Going for China’s glam market
China is the world’s number 3 cosmetics market and foreign-based brands are trying to gain a foothold. But as one luxury goods adviser said, despite clear opportunities, China’s beauty market is difficult to crack, reports ZHANG YUWEI in New York.
On a snowy evening in early December, the residence of Peter Thomas Roth, founder of Peter Thomas Roth Clinical Skin Care, on the Upper East Side of Manhattan was filled with its first group of guests for a pre-Christmas party. The cozy gathering was not for family members or friends but a group of Asian journalists, with quite a few from China, where the brand considers it to be its best bet for overseas growth in the coming years.
“You should really try our cucumber eye cubes – it’s amazing,” said Roth, passing an eye-mask-shaped box to Maddie Liu, a Chinese guest at the party.
Liu, 39, is among many professional, trendy Chinese women who seek unique, new skincare brands from aboard. “The cucumber products of PTR has a good selling point in the Chinese market because the concept of using vegetable fruit for skincare attracts a lot of Chinese women of different ages,” she said as she checked out the eye cubes.
A Beijing native who moved to New York three years ago, Liu said the best selling point for PTR – or any new Western brands tapping into the Chinese market – is its uniqueness.
“Especially for those women in first and second-tier Chinese cities, if a new foreign beauty brand wants to stand out from the well-established premium brands, it must offer something unique,” said Liu. Uniqueness sells
When Roth talks about his products, he brings in his own experience, which is how his passion for establishing a skincare brand started. Born to a family that had owned two spa resorts in Hungary, Roth, the first generation child of Hungarian parents who moved to the United States, launched his own brand under his name in 1993 to share his experience of treating his own skin problems, such as acne.
“I think I have similar skin type to Asian skin, so if I am happy with the products I make, then Chinese people with a similar skin type will like them, too,” said Roth.
PTR’s products now include cleansing, moisturizer and mask, a full range of skincare categories. In 2007, the brand entered Hong Kong before its launch in other Chinese cities in 2010. Within four years, it was being sold in more than 300 Sephora stores – a French brand and chain of cosmetics stores – in China, where PTR is ranked the No 1 exclusive brand.
PTR is sold in more than 25 Chinese cities, including first tier cities like Beijing and Shanghai. After a successful launch of its $45 Rose Stem Cell Bio-Repair Gel Mask in China last year, the company will bring its make-up product – Lashesto-Die for Platinum – into the Chinese market in March.
Roth said the beauty consumer trend in China surprisingly gives them a better idea of what kind of products they should consider launching within and beyond the US.
“The Rose Mask was one of those we created for China but since it was so popular we launched it worldwide,” said Roth.
Echoing Roth’s comments, his wife Noreen Donovan Roth, who is managing director of PTR, said Chinese beauty products consumers are also leading the trend globally.
“What we are seeing is that our global customers in the US and elsewhere look toward what’s going on in China,” she said. “Our products that become real superstars in China – then all of sudden it’s contagious – and they become huge all over the world,” she added.
Noreen, who visits China for business about three times a year, said Chinese customers are getting more sophisticated when it comes to choosing skincare products.
“They do their research well; Forty percent of the daily visitors to our website are Chinese from China,” she said.
About 60 percent of Chinese consumers had bought foreign brand cosmetic products in 2013, according to Statista.com, an online statistics portal.
Oscar Yuan, a New York-based partner of global marketing consultancy Millward Brown Vermeer, said the Chinese consumers’ savviness makes this crowded market more competitive.
“They will be looking for unique and different brands that deliver on specific needs, both functional and emotional,” said Yuan. “Beauty brands will have to start developing deeper and deeper understandings of the Chinese consumer, and perhaps start creating unique offerings for the market, rather than simply introducing brands they are selling elsewhere.”
Waldemar Jap, a partner at the Boston Consulting Group in Hong Kong, said as Chinese consumers are becoming more knowledgeable, they trade up to the high-end brands backed by scientific claims or tradedown to more mass brands where they go for more basic functionalities.
