Why few European cosmetics brands enter into Chinese market?

Market competition is increasingly coming from Asian as well as other Western companies.

European cosmetics brands should proceed with caution in the Chinese market.

The departure in 2013 of Garnier from the Chinese market, a brand of L’Oreal and also Revlon has demonstrated that European brands need to adapt and innovate if they want to have a strong market presence in China.

L’Oreal has decided it is not worth it to sell Garnier products in China and it is better focus its efforts in Maybelline and L’Oreal Paris, its two other brands.

Due to the drop of cosmetic’s sales, from $24 billion in 2012 to $21.9 billion in 2013, there is a aggresive competition.

The profits of European brands are threatened by South Korean brands like AmorePacif, Missha and Sulwhasoo and also by Chinese brands as Houdy, Longrich, Caisy and Chinfie.

The barrier for Western brands is not due to the market growth but rather to the competition and their failure to beat it. The competition is increasingly between Asian brands and European brands.

The advantage for Chinese brands is that they are more flexible and they have traditional Asian ingredientes which make their products more convincing. In addition, some foreign cosmetic brands have also struggled in order to compete against discounts which offered by online retailers on high-end beauty brands.

Despite the competition, there are some Western brands which have a consolidated presence in China like L’Oreal or Procter & Gamble. As reported by Euromonitor, in 2012 L’Oreal had a 41% value share in men’s skincare and up 22% value share in men’s grooming. However, those brands are loosing market share. In order to avoid this, European brands should understand Chinese consumer and their fast changes of behavior.

European beauty brands are finding that increasingly sophisticated Chinese costumers don’t want to pay more just to get an European cosmetic brand. Brands should be more competitive in order to justify the expense.

In addition, nowadays, due to the e-commerce, the consumers have more choices and therefore they are less loyal than before. As reported, these past few years, online cosmetics sales have grown while sales in the stores have decreased because through internet, consumers have more products available.

E-commerce could help companies to increase their sales, particularly in lower-tier cities where cosmetic stores may not be available. For example Esteé Lauder sales in China have increased up to 40 % online.

In the cosmetic sector there is a need for constant product innovation and it is a challenge faced by all companies. Brands should launch new products for the Chinese consumers because they think that the long use of any one product is bad for their skin. As a result there are brands creating new products and therefore, consumers have more choice and the competition has become fiercer.

L’Oreal and Procter & Gamble are forced to adapt their offerings and marketing strategies in order to mantain their leadership in an increasingly digital environment.
Another important factor is the cost of doing business in China which is increasing for European companies due to the tax laws.

Korean brands are ahead of the trends and also have better technology. In addition, European brands have developed products for Western faces while Korean cosmetics have done the same but for Asian skin tones.

China is the world’s third-largest cosmetics market, and if European companies want to consolidate its brands in the Asian giant, they should be more aware of local tastes.

Once they do so it is crucial to adapt to the Chinese market and use the right channel in order to capture your core customers in China.

Chinese customers increasingly go online to check cosmetics out and decide what to buy. Some platforms, like PC Lady have even become a natural part of the customer decision process

 We can help you improve your cosmetics brand image and awareness on the Chinese platforms.

Check here to know more about all you need to attract Chinese customers into buying your products

Sources:

• Cosmetics market in China.
• Favorite cosmetics brands of Chinese woman.
• Perfumes are successful newcomers in China

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