High-end beauty’s China challenge: Adapt or fade

Subscribe to our Jing Beauty to get the latest on China's world of beauty and wellness. The shine is fading from China’s high-end beauty market. Once a pillar of growth, the segment is grappling with a sharp slowdown, and major players are feeling the squeeze. While Procter & Gamble (P&G) remains cautiously optimistic about a potential market rebound, its forecast is far from rosy. “We don’t expect to return to the growth rates we saw pre-Covid,” said P&G’s CFO Andre Schulten during the quarterly earnings call held in July this year, predicting mid-single-digit growth at best “over time.” P&G’s outlook mirrors a broader reality: the post-pandemic recovery is proving more challenging than expected for high-end beauty brands. After a remarkable 21.3% YoY sales growth in 2021, L’Oréal’s luxury division posted 2% growth in 2022, stymied by a more cautious consumer mindset. According to a report by Tencent Marketing Insights and Boston Consulting Group, the market shrank 2% to 125 billion RMB ($17.8 billion) in 2022 from 128 billion RMB ($18.2 billion) in 2021. High-end skincare eked out just 1% growth, premium makeup tumbled 5%, and perfume flatlined. This marked the first major stumble for China’s premium beauty market since its meteoric rise in 2018, and the decline has only accelerated since. “In the wake of the Covid-19 pandemic, we’re witnessing a nuanced shift in consumer behavior, particularly in the realm of conspicuous consumption. People are becoming increasingly deliberate about their spending, considering not just where and how much they spend but the value and long-term efficacy of their purchases,” Elisa Harca, co-founder and Asia CEO of Red Ant, tells Jing Daily. Weak sales Luxury beauty’s downturn only intensified in 2023. P&G’s SK-II brand saw sales in Greater China plummet 34% YoY; La Prairie, owned by Beiersdorf, reported a 15.4% drop in revenue, citing sluggish demand from both mainland China and travel retail; and Shiseido’s prestige brand Ipsa began closing physical stores, signaling deeper struggles. Even Helena Rubinstein, which managed to surpass 7.7 billion RMB ($1 billion) in sales last year, is under increasing pressure to maintain momentum. What’s driving this dramatic decline? For some, it’s brand fatigue. Once top-tier luxury names are now seen as aging and uninspiring by younger, savvier consumers. For others, the challenge is competition. Chinese consumers, now accustomed to a wealth of choices, are turning to alternative solutions and new entrants at an unprecedented pace. Jacques Roizen, managing director at Digital Luxury Group, believes that global beauty brands initially thrived on the remarkable expansion of the Chinese market and the millennial generation’s ambivalence toward domestic brands when they first entered the market over two decades ago. “The landscape for global brands has become far more complex due to two key issues. First, many brands have relied excessively on frequent and deep discounting, eroding their prestige, brand equity, and perceived value in the Chinese market. Second, they have limited control over their online presence in China, given the unique nature of the country’s digital ecosystem. This lack of oversight undermines the quality of their communications and commercial strategies,” he says. C-beauty’s affordable alternatives Adding to the pressures, local Chinese beauty brands are rapidly gaining ground, offering similar formulations at a fraction of the price. Take Shiseido’s popular Ultimune Power Infusing Concentrate, which retails for 590 RMB ($85) for 30ml. In comparison, Proya’s Ruby Essence, offering comparable ingredients and results, sells for around 300 RMB ($43). This price gap is driving a broader shift among value-conscious consumers toward domestic brands and putting particular pressure on entry-level high-end brands that traditionally served as a gateway to luxury. “It is undeniable that new Chinese brands have emerged with very compelling products, value propositions and marketing campaigns that take advantage of their intimate understanding of the local consumers,” says Roizen. It’s no wonder then that international brands are struggling to maintain their premium positioning. In the first eight months of 2024 alone, nine major high-end skincare, makeup and fragrance brands quietly exited the Chinese market. The retreat is not limited to small players; even Benefit, once LVMH’s top-performing makeup brand, has pulled out. Competition from light medical beauty But it’s not just C-beauty encroaching on this territory. The rapid rise of light medical treatments in China is also reshaping the landscape. The market for light medical beauty grew 19.6% in 2023, reaching 146 billion RMB ($20.6 billion). Non-invasive treatments like Thermage, UItheraoy, and skin rejuvenation procedures have gained popularity among younger consumers, especially those aged between 21 and 40. The promise of visibly improved skin through light medical procedures is surpassing the results offered by even the most advanced serums and creams. “Rising living costs and stagnant wages have fueled financial uncertainty both locally and globally, prompting consumers to scrutinize their spending. Many are opting for micro-treatments or more affordable alternatives over ultra-luxury beauty products, questioning whether premium prices truly deliver better results — often concluding that they are equally effective,” says Harca. For China’s Gen Z and millennials, regularly doing light medical treatments and adopting a simplified skincare routine is more time- and money-effective than using luxury skincare and following complex routines. This shift is forcing brands to reevaluate their product positioning and efficacy claims. What’s next? The days of easy growth for high-end beauty in China are over. The new landscape requires agility, creativity, and a deep understanding of a consumer base that is no longer swayed simply by brand prestige. Harca believes high-end beauty brands must ensure their products deliver on their promises and that their messaging aligns with consumer needs. “If they have a domestic physical presence, they should offer experiences that allow consumers to immerse themselves in the brand — whether through spas, concept stores, or pop-ups. This is crucial for building a deeper emotional connection offline,” she says. “While the rise of powerful Chinese brands and the economic climate are beyond their control, prestige beauty brands have an opportunity to rein in excessive promotions and reinvest in qualitative storytelling to restore the status many have lost in recent years,” Roizen adds.

High-end beauty’s China challenge: Adapt or fade

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Published October 17, 2024

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High-end beauty’s China challenge: Adapt or fade