear sign of intensifying rivalry. For international beauty giants, this recovery may come at a cost. Brands like L’Oréal, Estée Lauder, and P&G have made significant efforts to stay competitive by offering deep discounting and extravagant gifts. Pyrrhic victories? In the first 10 minutes of Tmall’s Singles’ Day sales event, 13 brands, including Lancôme, Estée Lauder, Guerlain, and SK-II surpassed 100 million RMB in sales ($14 million). L’Oréal Group alone claimed seven spots on the top 20 ranking, the result of an aggressive push to reclaim market share from local brands. International brands like L’Oréal and Estée Lauder dominated “Lipstick King” Li Jiaqi’s livestreaming product lineup. In fact, the ratio of foreign to domestic brands featured on his livestreams was roughly 3:2, signaling the clout these brands still hold in the beauty category. But relentless discounting, which has intensified this year, might tarnish the image of luxury beauty brands. For years, luxury beauty players resisted heavy discounting, maintaining exclusivity through premium pricing. “A ‘keeping up with the Joneses’ mentality among brands has led to a race to the bottom in terms of gifts, bundles, offers and other forms of promotional activity. Brands that have tried to maintain the upper ground risk being seen as ‘lacking in generosity,’” Adam Knight, cofounder of Yaso, an agency that serves beauty brands expanding in China. “This might point to a deeper issue: a mismatch between consumer expectations and the perceived value of these offers. For luxury brands, maintaining a balance between appealing to price-sensitive shoppers and preserving their high-end image is crucial,” Knight adds. Zarina Kanji, UK and Europe Managing Director at WPIC Marketing + Technologies, concurs. “The addressable market for luxury brands consists of highly-sophisticated beauty consumers who carry out extensive research on product function and are less influenced by price,” she says. Yet, recently, even prestigious brands like Estée Lauder, Lancôme, and SK-II have cut prices significantly to court China’s consumers. During Singles’ Day in 2018, brands like Estée Lauder, Lancôme, and SK-II offered discounts of 20% or less. By 2019, these brands had shifted to “buy one, get one free” promotions, effectively cutting prices by around 50%. In 2020, both international and domestic beauty brands further lowered prices through bundled offers, discount vouchers, and livestream-exclusive gifts. This year’s offers go even further, with foreign and domestic brands alike promoting “buy one, get more than one free” deals and flooding consumers with free samples. For example, L’Oréal’s hyaluronic acid mask set comes with 22 free masks when a consumer buys 20, and a purchase of 50ml of Proya’s Ruby Essence nets consumers 150ml of product. “Trading prestige for GMV, is unfortunately likely to erode brand equity overtime, but the most ironic part is that it’s actually a GMV boosting mechanism that more often than not doesn’t translate into net revenue growth,” Digital Luxury Group Managing Director Jacques Roizen says. Diminishing returns While these tactics drive short-term sales, this approach could undermine brand value and future growth. When many brands engage in a price war, the differentiating power of discounts diminishes. This year, many consumers, bombarded with gifts and samples, still feel that some brands lack “generosity.” “In a market where savvy consumers easily access digital information, why would anyone pay full price for a brand that slashes prices by 50%, or more multiple times a year? It’s not just Double 11 — these steep discounts appear during Chinese New Year, Valentine’s Day, Women’s Day, 520, 618, Golden Week, and again during Double 12 Day, or Christmas,” says Roizen. “Brands offering 50% off, often through excessive free samples and platform-funded coupons, are essentially training Chinese consumers to question the real value of their products. With such promotions happening six to 10 times a year, shoppers are becoming accustomed to waiting for discounts, redefining the price they believe they should pay,” he adds. This shows how difficult it is for even luxury brands to maintain their allure while participating in aggressive promotions. As discounts continue to deepen, the risk of eroding brand prestige and consumer trust grows — an issue global luxury beauty brands cannot afford to overlook in the world’s second largest beauty market. Staying relevant China’s shopping festivals are a double-edged sword. While offering label’s an opportunity to clear out end-of-year stock, they erode brand equity. In light of this, Knight suggests, “Launching limited-edition products, particularly in collaboration with high-profile influencers, artists, or local celebrities, which can generate excitement without eroding brand value. These exclusive releases, if done strategically around key shopping festivals like Singles’ Day, can drive sales while preserving the brand’s premium image.” For beauty in particular, Knight believes that offering personalized beauty solutions through technology can differentiate luxury brands from mass-market competitors. “Whether through AI-based skin consultations or custom-formulated products, personalization signals that the brand caters to individual needs, creating a more intimate connection with consumers that goes beyond discounts,” he says. Meanwhile, Kanji advocates building out a bespoke online luxury shopping experience. “To stand out on Singles' Day, brands should introduce creative campaigns, gifts-with-purchases, or offer special benefits to members of loyalty programs,” she says. Ultimately, luxury brands need to find innovative ways to connect with consumers without over-relying on discounts. Whether through personalized experiences, limited-edition products, or exclusive collaborations, maintaining a sense of scarcity and prestige could be a more effective way to retain value in the eyes of the Chinese consumer.

Singles’ Day price war: Why beauty brands may suffer

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Published October 22, 2024

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Singles’ Day price war: Why beauty brands may suffer