Ready for Growth, the Chinese Beauty Market Requires Overseas Brands to Understand Nuance

“CP” initiator and digital-driven platform S’YOUNG INTERNATIONAL discusses the state of the and what brands must know when considering the opportunity.

AS BEAUTY BRANDS across the globe consider the potential for new areas of growth, S’Young International, the beauty brand management company and digital-driven open platform for global brands, remains steadfast in its belief that there is ample opportunity to enter the Chinese market.

Previously reported by WWD Beauty Inc, China has already become key to growth for global beauty companies, driven by rising household incomes, new entrants and the increasing development of local brands. Reports have shown an increasing customer base for beauty and skin care products in China as a result of not only rising household incomes but also the increasing consumption power of lowertier cities and the rise of independent Chinese brands.

Over the last decade, over 5,000 foreign cosmetic brands have entered the Chinese market where they have seen continuous growth and contributed to the Chinese beauty industry value chain becoming more sophisticated.

FOUR KEY DIFFERENCES TO CONSIDER FOR OVERSEAS BRANDS

According to Marshall Chen, co-founder and chief executive officer of S’Young International, China’s beauty market is booming and can be mainly divided into three parts including local Chinese brands, overseas established groups and niche overseas brands.

“For those overseas established names like L’Oréal and Estée Lauder, they already have clear positionings for the Chinese market and have achieved notable success in past years,” said Marshall. “We also noticed the niche overseas brand part is growing, although it is currently in third place.”

Even more nuanced though is the Chinese beauty market consumer, how they shop and what their needs are. And with this in mind, Marshall said, brands need to be careful to consider four key differences in the Chinese market before they can do serious business in China. These differences include not only the Chinese consumer but also differences in channels, marketing and regulations.

CONSUMERS DIFFER AMONG CITIES AND GENERATIONS

Consumers are quite different from city to city and generations. China has a population of over 1.4 billion and people born in different generations present characteristic consumption features.

“In China, most of Gen Y have a steady income and they tend to fulfill their basic demands with big groups like

Estée Lauder or L’Oréal,” said Marshall. “But Gen Z is typically more open to a variety of options including new and niche brands to seek personalization. This is a fundamental difference between generations of consumers.”

E- COMMERCE LEADS THE WAY

Still, across all generations, e-commerce remains the most popular way to shop for Chinese consumers representing the leading channel in China with a high rate of engagement.

According to eMarketer, China’s online retail transactions reached more than 710 million digital buyers with transactions reaching $2.29 trillion in 2020 and forecasts to reach $3.56 trillion by 2024. A report released during the 2023 China International Fair for Trade in Services (CIFTIS) also pointed out that China ranked first in global

B2C e-commerce turnover in 2022 (37.2 percent), followed by the

U.S. (24.4 percent).

For niche overseas brands, over 80 percent of transactions are completed through e-commerce channels. Comparatively, Marshall said, the

Chinese market or Chinese consumers can quickly adapt to various models for e-commerce including B2C platforms and C2C platforms that could push a higher transaction rate.

GEN Z PURSUES DIVERSITY ON SOCIAL MEDIA

At the same time, social media is fulfilling Gen Z’s demand for diversity. According to Marshall, Chinese consumers favor social media shopping and transactions is happening across social media platforms, such as Douyin and Little Red Book. Driven by personalized consumption,

Gen Z consumers in China tend to explore brands through social media, to look for diverse content to help understand brands and products. Social media’s embrace of extensive content caters to Gen Z’s request, creating a synergy for them as consumers. With this in mind,

S’ Young encourages brands to strategically and effectively amplify efforts in brand communication on those key platforms.

CHINA’S REGULATIONS

A key difference that must be addressed when entering the Chinese market is a strict list of regulations on ingredients with some being prohibited and limited or requiring certifications and testing. And these regulations change. The China National Medical Products Administration (NMPA) used to request animal testing for already registered products but at present, this is no longer needed. Instead, brands are requested to provide more certifications for raw materials. Marshall noted that this adjustment is favorable for overseas brands, making it easier for them to enter the Chinese market.

RESPECT FOR BRAND STORIES

With many legacy brands already owning established relationships with the

Chinese beauty consumer, Marshall said, brands entering the market for the first time will be challenged when breaking the ice with target audiences. Considering these comparisons, S’Young helps brands find an appropriate positioning as the first step, leveraging brands’ original story as the best asset to distinguish brands in the competitive market.

THE CP DIFFERENCE

Positioned as a “CP” (China Partner) for overseas beauty brands, S’Young International provides a complete solution for brands. What this means, explained Marshall, is that “S’Young International is a highly digitized brand management company that aims to be a reliable strategic China partner for cooperating brands, going beyond the role of sale-driven only company.”

Under the “CP” Model, S’Young formulated a particular pattern called “139N” for branding establishment, which means “1 DNA, 3 Asset keywords, 9 Factual dimensions and N content forms.”

During the initial stages of partnerships, S’Young International will clarify very clearly the DNA and the three key assets of the brand and all branding activities are centered around the “1 DNA” and “3 Asset keywords” to enhance brand awareness and resonate brands’ stories with consumers, influencer/KOL and channel partners.

The “9 Factual dimensions” include founders’ background, brands’ visuals, history, core raw materials, technology and other angles available to diversify the “N content” and touch points with consumers.

Marshall emphasized that one belief S’Young International sticks to is that branding building and respect for brands’ founding concept are always the most important things for business.

MARKETING IN CHINA MEANS SALES GLOBALLY

S’Young also holds a concept called “Marketing in China, Sales Globally,” which means building up awareness in China to boost global businesses. Specifically speaking, successful marketing and increasing popularity in the Chinese market help brands, especially niche brands with low awareness in their birthplace, attract global attention, drive organic exposure from media and influencers worldwide and thereby elevate brands’ global brand visibility, industry recognition and transactions.

Looking to the future, S’Young has confidence that the Chinese beauty market will become the marketing center as well as an innovation hub for many overseas beauty brands. Due to the intense market competition in China, Marshall explained that overseas brands in the Chinese market are not only competing but also learning and getting inspired from each other. This landscape requires brands’ continuous efforts to expand the consumer base, understanding new consumers and striving for larger market shares with innovative technology and products.