Experts weigh in on how to handle the region’s rebound.
China’s beauty market continues to be in a transitional phase. According to multi-national banking firm Jefferies, the country’s recovery has been slower than expected, reflecting the overall economy and spending. Nevertheless, China’s beauty sales in January and February increased by 5.5% year over year – slightly higher than estimates, as reported by Jefferies.
Sarah Hu, NIQ China’s Chief Business Officer, agreed that the beauty industry’s growth rate has been slowing down compared to the last decade, with online sales being a significant driver of growth.
“Consumer trends in China are mixed,” said Oliver Chen, Managing Director, Head of Retail and Luxury at Cowen, and Professor of Marketing and Retail at Columbia University Business School. “We’ve seen volatile consumer spending and confidence, along with high levels of unemployment. The housing market has also been under pressure in terms of valuation, which affects the overall environment. It’s the backdrop that matters, especially during periods of decelerating growth.”
China’s New Beauty Consumer Mindset
Despite slower growth, there are steps beauty brands can take to gain an advantage in China.
For years, beauty giants like The Estée Lauder Companies and L’Oréal have relied on brand reputation to establish themselves in Asian markets. However, modern Chinese consumers are more focused on what the product delivers.
“We’re seeing that fewer consumers are paying for brand reputation,” said Larissa Jensen, SVP, Beauty Industry Advisor, Circana. “They’re looking for functionality, effectiveness, and whether a product suits their specific skin condition. With changing mindsets, they’re no longer willing to pay just for the brand.”
A significant global trend is the growing appreciation for science-driven efficacy and results, which also applies to the Chinese market. As consumers become more informed, brands need to meet their higher standards.
Jensen suggests that brands should consider establishing local innovation centers to research and develop products tailored to regional consumer needs, focusing on functionality and effectiveness rather than relying solely on brand reputation. “Skin conditions in China may differ from what global brands are developing more broadly,” she said. “There may be an opportunity to create and develop more locally suitable products.”
It’s also crucial to understand how and why consumers spend in China. Hu cites NIQ research indicating that consumers have become more rational with their spending, paying more attention to prices and planning their expenditures.
“At the same time, research shows they are willing to pay for more emotional elements because there is a psychological recovery needed after COVID,” Hu said. “Experiential corporate consumption is prominent, but there might be less emphasis on the actual product. There will be changes in consumer behavior, psychology, and sentiment.”
Livestreaming Remains a Top Shopping Platform
With global travel slowing down in China, Chinese consumers are spending less overseas and more domestically, but where they shop has evolved.
Douyin, the Chinese equivalent of TikTok, has emerged as a major player in the beauty sector. “The growth is now coming significantly from online platforms, moving away from traditional e-commerce,” Hu said, attributing significant growth to Douyin.
“There has been a significant change in channel dynamics in terms of beauty purchases,” Jensen said. B2C e-commerce platforms like Tmall and JD have traditionally been where consumers shopped and discovered products. “For a long time, that has been the entry path in China. However, we are starting to see a slowdown in performance there because more Chinese consumers are choosing to purchase through livestreaming platforms.”
Chen from Cowen also emphasized the importance of livestreaming, suggesting that brands need to focus on creating products that could go viral. “It must be visually appealing with a compelling story — simple yet complex,” he said. “You need to design products to optimize for potential virality. China is much more advanced with digital, and the customer needs a phenomenal online storytelling experience.”
The appeal of livestreaming platforms lies in interacting with local beauty influencers, and brands must understand how to navigate the influencer landscape in China and form the right partnerships, both crucial for building brand awareness.
Another advantage of livestreaming in China is competitive pricing. “With all these channel choices, consumers will seek out the best pricing available rather than sticking to a single source like Tmall,” Jensen said.
These marketplaces are now filled with local emerging Chinese brands, intensifying competition for global brands that may struggle to adapt to this new format quickly enough.
Local Brands Gain Traction Over Multinationals
“Speaking to my colleagues in China over the last few years, they have been suggesting that Chinese local brands are becoming bigger and more important; this trend has continued to accelerate significantly,” Jensen said. “Now we’re at a point where there’s a lot of local pride, and Chinese consumers are more open to purchasing from local brands, which are gaining importance across all categories.”
This trend is supported by NIQ data as well.
“A lot of booming new brands and smaller, local Chinese brands have entered the market, adding competitiveness to the overall industry,” Hu said. “Most of them are active on Douyin. There are so many emerging local Chinese brands on this platform. However, global brands are resilient because they operate across multiple channels.”
According to a report by JingDaily, “among local beauty brands, Aupres, Proya, and Florasis secured the top three spots in media value, according to WeArisma. Pechoin and Flower Knows followed closely behind.”
Most emerging local brands only utilize Douyin as their commerce channel, while global brands can reach consumers through various channels. “In the long run, they will still be very competitive in the Chinese market, but they need to be more adaptive to changes in the channel and challenges of the consumer,” Hu said. “Global brands might need to adjust the way they communicate with consumers and promote their products.”
Looking Forward
Between the aftermath of the global pandemic and the volatility of the Chinese market, brands need to consider logistics even more.
“The supply chain and product development process both help you plan for volatile changes in the environment,” Chen said, “and they also help you manage new product development.”
Chen pointed out that over the past few quarters, China had an excess of inventory that needed to be cleared, putting pressure on market-wide discounts and contributing to a slower-than-expected recovery.
“For beauty brands not in China, it becomes a decision about how to approach distribution and who to partner with,” Chen said. “Because as you build, you need to make decisions about speed, cost, and partners. Certainly, Sephora Asia is a big player, and it’s global.”
Ultimately, experts predict that the China beauty market will continue to recover, with anticipated single-digit growth in 2024. “We believe that premiumization will continue, with luxury price points remaining a hot topic, as well as emerging channels,” Jensen said. “Global brands with the ability to adapt to this new normal will likely perform better. We’re in a period of change in the China market, so it’s about turning potential challenges into opportunities. Brands have an opportunity if they consider what consumers are looking for and have the ability to adapt and create products to meet those needs.”
Although the Chinese market will likely remain dynamic for some time, it will remain crucial for global brands. “With its vast population and a growing middle class willing to spend, China presents fertile ground for brands looking to enter a profitable space,” Jensen said. “But success in China won’t be easy anymore. Brands will need to continue investing in products that meet evolving needs and quickly.
