The Rise of China’s Domestic Cosmetics

By Jay Ian Birbeck

The rise of Chinese beauty(C-beauty) brands has surprised foreign companies, which have long dominated China’s cosmetic market. In only a few short years, Estée Lauder, P&G, Beiersdorf, and other large multinationals have lost significant market share to their Chinese competitors.Superior digital marketing, social commerce strategies, and national pride, have enabled small Chinese beauty companies to become leading players in the industry almost overnight.

In response to the success, investment funds are offering vast amounts of cash to Chinese cosmetic brands looking to expand overseas. Sephora, one of the world’s largest beauty retailers, recently announced China Accelerate, a program to grow premium Chinese beauty brands abroad. Over the next three years, it aims to support five local premium beauty brands to achieve 100 million yuan($14.8 million) in annual revenue and help C-beauty brands gain traction in international markets. The announcement follows similar moves by Japan’s Shiseido, which launched an innovation fund to invest in emerging Chinese brands in August 2021, and France’s L’Oréal,which in May debuted Bold, a venture capital unit targeting C-beauty companies.

However, this does not necessarily mean entering the international beauty market is easy. Global expansion poses several challenges that C-beauty brands should consider if they want to compete on an international level.

First, C-beauty brands must develop a distinct niche that distinguishes them from competitors. However, C-beauty brands still lack a distinctive core idea.

One concept could be their association with traditional Chinese wellness techniques and beauty practices. Global consumers have previously shown interest in traditional Chinese culture. In 2018, for example, the jade roller,a traditional Chinese tool for facial massage,went viral in the U.S., and sales rapidly increased. Cultural practices from ancient China,traditional Chinese medicine ingredients, and other aspects of China’s heritage could help C-beauty brands find their distinctive lure.

Lipsticks developed by the Palace Museum come in packaging inspired by imperial times

However, brands need to strike a balance between being unique and catering to the preferences of international consumers. While Chinese brands should undoubtedly keep their Chinese characteristics, they need to adapt their marketing strategy to appeal to a more global audience.

There are many ways to do this, for example by recruiting localized teams and offering products relevant to different cultures. C-beauty brands should also consider investing in influencer marketing. By partnering with influential makeup, skincare, lifestyle bloggers and vloggers, they can reach a broader audience and build a more substantial brand presence that resonates with consumers worldwide.

Above all, C-beauty brands should play to their strengths. China’s unmatched supply chain capacity is one significant advantage, but there are many others, such as e-commerce live-streaming, a field in which Chinese brands are pioneers.

By combining entertainment and instant purchases, e-commerce live-streaming has revolutionized China’s retail industry and become a key sales channel over the past five years. It’s one of the primary marketing tools C-beauty brands have used to shake up the domestic market. This has positioned them well for the coming years as e-commerce takes off in Western markets. Morgan Stanley estimates that live-stream-initiated sales will account for 10 to 20 percent of global e-commerce by 2026. With their extensive experience in this area, Chinese brands should be able to utilize this trend effectively.

To compete on the international stage,C-beauty brands must get creative and focus on building solid relationships with consumers. They will have to strike a balance between being distinctly Chinese and globally alluring.While worldwide success is far from a guarantee, investments from top beauty companies and retailers are potent indicators that C-beauty is going global. BR