As much of the world continues to grapple with the effects of the COVID-19 pandemic, China has managed to quickly bounce back to a growth trajectory.
By the end of 2020, spending on fast-moving consumer goods in the region recovered spectacularly, with the second half of the year fully offsetting the negative impacts that COVID-19 had in the early months of 2020. China often counterbalanced record low annual results for multinational cosmetics groups. L’Oréal, for example, reported a sales rise in Asia of +1.5% for 2020, compared with declines of 9.2% and 8.8% in Western Europe and North America, respectively. Estimated at $55B in 2020 at the retail level and on a steady growth path, the Chinese beauty market continues to be highly attractive.
In the early post–COVID era, Chinese consumers continued to look for unique beauty products, particularly trend-seeking members of Generation Z and millennials, accounting for 330 million and 140 million consumers, respectively. Gen Z consumers have emerged as a source of market growth and drivers for innovative concepts; at the same time, millennials form the core of Tmall’s lifestyle and luxury beauty consumers. These young consumers are constantly on the hunt for new, exciting products and brands that can help them express their individuality―and it’s indie brands that are often the first to respond to these growing social and cultural movements.
Defined as independently owned and operated brands, indies often adopt unconventional approaches by offering innovative new products, clean formulations, or other disruptive ways to resonate with their consumers. They master success factors such as clear positioning, building consumer trust, robust financing/ownership, and carefully considered go-to-market strategies. Many excel in their home market by very much understanding their target, often referred to as “communities.”
But despite their adventurous approaches, many Western indie beauty brands find the Chinese market intimidating, with challenges and nuances that are vastly different from their home markets. Also, many remain hesitant given the animal testing regulations (China remains one of the few countries in the world to require tests on animals for beauty products). The good news: Recent positive evolutions of animal testing could lift some of these concerns and no longer be a barrier in tapping into the Chinese market’s potential. Cross-border e-commerce could do the same. For example, Alibaba’s Tmall Global, positioned as the most significant cross-border B2C e-commerce platform in China, claims to connect more than 25,000 brands from nearly 100 countries with more than 700 million consumers. Demand for imported goods through cross-border e-commerce could reach $184 million in 2021, with beauty, skin care, hair, body care, and personal care products being at the forefront. Indie (or ex-indie) brands such as Fenty Beauty, Kora Organics, Huda Beauty, Drunk Elephant, Farmacy, OUAI, and Smoothskin benefited from Chinese e-commerce platforms to develop their presence.
As for local Chinese indies, Kline identified that cosmetics marketers, retailers, and shoppers alike are interested these privately owned gems. Recording staggering growth, these indies typically outpace the total market by offering unique product and ingredient stories, combined with compelling digital marketing that resonates with today’s beauty consumers. Florasis, launched on Tmall as its sole sales channel, is positioned as a fashion-oriented brand. It incorporates traditional Chinese ingredients to gain attention from members of Generation Z, as the youths are increasing interested in traditional Chinese culture. Geoskincare, meanwhile, is positioned to provide customers with natural products formulated with ingredients sourced from New Zealand’s geothermal areas. And Red Earth incorporates plant-based skin care concepts into makeup products. Each of these brands recorded a triple-digit growth (2020 vs. 2019).
While fierce competition among the leading top players continues to characterize the nature of the industry, Kline’s recently published China volume of the Beauty Indies: Analysis of Booming Independent Brands report has identified brands such as Colorkey, Dr Plant, Florasis, Judydoll, Little Dream Garden, Mask Family·1908, MayCreate, MEIKING, Mo Amour, Red Earth, and Unifon as potential game changers in the Chinese beauty market. The report highlights sales and grow drivers, product offerings, new launches, promotional activity, pricing and distribution strategy, and an outlook for each of these brands. The United States volume is also underway, scheduled for publication in the third quarter of 2021.