Estée Lauder looking to China and e-commerce
The global beauty giant is due to announce its third quarter results this week and is expected to record a net sales increase of 2 - 3% year-on-year, according to guidance from the company.
It hopes a focus on China and e-commerce will see these figures continue to rise in the coming months, looking to enjoy online sales from brand and retailer sites to surpass the $1 billion mark for the first time this year.
China is enjoying significant growth in its e-commerce market, thanks to a rising upper middle class with increased disposable income.
“According to Boston Consulting,” explains market research firm Trefis in a recent Forbes report, “China is entering a new era and consumption growth will be driven by the rise of upper middle class. In fact, the number of affluent households is projected to double to 100 million by 2020.”
The country is making moves to continue this online sales momentum, recently announcing a trial new tax policy for ecommerce, a move which looks set to particularly benefit the beauty industry.
According to Euromonitor’s recently released 2016 report on the beauty industry in China, investing in digital there is essential for brands.
“To remain competitive in such a fierce market, manufacturers are increasingly looking at online distribution, with more multinationals setting up online flagship stores on leading B2C platforms such as Tmall.com and JD.com,” the market research company confirms.
Rural and tax changes
Rural consumers are also fuelling the growth, with record numbers taking to the internet fuelling a spike of sales by 200% since 2006, with the rural market tipped to reach 460 billion yuan this year.
Estee Lauder is one brand which sells particularly well in counties and townships, with consumers out-buying their more affluent urban counterparts: a report by Taobao notes they spend an average of 765 yuan a piece, slightly more than the 652 yuan spent by first- and second-tier city residents.
The enthusiasm for international brands online among rural consumers is due to the accessibility of digital retail for communities which traditionally had little access to the big western beauty players.