Reaching out to Chinese beauties

Online sales, influencers and decreased price sensitivity

Total online sales of cosmetics amounted to 2.1 billion Euro in 2017, more than 60% of the total annual sales of 3.2 billion Euro2. Under certain conditions (see challenges) online business provides a more efficient access to millions of young Chinese customers in contrast to classical offline sales channels. Consumers also increasingly use social media platforms to obtain information on the newest product trends. According to various statistics, more than 90% of the product-related cosmetic information is presented and viewed on social media platforms, the most important of which is WeChat. This social media platform provides companies the opportunity to communicate their products features via its newsletter function. The newsletter can be linked to the integrated shop or connected to other online shops such as Tmall or JD. 

By now most well-known international brands use this service in China. But the slogan of the WeChat Newsletter is “Even the smallest unity has its brand value”. The opportunities for unknown or niche brands to thrive on the Chinese market have never been better. Due to the latest developments of information technology consumers have a chance to get directly involved. For example, on the lifestyle platform and app Little Red Book consumers can evaluate the cosmetic products freely and exchange information with each other. 

Many passionate cosmetic consumers have started to become influencers themselves by sharing their personal experience with cosmetics products. Once they have a sufficient number of followers they start recommending products on a commercial basis or even establish their own online shops, which are often managed by a product distribution or marketing company. Behind the glamorous appearance of these influencers, the business itself is based on pure professionalism. For foreign brands it is important to understand the new market rules and work out a proper brand strategy, then use all available (economical) possibilities to build up brand awareness. 

The second remarkable trend is the change in consuming habits, that is, price sensitivity is less of an issue than before. The increase of the middle class population (at a yearly income of up to 43,000 USD) from 5 million in the year 2000 to 225 million today has made China the most attractive consumer market in the world. This population group will grow to 275 million by 2020. The increased purchasing power is boosted by younger consumers. 

According to the China Cosmetic Newspaper and Kantar Worldpanel women between 25 and 34 years old are the main contributors to cosmetic sales in China. This group of consumers is very well informed about brands and hot sale products and is willing to pay high prices for well-known brands and proven functionalities. At the same time, these are looking for special niche products underlining their individuality. 

Products with a clear profile and obvious functions have a very good chance of being discovered which can then again lead to tremendous increases in sales. According to the latest Tmall Cosmetic Trend Report, the sales increase in luxury skin care products remains steady at 103%. This report also confirms that the sales figures are very good for smaller but specialised brands, especially among young people. 

Product performance is key

Another obvious trend is product performance. As consumers expect more and more high performance from products, prices keep increasing. Plain product descriptions such as moisturising or being natural-based are no longer enough to catch the attention of consumers. The product descriptions have to be more specific, e.g. a moisturising effect for more than 24 hours or over 95% natural-based.

Whitening products for a flawless complexion are still consumers’ favourites. The general product description “whitening” is replaced by more specific terms such as “anti-pigmentation” or “anti-acne”. Chinese consumers expect an ideal product to be natural-based with great visible performance.

Planning market entry

Other product related-trends are booming make-up products, men’s skin care, K-Beauty products and cosmetic devices. There are also new approaches in terms of product sales. 

With the above trends in mind cosmetic companies can assess what their own strengths and opportunities are when planning their market entry. 

Combining online and offline sales activities is a desirable situation. What is essential is to have an overall strategy and to work with trustful local partners in China. Then, it is important to master the first challenges when entering the Chinese market. 

The first and biggest challenge is that the brand orientation of the Chinese consumers is stronger which makes expanding online and mobile sales more difficult□. Due to viral information spreading quickly, high ranking cosmetic brands are becoming even more popular among consumers. According to statistics, the top 10 brands in online business (Estée Lauder, Lancôme, M.A.C., Dior, Kiehl’s, Sulwhasoo, Hera, Shiseido, SK-II, Yves Saint Laurent) enjoy more than 50% of consumer’s attention. 

Mass market brands such as L’Oréal or Innisfree also have a high number of followers and benefit from a high degree of attention. These brands contribute greatly to the explosive sales volumes of the Double Eleven Shopping Festival organized by Tmall every year. 

In these circumstances, the most crucial product selection criteria for Chinese online distributors is the brand value in the country of origin and among the Chinese customers. Due to hard competition and high costs in the online business sector, online distributors are mostly aiming for a quick market establishment of the product and explosive sales volume within a short amount of time. They prefer to choose products which already enjoy brand awareness.