A Guide To China’s Fast-Evolving Fragrance Market In 2023

L’Oréal-owned high-end perfumer Atelier Cologne was one of the first international scent labels to enter the Chinese market — as early as 2017. However, in recent months the business has been withdrawing from multiple landmark department stores in China, despite the country‘s booming fragrance sector. Dao Nguyen, founder of fragrance and beauty marketing agency Essenzia by Dao, whose clients comprise cosmetics and scent brands that want to engage young Chinese consumers, explains to Jing Daily that in light of local consumers’ shifting demand, “the brand is now working on a 360° revamp from packaging to communication, retail experience, and its business model.” In 2022, the mainland market recorded $2.5 billion (17 billion RMB) in fragrance sales. That number is forecast by Euromonitor to nearly double by 2025. The lucrative market is attracting international and domestic players to enter the perfume segment. CBNData shows that the cumulative number of registered perfume companies in China has since 2017 exceeded 2,000. Given the increasingly crowded space and consumers’ ever-evolving needs, to win market share, scent labels need to constantly reinvent themselves to stay relevant to local shoppers. “The Chinese fragrance market has been through several stages of development and growth dynamics: new drivers on the consumer side and learning curves, multiplication of international and local offerings, and new olfactive trends,” says Nguyen. Here, Jing Daily looks at how brands should adapt to China’s fast-changing fragrance landscape in 2023. Evolving olfactive preferences Local Gen Z consumers are driving China’s fragrance boom. A 2020 iiResearch report shows that over half of the Gen Z population wears scent on a daily basis, and penetration is expected to expand. As such, this cohort is dictating the rules of the market. In recent years, Gen Z shoppers have propelled the rise of niche high-end fragrances. According to Euromonitor, sales of high-end perfumes increased 18 percent in 2021 year on year. On the other hand, the mass perfume market shows signs of slowing. Floral and lemony scents once favored by locals are also losing their appeal. “Atelier Cologne was famous and especially coveted for its citrusy scents — Oolong Infini and Orange Sanguine — back in 2015. But in 2023, the context, consumers, drivers, competition, and olfactive trends have evolved,” says Nguyen. Intelligence platform Euromonitor finds that today young consumers prefer woody, maritime, and herbal notes. In particular, Euromonitor identifies high-end gender-neutral scents as a subcategory with the highest compound annual growth rate (2016-2021). In 2020, Byredo’s Rose of No Man’s Land and Juliette Has a Gun’s Not A Perfume ranked among young consumers’ top-10 niche fragrance brands on Tmall. In light of China’s evolving fragrance tastes, brands can experiment with dedicated perfumes for the market to cater to local shoppers. Long-term focus trumps shortcuts like KOLs “Niche fragrance brands should avoid being complacent, and keep capitalizing on what made their success without reflecting on how market dynamics are changing the game,” says Nguyen. Celebrities and influencers offer brands a shortcut to rapidly gain exposure and boost sales. However, this approach doesn’t build long-lasting relationships with consumers. Once the marketing budget stops, the conversion rate retreats, too. “These tactical moves will not be enough to make a brand last, more worryingly, it can be detrimental to the brand in the mid- to long-term,” adds Nguyen. Fragrances are associated with feelings. To create resonance and stand out from the crowd, brands should emphasize strong content, their visual identity, and memorable names. For instance, Loewe’s 001, known also as ‘the morning after the rendezvous,’ captured consumers' imagination. Over the past year, it’s been one of the most recommended niche fragrances on Xiaohongshu. Experiential retail stores and online channels replace counters Despite their comparatively smaller budgets, lack of retail presence, and the absence of traffic-driving celebrities, niche fragrance brands have successfully developed their own marketing and sales model and rapidly expanded their market share in China, directly competing with established names. The consumer shopping journey starts with online recommendations as the discovery channel, and ends with purchases on e-commerce platforms. Meanwhile, counters are being replaced by spacious and fully immersive experiential stores that aim to educate consumers about the brand and its perfumes. Recently, niche fragrance brand Le Labo debuted its first duplex store in Shanghai’s Xintiandi shopping district. Inna Kochanzhi, head of the beauty division at the Gentlemen marketing agency, cites Jo Malone as an example of the strategy’s application. “Jo Malone has almost 5 million followers on Tmall, 125,000 on Xiaohongshu, and its annual revenue on Tmall surpasses $150 million, without taking into consideration its offline stores. It developed its popularity in China starting with recommendations, and then they expanded to selling without the help of KOLs.” Kochanzhi believes the tactic works today, as well. “The fact is that most Chinese consumers not only like the fragrance itself, but also the social value behind it.” In light of this, online recommendations are a crucial gateway for fragrance-makers to raise awareness and build their reputation. “The choice of channels is a very individual one for niche fragrance brands. But, Xiaohongshu is essential. It is a hub for the fanbase and also a search tool, serving as a Google when it comes to niche brands,” says Kochanzhi. In 2021, fragrance sales in China accounted for only 4.1 percent of the world's perfume market. Over the five years to 2021, China’s perfume market expanded at a compound annual growth rate of 21.4 percent, 10 times global market growth in the same period. The Chinese market will make up an increasing ratio of the international market, so brands must quickly react to changes in the country to stay afloat.

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A Guide To China’s Fast-Evolving Fragrance Market In 2023