China Beauty Boom Sees Rush of Beauty Collection Stores Entering Market

China’s booming cosmetics sector is attracting the attention of large high-street cosmetic chain stores. According to data, from 2014 to 2018, the proportion of beauty and makeup collection stores in shopping centers increased dramatically, rising from 2.5% to 7.6% ^[1]. Some segments, such as toiletries, men's grooming, and beauty and makeup tools, rely largely on these channels.

In China’s beauty collection store, one brand stands head and shoulders above the rest, Sephora. The beauty retail giant entered China in 2005 and now has opened more than 200 stores in Chinese cities and has also vigorously expanded its e-commerce channels. In recent years, consumers' awareness of beauty makeup and skincare has greatly expanded, and a large number of new cosmetic segments and new brands have emerged, which has contributed to intensified competition in the e-commerce space. Despite the current dominance of e-commerce, bricks and mortar channels are experiencing somewhat of a renaissance and are becoming increasingly relevant for discerning Chinese consumers. 

The two major types of beauty collection stores:

There are two major types of beauty collection stores. The first is the single-brand store, represented by Perfect Diary and 3CE, and the other is the multi-brand store, with The Colorist, WOW COLCOUR as the prominent ones.

Single brand store

As the name suggests, a single brand beauty store only carries products from a single brand. Take Perfect Diary as an example. As a successful online brand (the first Chinese brand to rank number #1 on the 2019 list of top Tmall retailers), it realized the importance of offline channels. The brand has opened 36 offline stores, including flagship stores, pop-up stores, and concept stores, etc., and plans to open 200 stores in eastern China and 600 nationwide in the next three years. In the last three quarters of 2019, its offline store accounted for 100% of Perfect Diary’s total omnichannel sales growth ^[2].

Full line of makeup products are shown in Perfect Diary's offline store in Hangzhou. (Photo source: ChemLinked)

Multi-brand store

A multi-brand store carries a wide range of makeup brands from different brands, countries, and regions. This is a good channel for new and niche beauty makeup brands that have garnered popularity using social media and hope to reach more consumers. Multi-brand stores can offer consumers rich and engaging shopping experiences. The Colorist is a beauty collection store focusing on makeup and selling brands from China, Europe, Japan, Thailand, South Korea, and the United States, etc. After its opening, the single-day customer traffic in its top store reached as high as 15000 people ^[3]. 

Understanding the growth of beauty stores 

Engaging shopping experiences appeal to a new generation of consumers.

Traditional beauty makeup shops have professional beauty advisors to engage with customers and promote products to them. According to one consumer survey, the “hard sell marketing” style used by some of the staff in traditional style offline stores actually puts consumers off. Millennials (those born from 1981-1996) and Gen Z (those born after 1996) have grown up with the ability to find everything they need to know about products online. Their purchasing decisions are largely driven by KOLs (beauty bloggers or web celebrities) and KOCs (Key Opinion Consumers), instead of salespeople. Therefore, the free shopping atmosphere in these newly established beauty collection stores is tailored to their demands.

Shop design elements and interactivity attract consumers.

Online shopping can offer convenient payment and delivery services, but this is not sufficient to satisfy consumers’ “share frenzy” mentality. HARMAY’s factory-style shop design, 3CE’s Korean-style fashion design, or Perfect Diary’s diversified shop designs, all offer consumers places to play, to experience, to buy and to take photos to share on social media. The experiential consumption model includes on-site makeup testing and can offer a level of engagement not possible online.

Female consumers take photos inside the beauty collection store. (Photo source: internet)

Are there any new entrants?

Suning JIWU (owned by China’s e-commerce enterprise Suning), a new retail store covering the personal care, travel, households, office, kitchen, and beauty makeup, is planning to open beauty collection stores in 2020. It has set up a beauty makeup area in three stores and has achieved good results. For example, it has set up a beauty makeup area of more than 80 square meters in its newly opened Xuzhou store, and within three days of opening, beauty makeup sales reached 850 thousand yuan ^[4].

The New World Department Store, a retail giant in mainland China, is also considering opening flagship stores in Shanghai and Chongqing.

The potential of the beauty store in China

China's struggles with COVID-19 have inevitably translated to a downturn in the beauty store sector. In an effort to suppress the spread of the virus in the community, China imposed draconian interventions curtailing the movement of people in public. As community spread now seems to be controlled in China, the country has opened up gradually. Consumer confidence is also returning. Although the current outbreak has hurt the cosmetics industry, especially offline channels, it can be expected that growth will rebound. The epidemic is also a reminder for beauty makeup retailers to attach equal importance to online and offline channels. The future of retail is an integration of online, offline, and logistics.