Estée Lauder, L’Oréal raise prices amid China’s economic slowdown

While consumer prices in China have been falling over the past few months amid the nation’s economic slowdown, luxury brands including Hermès, Chanel, and Louis Vuitton have been raising their prices in the market. And now, high-end beauty businesses and brands, including L’Oréal Group, Estée Lauder Group’s La Mer, and Mac, have initiated their own price hikes. While beauty firms claim that price increases, between 10 percent and 30 percent, are a way to combat the rising cost of raw materials, consumers have complained. Over the past few months, Jing Daily has reported that Chinese consumers are adjusting their spending habits and tightening their wallets in response to ongoing economic challenges. China’s economic slowdown is expected to persist over the next few years, according to the International Monetary Fund’s latest projections. Concerns have been mounting due to sluggish growth, declining consumer prices, escalating unemployment, and the bursting of China’s real estate bubble. Yet, in response to global inflationary pressures and rising supply chain costs, beauty conglomerate Estée Lauder raised the prices of its products last month. The Estée Lauder Advanced Night Repair Cream now sells for 565 RMB ($78.50), up from 550 RMB, and La Mer’s Crème de la Mer (15ml) retails for 945 RMB ($131), up from 920 RMB. “Estee Lauder betrayed the Chinese market and has played itself to death,” wrote netizen @tigertiger on social media platform Xiaohongshu in response to the increases. Others pointed out the discrepancy between duty-free and regular department store prices for Estée Lauder brands. “Estée Lauder seems to have split personality disorder,” Xiaohongshu user @poplarpoplar posted. “Duty-free shops are slashing prices to the bone, while domestic counters are raising prices to the sky. The difference is too much.” Like Hermès, Chanel and Louis Vuitton, in addition to boosting margins, beauty brands are raising their prices to enhance brand equity, status, and reputation says Jacob Cooke, co-founder and CEO of e-commerce solutions provider WPIC Marketing and Technology. “Raising prices projects exclusivity and high product quality,” he explains. “Chinese consumers have taken to sophisticated luxury and authentic lifestyle brands that seldom offer discounts, as well as high-quality, product-focused brands that rely on premium pricing and a base of loyal, satisfied customers.” L'Oreal sees greater understanding Meanwhile, French beauty giant L’Oréal Group, whose beauty portfolio includes Yves Saint Laurent Beauty, Biotherm, Lancôme, Kiehl’s, and other brands, received a warmer reception for its price hikes. Prices for Biotherm’s Life Plankton Elixir (50ml) rose to 1,280 RMB ($179) from 920 RMB, an increase of nearly 40 percent, while Helena Rubinstein’s Powercell Skinmunity Reinforcing Serum (50ml) increased from to 1,750 RMB ($243) from 1,680 RMB. “Many products from L’Oréal's Asia-specific lines are better than the overseas versions,” wrote Xiaohongshu user @sanseguopan. “That makes it stronger than many brands.” On the same forum, @momo concurred, writing: “L’Oréal develops new products tailored for Chinese consumers’ needs, which are great to use … They cover both affordable and high-end products. The cost-effectiveness of the products is [still] good.” Some netizens have vowed to stop shopping for big global brands entirely, stating that Chinese labels such as Florasis and other domestic brands are better suited for their complexions. “I no longer buy luxury brands. I’ve tried Lancôme, Estée Lauder, and other high-end lines, but they’re just okay,” wrote @qiaokelidangao. “Before the New Year, I tried a product from Pien Tze Huang and was amazed. From now on, I’ll buy domestic products.” Indeed, as China’s beauty market evolves and diversifies, global players including Estée Lauder Group and L’Oréal Group will need to adapt not only to China’s economic headwinds, but also to rising competition from domestic players as they build market share. Strengthening quality assurance and offering products specifically tailored for Chinese consumers’ beauty needs, along with ensuring transparency in pricing between duty-free and local shops, will be major areas to focus on. By keenly observing the complexities of China’s ever-evolving macro conditions and establishing a strong, engaging presence with local consumers, brands will be better equipped to weather the uncertainty ahead. Additional research by William Zhou. Key Takeaways Luxury brands and beauty businesses in China, including Hermès, Chanel, and L'Oréal, are raising prices by 10-30% amidst the economic slowdown, leading to consumer complaints. Chinese consumers are adjusting spending habits due to ongoing economic challenges, as reported by Jing Daily. Estée Lauder's price hike on products like the Advanced Night Repair Cream to 565 RMB ($78.50) from 550 RMB sparks social media backlash. L'Oréal Group receives positive feedback for its price increases, attributed to tailored products and perceived quality among Chinese consumers. Global brands like Estée Lauder and L'Oréal must adapt to China's evolving beauty market, focusing on quality assurance and pricing transparency to maintain market share amid rising domestic competition.

Estée Lauder, L’Oréal raise prices amid China’s economic slowdown

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Published March 06, 2024

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Estée Lauder, L’Oréal raise prices amid China’s economic slowdown