“Western brands have the advantage of R&D investment to support their claims and strong advertising/ marketing muscle. Nonetheless, Chinese consumers have become more sophisticated and often conduct their own research to assess how different brands/products fit with their skin,” said Jap. Land of opportunity
The cosmetics sector in China – the world’s No3 cosmetics market – has been growing at a fast pace with the country’s economic growth in recent years, creating opportunities for many foreign brands. The total retail sales of skincare products and make-up products in China reached 131.4 billion yuan ($21 billion) and 18.8 billion yuan ($3.1 billion), respectively in 2013, achieving year-on-year growth of 9.1 percent and 7.3 percent, respectively, according to British market intelligence firm Euromonitor.
Yuan said despite the competitiveness the market is big enough for different levels of foreign brands to establish and make their own China stories.
“In China, focusing on their strengths will allow Western brands to do well, rather than competing in the mass market, which is much more price-driven, and in which the halo of being a Western brand is less likely to impact sales,” said Yuan. “Particularly as Chinese brands become better marketers, Western brands will have to double down on their unique differences.”
Despite Western brands, such as Estee Lauder and L’Oréal, which entered in the Chinese market in the early days and have dominated the ranking chart, newer brands want to open their own channels in this growing market by selling their unique experiences to customers in the world’s No 2 economy.
Erno Laszlo, a skincare brand created by late Hungarian-American dermatologist Erno Laszlo, is one of them.
As the brand turns 88 this year, it has big expansion plans for China, where it launched its first three counters in Shanghai and Xi’an in 2014. The brand is planning for 10 stores by the end of this year and 100 counters in the next five years, said CEO Rochelle Weitzner.
The brand had to wait almost nine months to get regulatory approval for its launch in China, but Weitzner said “it’s all worth it”.
Erno Laszlo – with its best seller $45 Sea Mud Deep Cleansing Bar – markets itself as a “celebrity’s skincare” brand with customers such as late Hollywood stars Marilyn Monroe and Audrey Hepburn as well as the current A-listers like Brooke Shields and Nicole Kidman. The company’s members-only The Institute in New York’s Soho is a place where its celebrity customers visit for spa services.
In China, the brand has only a small group of customers, but Weitzner believes it is more important to have a solid reputation than a fast return of profit.
“We are not really targeting a particular consumer group; what we are targeting is those individuals who are very passionate about skincare and want to see results,” she said.
Weitzner said the way the company markets the brand is by “word of mouth”. With a similar strategy of celebrity endorsements in China, the company tries to work with local Chinese public relations firms to get influential personalities to use the products and spread the word.
The selling point of Erno Laszlo, according to its CEO, is to offer Chinese customers a unique “education” of its skincare ritual, which includes its special instructions for using the sea mud soap bar and its skincare concept of a clocking system that shows a person’s different skin conditions at different hours of the day.
Erno Laszlo sells its concept of being committed to skin caring as Weitzner puts it: “It doesn’t take a miracle to have perfect skin, it takes a commitment.”
For the Chinese market, she said, their products also respond to consumers’ increasing concern about pollution.
“Our products are for those who are passionate about having the best possible skin they can and understand that commitment is involved,” said Weitzner.
Avery Booker, a partner at China Luxury Advisors, a Los Angeles, New York, and Paris-based firm that helps luxury brands and retailers attract affluent Chinese consumers in the US and Europe, said despite clear opportunities, China’s beauty market is “trust-based” and difficult to crack.
“Brands new to the market will have to work hard to court the right consumer demographic, work with the right market influencers, and figure out how to make a compelling value proposition,” said Booker.
The Chinese beauty market increased 13 percent in 2013 to $26.4 billion, down from 17 percent growth from the previous year when global multinationals Procter & Gamble, L’Oreal and Shiseido dominated the market, according to digital research firm L2.
