Since June, United States skincare brand Petrov has been rumored to have withdrawn from the Sephora channel and gradually withdrawn from the Chinese market; Shiseido's high-end skincare brand BAUM withdrew from China based on strategic adjustments; Skincare brand Charvin announced the closure of stores on Xiaohongshu; Domestic makeup VNK Tmall flagship store closed......
According to incomplete statistics, in the first half of 2024, more than 20 brands have announced the closure of stores, of which more than half are overseas brands. These brands either completely withdraw from the Chinese market, or "strategic adjustment" to exit a certain channel, both of which together point to a signal - "strategic contraction".
01
Large-scale cabinet removal and slimming from offline
At the beginning of this year, IPSA reported a large-scale reduction of offline counters. Shiseido China responded: "IPSA China is making normal layout adjustments to the offline business part to better adapt to market changes and consumer needs. ”
In June, another Shiseido brand, Elisil, was rumored to have closed offline stores in Nanjing, Chengdu, Huzhou and other places. In July, Shiseido's high-end skincare brand, BAUM, withdrew from China based on strategic adjustments.
Shiseido's downsizing strategy is directly reflected in the financial report, and from 2024 to 2025, the group plans to cut costs by nearly 2 billion yuan, of which about 385 million yuan will be cut in China, and the main reform measures include "operational reform".
It is not only Shiseido that has undergone strategic contraction, but Maybelline, a subsidiary of L'Oréal, has successively adjusted its offline layout since 2018, closing all offline stores in China in 2022, retaining only Watsons channels, and shifting its development focus to online to reduce costs and cater to the consumption habits of young consumers. NYX, another makeup brand owned by L'Oréal Group, closed stores in the first half of this year due to strategic adjustments and withdrew from China, after the brand had achieved the No. 1 direct sales volume on Tmall Global.
Earlier, Korean cosmetics brands such as Fisher Xiaofu and HERA, which were all the rage in China, significantly closed offline stores and withdrew from the Chinese market; In 2022, innisfree was revealed to have closed 600 stores in China; In 2021, Etude House closed its offline stores in China, and in 2022, the brand's Tmall flagship store ceased operations.
The brands of Korean cosmetics giant LG Household and Health have also withdrawn from offline on a large scale and moved online. LG Household and Health mentioned the change in its operation strategy when it closed offline counters such as Sumi, saying that the brand will fully focus on online operations in the future. OHUI Ouhui will withdraw offline from the end of 2023, and close all offline physical counters in Chinese mainland in early 2024, only retaining the official stores of online platforms such as Tmall, Douyin, JD.com, and Kuaishou; The main sales channels of the Group's Whoo post-brand in the Chinese market have also shifted to online channels such as Douyin and Tmall.
Since 2020, the trend of shrinking overseas brand channels has become more and more obvious. According to the offline survey data of GfK Market Consulting, 56% of beauty brands have carried out strategic contraction adjustments in 2020, and the ownership of beauty giants in the Chinese market in 51 cities has declined to varying degrees.
02
Traditional e-commerce is no longer a must, and new scenarios reach consumers
The withdrawal of offline and the optimization of online channels are happening at the same time.
In April, KOSÉ announced the closure of its Tmall online flagship store, leaving only offline channels and online WeChat mini program channels.
Coincidentally, France pioneer salon fragrance brands Jiefang Orange County and Marc Jacobs Mojabs, which closed their official flagship stores on Tmall in May and June respectively, recently announced their exclusive entry into Sephora.
With the fragmentation of channels, the cost of customer acquisition in online channels is gradually increasing. The rise in operating costs, interest e-commerce, and new retail channels have also made some overseas brands no longer regard traditional e-commerce channels as a necessary option.
Bobo, founder and CEO of iProfit & Douchacha, told CBO: "The cost of many overseas brands to connect with domestic online operations is relatively high, and not only the brand itself needs a lot of business leaders, but also service providers. Some brands that have just entered the Chinese market and those with smaller scales are prone to adaptation when entering the Chinese market. ”
Most overseas brands have successfully completed the initial layout in the Chinese market with the help of unique concepts or celebrity effects, but how to take root is a problem faced by these brands in the highly competitive market environment.
In 2022, LVMH Group adjusted the layout of its Chaling and KENZO in the Chinese market, and at present, Chaling has closed all offline stores and changed to exclusive sales of Sephora; KENZO has closed its online flagship store and switched to Sephora sales to explore the private domain value of the channel and improve the consumer service experience, so as to better communicate its brand concept.
