How to win over… China’s value-drive beauty consumers

The beauty success stories in China have been the stuff of legends. Like how China’s top beauty influencer Austin Li beat Alibaba founder Jack Ma in to sell 15,000 lipsticks online in a mere five minutes (that’s 3,000 lipsticks per minute).

This is but one of the many success stories that are a reminder of the unparalleled growth opportunities China’s booming beauty market offered. However, recent shifts in consumer behaviour and increasing sophistication in purchasing decisions have completed reshaped the landscape.

Beauty brands have faced another challenging year in 2024 as consumers in the once- bountiful Chinese market continued to navigate uncertain economic conditions. According to Euromonitor International, the world’s second-largest beauty market reached USD77.35bn in 2023, up from USD74.96bn in 2022.

In 2024, the market conditions have barely improved enough to deem it a rebound. Beauty giants like the L’Oréal Groupe, the Shiseido Company, and the Estée Lauder Companies have not been able to escape the ramifications of the slowdown. L’Oréal, for instance, estimated that China’s beauty market dipped by 2% to 3% for the company.

“After a very slight recovery at the start of the year, market growth turned negative in the second quarter as the comparison base was very high. And we are not seeing any pickup in consumer confidence which is critical to growth in beauty. Overall, we estimated that the market was down between 2% and 3% in the first half,” said L’Oréal’s chief executive Nicolas Hieronimus.

“With ongoing pressure on the economic environment, the growth rate of per capita disposable income has slowed… Notably, the cosmetic retail sector has experienced its weakest performance in a decade, excluding the year 2022 when pandemic restrictions were lifted.” said Jessica Jin, Category Director, Beauty and Personal Care, Mintel China.

Jin cited data from the National Bureau of Statistics (NBS)​ which showed that the year-on-year growth rate from January to August 2024 was -0.5%.

“Before the pandemic, this figure consistently maintained double-digit growth,” said Jin.

In the last few years, we have seen a number of brands exiting or shrinking their presence in China. In July, Shiseido-owned Baum pulled out of the Chinese market, shuttering its physical stores and Tmall flagship while discontinuing its WeChat mini program service.

A few months before that, LVMH-owned Benefit Cosmetics closed its online flagship stores on major e-commerce platforms Tmall and JD.com, as well as Douyin. Japanese beauty brand Kosé and American affordable beauty brand e.l.f. also exited Tmall.

These are just a few of the many brands that have been pushed out of the competitive market, underscoring the thin margins for error in China.

The subdued shopper

The Chinese beauty consumer is among the most sophisticated. They are not only knowledgeable and well-informed, but they are also curious and open to trying out new brands and innovations. At the same time, they are extremely demanding. They will not accept any trade-offs when it comes to performance, quality, and safety.

These core characteristics of the Chinese beauty consumer have largely remained unchanged. However, there is greater focus on value. With the economic uncertainties, consumers have a more discerning approach to spending, seeking products that offer both quality and affordability.

Mintel research from 2022 to date indicated that one-third of Chinese consumers are controlling their overall spending on beauty and personal care products.

“Beauty products, being non-essential items, have also come under scrutiny from various value perspectives… After enjoying a wave of benefits, the live streaming economy is now losing momentum, with 26% of consumers reporting a reduction in impulsive purchases of cosmetics during live streams in the past six months. Additionally, 36% of consumers prefer to use up their current stock of cosmetics products before buying new ones,” said Jin.

“The Chinese beauty consumer is now less impulsive and much more price sensitive. They are also more discerning when making purchase decisions. Consumption remains low, and consumer spending has definitely dropped,” said Yumie Chia, general manager of Elizabeth Arden Asia Pacific Travel Retail.

Toshinobu Umetsu, chief executive of Shiseido China echoed Chia’s statement, highlighting how intense the price competition​ has become.

“Consumers are looking for the channel or touchpoint where they can purchase at the cheapest price. That has become more active and more aggressive among the consumers,’ he said.

This is driving demand in the mass beauty category​, with brands such as L’Oréal Paris are excelling.

“The pattern that we see in Chinese consumers right now is that they are indeed buying less and buying more looking for value-for-money,” said Hieronimus.

Under these circumstances, beauty brands must clearly demonstrate their value by presenting a compelling case in order to close the deal.

“The products need to be functional and high in efficacy, in addition to being value for money.  Hence, the reputation and reviews are highly important in swinging a consumer towards deciding to try a new product,” said Chia.

She highlighted the importance of tailoring product development and marketing strategies to this ingredient-conscious and results-driven audience.

“Chinese consumers are very familiar with ingredients. Products with high-efficacy ingredients and strong results are highly attractive to Chinese consumers. There will always be opportunities for new products with strong ingredient stories and breakthrough technology, promising excellent fast results for the consumers.”

