Prestige Beauty: the next growth engine for beauty players in China
In mid-January, Shiseido decided to sell its two brands, Za and Pure&Mild, to a beauty brand management group, and the deal is expected to close this year. So far, in more than a year, Shiseido has sold 15 mass and cosmetic brands, which further indicates that Shiseido is focusing on more prestigious and high-end business segments.
The Japanese giant attributed its business growth in China to the growth of its high-end brands, according to their annual financial report for 2021. On Singles Day in November 2021 in China, its prestige segment increased 1.5 times. The brands with the most improved rankings are Shiseido, Clé de Peau Beauté and NARS.
Just before the onset of the COVID-19 pandemic, Chinese demand for luxury beauty products was on the rise. According to CBN Data statistics, the high-end beauty sales scale has reached 151.8 billion RMB (US$24 billion) in 2019, accounting for 51% of total cosmetics retail sales, with a market share surpassing that of mass beauty for the first time.
Well-being, driving the Chinese market
The craze evolved after the pandemic. If COVID-19 has taught Chinese customers anything, it’s that health is earned, not given. This is true for both physical well-being and skin health. The pandemic has spurred global awareness of personal care and shifted focus to skincare products as consumers pay more attention to skin health. Because everyone wears a mask, there’s less reason to wear makeup and fewer opportunities to go out.
As China’s disposable income continues to rise, high-end and effective skincare products are more likely to be recognized for their ingredients and technology, leading to significant growth in skincare product sales. high end beauty. As domestic e-commerce explodes and consumer behavior shifts towards health and quality consciousness, high-quality products are no longer a luxury, but are gradually becoming a necessity.
Indeed, the premium beauty market in China is one of the most promising opportunities today. Sales of high-end beauty products are expected to grow at a compound annual growth rate (CAGR) of 13%, with the high-end market share increasing further to reach 53% by 2025, Euromonitor predicted.
Beauty and cosmetics leaders thrive on premiumization in China
In the post-pandemic era, competition within the high-end beauty market has become the main axis of the Chinese strategy of large groups. High-end brands with more premium space and more robust capabilities to maintain their lofty images have gradually become part of the beauty giants’ strategy.
With vibrant online shopping among Chinese customers, Shiseido Group has seen more than 30% growth of the prestige division on e-commerce over the past year. Last November, Shiseido Group introduced high-end brands Ginza, Baum and Effectim at the Fourth China International Import Expo to create a stir in the Chinese market.
L’Oréal also revealed in its annual report 2021 that its luxury skincare division has achieved impressive success in China with high-end skincare brands Lancôme Absolue and Helena Rubinstein.
The skincare sector is not alone in benefiting from the increased interest of luxury customers in China. The L’Oréal group’s niche brands, such as Maison Margiela, Atelier Cologne and Armani Privé, have achieved remarkable success. The French cosmetics conglomerate attributes the rise of luxury fragrances to growing appreciation among Chinese customers. The L’Oréal Group expects this trend to continue to grow by double digits in the years to come.
Now let’s look at China’s domestic players. YSG (YatSen Global), which started with Perfect Diary, an affordable makeup brand, successively acquired French high-end skincare brand Galenic and high-end natural spa brand Eve Lom in the UK. In October 2021, 35-year-old brand Eve Lom appointed Chinese actor Yang Yang as its first brand ambassador. Yang has colossal influence among Chinese Gen Z consumers, with 56.3 million Weibo followers.
Go Where Customers Go: Localizing Ecommerce Efforts
One of the key lessons from the luxury beauty industry’s experience with the pandemic has been that retailers need to have an up-to-date and actionable digital strategy. Digitization is another crucial factor in China’s expansion.
As the influence of COVID-19 fades in China and new consumer trends emerge, beauty brand giants have continued to explore untapped potential and thrive on popular e-commerce platforms and social media companies in China, including Tmall, JD.com, WeChat and Douyin (TIC Tac).
Take La Mer, one of the super premium beauty players that is embarking on full digitalization. Chinese customers’ passion for high-quality products has led La Mer to take an increasingly creative digital path. The brand launched its flagship store on Tmall in 2015 and repeatedly made the bestseller list in the beauty and skincare category. In 2019, La Mer was among the first high-end brands to launch on the WeChat mini-program, along with a host of luxury brands including Louis Vuitton and Dior.