Big discounts and a broad range of products from online retailers of beauty products are attracting growing numbers of Chinese consumers.
“Direct sales and department stores are outdated,” Leo Chen, chief executive of Jumei.com, told the Wall Street Journal. His assessment was shared by a Procter & Gamble executive, Andrew Li, P&G’s associate director of greater China, who said online sales were key to the FMCG giant’s strategy.
Digital players benefitting from this trend include Jumei.com, an online retailer offering discounts of up to 15% on international cosmetics brands, which claimed its revenues quadrupled in 2012 to $400m. Bricks and mortar channels are suffering as a result. For example, Sephora, part of LVMH, recently closed stores and plans to launch a new website later this year.
Avon, best known as a direct sales operation, saw revenues in China decline 31% during Q3, at which time its chief executive said the company would be “taking a step back with the management team there and … taking a holistic approach to understand how best for Avon to compete in China”.
“It’s a different market, different way of doing business and if you don’t adapt to the way people are used to shopping there, you’re not going to succeed,” said Jeremy Goldman, former director of global e-commerce and new media at Kiehl’s, a skin-care brand owned by L’Oréal. Goldman suggested that in China, sites selling multiple brands are key; L’Oréal already operates such a site for its luxury brands like Kiehl’s and Shu Uemura.
Esteé Lauder, meanwhile, is one of the global brands that is performing markedly well in ecommerce, with online sales up 40% in the year to June. A spokeswoman explained to the Wall Street Journal that more than two-thirds of the company’s online sales come from cities in which it has no physical distribution.
Chinese women are among the biggest spenders on cosmetics and skincare products. A recent survey by Elle magazine found that for 85% of Chinese women, it was their biggest expenditure.
Published with permission from WARC