Booker said regardless of the overall growth in China’s cosmetics market, smaller brands have a great opportunity this year to engage outbound Chinese tourists, students, and partial emigrants, who make a significant amount of beauty purchases in New York, Los Angeles, Paris, and elsewhere. Positive outlook
Millward Brown’s Yuan said that despite the slow growth of the cosmetic market in China, the outlook for the beauty market is positive because of consumers’ growing enthusiasm to explore new and different products.
“The consumer exposure and interest in brands continues, particularly in sectors like personal care and cosmetics, as the population continues to urbanize,” said Yuan. “The growth rate might slow from previous years, but will still be ahead of stagnant or declining rates for well developed markets like Western Europe or North America.”
Liu, the Chinese media specialist, said Chinese consumers are keen on getting reliable products and brands – be it domestic or Western.
“I find that credibility, quality and reputation of a brand is important among Chinese customers who now have many choices because of the size of the market,” she said. Yuan, the branding expert, agrees. “China will continue to be an opportunity area for Western brands, as they still hold strong prestige and quality attributes for the Chinese consumer, especially in the face of product safety concerns for domestic Chinese brands,” Yuan said.
Domestic brand and Asian brands – Japanese and Korean – are becoming more competitive in China’s beauty market, making Western brands difficult to stand out.
However, the increasing e-commerce trend in China has opened a new channel for foreign brands to reach out to more customers in China. An L2 report finds that storebased retail of beauty products has declined in China while online retail sales have soared since 2007.
The Internet is one of the reasons why Chinese consumers are savvier about the numerous brands and specific ingredients that are in the market, said Robb Akridge, global general manager of Clarisonic, a L’Oreal-owned company that produces electronic cleansing brushes.
“E-commerce allows brands to deliver products to the consumer rapidly without having to depend on brick and mortar retail stores for their distribution. It also gives companies like Clarisonic the opportunity to update consumers instantly with information about our products,” said Akridge.
Chinese consumers have embraced the Clarisonic’s technology so well that it has given the company consistent double digit growth since its launch in 2013, he said.
Internet users hit 618 million in China, larger the the whole US population.
Most of foreign brands now are participating in Chinese social media channels including Sina Weibo – a Twitter-like a micro-blogging site – and WeChat – a mobile communication and social networking app that has 438 million monthly active users, catching up to the 500 million-userbased WhatsApp. E-commerce
Foreign brands are using Chinese e-commerce platforms, including Alibaba, Jumei and JD China’s e-commerce giant Alibaba’s online retail Tmall also helps open retail channels for foreign brands, especially those new brands including Peter Thomas Roth and Erno Laszlo.
JuE Wong, CEO of StriVectin, a brand known to be the pioneer in clinical anti-aging skincare, said the power of these social media platforms will help increase sales further as “buy” components are added and evolved.
“Shopability will make it even more convenient for consumers via guided reviews and recommendations to support buying decisions, and ease and security of purchase,” said Wong. “Together with the power of data collection and analytics, which allow brands to tailor and customize communications with the consumer, the experience is essentially like having a personal shopper in your pocket for every aspect of their consumption needs.”
iReserach, a market research firm focusing on China’s internet industry, said the reason for the stable growth in China’s cosmetics market – which is to hit 113.9 billion yuan in 2017 with an annual growth of over 20 percent – is its well-developed online shopping market.
Frank Lavin, a former US undersecretary of Commerce for International Trade and founder of Export Now, which has a partnership with Tmall, said e-commerce is a powerful tool for foreign brands because it allows them to test products quickly and inexpensively.
“Similarly, digital communications allows brands to test themes and messages quickly and inexpensively. E-commerce allows the newer and smaller brands to compete on the same footing as the larger and well-established brands,” said Lavin.
But everything has two sides. Online retail brings certain concerns too.
“The main challenge and caution for the consumer using e-commerce is making sure the products they buy come from an authorized dealer to ensure the product is authentic and comes directly from the brand,” said Clairesonic’s Akridge. Contact the writer at yuweizhang@ chinadailyusa.com Lu Huiquan in New York contributed to this story.