New Development Trend of China’s Cosmetics

Wang Zhuo

Shanghai Siru Business Management Workshop,China

Today,it is time for the sector of cosmetics in the world to have beauty re-imagined again for the third time.Apart from the beauty technology and digital technology,the most powerful force driving this great imagination is the Chinese market and Chinese consumers.The author of this article explores four issues as follows:first,what are the main characteristics of China’s cosmetics market? Second,what major shifts should China’s cosmetics sector need to experience? Third,what cosmetics do Chinese consumers want on earth? Fourth,how do Chinese cosmetics companies meet the needs of consumers?

1 What are the main characteristics of China’s cosmetics market?

In my opinion,there are following features concerning China’s cosmetics market:first,the pattern is broad.The varied segmented markets exist targeting at consumers at different ages.They include“five generations” as baby-boomers,X-generation,Y-generation,Z-generation and Alpha generation;the scale of each category should not be underestimated with a considerable growth rate.Personal washing and care,skin care products,makeup and perfume are all involved like “a hundred flowers blooming together”;the origins of cosmetics range from developed countries in Europe and the United States,Japan and South Korea to other emerging countries like Australia and New Zealand,also Israel and Thailand.It can be said that “goods from all countries are shipped to China”.

Next,it is “large” in terms of scale.There exist different estimations regarding the scale of China’s cosmetics market.Looking at a variety of data,the author holds that it reaches about 500 billion yuan and enjoys the second largest market in the world,only next to America.But it will surpass America soon(someone think China may exceed America next year)and come up to 1,000 billion yuan(excluding the market of aesthetic medicine).The growth mainly originates from the rise of consumption per person(it only stands one seventh of that in developed countries in Europe or America)rather than the increase of population.

Additionally,it is “rapid” in terms of speed.It’s like “traveling eighty thousand miles a day while staring at the sky and seeing a thousand rivers”.The average growth of China’s cosmetics market has been higher than the growth of GDP and retail sales.There remains a sharp contrast among various categories.The growth rate of sensitive skin care,cosmetics,perfume and men’s sub-categories far exceeds the average growth rate of the industry.Moreover,it is “flexible” in terms of the state.Thanks to the continuous emergence of new groups,new demands(mainly upgrading),new categories,new brands,new aesthetics,new technologies,new channels,new media,new connections and new models,China’s market is full of energy and vigor unprecedented before.It reminds us of the poem by Huang Tingjian:“the Spring water and rain in your eyes,I could see nothing but the waves in northern and southern China”.Finally,it is “refined” in terms of the direction.China’s cosmetics consumption at all levels(high,middle and low)continues to upgrade,and beautiful,fun and meaningful products keep emerging and improving.The contradiction between consumers’ growing needs for a better life and the inadequate and unbalanced development of cosmetics brands still exists,which has become the driving force behind the supply-side reform.

China’s cosmetics market is featured by “broad,large,rapid,flexible and refined” development.The article describes the surging development period of China’s local cosmetics companies and the efforts of them to seek changing way of progress with continuous upgrading.And the following “revolution” of China’s cosmetics sector is depicted herein,along with the journey to the high-end and international market.

2 What major shifts should China’s cosmetics sector need to experience?

A couple of years ago,the author,staring from the perspective of marketing,generalized the paradigm shift of China’s cosmetics sector from three dimensions.First,the marketing dimension.It includes the following aspects:the paradigm shift.The author described it as the shift from“silent lamb(to be slaughtered)” into “sassy girl”.Likewise,the center of the business world shifted from firms in the age of scarcity(we might as well call it “geocentric theory”)to consumers in the age of plenty(“heliocentric theory”).Furthermore,they change from focusing only on products or consumer characteristics to focusing on consumer to-do tasks(JTBD,Job-to-be-done),and from focusing only on the functions of products to functional,emotional and social dimensions.The paradigm shift of product innovation has turned from being proud of copycat to being original,from making urgent decision to using big data,from relying on process shift to displaying imagination,from low-technology investment to hightech input,from aesthetics blindness to aesthetics priority,from lacking personality and focusing on reality to highlighting stories and personality and from only taking advantage of the local resources(closed)to utilizing global resources(open);the paradigm transformation of sales channels has shifted from the previous offline and online separation(OVO O2O)to the integration of online and offline,from the game model with the goal of maximizing self-interests to the cooperation model with the goal of maximizing consumer satisfaction.Besides,it has turned from the trade business model to the relation model focusing on consumers;the reform of marketing method has changed from traditional advertising bombardment model to accurate communication model(MCN/KOL/KOC/KOS)in a social and fragmented media era.Moreover,it has shifted from simple content and one-way communicative model to multi-way communication model with rich content.Additionally,it has transferred from centering on those putting together content(integration)to centering on the original content creators.And it has focused from only on product research and development without emphasis on content R&D to putting parallel emphasis on product R&D and content R&D.It also has transitioned from separating communication from sales to the integration of communication sales(content e-commerce represented by live broadcasting).

