What Happened: After poor sales performance on Women’s Day in March this year, Japanese beauty giant Shiseido is turning away from aggressive promotions during China’s major shopping holidays — starting with the upcoming 618 shopping festival.
“Although, there is 6/18 — June 18 shopping day online — we will continue to turn away from heavy reliance on extreme promotion, and execute appropriate allocation of resources for sustainable and profitable growth,” Shiseido CFO Takayuki Yokota writes in the company’s Q1 2023 financial report.
The Jing Take: As domestic beauty brands continue to gain traction and challenge the relevance of international players, competition during China’s e-commerce extravaganzas has become all the more fierce.
As such, brands are reportedly rolling out more discounts during this year’s 618 compared to last year’s Double 11 and 618 events to boost consumer spendings post-pandemic. Global players like Estée Lauder have shifted from offering small samples to implementing buy-one-get-one deals.
Consumer enthusiasm for making bulk purchases during shopping festivals has waned following years of lockdowns, with an economic rebound yet to fully materialize. In 2022, JD.com recorded sales of $53 billion (379 billion RMB) during 618, a year-on-year increase of 10.3 percent, its slowest growth in recent history. Alibaba’s Taobao and Tmall did not disclose their total turnover. Meanwhile, online beauty sales totaled $5.8 billion (41 billion RMB) during the mid-year shopping holiday, an almost 20 percent decrease compared to the $7.2 billion (51.2 billion RMB) generated in the same period in 2021.
Shiseido’s decision reflects the challenges that major players face amid China’s evolving beauty landscape. Shopping festivals, once a prime opportunity for brands to market products and drive sales, have now become a double-edged sword. Without major promotions or compelling discounts, many brands are struggling to stand out in a saturated market and capture dwindling enthusiasm.
Rather than being effective sales drivers, China’s shopping festivals have become costly and even counterproductive for high-end beauty brands. Ultra-low discounts dilute these companies’ brand image.
Currently, international brands maintain an advantage through their premium product lines, backed by years of research and patented formulas. Consequently, strengthening brand equity is crucial for survival in the fiercely competitive domestic beauty market. Shiseido’s Win 2023 and Beyond medium-to-long-term strategy focuses on skincare brands, particularly those in the ultra-luxury segment.
“We will accelerate our offline growth and enhance our response to the evolving online landscape, with a strong emphasis on improving sustainable profitability for brands like Clé de Peau Beauté, Shiseido, and Nars,” writes Yokota.
It’s likely that other beauty brands will follow a similar path, prioritizing select occasions that align with their brand image instead of caving to heavy promotions during shopping festivals. By concentrating their efforts on enhancing the consumer experience, they will forge stronger bonds with loyal shoppers in the long run.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.