G&M Cosmetics is an Australian brand that owns several brands including Australian Creams, and P’URE Papayacare. It has been established in China for two decades with online and offline touchpoints. The company was voted as the Most Trusted Australian Brand in China, according to Monash University’s Australian Brands in China Index in 2018.

G&M Cosmetics global marketing and sales manager Peter Bosevski told us that the shifts in China motivated the firm to redevelop some of its products.

“We’ve been in the market for a long time. We’re known for our lanolin cream, emu cream, and so on. These were the staples. But now it’s getting competitive, and consumers are changing.

“We’ve listened and adapted to those changes. We’re changing our formulations to adhere to what the consumers want while still keeping the range as classic as possible. We’ve added some features and backed it up with some scientific research. We’re trying to go to the next level with this brand,” said Bosevski.

Bosevski concluded: “If you don't move with the times, you’ll get left behind because that’s how quick Chinese consumers can change.

A transformed horizon

For years, ​Chinese e-commerce platforms like Tmall and JD.com dominated the landscape. However, these traditional platforms have steadily been losing market share to emerging players like Douyin, the Chinese counterpart of TikTok.

Coty-owned Lancaster has capitalised on the immense popularity of Douyin, bypassing the e-commerce marketplaces altogether with the launch of its Ligne Princière line. Speaking about the launch in 2023, Coty CEO Sue Y. Nabi commented​ that “The magic of Tmall is less present than it used to be.”

Italian brand Teaology has made the strategic decision to build up a physical retail presence in China as competition through cross-border e-commerce​ heats up.

“On Tmall, the brand is doing well but it’s not like 2015 or 2016. Right now, it’s all diluted because the market is too crowded. The boom in Tmall, Little Red Book – these made it too easy for everyone to be there so everyone was there,” said CEO Paolo Bevegni.

The firm believes having a physical presence will help cut through the noise online.

“Now to be modern in China, you must do it the old way. That means you must be in brick and mortar, where at least there’s a filter for the brands,” said Bevegni.

According to Jin, this year’s 6.18 Shopping Festival was the weakest it has ever been at negative double digits. She noted that the brands and platforms have moved away from extreme price promotions, which possibly affected the sales.

“I think the platforms are trying to move away from these price promotion activities, but you can see the effects on 11.11 and 6.18. Consumers may buy what they need, but they won’t stockpile during the sales.”

She attributed the growth of Douyin to the economic downturn, which has allowed Douyin to continuously capture more consumers within the mass-market price segment.

“Most beauty products on Douyin are primarily sold within the price range of 100 RMB, whereas Tmall mainly occupies the mid-to-high-end price range. However, Tmall's declining market share has led it to place greater emphasis on the competitiveness of low-priced products, with its market share in the past three years gradually shifting towards lower prices.

“In some beauty subcategories, sales on Douyin have even surpassed those on Tmall. The high growth of Douyin can be largely attributed to the increasingly dominant role of short video platforms in occupying consumers' daily fragmented time, becoming an indispensable part of their lives,” said Jin.

However, Douyin comes with its own set of challenges, including intense competition.

“The widespread adoption of live streaming for product sales has led more products to rely on best-sellers and traffic-driven sales. Compared to long-term brand building, there is a greater inclination towards short-term gains. On Douyin, the top 20 beauty product categories by sales undergo significant reshuffling each year, with over half of the brands being eliminated,” said Jin.

Chia noted that retailers and brands alike are facing mounting pressure to provide more value with promotions as well as gifts.

Jin foresees that brands will encounter major challenges as the price competition heats up on Douyin.

“Today, survival is the top priority. To survive, they need to be in the consumer’s shopping cart. That’s why there’s so much price competition. But this is not a long-term sustainable strategy. Other brands will catch up and provide a similar product and a better price.”

The new challengers

In a recent edition of How To Win Over…​, we explored the rise of China’s domestic beauty brands such as Florasis, Winona, Judydoll, and Flower Knows. In recent years, Chinese consumers have embraced these local heroes for their quality and affordability.

“Chinese consumers used to love Japanese and South Korean brands. They also favoured European and American brands from the big groups. Domestic brands were thought to be not as good. But today, the domestic brands are the trusted favourites of many consumers,” said Kevin Zhang Zilong, founder of KEV Beauty, a Chinese beauty industry aggregator.

“Contemporary C-Beauty has effectively transcended the ‘cheap’ label, leveraging robust research and manufacturing capabilities, coupled with a distinctive Chinese Eastern cultural heritage, to emerge as a formidable trendsetter. Through product innovation and strong reputation, we have gained the love and recognition of an increasing number of consumers worldwide.”

