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Monthly Digest: China Cosmetics Industry Review | May 2021

Market Updates

1.       On May 4, Alibaba announced to release Tmall Hongkong site. At present, more than 2000 brands and merchants have entered this platform, covering cosmetics, clothing, electronic devices, etc. In the future, Tmall plans to invite more local brands.

2.       On May 16, 2021, Kuaishou released its cross-border e-commerce (CBEC) regulations, implying the oncoming of its CBEC business. The first-stage business only opens access to four categories: cosmetics, food, clocks & watches, and luxury products. More details on ChemLinked.

3.       At the end of May, most e-commerce platforms have started their 618 shopping festival campaign. This year’s uniqueness is that Douyin and Kuaishou, the top2 short video platforms, also join the game. The atmosphere is tensing gradually. More details on ChemLinked.

Company Dynamics

1.       LVMH invested one billion yuan in building a new storage and distribution facility in Shanghai to serve its e-commerce business in the Asia-pacific area.Perfume and cosmetics of beauty brands from the LVMH group will be packaged and shipped from the new facility after its completion at the end of 2020.

2.       Canten, a Chinese natural mineral water brand, enters the cosmetic industry by launching a moisturizing spray.

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Spray from Canten

3.       On May 5, the Spanish fast-fashion giant Zara officially established a beauty department. It will open a beauty area in its offline stores from May 12 and launch a beauty section on its online channels.

4.       Blispring (冰泉), a domestic oral care brand, completed its A and A+ rounds of financing, securing tens of millions of dollars. Founded in 2019, Blispring now has about 80 SKUs. Its flagship store on Tmall has entered the top 5 sales list in the oral category and ranked top 1 in the oral category on Douyin and Kuaishou live commerce.

5.       On May 8, Yatsen Global founded a logistic company in Hainan, covering business such as product storage, bonded warehouse management, duty-free product sale, etc.

6.       L’ Oreal Paris officially entered Douyin e-commerce in May. Its cooperation campaign with Douyin contributed to a 2-million-yuan GMV.

7.       Innisfree will close about 170 offline stores in China in 2021. Affected by the pandemic and the rise of new domestic brands, Innisfree is losing its market share in China.

8.       On May 8, Sephora opened a new digital art flagship store in Beijing. This new store’s main purpose is to build brand image rather than to achieve high sales, so the store focuses more on consumers’ shopping experience.

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Sephora’s new store

9.       Estee Lauder group increased its share of Deciem Beauty, the parent of company of The Ordinary, from 29% to 76%.

10.   Scentooze (三兔), a new domestic perfume brand, completed its third round of financing after one year after its establishment. This new perfume brand targets post-95 girls by providing them more affordable but still delicate products.

11.   Renhe Pharmaceutical acquired another cosmetic company’s share, implying its big ambition in the cosmetic industry. In recent years, Renhe has made many efforts in the cosmetic industry in recent years. It nurtures three brands to tap into this market, including Yaodu Renhe, Renhe Jiangxin, and Zhicaiji. In addition, it opens a Tmall store named Yaodu Renhe, which sells beauty products from Yaodu Renhe and Renhe Jiangxin and now has more than 700,000 followers.

Data Browsing

1.       According to the National Bureau of Statistics, in April, China’s total retail sales of consumer goods reached 3.3153 trillion yuan, a YoY increase of 17.7%. Among them, the total retail sales of cosmetics were 27.2 billion yuan, a YoY increase of 17.8%.

2.       In April 2021 on Ali platforms, the online sales of the skincare category were 12.189 billion yuan, dropping by 12.31%. The figure for the makeup category was 4.709 billion yuan, decreasing by 10%.

For the first time, top domestic brands’ GMV exceeded top international brand. Florasis and Perfect Diary, TOP 2 domestic brands, have achieved 218-million-yuan and 183-million-yuan GMV respectively. TOP 1 international brand Estee Lauder has a GMV of 159 million yuan.

3.       618 pre-sale result:

Tmall: Among top 10 sales brands who self-ran live-stream, six were beauty brands. They are Estee Lauder, Lancome, Skinceuticals, Shiseido, L’ Oreal, and Lamer.

JD.com: Pre-sales of beauty products increased by 12% year-on-year. 24-hour per-sale orders increased by 242% year-on-year.

4.       According to customs statistics, cross-border e-commerce imports and exports in China reached 419.5 billion yuan in the first quarter, a YoY increase of 46.5%, among which exports were 280.8 billion yuan, a YoY increase of 69.3%; imports were 138.7 billion yuan, a YoY increase of 15.1%. Business Big Data shows that the imported goods originate from Japan, the United States, and South Korea.

5.       On May 25, the China Chain Store & Franchise Association and Deloitte China jointly released the 2021 Online Retail TOP100 Report. The report shows that in 2021, the sales of the top 100 online retail companies are expected to exceed 1.47 trillion yuan, an overall increase of 18.5% over 2020. Among them, 51 are consumer product companies.

Financial Reports

Estee Lauder   2021Q3

  • Net sales reached $3.86 million, an increase of 16%.

  • Sales rose in every region, led by double-digit growth in Asia/Pacific, where many markets contributed, and sales growth in mainland China accelerated.

  • Estée Lauder, La Mer, Jo Malone London, Clinique, and Tom Ford Beauty led the robust performance.

Shiseido    2021Q1

  • Net sales were 244 billion yen, an increase of 7.5%.

  • The performance of the Chinese market is particularly impressive, with sales increasing by more than 40% year-on-year, in which high-end cosmetics brands achieved a growth rate of more than 70%, and e-commerce channels achieved a growth rate of more than 50%.

  • Most skincare brands performed well, achieving double-digit growth. The new acquired brand, Drunk Elephant, saw the fastest growth rate of 30%.

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Drunk Elephant

Amorepacific   2021Q1

  • Revenue up 10.8% to KRW 1.3 trillion, operating profit up 189.2% to KRW 176.2 billion.

  • China showed a mid-30% growth (sales in China accounted for 70% of Asia sales). Online sales grew more than 30% contributed by the strong performance of Sulwhasoo, especially on Women’s Day (March 8th).

L’ OCCITANE   2021Q4

  • Sales were 361.466 million euros, an increase of 12.5%, driven by the core brand L’Occitane en Provence (+10.2%), ELEMIS (+24.2%), and LimeLife (+29.2%).

  • China posted encouraging growth at a constant rate of 60.0%.

  • Online channels remained robust and grew 60.5%.

Regulatory compliance

1.       Assorting with the enforcement of Cosmetic Supervision and Administration Regulation, China formally implements a brand-new cosmetic and new cosmetic ingredients pre-market approval system by putting seven crucial regulations into effect on May 1, 2021. More details on ChemLinked.

2.       China introduces transitional arrangements concerning the change of cosmetics registration and notification information management platforms. More details on ChemLinked.

3.       On May 28, National Medical Products Administration (NMPA) released Inventory of Prohibited Cosmetic Ingredients and Inventory of Prohibited Plant(Animal) Cosmetic Ingredients. These two new documents prohibit cannabis sativa seed oil, cannabis sativa fruit, cannabis sativa leaf extract, and cannabidiol (CBD) as cosmetic ingredients, implying the end of CBD cosmetics in China.

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