The C-beauty paradox: Premium pricing but shrinking profits

A bottle of Comfy’s recombinant collagen essence now sells for more per milliliter than SK-II’s Facial Treatment Essence. Proya has raised the price of its bestselling “Morning C, Evening A” skincare range by more than 40%. Perfect Diary, which built its reputation on 20 RMB ($3) lipsticks for university students, now sells some products for 160 RMB ($23.50). Winona’s hero skincare products, once marketed as affordable alternatives to French pharmacy brands, have almost doubled in price. Five years ago, those prices would have been difficult to imagine. Chinese beauty brands were still fighting to shake off their reputation as inexpensive substitutes for imported cosmetics. Today, many compete directly with multinational prestige labels on price, presentation and scientific positioning. Domestic ingredient suppliers have improved rapidly, consumers have become more confident in locally developed formulations, and brands have invested heavily in proprietary technologies, clinical claims and increasingly sophisticated branding. Premiumization, long considered the missing piece in China’s beauty industry, finally appeared within reach. Why is premiumization no longer converting into higher profits for China’s biggest beauty brands? The financial results, however, suggest something else has changed. In 2025, Proya’s flagship brand revenue fell 10.39% despite years of successful price increases. Botanee, owner of Winona, reported sales falling 6.6% in 2025, marking its first annual revenue contraction since listing. Perfect Diary parent company Yatsen returned to revenue growth after several difficult years, but still recorded a net loss of 61.9 million RMB ($9.1 million). Even Giant Biogene, one of the industry’s strongest performers during the recombinant collagen boom, saw revenue soften while profit fell faster than sales. The numbers point to a question that has become harder for investors to ignore. If Chinese beauty brands have finally persuaded consumers to pay prestige prices, why are so many finding it more difficult to convert those prices into profit growth? Guilhem Souche, founder of Anfu Asia Consulting and former senior vice president of global travel retail at Coty, said: “For much of the past decade, C-beauty brands benefited from a unique combination of premiumization, agility in attracting digital traffic and consumers rapidly trading up. That allowed brands like Proya and Winona to increase prices while continuing to grow.” Chinese brands changed what justified a premium. Rather than competing as cheaper alternatives to imported labels, companies repositioned themselves around efficacy, patented ingredients and formulations designed specifically for Chinese skin. Consumers increasingly rewarded scientific credibility over heritage, allowing domestic brands to occupy price points that had once belonged almost exclusively to multinational prestige players. Just as brands were climbing the value ladder, however, the economics supporting that climb began to change. The rising cost of beauty brand growth Beauty has always been an expensive business. Unlike consumer electronics or automobiles, products are relatively easy to manufacture and difficult to differentiate through technology alone. Brands compete for attention as much as efficacy. Marketing has therefore never been an optional expense but a core part of the business model. Every successful product launch quickly attracted copycats. Livestreaming evolved from an opportunity into a necessity. Brands that once relied primarily on Tmall suddenly found themselves competing across Douyin, Xiaohongshu (also known as RedNote) and multiple social commerce platforms simultaneously. Offline investment accelerated as companies opened increasingly elaborate flagship stores and experiential retail spaces designed to reinforce premium positioning. “The model is becoming more and more expensive,” Souche said. “Companies used to compete in brick-and-mortar and on Tmall. Today they need to be present across multiple e-commerce platforms. Traffic on Douyin is expensive, livestream commissions have risen, and competition is much more intense.” The ‘miracle’ Perfect Diary playbook no longer works The industry’s first generation of digital winners was built on successive waves of inexpensive consumer traffic. Tmall gave domestic brands national reach. Livestream commerce dramatically lowered the cost of customer acquisition for early adopters. Douyin and Xiaohongshu created entirely new discovery channels where relatively unknown brands could compete with global incumbents. No company demonstrated that opportunity more clearly than Perfect Diary. Rather than treating social media as a support channel, Perfect Diary made it the center of its growth strategy. Around 2020, founders across China’s consumer sector joked that launching a successful beauty brand had become almost formulaic: flood Xiaohongshu with seeded content, recruit hundreds of influencers, secure appearances in leading livestream rooms and convert attention during major shopping festivals. The strategy transformed Perfect Diary into one of China’s fastest-growing consumer brands while pushing the entire beauty industry online. Today, online sales account for more than 70% of revenue for many listed beauty companies, making cosmetics one of China’s most digitally concentrated consumer sectors. However, Alec Hou, founder and chief executive of Essence Group, points out: “When growth is built mainly on channel advantage rather than brand equity, the channel eventually takes the margin. Chinese beauty brands benefited from successive waves of channel advantage. But once a channel proves it can build big brands, everyone enters, competition intensifies and the original traffic dividend disappears.” The platform economy is squeezing margins Beauty has always been one of the world’s most marketing-intensive industries, but Chinese brands now spend far more simply to maintain visibility than they did during the industry’s first digital boom. In 2025, Yatsen generated 4.3 billion RMB ($632 million) in revenue, yet spent 2.85 billion RMB ($419 million) on selling and marketing. Platform commissions alone reached 513 million RMB ($75.4 million), up 44% from the previous year. The company returned to revenue growth, but remained loss-making. Proya increased selling expenses even as revenue and profit declined. Giant Biogene reported higher sales expenses despite weaker earnings growth. Botanee reduced marketing expenditure, only to see revenue fall by almost the same proportion. Across the sector, higher prices have coincided with persistently high customer acquisition costs rather than materially stronger profitability. Higher prices have increasingly been used to offset rising customer acquisition costs rather than expand profitability. “Brands cannot