SkinCeuticals, an American niche skincare brand acquired by the L'oreal group in 2006, has seen explosive sales growth in the Chinese market in recent years since its official entry in 2010.
In 2017, SkinCeuticals' China market sales increased by 84%, making China the brand's second-largest market in the world. In 2019, SkinCeuticals flagship store (opened in 2016) ascended to the dizzying heights of the Tmall 11/11 Singles Day Top 10 bestselling skincare stores. Over the past two years, the brand's sales have tripled.
These brilliant figures have proved the niche brand's strength and the potential in China's high-end professional skincare market.
What's the recipe for the success of SkinCeuticals, which was firstly promoted on a small scale in China's beauty clinics and SPA centers?
A brand born from academic research
SkinCeuticals, as the name implies, is positioned as a brand that manufactures products produced using active ingredients with clinically verified efficacy and back by a substantial body of scientific research. The active ingredients tend to address fundamental pathological and natural physiological processes in the etiology of skin damage and skin aging. Antioxidant ingredients like ascorbic and skin remodeling substrates like collagen and a host of anti-inflammatory and anti-microbial ingredients are commonly utilized by the brand.
In 1997, Sheldon Pinnell, a professor of dermatology at Duke University in the United States, patented an antioxidant skin serum containing 15% naturally derived vitamin C and 1% vitamin E, combined with ferulic acid. In the same year, the brand SkinCeuticals was founded. Based on the patent of this formula, Skinceuticals launched its hero product, "CE Ferulic High Potency Triple Antioxidant."[1]
After being acquired by the L'oreal group, the brand established a research network of multidisciplinary experts to continue research and development of products featuring state of the art active ingredients.
For example, in 2014, it successfully formulated a topical form of resveratrol "Resveratrol BE Antioxidant Night Concentrate" that can repair and prevent skin damage. In 2016, it launched the first whitening antioxidant -- "Phloretin CF High-Performance Broad-Action Antioxidant", containing 2% phloretin, which is excellent for reducing blemishes and lightening skin tone.
The evidence-based efficacy principle the brand is founded on has resonated strongly with consumers and has translated into substantial sales. According to L'oreal's latest financial results, the brand flourished in all regions in the first half of 2019, posting record sales in Asia[2].
Localization strategy
For a foreign brand that wants to carve out a niche in the Chinese market, localization is mandatory. SkinCeuticals is no exception. It has been nine years since SkinCeuticals entered the Chinese market. In the first five years, it focused exclusively on professional clinic channels, and in the sixth year, in 2016, the brand opened its flagship store in Tmall officially.
The cooperation with Tmall helped SkinCeuticals gain insight into Chinese consumers, who showed a higher interest in hydrating and anti-acne cosmetics[3].
As a result, Skin Ceuticals promoted its "Phyto Corrective," which is designed to hydrate and soothe irritated or sensitive skin. On its Tmall flagship, the sales of "Phyto Corrective" was high at 16,000 pieces in the last 30 days, compared with "CE Ferulic High Potency Triple Antioxidant" and "Phloretin CF High-Performance Broad-Action Antioxidant," which sold 1,000 pieces and almost 2,000 pieces respectively.
The brand has also made efforts to localize its packaging. Initially, the single product of Skin Ceuticals was sold in large volumes at a high price, so the cost for consumers to try the product was relatively high. After adjustment, SkinCeuticals launched 15ml-version products, which enticed more customers to try the product.
Evidence-Based Efficacy is a significant driver of consumer purchasing preference in China
Chinese consumers are increasingly paying attention to the ingredient descriptions on the back of the package, trying to understand which ingredient is good for the skin and which are bad. For example, some skincare products designed for sensitive skin should not contain any alcohol, and other irritating ingredients, and some products for oily skin cannot be too viscous.
According to the 2018 China Fashion and Beauty Trends Report released by CBNData, evidence-based efficacy has emerged as one of the top 5 hottest online topics, with discussion on ingredients undergoing explosive growth in the second half of 2018[4].
SkinCeuticals is perfectly aligned to cash in on this major trend, and it's not surprising that the recent spike in sales has coincided with the mainstreaming of the evidence-based efficacy trend. The use of ingredient content and ingredient function labeling are major product differentiators that have a massive impact on consumer preference.
O+O+O Mode
In the United States, SkinCeuticals only sells its products through the medical clinic channel, whereas in China, it has expanded to three channels: Doctor Offices, Tmall (online), and Shopping Mall (offline), which is called "O+O+O" mode.
Currently, the three channels have been integrated, with more than 660 professional clinics, high-end SPA outlets, and about 20 offline department store/shopping center outlets (plan to expand to about 30 this year, making a presence in China's top 30 cities). Besides, its Tmall flagship stores have accumulated 1.65 million fans[5].
However, SkinCeuticals sees more value in its clinic channel, and these sales channels remains a major focus of the company in its mission to make advanced professional skincare more accessible to Chinese consumers. This year, the brand aims to expand the number of professional clinics to about 1,000.
Additionally, it is also shoring up the professionalism of its offline stores. In September, the company began to introduce smart diagnostic equipment into its stalls and shops in department stores.
At its initial stage of landing in China's e-commerce platform, SkinCeuticals chose to localize its strategy to align with consumer preference, marketing strategy, and channel selection, which helped this niche brand get off to a good start. Its resounding success in the past three years is a testament to the significant changes in China's cosmetic sector, in which consumers are more educated and more demanding of products formulated with state of the art ingredients back by rigorous and robust scientific and clinical evidence.
Disclaimer: All photos are from the website.
Reference Link
[1] SkinCeuticals' China Performance Has Exploded for Three Years
[2] SkinCeuticals Sees Rapid Development in China Market
[3] Data Helps International Beauty Giants Know Chinese Women Better
[4] Evidence-Based Efficacy Gaining Traction with Chinese Consumers
[5] Fifty Percent of SkinCeuticals' Business Lies in Professional Clinics
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