Second,in speaking of the paradigm change of organizational dimension,Chinese cosmetics enterprises in turbulent times must change from management priority to leadership priority,seeking openness instead of closed development.Besides,it has shifted from emphasizing norms to inspiring vitality,from opposing individual heroism to advocating individual heroism,from employment to partnership,from disciplined army to flexible crew and from empire establishment to complying with the quicksand.

In addition,the paradigm reform of talents shifts from prioritizing special talents to advocating liberal,from highlighting management capacity to management ability,from planning capability to the spirit of experiment,from execution capability to improving imagination,from macro-control to detailed participation and from professional manager mentality to entrepreneurship.

The above-mentioned three dimensions of marketing organization and talent management paradigm transformation can be concluded as the transformation from solid thinking to liquid thinking.Due to the space constraints,the writer of this paper cannot expand the discussion on these changes.Here,the author intends to discuss the paradigm reform regarding spirits of China’s cosmetics industry.It is a “spiritual watershed”,quoted from Deng Min.The details can be divided into the following five aspects:

At first,it turns from blind self-confidence to clear consciousness.With the rise of China’s Internet industry(symbolized by BAT),the communications equipment industry and the rapid increase of China’s economic scale(China ranked 2nd in 2010),Chinese companies have gained a first-mover advantage in e-commerce,mobile payments and sharing economy.Especially since China successfully hosted the 2008 Olympic Games and after the world economic downturn,our business,political and academic communities have become confident and even conceited.The typical statement is “my country is so powerful!” Chinese companies(including cosmetics companies)did not pay as much attention to the gap between Chinese sectors and enterprises and the advanced international level as before.It was not until the ZTE chip incident that they suddenly woke up and realized that the difference in key core technologies(including soft technologies such as brand building)was still very large.

In recent years,the growth rate of foreign cosmetics brands is far higher than that of domestic cosmetics brands,especially in high-end market segments,be it in terms of the e-commerce sales and the yearly all-channel sales during the shopping season on double 11 and 618.Comparing with the period between 2007 and 2013,foreign brands are now re-showing a huge competitive advantage in China,presenting a new round of crushing situation for local brands.Local cosmetics brands lost again their narrow position in the high-end market and their first-mover advantage in e-commerce channels,while China’s cosmetics trade deficit(import is outperforming export)increased rapidly,which is rare in other categories and industries.Under the guidance of China’s policy of deepening opening-up and vigorously promoting import trade,local cosmetics brands,especially middle and high-end brands,will not enjoy a good life for a long time in the future,and they need to experience tough challenges featuring“being brought to life after death”.

Twenty-four years ago,Mr.Fei Xiaotong,a famous socialist,put forth the idea of “cultural self-consciousness”,believing that it referred to an awareness about the culture people lived in and the full understanding about the development progress and future.It also could be summarized as a self-awakening,self-reflection and self-creation.According to Mr.Fei,“cultural consciousness is a difficult process which could only find its own place based on the understanding of its own culture and other kinds of cultures.After that,by way of self-adaptation,it can learn from and complement each other with other cultures to jointly establish a common basic order and a set of coexistence principles that all cultures can coexist peacefully and develop hand in hand.” At his 80th birthday,Mr.Fei refined it as “every form of beauty has its uniqueness;precious is to appreciate other forms of beauty with openness;if beauty represents itself with diversity and integrity;the world will be blessed with harmony and unity”,16 Chinese characters in total.It can be seen as the summary of the “cultural consciousness”.We should enter the “age of awakening” and champion democracy and science,as well as aesthetics.We also need to strengthen introspection,look for the gap,catch up,and aspire to exceed others.As mentioned in Mencius.Gongsun Choushang,“benevolence of the people like the competition of the arrow:the archery people first correct their own posture and then release the arrow;if you miss,don't blame those who beat you,just ask yourself”.

