Following years of product development, domestic brands in China are now growing in both popularity and sales, having reached a combined value share of 4% in 2015 among the top 10 players, up from 3% in 2011.
Multifunctionality is key
China’s leading domestic players are creating multifunctional products that are present in a variety of beauty and personal care categories including skin care and colour cosmetics.
Euromonitor International states that the cosmetics and beauty industry’s value share gain can be significantly attributed to products’ success in second- or lower-tier cities, instead of top-tier cities where the market development focus once sat.
As marketing and advertising campaigns have become an important focus for many companies in the Asia-Pacific (APAC) regions, brand identities and awareness are also stronger as they have gained the attention of media including sponsorship from popular reality television shows.
However, in China, domestic consumers have become more mature and, as a result, have changed their attitudes towards these brands, often viewing them as lower in quality and design than its neighbouring countries or global heavyweights’ product ranges.
The natural and organic ingredients market is one key area where domestic Chinese players are dominating. Yunnan Baiyao and Shanghai Jahwa, for example, are two renowned brands generating consumer respect and appealing to evolving demands, which in turn creates new growth opportunities.
In addition, China is also considering the importance of its national identity and showcasing its unique culture to continue to appeal to consumers’ growing acceptance of domestically manufactured products.
As consumer’s needs continue to change, brands are expected to develop more segmented upmarket offerings, as shown by Shanghai Pehchaolin’s Bluemyth series, launched in May 2015, with beauty specialist retailers and department stores its main distribution channels to offset the assumption that cosmetics and beauty products in China are low in quality and design.
The growing prevalence of China’s domestic players has resulted in some multinational brands withdrawing from Chinese markets, including Revlon in 2013 and Garnier in 2014.
To bridge the gap, however, leading multinational players are now utilising online distribution to reflect the growing digital retail trend. B2C platforms including Tmall.com and JD.com are using this channel to reach out to consumers in lower-tier cities.
Lancôme, for example, created its official online flagship store on Tmall.com in January 2015.
Multinational brands will likely acquire known domestic brands to improve their presence and appeal. L’Oréal China has already purchased MG face masks in 2014.
However, it is probable that as a result of reduced import tariffs in 2015, companies with a wider presence will discount retail prices to increase their consumer base and maintain market share.
Strong distribution networks are expected to result in continued success for domestic players and brands over the forecast period too.