Fierce competition among international beauty brands in China "6·18" shopping festival

 Source from CAFFCI

International beauty brands which never give away formal products when selling formal products conducted a big promotion of “buy a bottle of formal product give sway a bottle of it ” in the livestream room of top livestreamers. The online sales price of “star products” such as foundation and cream of famous brands which never give discounts is almost half of the original price. In this year’s “6·18”, beauty brands began “competing fiercely” in discount degree. Due to the impact of covid-19 and the rise of the ingredient price and other factors, “6·18” 2022 might be “a straw to catch at” for beauty brands.

 

Put down “cold face”, take part in the discount battle

In this year’s “6·18”, international beauty brands never giving discounts, no longer put on a “cold face”. Consumer Ms Wang told the reporter of China Business Herald, “the price of Kiehl’s Rare Earth Deep Pore Cleansing Masque is 300+ yuan, and the price of it in the livestream room of top livestreamers in “6·18” is only 100+ yuan. For Estee Lauder Futurist Foundation, the “Buy on behalf”(The sales price of a product sold in China is usually higher than that sold overseas, so buy a product for customers from a country/region outside China Mainland is called “buy on behalf of customers”) price is 300~400+ yuan, but the price of it in “6·18” shopping festival is 200+ yuan.” It’s easily seen that in this year’s “6·18”, international beauty brands obviously strengthened their discount degree.

The head of the marketing department of an international beauty brand told the reporter, Beijing, Shanghai are the main consumption cities of the brands. Due to the impact of the epidemic, the major offline consumption places in these 2 cities are almost shut down, which surely affected the sales amount. In this case, brands do get more attached to online promotions. The head of a large beauty OEM in a district of Shanghai said: “Many international beauty brands’ OEMs are located in Shanghai which are in shutdown because of the epidemic and didn’t carry out promotions in ‘ 520’, ‘ 5·1 Labor Day’. After they resume work and production of some production lines, the orders are too many to deal with. The brands held great expectations for “6·18”.”

In Chinese market, most of time the ways of promotion are to offer lower price. According to incomplete statistics of the reporter, in livestream rooms of the top 2 livestreamers who possess the most traffic, the number of international beauty brands which took part in the activity of discount promotion exceeded 100, the price of which nearly reached the lowest point of promotions in the past 3 years. It’s noteworthy that international beauty brands’ strengthening promotion degree of online activities is directly related to the decline of their performance. In Q1 of this year, the performance of international beauty giants has declined. In Q1 of 2022, Chinese market sales amount of Shiseido Group has met a YOY decrease of 20.6%. And Shiseido said the decline of performance was principally influenced by objective environment--Decrease of offline customers and the shutdown of some physical stores. The sales amount of Asia Pacific Market of Estee Lauder Group YOY has dropped by 3.91%. The sales amount of Amore Pacific Group in Chinese market has seen a decline of 10%, its stores in many cities were temporarily shut down. P&G disclosed in a conference call that, its performance in China bore pressure and the sales amount presented declining trend.

However, in the financial reports of international beauty giants, the sales amount of online e-commerce channels have achieved positive growth. Estee Lauder reported that the double-digit growth of online stores in China was able to offset some of the decline in physical stores; Shiseido's e-commerce sales business also increased by 20%.

 

Chinese domestic beauty brands gradually lost the advantage of promotions

International beauty giants’ attack on e-commerce field may be squeezing the surviving space of Chinese domestic beauty brands.

Industry insider of beauty promotions Mr.Kong said that high quality resources such as top livestreamers and channel offers all tender to choose international cosmetic brands. These giants also find that give away product samples, sell limited packaging, give discounts can improves sales. Previously, Chinese domestic brands didn’t have advantages over pricing strategy, now, there is no more price-reducing room for them.

The founder of a efficacy skincare brand told CBH reporter, its brand didn’t put many efforts in ‘6·18’. On the one hand, sales have already dropped to a large extent due to the epidemic, and give discount again in the promotions will only cause the company's performance to decline further; on the other hand, international beauty brands are offering increasingly strong discounts during promotional festivals, and domestic brands have little advantage in terms of discounts. The competition in the online market is too fierce for domestic beauty brands.

The founder of a efficacy skincare brand above said, in April this year, the cosmetic ingredients were all increasing price, the price increase of some ingredients reached the highest point in the past decade or so. Price increase has been the major way to protect and guarantee the interests of brands. In this case, participate in discount promotions is a foolish action.

In this year’s “6·18”, under great attack of international beauty brands, it’s very difficult for domestic beauty brands to have good sales performance. According to the first 4 hours pre-sales data of Tmall, among beauty&skincare categories of Tmall pre-sales list, the top 3 brands were L'Oreal, Proya, Estee Lauder. Foreign invested brands accounted for bigger proportion in brands of top 20 sales amount.

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ZMUni Chinese Cosmetic Regulation Compliance Centre 中贸合规中心

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