Beauty Giants Struggle in China: Evelyn Zhu, a Chinese branding professional, has bid farewell to extravagant beauty splurges, mirroring a trend among millions of consumers in China. The world’s second-largest beauty market, valued at $52 billion, is witnessing a shift in consumer behavior that poses challenges for global giants like L’Oreal, Estee Lauder, and LVMH.
The economic slowdown in China has undoubtedly impacted beauty sales, but analysts argue that the fundamental issue lies in the multinational companies’ sluggish adaptation to evolving consumer preferences. Discerning consumers now prioritize high efficacy products, leading to a decline in lifestyle-driven luxury brands.
Local brands, such as Botanee Biotech’s Winona, are reaping the benefits of this shift. Positioned similarly to L’Oreal in terms of pricing, Winona addresses concerns like redness, a prevalent issue for 40% of women, according to iResearch. Botanee’s revenue is expected to surge by almost 18% this year to $824 million, with Winona driving most of the gains.
Contrastingly, global beauty giants are anticipated to experience declining sales. LVMH’s beauty division reported an 8% drop in China sales in the first half, while Estée Lauder Companies, relying on China for one-third of its business, faced a 12% sales decline over the same period.
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Despite offering deep discounts of up to 40% and lavish gifts during peak shopping events like Singles Day, the multinational brands are struggling to reverse the trend. Luxury skincare brand La Mer, known for its rarity in discounts, gave away so many gifts-with-purchase during Singles Day that it essentially matched the value of the products sold.
In response to the slowdown, major beauty brands are discounting aggressively, but the data suggests this strategy may not be as effective as hoped. Larger brands are witnessing a decline in Tmall GMV (gross merchandising volume), with a 40% average decrease during the 11.11 shopping festival, according to Digital Luxury Group.
The discounts, characterized as “insane” by industry insiders, raise questions about the sustainability of such approaches. Gregoire Grandchamp, co-founder of Next Beauty, suggests that a more rational market approach, acknowledging China’s new normal of single-digit growth, might be the prudent path forward for major players like L’Oreal.
As the beauty landscape in China undergoes a transformation, the ability of global brands to adapt to the shifting preferences and economic realities will play a pivotal role in determining their success in this dynamic market.
Our Reader’s Queries
Is the beauty industry big in China?
China dominated the Asia-Pacific cosmetics market in 2021, claiming a staggering 50% share. On a global scale, China also made a significant impact, accounting for over 20% of the world’s cosmetics market.
Is it safe to use makeup made in China?
Cosmetics from China may not adhere to the same safety regulations as those sold in other countries, making their ingredients potentially unsafe for use. Moreover, counterfeit cosmetics may contain harmful chemicals or toxins that can lead to skin irritation or other health issues. It’s crucial to be cautious when purchasing cosmetics and to ensure that they are from reputable sources.
Which country has the largest cosmetic industry?
By 2023, the beauty and personal care market is expected to grow in 20 countries worldwide. The United States is projected to lead the pack with a revenue of 98 billion U.S. dollars, followed by China with 67 billion U.S. dollars.
What is the beauty capital of China?
Huadu, known as the “Beauty Capital of China” and “Cosmetics Capital of China”, is committed to high-level planning, high-quality construction, and high-standard development. The goal is to establish a fashion and beauty industry hub with a global perspective, and to achieve remarkable growth.