“Not long ago, just withdrew the cabinet.” Recently, CHAILEEDO learned from several shopping malls across the country that Atelier Cologne, a high-end salon fragrance brand under L’Oréal, has successively withdrawn its cabinets in Guangzhou, Shenzhen, Wuhan, and other places since last year. So far, among the sixteen Atelier Cologne counters found by CHAILEEDO, only four are currently operating normally.
It’s not just Atelier Cologne. Since the beginning of the year, IPSA, Benefit, and other foreign brands that were once extremely popular have all heard news of large-scale withdrawals. All signs indicate that while many brands are preparing for the big promotion on March 8th, there is a quietly brewing wave of foreign beauty brands withdrawing from the market.
Regarding the current trend of well-known brands withdrawing from the market, “Whether it’s imported big brands or domestic newcomers, whoever doesn’t get close to consumers will be eliminated.” said Zimu, general manager of a well-known beauty chain marketing center, speaking under a pseudonym.
Involving multiple beauty giants, covering skincare, makeup, and perfume brands
Recently, there have been media reports stating that IPSA is undergoing a large-scale reduction of offline counters. Among them, the IPSA counter at the Wuhan Grand Ocean Department Store will be closed in March, and “there may only be one IPSA counter left in the Wuhan area.”
However, CHAILEEDO’s on-site visit found that the IPSA counter at the Grand Ocean Department Store is still operating normally. When asked about the closure rumors, the staff neither confirmed nor denied them, stating, “This is not something we can comment on.”
According to one staff member, the counter has not yet started the rumored major promotion mentioned online. “We are still following the activities of the department store. Currently, there is a 12% discount storewide, and we will try to offer more complimentary gifts.” CHAILEEDO noted that the official price of the IPSA Black Gold Cream is 860 yuan/50ml, and the discounted price at this counter is around 756 yuan.
As is well known, Wuhan, as a commercial hub in central China, is a priority location for many beauty brands to establish a presence in the central region. However, according to a survey conducted by CHAILEEDO, not only is IPSA facing rumors of counter closures in the Wuhan area, but also several well-known international brands have recently completely withdrawn.
For example, just recently, staff at the well-known upscale shopping mall K11 in Wuhan revealed to CHAILEEDO that the store opened by Atelier Cologne in K11 had closed two months ago, making it Atelier Cologne’s first concept store in central China. The aforementioned staff member stated, “There are no longer any Atelier Cologne counters in Wuhan.”
Additionally, CHAILEEDO also noticed that Sulwhasoo, a high-end cosmetics brand under LG Household & Health Care Ltd., which announced last year that it would close all offline counters by the end of the year, still has counters that have not yet closed. CHAILEEDO’s investigation found that the Sulwhasoo counter at Wushang Plaza is still operating normally. However, the staff at the counter told Qingyan, “Only Wuguan [Wushang Plaza] is left,” and revealed that the counter will close on March 31st.
Public information shows that the Sulwhasoo counter at Wushang Plaza opened in December 2016 and has been in operation for nearly 8 years. The closure of this counter may also indicate Sulwhasoo’s “farewell” to Wuhan.
CHAILEEDO’s analysis revealed that the withdrawal of the aforementioned brands from Wuhan is just a microcosm of their “slimming down” in the domestic market. Taking IPSA as an example, CHAILEEDO found through inquiries to shopping malls and brand counters across the country that IPSA has withdrawn at least 8 counters in the past two years, involving cities such as Shanghai, Nanjing, and Huaian.
It’s worth mentioning that in December last year, IPSA, which had just launched Shiseido China’s first personalized customization service project, will also close its store at Lujiazui Center in Shanghai soon. The store staff told CHAILEEDO, “Previously, the customized service was operated in our store, and then gradually expanded to other counters. Now, the IPSA counter at Shanghai First Plaza can also experience related services.”
Additionally, Atelier Cologne, backed by the L’Oréal Group, has also undergone a large-scale withdrawal recently. CHAILEEDO learned from inquiries to several shopping malls nationwide that last year alone, the brand withdrew at least 8 or more counters, involving cities such as Shanghai, Beijing, and Guangzhou, as well as emerging cities like Hangzhou and Chengdu.
As of now, among the 16 Atelier Cologne counters that CHAILEEDO has found through public channels, only four remain, located in Shanghai, Beijing, and two in Chengdu. Meanwhile, the once-popular makeup brand BeneFit, owned by LVMH Group, has closed its official flagship stores on Tmall, Douyin (TikTok), and JD.com, retaining only the Sephora channel, and recently, rumors emerged about its withdrawal from the Chinese market.
According to interviews conducted by CHAILEEDO, several Sephora store staff members mentioned, “BeneFit is indeed withdrawing from counters,” but the timing is uncertain, and it’s unclear whether this means a complete exit from the Chinese market.
CHAILEEDO’s partial analysis reveals that the brands undergoing counter closures recently belong to international beauty giants such as L’Oréal, Shiseido, LG Household & Health Care, etc. These brands cover a wide range of categories, including skincare, makeup, and perfume, and are positioned in the mid-to-high-end segment.
Behind counter closures: complete Withdrawal or strategic turnaround
Although counter closures do not necessarily mean the complete disappearance of a brand from the Chinese market, for foreign high-end brands like IPSA and Atelier Cologne that rely on offline channels to convey brand concepts and build consumer mindshare, the sudden reduction in the number of counters is undeniably a “dangerous” signal.