keep renting every consumer interaction from the same platforms and expect margins to improve,” Hou said. “The next competitive advantage is the ability to build a real relationship with consumers beyond a single growth channel.” C-beauty pricing moves up while global players go down The pressure has coincided with another change unfolding across the competitive landscape. While domestic brands have steadily moved upmarket, many international prestige players have become markedly more promotional. “A Chinese serum is no longer competing against the list price of Lancôme Génifique or Estée Lauder Advanced Night Repair,” said Guilhem Souche. “It’s competing against their promotional price.” During this year’s 618 shopping festival, discounted prices often mattered more than official retail prices. Consumers comparing a domestic serum no longer measured it against Lancôme Génifique or Estée Lauder Advanced Night Repair at full price, but against heavily promoted offers across e-commerce platforms. Helena Rubinstein’s Replasty cream now sells well below prices seen several years ago through promotional channels. La Mer and Lancôme routinely participate in department-store campaigns, while products once considered premium pharmacy staples have become far more accessible during online shopping festivals. The result is a market where domestic brands are moving up just as international competitors are moving down. Pricing power now depends on consumer trust That has made every additional price increase harder to defend. “The trap isn’t the pricing,” said Jacques Roizen, co-founder of Shanghai-based Foresight Performance Partners. “Price is being used to solve a demand problem, but price has never solved a demand problem.” His point goes beyond cosmetics. China’s beauty market is no longer expanding at the pace that allowed brands to raise prices without much resistance. After retail sales of cosmetics declined in 2024, the market returned to growth in 2025, but the recovery has been measured rather than exuberant. Consumers have become more selective, weighing efficacy and value more carefully before trading up. Raising prices may help offset higher operating costs, but it does little to create demand where demand has softened. The market has also become more unforgiving. During the industry’s earlier growth phase, domestic brands benefited from a relatively clear positioning advantage. International prestige brands remained expensive while local competitors steadily improved product quality, narrowing the perceived gap in efficacy. Price alone therefore explains less than it once did. Consumers compare scientific credibility, formulation, retail experience and brand identity alongside efficacy. A premium price has become easier to achieve than a premium perception. “The ceiling was never the price,” Roizen said. “It’s the proof behind the price.” As a result, investors have become increasingly sceptical of marketing-heavy business models. Beauty has always depended on advertising, but many executives argue the industry’s spending is no longer creating the same returns it once did. “The problem isn’t how much brands spend,” Roizen said. “It’s what the spend buys. Too much of it rents an audience the brand never actually owns.” Building brands beyond livestream commerce Consumer behavior reinforces that challenge. Discovery still happens on Douyin and Xiaohongshu, but purchase decisions increasingly involve ingredient breakdowns, dermatologist recommendations and peer reviews. Platforms influence not only where consumers find products but also how they evaluate them. Brands therefore spend more to reach consumers while having less control over the conversation that follows. Benjamin Cavender, managing director at China Market Research Group, believes the industry’s next stage will depend less on generating attention than on earning trust. “There is now a much clearer ceiling,” he said. “When domestic brands approach the price of Estée Lauder, Lancôme or Shiseido, consumers start asking a harder question: What am I really paying for?” His answer differs from the growth formula that defined China’s beauty boom over the past decade. Hero ingredients, viral campaigns and aggressive platform spending may still produce breakout products, but they are becoming less effective at building businesses capable of sustaining premium pricing across an entire portfolio. “Chinese beauty brands need to move from traffic brands to trust brands,” Cavender said. “That means fewer but stronger hero products, better R&D, clearer dermatological or functional claims, stronger retention and less dependence on discount-led platform growth.” Some companies are already moving in that direction. Rather than chasing every trending ingredient, HBN has concentrated on proprietary retinol encapsulation technology and clinical validation. To Summer has differentiated itself through a distinct cultural identity that extends well beyond fragrance formulas. Mao Geping has invested heavily in a recognizable brand universe built around artistry, education and offline experience, creating pricing power that depends less on promotional intensity than on brand recognition. The next growth model for C-beauty Souche sees similar priorities emerging across the industry. The companies most likely to outperform over the next decade, he argues, will share four characteristics: distinctive brand desirability, proprietary innovation, stronger first-party consumer relationships and operational discipline. None relies on simply raising prices. “Products solve problems,” he said. “Brands create preference.” In the past, beauty executives measured success through GMV, market share and the speed with which new products climbed platform rankings. Today, companies are reassessing what growth should look like. Revenue growth bought through heavier discounting or rising customer acquisition costs no longer commands the same confidence if profitability continues to weaken. The industry’s next competitive advantage may therefore be less about discovering another blockbuster ingredient than reducing dependence on rented attention. CRM programmes, membership ecosystems, offline services and community building all serve the same objective: increasing the lifetime value of existing customers rather than continually paying to acquire new ones. Chinese beauty has already answered the question that defined its first generation. Domestic brands have proved consumers are willing to pay prestige prices for products developed at home. The next question is considerably harder. Can those same brands build businesses that rely less on buying attention and more on earning loyalty?

The C-beauty paradox: Premium pricing but shrinking profits

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The C-beauty paradox: Premium pricing but shrinking profits

How Bottega Veneta weaved China’s forever it bag