The situation where international brands have long dominated the market is being broken.
In the past Double Eleven, the Japanese cosmetics brands that had consistently dominated the rankings disappeared from the list, replaced by a group of domestic brands that had jumped in rankings. Pelaiya also topped the top of the top e-commerce platforms' TOP lists, and after five years, domestic products returned to the top, which was interpreted by the industry as entering a new development cycle for domestic products.
With the rapid development of local enterprises, the proportion and ranking of domestic brands in various categories such as skincare and makeup on mainstream e-commerce platforms have significantly increased compared to previous years. Not only Tmall, but also in the daily cosmetics category of Tiktok and Kwai platforms, domestic products have begun to share the same with foreign brands.
Southern Daily reporter Li Jie
Collective pressure on the performance of Japanese brands in the third quarter
Since the beginning of winter, Japanese cosmetics brands have felt "chills", and Shiseido, one of Japan's largest cosmetics companies and highly dependent on the Chinese market, has the most obvious feeling.
Since November, Shiseido has been on the hot search list one after another due to the decline in stock price, revenue decline, and the price drop of its flagship product "Red Kidney". The latest financial report released by Shiseido shows that the net sales in the third quarter of the 2023 fiscal year were 228.2 billion yen, a year-on-year decrease of 15.3%; The core operating profit was 8.8 billion yen, a year-on-year decrease of 52.9%. Under the decline of both net sales and core operating profit, the third quarter became Shiseido's worst performing quarter in the past 11 quarters.
Specifically, in the Chinese market, Shiseido's sales fell by 9% in the third quarter, and the Chinese market retreated to become Shiseido's second largest market. On November 13th, Shiseido's stock price suddenly plummeted by over 14%, marking its largest decline in at least 15 years.
In fact, not only Shiseido, but also major daily cosmetics groups such as Huawang and POLA have all experienced pressure on their performance in the first three quarters of this year, with one key reason pointing to "nuclear sewage discharge". Since Japan announced the schedule for the discharge of contaminated water from the Fukushima nuclear power plant in August, there has been a heated discussion on social media in China regarding the discontinuation of Japanese cosmetics. The third quarter thus became the most significant period affected by nuclear sewage discharge.
According to Shiseido's financial report, due to the slowdown in demand from Chinese consumers caused by Japan's nuclear sewage discharge, sales in China decreased by about 10% in the third quarter. The company believes that the impact of nuclear sewage discharge will continue until the first quarter of 2024. As of the first half of this year, the Chinese market remains Shiseido's largest market.
The parent company of Kerun and Furifangsi, Flower King Group, recently released its third quarter financial reports, but their performance is also not optimistic. The sales revenue of the company's cosmetics business is 175.1 billion yen (approximately RMB 8.455 billion), a year-on-year decrease of 1.7%; The core profit loss was 1.6 billion yen (approximately RMB 77.25 million). Hua Wang admitted that this is mainly affected by the significant decline in sales in the Chinese market, and the performance of the Chinese region may experience low growth, and the impact on Japanese brands is still uncertain.
Coincidentally, POLA Polaroid Group was also affected by Japan's nuclear sewage discharge into the sea in its third quarter financial report. To be frank, the economic situation and consumption trend of the cosmetics market in Chinese Mainland are uncertain and still need to be monitored continuously.
Gao Si mentioned in a recent financial report Q&A that Chinese KOLs are unwilling to recommend Japanese cosmetics due to Japan's nuclear sewage discharge plan. Indeed, Japanese cosmetics need to rethink and adjust their brand strategy in the Chinese market.
In the years prior to this, Japanese cosmetics had consistently dominated the Chinese market. According to data from the General Administration of Customs, in 2019, Japan surpassed France and South Korea for the first time as China's largest importer of cosmetics. From this year until 2021, daily makeup achieved a "triple crown". Until 2022, Japan was overtaken by France.
Double 11 Top Chinese Brands
Compared to the gradual decline of Japanese cosmetics brands, domestic brands have gained momentum in recent years. This phenomenon has been fully demonstrated in this year's Double 11.
From the first day brand performance report of Tmall Double 11, it can be seen that Perlier has surpassed many international brands such as L'Oreal and won the TOP1 beauty category; Kefu Mei entered the best-selling list with a super high growth rate, with a year-on-year growth rate of 1798.7% in sales. Compare the top 15 brands in the beauty and skincare category of Tmall Double 11 in 2022 and 2023. Domestic brands have increased to four seats, while daily cosmetics brands have dropped out of the list for the first time this year.
Tmall Spokesperson, the official official account of Tmall, wrote in the article: The new domestic brands participating in Tmall Double 11 this year have increased significantly compared with previous years. Both established domestic products and emerging brands have achieved unexpected growth. In the top 20 pre-sale (4-hour) list of Tmall's Double 11 beauty products, domestic and cutting-edge brands accounted for 10 seats, a double increase from last year.