Aromababy is an Australian mother and baby care brand that has been in the Chinese market for almost two decades. Founder Catherine Cervasio has observed first-hand the rise of C-beauty brands such as Hi!Papa, a baby care brand from.

In 2023, Hi!Papa completed a Series A+ fundraise led by L Catterton, the key investment arm of French luxury giant LVMH.

“In general, the market is tough. Less disposable income, less births, and a more competitive market, especially from domestic brands – and the brands there are quite sophisticated. Back then, 10 years ago, consumers wanted to prove their trend and status by using imported products.

“Some didn’t trust Chinese brands, but now China is so advanced in its technology and product offerings. We can’t ignore the great job they have done. I think brands like Winona are in a seriously strong position. It’s getting harder for smaller, indie brands to stand out,” said Cervasio.

Today, we are seeing more C-beauty brands partner with top international ingredients suppliers such as the partnerships of Lubrizol and Proya​, and Hallstar and HBN​.

“An important and noticeable shift among Chinese Beauty consumers during the post-covid era is the shift towards higher preference for value effectiveness vs cost effectiveness or brand names,” said Eileen Zhang, general manager, APAC, Hallstar Beauty.

“Such consumer’s priorities command Beauty players to accelerate innovation and work closely with upper stream partners, such as ingredient suppliers, to bring out safe and high-quality products in order to hold and strengthen market position.

“Chinese leading brands, such as Proya, Winona, and Kans, have grasped the opportunity brought by this shifting consumer behavior to grow their impacts in the market. Hallstar, as a global specialty cosmetic ingredient supplier, continues to devote our resource and innovation to foster such partnership with Beauty brands and manufacturers.”

For more insight from Hallstar, check out the video below:​

C-beauty brands not only produce great products at attractive prices but can also be very aggressive when it comes to marketing.

“For instance, with the mega sales periods, our agents have to invest in all kinds of activities, or we wouldn’t stand a chance. We might as well not participate. I feel that its really difficult for brands to scratch the surface. You got to put a lot of money to promote your sales to get a lot of sales out. But we’re not here to make sales of sales sake,” said Cervasio.

Investing in superstar key opinion leaders (KOLs) for a livestreaming session is not something every brand can afford to do regularly, even if it is de rigueur. For brands like Aromababy, organic world of mouth is extremely important.

In the last 18 years, Cervasio has personally cultivated a community of mothers on platforms like RED and WeChat. These mothers share their experiences of using Aromababy products or go to Cervasio for advice on skin care or even massage. Sometimes, they even purchase products directly from her.

“One mum might say she has gathered 100 mums ready to order and ask for $2 off the price. We get a sale, and she gets the kudos and is seen as a leader producing access to better prices. It doesn’t take away from retail, its just another way of marketing and staying connected,” she explained.

“If you don't have the resources to play at that really high level, you've got to bring something else to the table that's unique and innovative. For us that’s me as the founder leaving a legacy of personalisation and approachability,” she said.

Is the end in sight?

China will continue to be an extremely important market for beauty companies in the future. But at the moment, the jury is still out on when we can expect a recovery.

Some, like Clean Beauty Asia founder and CEO Allie Rooke are not very optimistic about the outlook next year.

“The younger generation seems less inclined to work, with many opting for a more relaxed lifestyle, often referred to as "躺平" (lying flat). The policy of raising the retirement age has led to frustration among the middle-aged workforce, who are essential to the labour market. Given that we’re approaching Q4 and companies, both global and local, continue to lay off employees, I don’t foresee a rapid recovery by next year.”

Chia echoed her views: “We believe it will take longer than a year as unemployment rates increase, and spending power remains low.”

While a recovery is inevitable, it is unlikely things will go back to the status quo.

“I don’t think it will return to the highs. It’s not as difficult to import and get your products on the shelves but it’s difficult in another way in that you have fierce competition. Everything has changed – taxes, regulations… I don't think it's going to go back to the way it was it’ll just settle into a new normal,” said Cervasio.

The lingering uncertainty about the Chinese beauty market will affect the overall situation globally.

Fabrizio Freda, president and chief executive of the Estée Lauder Companies said he was hopeful that global prestige beauty will have mid-single digit growth by fiscal 2026, depending on the situation in China.

“We expect the global prestige beauty industry to reaccelerate to historical mid-single-digit growth in fiscal year 2026, assuming China progressively stabilises and then returns to growth,” he said.

However, with the challenges, will come new opportunities.

“Personally speaking, I remain rationally optimistic of a gradual economic recovery at the macro level, and strongly optimistic about the Beauty industry. Consumer needs are still there and are becoming more diverse,” said Zhang.

“The market selection, triggered by the demands from more rational and educated consumers, will lead the Chinese beauty industry towards a more scientific, innovative, and value effective era.”