Next,Chinese flags have replaced the western brands.In the past,Chinese cosmetics enterprises used to follow the lead of western cosmetics giants and international big brands,from Europe to the United States,Japan and South Korea with blind worship.From surface to the inner side,they are sending out foreign air and foreign flavor.Ⅰn recent years,there has been some improvement,the names and faces are no longer directly in the foreign style,but the heart of the foreign worship mentality is still deep-seated.With the emergence of China’s economy and the gradual implementation of the four self-confidence,the trend of national fashion and domestic goods also began to enter into the cosmetics field.In addition,the strong performance of The Chinese cosmetics market during the epidemic period,the global cosmetics entered the Chinese time.After entering China time,Chinese cosmetics enterprises dare to wave the Chinese flag and stick to the Chinese path to build Chinese style.It is a pleasant shift and a result of unremitting efforts by Chinese cosmetics practitioners for generations.On the basis of this spiritual watershed,Chinese cosmetics enterprises should seriously think and explore how to hold the Chinese flag,follow the Chinese path and build a positive Chinese style.When I was a Herborist brand,I firmly believed that Chinese culture and its great revival was a powerful driving force and inexhaustible source for the development of cosmetics brands.In this beautiful China,medicinal literature and philosophical aesthetics can provide strong support for a large number of Chinese brands including Herborist in terms of concept,technology and image.

The writer wants to remind readers that domestic goods should not be mistaken and the priority is the goods followed by the country.What consumers really want is the great goods,tools and methods which help getting things tasks better and convenient(these tasks have multiple types including functional,emotional and social dimensions).Enterprises must not count on the domestic boom to become the “wind gap” which can blow pigs in to the air.

Chinese cosmetics enterprises will increasingly carry forward Chinese thought and Chinese philosophy,enhance cultural consciousness and cultural confidence.But they should avoid taking the country as a wind gap which can automatically blow itself up.Rather,those companies should constantly strengthen their own cultivation and believe in the idea of “sharp sword from the sharpening out,plum blossom incense from the cold weather” and proactively chose excellence and being great by choice.

Besides,Chinese cosmetics sector has developed from a small scale.Over the past forty years,China’s cosmetics market has been booming,and companies and owners in all steps of the industrial chain “have earned beautiful money” even “have beautifully earned beautiful money”.But many people are rich and have no big ideals.They neither want to build a brand nor innovate independently.Even if they want to build a brand,they can only meet the needs of consumers by launching the functional brands.They are unable to satisfy their emotional and selfexpression needs.In other words,they do not dare to build aspirational brands and high-end brands.They also dare not to go abroad and earn beautiful money in a foreign country and show Chinese beauty.I felt lonely working in high-end channels like department stores in China and developed European markets typified by France.Now,as we enter into the Chinese time,we believe there will be a large number of Chinese cosmetics businesses(including mature companies and emerging brands)which actively sail in the beautiful ocean around the world thanks to the encouragement and promotion by the Belt and Road Initiative,dual circulation pattern and RCEP.

This is the reflection of both the ambition and talent of Chinese cosmetics entrepreneurs and businesses.In February,2017,I used a poetic title:“promote Chinese brands to rise in the global beautiful sky”.This indicates the genuine feeling and real dream of the author who hopes the dream can be realized as early as possible.Hope rests on the new generation of Chinese cosmetics industry entrepreneurs and I believe they will live up to the trust.

