In mid-January, Shiseido decided to sell its two of its 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 cosmetics brands, which further signals that Shiseido is concentrating on more prestige and premium business segments.
The Japanese giant attributed its business growth in China to its high-end brands’ growth, according to their annual financial report for 2021. During Singles’ Day in November 2021 in China, its prestige segment grew 1.5x. Brands with the most improved rankings included Shiseido, Clé de Peau Beauté, and NARS.
Just before the COVID-19 pandemic started, China’s demand for luxury beauty had been on the rise. According to CBN Data’s statistics, the sales scale of high-end beauty reached 151.8 billion RMB ($24 billion US) in 2019, accounting for 51% of total cosmetics retail sales, with market share surpassing that of mass beauty for the first time.
Well-being driving China’s market
The craze has evolved post-pandemic. If COVID-19 has taught Chinese customers one thing, it is that health is earned rather than given. This is true for both physical well-being as well as skin health. The pandemic has fostered the overall awareness of self-care and shifted the focus to skincare products, as consumers are paying more attention to skin health. Because everyone wears a mask, there are fewer reasons to wear makeup and fewer opportunities to go out.
With China’s disposable incomes continuing to rise, high-end and efficacious skincare products are more likely to be recognized for their ingredients and technology, resulting in significant sales growth for high-end beauty products. As domestic e-commerce booms and consumer behavior shifts towards health and quality-consciousness, high-quality products are no longer a luxury, but gradually becoming a necessity.
Indeed, the premium beauty market in China is one of the most promising opportunities today. Premium beauty sales are expected to grow at a compound annual growth rate (CAGR) of 13%, with premium market share further increasing to 53% by 2025, Euromonitor predicts.
Beauty and cosmetics leaders thrive on premiumization in China
In the post-pandemic age, competition within the high-end beauty market has become the main focus of major groups’ China strategy. High-end brands with more premium space and more robust capabilities to maintain their noble images have gradually become part of the beauty giants’ strategy.
Thanks to robust online shopping among Chinese customers, the Shiseido group saw over 30% growth in the prestige division on e-commerce over the past year. Last November, Shiseido Group introduced high-end brands The Ginza, Baum, and Effectim at the Fourth China International Import Expo to make a big splash in the Chinese market.
L’Oreal also revealed in its 2021 annual report that its luxe skincare division gained impressive success in China with premium skincare brands Lancôme Absolue and Helena Rubinstein.
The skincare sector is not the only one benefitting from heightened interest from luxury customers in China. Niche labels that L’Oréal Group carries, like Maison Margiela, Atelier Cologne, and Armani Privé, have achieved remarkable success. The French cosmetics conglomerate attributes the surge in luxury perfume to rising appreciation among Chinese customers. L’Oréal Group predicts that this trend will continue to expand by double digits in the following years.
Let us now look at China’s domestic players. YSG (YatSen Global), which began with Perfect Diary, an affordable makeup brand, has successively acquired the high-end technology French skincare brand Galenic and the high-end natural Spa brand Eve Lom from the UK. In October 2021, the 35-year-old brand Eve Lom appointed Chinese actor Yang Yang as its first brand ambassador. Yang boasts colossal influence among Chinese Gen Z consumers, with 56.3 million Weibo followers.
Go where customers go: Localizing e-commerce efforts
One of the key takeaways from the luxe beauty industry’s experience with the pandemic has been that retailers must 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 flourish on China’s popular e-commerce and social media platforms, including Tmall, JD.com, WeChat, and Douyin (TikTok).
Take La Mer, one of the super-premium beauty players embarking on comprehensive digitalization. Chinese customers’ passion for high-quality products has led La Mer to take an increasingly creative digital path. The brand debuted its flagship store on Tmall in 2015 and has repeatedly made the best-selling 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.