The annual Double 11 promotion is an important node in the sales of the cosmetics industry, reflecting the barometer of the consumer market. For a persistent domestic brand like Pereira, winning the top 1 of the Double 11 is undoubtedly a milestone. They have just celebrated their 20th anniversary this year and are long-distance runners who have crossed the cycle. "Huang Bailu, the data and communication manager of Northbell, said that this reflects that the success of domestic brands at this moment is not accidental. It is the brand's years of reputation accumulation and the results of sprinting at important nodes of the Double 11.
With the tide of "cultural confidence" and "China-Chic renaissance", the influence of domestic brands is expanding. The scale of China's cosmetics market is expected to exceed 510 billion yuan in 2023, among which the scale of domestic beauty brands is constantly increasing. Currently, the domestic market share of China's cosmetics market is close to 50%. According to the 2023 China China-Chic Beauty Consumption Trend Insight Report released by Ai Media Consulting, 71.22% of the surveyed consumers said they used more domestic beauty brands.
Behind the synchronous increase in scale and reputation, the rise of domestic beauty products cannot be separated from the increasing investment of various beauty companies in product strength. The research and development of "roll" has become the focus of competition among domestic cosmetics companies, and even the confidence to compete with international brands on the same stage.
Recently, the semi annual performance reports of listed companies for 2023 have been released one after another, indicating the importance and layout of scientific and technological innovation by various enterprises from research and development data. In the first half of the year, P&L's R&D expenses increased by 49.9% year-on-year, with a R&D expense rate of 2.5%. The R&D cost of Betaine reached 110 million yuan. A year-on-year increase of 33.6%.
Of course, the Double 11 promotion also reflects to some extent the preferences of Chinese consumers, which is the pursuit of high cost-effectiveness, and price has become an important factor to consider when placing orders on Double 11. Huang Bailu believes that domestic brands are developing rapidly and have higher cost-effectiveness, which is more in line with the habits of Chinese consumers and has become an important weapon for surpassing international brands.
Perfect Diary's parent company, Yixian E-commerce, also proposed a similar viewpoint in its third quarter financial report: currently, consumer demand is slowing down and upgrading, and consumers prefer brands with high quality to price ratios, pursuing consumption with technological attributes and pleasing emotional attributes. In this context, Yixian E-commerce focuses on enhancing brand stickiness and development vitality based on creating excellent product performance and improving consumer satisfaction.
The outcome of the first battle cannot be determined yet
Does it mean that Chinese brands have since taken the C-position in the market, as Perleya has won over L'Oreal in the Double 11 and Japanese brands have been squeezed out of the list?
The answer, of course, is no, we still have a long way to go by extending the timeline, "emphasized Huang Bailu.
Regarding the drop of Japanese cosmetics from the list, Zhang Bingwu, the chief consultant of Toutiao Super Product Research Institute, also stated that we cannot conclude that Japanese brands are no longer viable. In the skincare sector, Japanese brands have always had a clear advantage, with a market sedimentation of many years and a certain consumer base. However, the Chinese consumer market has undergone changes now.
In Zhang Bingwu's view, the reason why domestic brands can achieve curve overtaking and catch up with international brands is largely due to the sales model of "live streaming with goods" with Chinese characteristics.
According to online economic and social data, in 2023, the market size of the live streaming e-commerce industry exceeded 35000 billion yuan, an increase of more than 225 times compared to the initial year of 2018, accounting for a quarter of the total market share of online e-commerce. If we calculate from the nationwide outbreak of live streaming fever in 2018, it has only been five years now. Over the past five years, thanks to the frenzy of live streaming sales, countless new brands have emerged in the consumer market, and countless myths of wealth have also emerged. Chinese brands can only rise against the fierce competition by seizing the preferences of the current young consumer group.
The new reach channels and marketing methods have brought a lot of exposure, driving the rapid development of domestic and emerging brands. However, as more and more players enter the game, the cost of traffic increases, and the difficulty of promoting new explosive products increases. How can emerging brands achieve a balanced growth in volume and voice, truly establish their brand image, and then achieve sustainable development? Zhang Bingwu agrees with Huang Bailu's view that we still have a long way to go to extend the timeline. In terms of product strength and marketing strength, some domestic products are not inferior to international brands, but in terms of comprehensive strength, hard work is not a day's work.
As the cosmetics industry management expert Baiyun Hu has said, the top of the Double 11 in Pelaia is a positive news worthy of praise and expectation for Chinese beauty. However, the achievement of sustainable competitiveness requires long-term purchases by consumer users to verify. Only by continuously exploring and practicing quality research, ESG values, and digital technology can more Chinese brands emerge and participate in the global competition of beauty.