Furthermore,they have shifted from being bosses to holding entrepreneurship.As is known to us all,there are very few state-owned enterprises in China’s cosmetics industry.The main body of this market is multinational companies and private enterprises.Multinational companies basically have relatively standardized processes and inheritance plans,while private enterprises basically still hinge on the bosses to do everything on their own.In a fastchanging and volatile market environment,private entrepreneurs directly command the market and fight in the front line,but meanwhile they have brought a lot of disadvantages.The boss style which does not adapt to the future development and become bigger and stronger should be transformed and upgraded to follow the entrepreneurial spirit of self-respect instead of arrogance,self-consciousness rather than being opinionated,self-confidence but not selfconceit and self-improvement but not self-hegemony and self-discipline other than self-fixation.Besides,they should embrace the Chinese culture and spirit featuring “being ambitious and committed” and the ambidexterity combining entrepreneurship and the perception of fashion.

Finally,they stop pursuing copycat products but begin to seek original goods.The most obvious disadvantage and the weak point of China’s cosmetics sector is getting used to stimulate and copy others’creations without feeling shameful but honored.It is also the factors preventing Chinese brands from moving forward and going global.Nowadays,more and more consumers have enjoyed higher education level,and broadened their vision.Their scientific accomplishment of knowledge level and aesthetic ability progress are extraordinary.So,they can see the differences between the original and copycat and are willing to pay a premium for the original.They despise copycat brands,copycat products and copycat behaviors.Entering into the Chinese time,Chinese cosmetics enterprises must realize that there is still a big gap between our cosmetics in key core technology(hard power)and key core art(soft power).Besides,we must attach great importance to originality,basic research and the creation and management of intangible assets.Without originality,we can never realize the dream of highend development,globalization and global highend products,but can only be complacent in a corner from the mainstream of cosmetics in the world.Only by focusing on and strengthening the originality can China rise in the global stage.It is expected that after China’s cosmetics industry enters China,original thinking and original behavior will become a trend,original achievements will emerge endlessly to benefit countless consumers,and original influence will spread throughout the industry across China and the whole world.

3 What kind of cosmetics do Chinese consumers really want?

The Chinese economy has been able to recover quickly from the COVID-19 crisis,which swept up the world,amid reduced global consumption power.Some of the industry trends that were already standing out conspicuously before COVID-19 have been accelerated by the pandemic.As China continues to consolidate its position as Asia’s largest economy,its influence will spread to more countries in Asia.The author summarized eight trends in China’s market:local pride—they feel proud of being Chinese;girl power—the interpretation of a new generation of feminism;standing out—Chinese consumers reflect their true characters;skinclusivity—they are more inclusive in terms of the dark skin color;virtual immersion—they began to get used to immerse themselves in the virtual stories far from reality;self-care—comfort and outlook enjoy the parallel significance;self-optimization—it is a common aspiration to pursue a better self;holistic life—seeking a life style balancing themselves and the environment in a sustainable manner.

These trends not only apply to makeup,but also to other beauty categories involving skin care,hair care and fragrance.Viewed from these trends,it is not easy to predict what kinds of cosmetics Chinese consumers really want.Normally,we should enter into specific categories,study the needs of Chinese consumers in detail,and seek market opportunities from the needs of those consumers who feel important but have not been met.This is the essential homework for product managers from each company,each brand and even each product line.However,the author plans to find the common needs shared by all cosmetics categories.A couple of years ago,the author extracted five “F”s:face;functionality;fun;fulfillment-emotional;fulfillment-social.

4 How do Chinese cosmetics businesses meet the demands of consumers?

In any era and at any time,businesses need to improve their competitiveness from three aspects including operational excellence,product leadership and customer intimacy.After entering China time,Chinese cosmetics enterprises still need to continue to make efforts in the above three dimensions to meet consumers’ growing needs for a better life.

First,we need to focus on operational excellence.From intelligent business to granular economy,Chinese cosmetics enterprises must redefine their industry via the refinement of production factors and the alignment of operation processes,so as to create new meanings.After entering into Chinese time,Chinese cosmetics enterprises must answer two key questions.First,how about the level of the digitization? Second,how high is the level of digital collaboration in operational processes? The era of scale and platform victory is closing to an end.The next era will require “refined” technology at the idea and process level,“precision” at the data dimension,and the “lean” results and benefits.

