Chinese beauty brands plan to go beyond the local market in China and penetrate the markets in nearby areas, such as Japan and Southeast Asia. Eventually, they plan to head to the other side of the globe and reach the Western markets.
This decision was made amidst a background of decreased domestic consumption. Countries all over the world are quickly adapting to the internet economy, especially because of the COVID-19 pandemic. Restrictions on mobility and operating hours of establishments, among other things, meant that consumers had to move away from their usual means of shopping. Physical stores have been difficult to access, but needs and wants are still there. This meant that consumers turned to the internet to purchase the things that they needed.
Digital Economy in Southeast Asia
Because of this, even if economic growth globally was decreasing, the internet economy in Southeast Asia was able to withstand the pressures brought about by the COVID-19 pandemic. In 2020, Google, Temasek Holdings, and Bain & Company published a study on the digital economy in Southeast Asia. They reported that as many as 40 million people had finally turned to the internet for the first time. With this additional number of people, the total population of internet users grew to 400 million.
Furthermore, the internet sector grew to $100 billion in that year alone. However, it won’t end there. It is expected to exceed $300 billion in 2025. The preference for the use of digital services will carry on even after the COVID-19 pandemic. 90% of the survey respondents said that they plan to continue using online platforms for their purchases.
Domestic Consumption in China
However, the growth experienced by other Southeast Asian countries does not seem to match the situation in China. Domestic consumption in the country decreased in 2020. This is the first time that it has happened in the past 44 years, wherein the local economy was stagnant up until the year 1978.
The total retail sales of consumer goods were only 39.2 trillion yuan in 2020, which is 3.9% lower than the year before.
Domestic consumption was better in 2021. It grew to 44.1 trillion yuan that year. Nevertheless, it was still not as fast as what was previously seen in China. The growth in consumption usually increased by two digits in the years before 2017.
This year, it is expected that exports will continue to drive the economy of the country instead of domestic consumption. For the past few years, authorities in the country have made efforts to decrease their reliance on exports. They wanted to promote domestic consumption as the main driver of economic growth. Doing so provides the country with a more sustainable development.
However, that goal was not actualized during the COVID-19 pandemic. Exports continued to contribute to the majority of the country’s growth, while domestic consumption was left behind. The trade surplus has also increased in the past few years. It had a value of $676.43 billion in 2021, which is more than the $523.99 billion recorded in 2020. This was even the highest it has ever been since 1950.
Mattie Bekink, the China Director at the Economist Intelligence Corporate Network, said that “in 2020, for example, net exports contributed the largest share of Chinese GDP growth since 1997 and consumption is not even recovered yet to its pre-Covid trend, according to China’s National Bureau of Statistics.”
2022 will not be any different. Many consumers remain hesitant to spend. The continued restrictions brought about by the zero-COVID policy of the country are still limiting mobility within and outside of the country. At the same time, these restrictions have a negative impact on the citizens’ ability to earn.
Chinese Beauty Brands are Venturing Out of the Country
This situation in the country has not been beneficial for Chinese beauty brands. Nevertheless, they will continue to ride through the waves that come with having a business. Companies in the cosmetics industry have been establishing their presence in neighboring countries in the past two years of the pandemic.
The techniques that they have developed in their home country have proven to be applicable elsewhere. Given that the market in China is competitive, Chinese beauty brands have gained the competence needed to maneuver markets in the face of great competition.
Sita Hu, the Vice President of Hebe Beauty, said that “international brands lack local consumer insights. With their relatively high prices and limited product range in Indonesia, local competitors cannot adapt to consumer needs with popular products online. That gives us an opportunity.”
At the same time, Chinese beauty brands have the advantage of supply on their side. With a multitude of options for their supply chains, they can create quality products without spending too much on the production process. As a result, they can offer their products at a lower cost.
Not only that, Chinese beauty brands also find the markets outside of China to be less competitive. They find it easier to sell their products in Southeast Asian countries, such as Indonesia, Malaysia, and the Philippines. This is because the preferences of consumers in these countries are similar to those in the domestic market. The legislative environments of other countries are also more conducive to the conduct of business. With this, the rules that Chinese beauty brands have to comply with can easily be integrated into their current structure.
However, venturing into untapped markets should always be done with careful consideration of the culture within the country. Even if there are similarities in the demographics and profiles of consumers across the world, local differences also come into play.
This especially came to light when Hebe Beauty showed an advertisement that was not in line with traditions in Indonesia. The individual in the promotional material was dressed in an off-shoulder top, which is not accepted in a country where most citizens belong to the Muslim religion. The advertisement had to be taken down because of it.
Chinese Beauty Brands Will Ride on the Growth of E-Commerce Platforms
Tiktok, Shopee, and Lazada are expected to continue growing in terms of their market reach. These e-commerce platforms are operated by or work with tech companies in China, such as ByteDance and Tencent Holdings.
Chinese beauty brands also plan to grow with these e-commerce platforms.
Shopee, in particular, is working towards being the number one e-commerce platform in the world. Christy Wu, Shopee’s Head of Business Development for Beauty Brands in East China, said that “we started from Southeast Asia because that’s where our executives are based, but in later stages we decided to launch in markets such as Brazil and Mexico based on their population size and prospects in e-commerce.”
Three Chinese Beauty Brands that have Already Entered the Western Market
- Hedone
This Chinese beauty brand does not just promote make-up to enhance one’s features. It also perceives make-up as a means to be able to express oneself. The colors of their eyeshadows are bright, and some of their other products even have glitter. Although it may seem unusual compared to the makeup looks often seen in China, Western youngsters from Generation Z found it fun and playful. It especially appeals to them as the show “Euphoria” has gained popularity.
- Herborist
Herborist incorporates Chinese herbal medicine with newer technologies. It offers beauty not just based on physical appearances, but also beauty that comes from within. When inner well-being and external beauty are harmonious with each other, the skin becomes healthy and balanced.
At the same time, they encourage consumers to build a beauty routine, and when they do, they should perform it in a slow-paced manner. It is important to take the time to promote one’s wellness so that the flow of energy is not disrupted and beauty can be obtained.
- CAICUI
The products of CAICUI that gained much attention were the snail face cream and an under-eye mask that contained Osmanthus. They offer skin care products, such as serums, gels, cleansing foams, and masks, with the same effectiveness as other professional products. However, they cost much less than other brands.