The immersive and experiential shopping environment has also brought new plasticity to offline channels, and offline channels carrying experiential functions have been re-emphasized by brands. Taking the perfume category as an example, the seemingly convenient channel of e-commerce channel has certain limitations for the perfume category, while the offline channel can build an experience scene for consumers and promote the transaction of goods and the communication of brand value.
For example, in the fragrance sector, Sephora Research released the "Fragrance Studio", which combines color, intelligent lighting, and fragrance, allowing consumers to experience and explore the association between fragrance and color in an immersive scene, and find the right fragrance.
While creating a unique consumption scene, Sephora is also constantly exploring China's sinking market and expanding stores in third- and fourth-tier cities. At present, Sephora has entered 102 cities in China and opened 349 offline stores. With a wide range of channel layouts and brand personalization, Sephora has become the choice of most overseas brands.
In addition, with the rise of new platforms and changes in consumer shopping habits, brands seek to directly interact with consumers in marketing, sales, feedback and other links, and strive to improve the stickiness with users. Among them, the private domain channel that links the community and undertakes and retains users at low cost has become a new choice for overseas brands.
In 2023, KOSÉ's performance in offline channels, mainly department stores, in the Chinese market remained at the same level as in 2022, but in e-commerce, it saw a significant decline. With such performance, KOSÉ pointed out in the financial report that in China, KOSÉ's work in 2024 will focus on improving brand value and business profitability, adjusting e-commerce promotion expenses, and improving profitability, and carry out a series of brand upgrades and product renovations around the two major brands of DECORTÉ and SEKKISEI.
KOSÉ has scaled back its online channels in China, closing its Tmall online flagship store and keeping only the WeChat mini-program as a private domain channel. At present, KOSE Micro Mall provides consumers with priority trials, exclusive beauty consultants and product purchase and gift activities.
Estee Lauder's perfume brand LE LABO also told the media: "In the future, LE LABO's products (online) will only be sold in mini programs, and will not be stationed on e-commerce platforms such as Tmall and JD.com, just to adhere to the unity of the brand core." ”
Although the exposure and traffic of private domain channels are not as good as those of public domain channels, from the perspective of long-term development, brands can strengthen customer loyalty and accumulate loyal users through customized services and membership systems.
03
Improve operational efficiency and don't leave the market easily
At a time when channel operating costs are increasing and competition is intensifying, overseas brands have entered a new stage of channel adjustment and upgrading, considering the operational efficiency of channels, no longer blindly all in, but instead devoting more energy to maintaining core customer groups and promoting sales growth.
In 2023, China's cosmetics sales will reach 797.2 billion yuan, and the online scale will reach 404.5 billion yuan. Among them, the market share of domestic products reached 50.4%, surpassing overseas brands for the first time. This also means that the pressure on overseas brands to survive and develop in China is increasing day by day.
L'Oréal Group CEO Ye Hongmu adjusted the growth forecast of the global beauty market from the previous "expected growth of more than 5%" to "growth of 4.5%-5%", and explained the reasons for the adjustment, the Chinese market has always been the growth engine of L'Oréal Group, and the lackluster performance of the Chinese market is one of the main reasons for the expected adjustment.
Overseas brands are realizing that doing business in China has become more complicated, but the sheer size of the Chinese market is indeed fascinating, and overseas brands are adjusting their strategies and increasing their stakes while losing their losses in a timely manner.
The Shiseido Group's business model in the Chinese market is no longer relying on large-scale promotional activities for growth, but is moving to a sustainable model centered on brand communication that gives value based on consumer preferences. On this side, the channel focus of IPSA and Elisil was adjusted, and on the other side, its high-end skin care brand Zuixiang was introduced into the Chinese mainland market, and it was first settled in 250 Sephora stores.
There are also some brands that choose to "make a comeback" and use a new attitude to lay out the Chinese market. After a large number of cabinet withdrawals were reported in March last year, Ullong has launched a refresh plan in China less than a year ago, planning to open more than 10 boutiques/counters in the Chinese market this year.
In the face of the rapid iteration of consumption levels and demand in the Chinese market, it is necessary to maintain the consistency of the brand's global strategy, but also to be flexible and adaptable, closely combining the needs and characteristics of the Chinese market, and the problems faced by overseas brands are becoming more and more complex.