Second,we need to build product leadership.Chinese cosmetics business operators used to believe in “good wine needs no bush”.But now they are convinced of “even the scent of wine is afraid of the deep alley” and even have a blind faith in “as long as the alley is not deep(shallow enough),it does not matter if the wine is not fragrant”.In the age of e-commerce and social media,they have transformed from short videos to live delivery and from membership system to private traffic.The change of channel and media makes them be close to alleys almost without any distance.Business operators should take advantage of the opportunities,presenting good wine to consumers.However,if you still concern about the issue of the “depth of alley”instead of “the fragrance of wine”,the sales of more lipsticks by inviting more celebrities like Ji Jiaqi rather than by achieving scientific progress,artistic aesthetics,craftsmanship,your businesses and brands will finally be despised,waived and abandoned.And they will also be surpassed and beaten by competitors prioritizing “the wine fragrance”,product quality and consumer experience.

In addition,we need to pay attention to customer intimacy.We developed from the indirect model of B2B and B2C to DTC model,from public domain to private domain and full domain,from the general content to individualized content,from linear journey(chained route)to non-linear journey(chained route),from CRM to sCRM and VRM(Vendor Relationship Management),from non-scene and non-experience management to the management of fostering scenes and experience,from one-off sales to LTV management.There is still a lot of room for improvement in all aspects of Chinese cosmetics enterprises,among which the biggest turning point and betterment opportunity lies in cognition and consciousness.Will you approach consumers with a solid and hunter-gatherer mindset or a liquid and gardening mindset? The former is ordinary flow thinking,while the latter is the special advanced flow(mind flow volume)thinking.The former is the idea and practice of making oneself feel good,while the latter is the idea and practice of letting consumers feel good.They are totally different.When entering into Chinese time,we strongly suggest that you change to the right mentality,and establish and develop a close and win-win relationship with excellent users with elaborate service and wonderful experience.

Apart from the above three directions,Chinese cosmetics enterprises should highlight the market insight and organizational resilience.We’ve talked earlier that today’s consumers are different for they are the sun and the businesses are the earth.The earth must circle around the sun and keep moving.In the past,Chinese cosmetics companies only used research and small data to gain insight into the market.In today’s digital era,they must combine big data with small data to understand market opportunities.Business leaders should take the lead in penetrating the market,not only by walking the market with their feet,but also by analyzing data to gain insights.What is the demands of and the tasks facing consumers?What are the challenges and constraints? We must fully understand what consumers expect to achieve in difficult situations.Ⅰn this day and age,entrepreneurs and managers need to be more empathetic than ever before to understand consumers’ life,food,accommodation,transportation and happiness and sorrows in order to gain insight.

Speed is especially important for the cosmetics market where consumers seek innovation and change.According to Kotler,“market changes faster than marketing”.We’d better understand in an opposite way that the marketing reform of our businesses are always slower than the market changes.It reminds us that we are constantly focusing on the market changes and taking measures to deal with the market changes.Based on Emerson,an American thinker and litterateur,“the only way to skate on thin ice without falling into holes is to run faster than the ice collapses”.After entering Chinese time,Chinese cosmetics enterprises must show their agile response force,which is inseparable from the transformation and improvement of thinking,action,leadership and organizational power.

In the new era,local cosmetics businesses must improve their ability in gaining market insight and organizational resilience so as to seize the opportunities.The author holds that the digitization degree of the capability of insight and the organizational resilience will be greatly raised.Data+ digitization is our new weapon to win in the era.

Operational excellence,product leadership,customer intimacy,market insight capability and flexibility and agility together form the “five competitive abilities” in the digital economy era.These are also the “five secrets” for Chinese cosmetics businesses to win Chinese time.

Furthermore,the author suggests Chinese cosmetics businesses strive to become a learning organization and study the learning and aesthetics capability from the first-class arts organizations and learn to upgrade and innovate from the first-class software companies,learn hacker marketing from the first-class Internet companies,learn experience marketing from the first-class performance institutions,learn content operation from the firstclass media and publishers,learn the guidance by learning from the first-class consultancy companies and learn talent nurturing from the firstclass education organizations…Chinese cosmetics enterprises can not only learn from other cosmetics enterprises,but draw on the strengths of all walks of life,so as to do a good job in cosmetics brands and remain invincible for a long time.