How to Navigate China’s Discount-driven Beauty Market

A major category for Singles’ Day, beauty sales during this year’s end-of-the-year e-commerce bonanza delivered on their promise.

According to data from Syntun, sales for personal care and beauty goods on major e-commerce platforms, including Tmall and Taobao, JD.com and Pinduoduo, reached 96.3 billion renminbi, or $13.2 billion, accounting for around 8.2 percent of total online sales during the period. Taking into account this year’s 10-day extension to the sales period, total sales increased 22.5 percent year-over-year.

Based on data from Bernstein, e-commerce sales in October surged by 87.7 percent due to this year’s pre-sales period extension. Market leaders, including L’Oréal, Proya, Shiseido and LVMH recorded strong results and market gains despite relatively flat sales across the board due to higher return rates this year. For the month of October, market share at L’Oréal jumped to 23 percent, Proya reached 8.3 percent, Shiseido grew to 12.9 percent, and LVMH grew to 9.7 percent. 

Tmall remains the most important playing field for online beauty sales, accounting for 41 percent of the turnover during the January to October period, according to data from China Association of Fragrance Flavour and Cosmetic Industries. Douyin, a strong contender, came in at 39 percent and leaned more toward local premium brands.

On Alibaba’s Tmall, this year’s top-grossing beauty labels were Proya, L’Oréal Paris, Lancôme, Estée Lauder, and La Mer. On Douyin, top sellers for 2024 are Kans, Proya, L’Oréal Paris, Estée Lauder and Komfymed.

“We expect returns to be higher this year than in previous years. Therefore, we focus on market share gains and relative performance rather than the absolute levels of growth shown in the data,” said Bernstein in a recent report. 

For Jacques Roizen, managing director of consulting at Digital Luxury Group, chasing Singles’ Day exposure will eventually do little for brand engagement. “It is obviously far more beneficial for luxury beauty brands to refrain from offering discounts — apart from perhaps a small sample — than to engage in the pervasive promotions that have become commonplace in China,” said Roizen. “Furthermore, there is little evidence to suggest that these frequent discounts actually contribute to market share growth.”

Roizen said that catchy promotional lingo, such as “getting more for free than you pay for,” selling tactics such as free samples, “gift with purchases,” alongside platform-funded coupons, will eventually “train Chinese consumers to question the true value of their products.” 

Roizen pointed to examples including La Mer and Lancôme offering more than 50 percent off hero products and a Dior Beauty splash ad accompanied by Tmall’s Singles’ Day tagline, “good brand, good price.” 

“This trend is not confined to Double Eleven [Singles’ Day]; it extends to various shopping occasions, including Chinese New Year, Valentine’s Day, and other significant dates,” Roizen added. “However, there is little evidence to suggest that these frequent discounts actually contribute to market share growth.”

For some industry insiders, the return of Alibaba‘s retail whiz Jiang Fan to the helm of Taobao and Tmall — where he will oversee efforts to merge Alibaba’s domestic and overseas e-commerce businesses — could turn things around.  

Jiang is widely credited with building the Tmall Super Brand Day campaign, which allowed brands to enjoy a Singles’ Day-like moment on a specific date each year.

For local upstarts, another key takeaway from this year is to have a “balanced multichannel strategy,” said Stefan Huang, group strategy head at Joy Group, which ranked 70th on WWD’s Beauty Inc Top 100 ranking. 

Joy Group’s color cosmetics brands Judydoll and Joocyee reported double-digit sales growth from October to November, a trend Huang attributes to the company’s focus on offline and international expansion efforts. During Singles’ Day, Joocyee opened its first stores in Chongqing and Changsha, both second-tier cities in China.

“Double Eleven [Singles’ Day] has become less important for us. At its core, it’s still a discount plus hoarding products retail moment, which is the direct opposite of what mass market cosmetics brands want to pursue, which is to engage with consumers on a daily basis with creative content,” said Huang. 

“Plus, we will never win the promotional war with big brands. Marketing during Double Eleven has become very expensive,” Huang added.

For Simply This, a “slow beauty” brand launched in 2019, Singles’ Day is a magnifying glass which sheds light on the trends shaping the market.

“The ebb and flow of the entire beauty market is accelerating, consumers tend to favor instant skin care results, and brands have flooded the market with single ingredient, high concentration products that treat the skin’s apparent problems, overlooking the fact that skin care is usually a prolonged process,” said Elaine Gong, founder of Simply This. 

Gong believes focusing on the ritualistic aspect of skin care will help her brand stand out from the noisy crowd. Its hero product, the Pure Collagen Eye Pad, retails for around 560 renminbi, or $77.

Taking a long view on the market, Gong believes that “every touch point matters.” “We have a group of influencers who recognize our idea of skin care, they serve as a bridge to reaching more users,” she added.