4 Ways that L’Oreal is Harnessing Key Cosmetic Consumption Trends in China

Since its entry into the Chinese market, L’Oreal has achieved almost continuous double-digit growth^[1]. In 2018, L’Oreal’s China market grew at a record pace of 33% YOY, the fastest pace in 14 years^[2].  In 2019, it beat Estée Lauder to become the No.1 selling cosmetic brand during Singles’ Day Sales. How can this brand continue to maintain growth after 22 years in China? Staying current on China’s newest consumption trends may be the answer.

Appeal to the Gen Z 

In 2018, the cosmetics consumption of the post-1995 generation, aka Gen Z, saw a staggering increase of 347%, according to Vipshop data. L’Oreal is deeply aware that appealing to China’s Gen Z is part of a successful recipe for rapid growth. To this end, it acquired 3CE in 2018, a South Korean beauty brand, which has already gained serious traction among young Chinese consumers. Data shows that since 2012, Chinese consumers contributed to 70% of the growth of 3CE.

L’Oreal’s savvy use of popular and increasingly young brand ambassadors has also contributed to its continued popularity in the Chinese market. Prominent L’Oreal brand ambassadors include the latest spokesperson Ouyang Nana(born in 2000), vitality spokesperson Zhu Yilong (born in 1988), brand ambassador Guan Xiaotong( born in 1997), cosmetics spokesperson Roy Wang(born in 2000), and brand image ambassador Dilraba(born in 1992), etc. 

Zeroing in on lower-tier markets

L’Oreal China has been focusing on consumers living in 3rd, 4th, and 5th tier cities. Lancôme (belonging to L’Oreal) was the first international brand to enter China’s lower-tier cities in 2011. By 2018, it had already opened 272 stores in 115 cities [3]. In addition, e-commerce platforms have helped connect L’Oreal with consumers in smaller and more remote cities. Data revealed by the group shows that 48% of YSL's (another L’Oreal brand) sales come from cities with no brick-and-mortar outlets. In 2019, it cooperated with Suning, one of China’s major e-commerce platforms, to tap into more retail opportunities in China’s smaller cities, communities, and even rural areas.

Develop e-commerce channels

E-commerce has been a big driver of L’Oreal's growth in China. In 2018, e-commerce revenue accounted for more than 35% of its total China sales, a rate much higher than in other markets. The group had 15% online sales in the UK, 11% in the United States, and just 4% in France.

According to L’Oreal’s latest financial data for the fiscal year 2019, it achieved revenue of 229 billion yuan, up 8.0% year on year. The AP region grew by 30.5% in the fourth quarter, thanks to a strong performance during China's Singles’ Day (November 11) sales.  At present, 24 brands of L’Oreal are being sold on Tmall^[5].

Leverage social media marketing

In China, social media marketing has been hugely influential in shaping the purchasing behaviors of Chinese consumers. Short video platforms like Tik Tok have rolled out e-commerce stores for users, and social e-commerce review based platforms like Red are also popular.  L’Oreal has been an early adopter of these innovative retail models, and this is paying huge dividends.  

L’Oreal has launched several KOL incubator programs to transform its BA (beauty advisers) into web celebrities. One of L’Oréal’s greatest successes in this regard has been the discovery of Li Jiaqi, who is now one of the most prominent anchors on Taobao Live.  In the first half of 2018, Li Jiaqi held 80 live-streams for L’Oreal, attracting tens of millions of views and translating to tens of millions of sales.

Disclaimer: All images used are from the internet.