China’s make-up boom over? Market headed for slow yet sustainable growth – Yatsen CEO

Yatsen is the Chinese cosmetics company behind C-beauty brand Perfect Diary. It announced on March 10 that revenue for its colour cosmetics division fell by 2.3% in 2021 after experiencing sluggish demand in the second half of the year.

“The colour cosmetics market decelerated in 2020 and then experienced low growth in the second half of 2021. Competition also intensified among domestic and global players,”​ said Huang Jinfeng, the founder, chairman and CEO of Yatsen.

He noted that the colour cosmetics category has experienced several years of fast growth already and now the market moving towards more sustainable, yet lower growth rates.

Furthermore, the impact of the COVID-19 pandemic was still being felt in the make-up category.

“First, the COVID impact is lasting till now. Consumers are wearing masks, so we see the lip category is not growing as fast as before.”​

The softening of demand is further aggravated by the increasingly competitive landscape, which has also impacted the rate of new make-up brands in the market.

“We also don’t see many new brands emerging in this category and this will also have some negative influence on the consumer demand for buying make-up.”​

Despite the downsides, Huang emphasised that China’s colour cosmetics market still holds potential as he expects market penetration to continue growing.

He also highlighted that the lip category will potentially return with a boom as the COVID-19 pandemic eventually ends.

“There is also some upgrade trend for the make-up market as well. So, all of those contributors will make this market to grow at a more sustainable growth rate.​

Huang revealed that the firm was gearing up for several colour cosmetic launches this year for brands like Pink Bear, which has been growing very fast.

It is set to expand the brand with new SKUs, including eyeshadow palettes and foundations.

Huang also teased that Perfect Diary would be two “very big” ​product launches later this year.

At the same time, the company will focus on brand building for its make-up brands.

“We plan to build brand equity with compelling high impact marketing while limiting discounts and the promotion.”​

Huang cited Perfect Diary’s 2021 China Growth Campaign as an example of its approach.

“We partnered with Cosmo Magazine to create content showcasing the dreams and aspirations of a diverse group of women across different locations and demography, reinforcing our products broad appeal while establishing our company as the face and future of modern Chinese feminine beauty.”​

The company is not the only one experiencing sluggishness in make-up as sales on e-commerce platform Tmall declined by 2.4% in the first two months this year, Huang pointed out.

Such trends are spurring the company to expand its sales channels.

“If you look at the traditional e-commerce channels… Looking forward, we think it will not be the main growth drivers for our brand portfolio… right now, our company is devoting more and more talent and resources into Douyin, and we saw quite remarkable growth in the last quarter.”​

In addition to Douyin, the firm is set to diversify its sales offline and through distributor models as well.