International brands are leading the industry: they occupy 54% of China’s cosmetics market. The American brand Procter & Gamble is ahead, followed closely by L’Oréal. Then come the Japanese group Shiseido and Unilever. As a result of the tremendous rise of China’s cosmetics industry and despite the numerous barriers to trade, foreign brands are rushing into China and competition becoms ever tougher. The main foreign investors in the cosmetics market come from the United States, France, Japan, South Korean and Germany.
Chinese consumers are fascinated by Western high-end brands and trust them. This explains the success of foreign brands in the cosmetics sector, and their domination on the market compared to Chinese brands.
However, the Chinese market is evolving very quickly. Local brands are gaining ground and most of them aim to market high quality products as well. Beyond their admiration and fascination for high-end Western brands, Chinese consumers are, above all, looking for quality offers and the trend is towards cosmetics products based on natural ingredients. Chinese customers are becoming increasingly demanding and desire to find products that perfectly meet their expectations.
French and foreign cosmetics companies have an interest in penetrating the market by asserting a high end positioning: this strategy will allow them to develop their business under optimal conditions in China. Demand remains high and often unsatisfied in China’s second- and third-tier cities.
In terms of cosmetics offers, make-up and perfumes seem to hold an untapped potential: according to some studies, about 90% of Chinese women use cosmetic creams, while only a third of them use make-up and less than 10% wear a perfume. Thus, Estée Lauder now focuses on make-up and perfumes to attract Chinese customers and gain vacant market shares. Estée Lauder is also preparing the launch of several fragrances, only dedicated to Chinese customers. Furthermore, the US group, well known for its specific developments adapted to the needs of particular countries, has already launched Nutritious, a brand dedicated to the Chinese market.
L’Oréal to adapt its positioning
L’Oréal, for which China has become one of the most important markets, aims to conquer 250 million new consumers by 2020. The group has recently decided to stop selling its mass-market brand Garnier - which is its second brand in terms of turnover - in China. Garnier had never been a great success in China: not high end enough to arouse the average and wealthy customer, and not low cost enough to attract other Chinese consumers, constantly looking for discounts and good deals.
Unlike India, where L’Oréal has penetrated the market thanks to Garnier and its general public positioning, in China, the group has found its place on the local market thanks to a high end positioning strategy, by playing the card of affordable luxury.
In terms of distribution, L’Oréal has decided to sell its products in major cosmetics distribution chains and hypermarkets, but essentially with a seller dedicated to customer advice, in order to be distinguished from cosmetics mass-consumption products and maintain its high end image in Chinese customers’ mind. The group adopts the same positioning strategy with its make-up brand Maybelline, leader in in China.
Amway meets success with Artistry
Another illustration is the success of US group Amway in China, especially thanks to its cosmetics products offer, marketed under the brand name “Artistry”. Thanks to a wide range of skincare and make-up products, the high-end brand has succeeded in reflecting a prestigious image in the Chinese customers’ mind. In China, Artistry does not play the card of affordable luxury. On the contrary, the brand aims to be only affordable for a very wealthy customer. Actually, this positioning strategy appeared very efficient in a country that records an increasing number of wealthy and very wealthy individuals.