EXPENSIVE beauty hauls are a thing of the past for Evelyn Zhu. The Chinese branding professional says she now only spends on skincare essentials, joining millions of other consumers who have cut back on cosmetics in the world’s second biggest market.
“In recent years, we all bought so many products,” the 32-year-old from the affluent eastern city of Hangzhou said. “My bathroom cupboard is full, it’s hard to say I need much more.”
This restraint, which has taken hold amid a slowing economy, spells bad news for global firms such as L’Oreal, Estee Lauder and LVMH who for years banked on China’s US$52bil (RM242.86bil) beauty market for growth.
Regional brands such as Japan’s Shiseido, which counted China as its top market for years, are also struggling.
But while the economic woes have certainly weighed on sales, analysts say the main issue facing the multinationals is their slowness to adjust to the shifting priorities of consumers, who have become more discerning about what they buy and are increasingly finding that local brands are more suited to their needs.
“What Chinese consumers are still keen to spend on are high efficacy products,” said William Lau, chief executive of multibrand beauty retailer Bonnie and Clyde, which stocks luxury international brands including Chantecaille and 111skin.
“What you’re seeing is a downgrade in lifestyle-driven luxury and premium brands,” he added.
Botanee Biotech’s sensitive skincare brand Winona is one of the beneficiaries of this paring back.
The Chinese brand, which is priced at around the same level as L’Oreal products, is known for combating redness, a concern that marketing firm iResearch reported affects two-fifth of women. Analysts from CMB International estimate Botanee’s revenue will grow almost 18% this year to US$824mil (RM3.84bil), with Winona responsible for most of these gains.
By comparison, sales for the global beauty giants are expected to fall.
An analysis from brokerage Jefferies showed first half China sales down 8% at LVMH’s beauty division, while sales at Estée Lauder Companies, which counts on China for one-third of its business, fell 12% over the same period.
Shiseido reduced its full-year profit forecast in November on slower China demand, which has also been hit by a boycott by some consumer of Japanese products following the release of treated radioactive wastewater in August.
L’Oreal, Estee Lauder and Shiseido did not respond to a request for comment. — Reuters