So, why are these brands conducting large-scale counter closures at this time? What are the similarities and differences in their counter closure strategies?
According to Zou Bin, a brand consultant at Swiss La Estephe, “These once hugely popular foreign brands have indeed influenced a generation of Chinese consumers. However, for today’s post-90s and post-00s consumers, with increased income and expanded horizons, they prefer better international brands.”
“The slowing down of capital investment will directly affect the research and development speed of some foreign brands, making it difficult for them to innovate,” Zou Bin said. CHAILEEDO has noticed that discussions about foreign brands like IPSA and BeneFit being too single-product focused, slow in product development, and out of touch with market demands are frequent on social media platforms.
Rome wasn’t built in a day. In addition to a lack of sensitivity to Chinese consumer demands and sluggish market actions, the rise of domestic beauty brands has further squeezed the survival space for foreign brands. According to CHAILEEDO’s Intelligence data, in 2023, the market share of domestic cosmetic brands in the Chinese market surpassed that of foreign beauty brands, accounting for 50.4%.
In response to the current market competition between domestic and foreign brands, a beauty chain enterprise leader in Beijing sighed, “The current beauty market in China is like a hundred flowers blooming and a hundred schools of thought contending. Only the fittest survive in the big waves. There are just too many brands and channels for consumers to choose from.”
It is worth mentioning that among the brands mentioned above that are undergoing counter closures, except for BeneFit, brands like Sulwhasoo and IPSA still retain online channels instead of choosing to completely “say goodbye” to the Chinese market.
“This is a sales strategy,” said a beauty distributor in Hangzhou with many years of experience. In recent years, interest-based e-commerce platforms like Douyin have developed rapidly. Compared to this, the operating costs of offline channels, including labor and mall rent, are relatively high. “Nowadays, the number of consumers in offline channels, including supermarkets, is indeed very small, especially in department stores. The foot traffic is not high, so some brands choose to retain some flagship stores offline.” That’s what he said.
It is worth noting that some brands, after closing counters, not only retain the “spark” of online channels but also embark on new initiatives in an attempt to turn the tide in the Chinese market. For example, after rumors of widespread counter closures surfaced last March, the head of L’Oréal China denied the news to the media, emphasizing that offline channels remain a very important sales channel for Atelier Cologne and that the brand will focus more on opening boutique stores in the future.
According to public reports, in November last year, the head of a high-end shopping center in Shenzhen told the media, “The design of the new product line and the decoration of the new concept store are in progress, and the brand new Atelier Cologne may be officially unveiled as early as March next year.”
In other words, the brand new Atelier Cologne store may “reveal its true colors” this month. For Atelier Cologne, which has already exited the North American market, seizing the Chinese market is of utmost importance, and the success or failure of this brand rejuvenation will greatly affect its “destiny” in the Chinese market.
“In the rapidly changing Chinese market, brands must progress or regress, both internally and externally. They cannot just cling to past glory. In the era of information explosion, with the limited mental bandwidth of young consumers, there may still be hope to rejuvenate the brand by appearing in a completely new image,” remarked Zimu.
Chinese beauty brands Fill in the Gaps: offline channels may face a turning point
According to CHAILEEDO’s intelligence data, the offline sales of the cosmetics industry in China reached 392.6 billion yuan in 2023, a slight increase of 0.8% compared to the previous year. Although offline channels were surpassed by online channels in terms of market share last year, the advantages of offline channels, such as brand value accumulation and providing growth increments, still make it difficult to replace online channels.
In contrast to some foreign brands’ retreat from offline channels, CHAILEEDO has noticed that several well-known domestic beauty brands have publicly announced their intention to increase investment in offline channels this year.
A distributor representing multiple international brands in offline channels told CHAILEEDO, “From what I know, many brands will increase their investment in offline channels this year, and we are also actively planning some offline marketing strategies.”
Emerging domestic brand Hong Zhi recently revealed to CHAILEEDO that they will devote more resources to offline channels this year. “The brand awareness has been established online, so it’s time to develop offline. We have confidence in our products.”
Starting from the CS channel, Yiboshi has also announced plans to expand into 1,000 new sales outlets this year. Over the next three years, the company will focus on the CS channel as its main battlefield and target the numerous small and medium-sized cosmetics stores in third, fourth, and fifth-tier cities as its precise target customers.
The issue of parallel imports and price chaos has always been a chronic problem for offline channels. This year, Wan Mei has taken a high-profile approach to implementing the strictest “anti-parallel import and price control order” in its history to clear obstacles to the development of offline channels.
It is worth noting that not only beauty brands but also many beauty retailers are confident in the development of offline channels this year and have announced a series of store-opening plans.
“When it comes to offline channels, many people would say that this year will be tougher than last year. However, in my view, with the regulation of the domestic situation, purchasing power is still growing, and offline stores are gradually developing, which will bring about more growth increments,” said a senior beauty distributor to CHAILEEDO, giving examples, “Anhui Fox Fairy, which already has more than 140 stores, and the chain brand Mingyuan Mingzhu, both have significant plans for store openings this year.”
According to Cheng Yingqi, the founder of Bingquan Micro-ecological Toothpaste, the reason why the industry is witnessing a trend of focusing on offline channels this year is multifaceted: “Firstly, the impact of the epidemic in the past few years has led to a downturn in offline channels, which urgently need to rebound and revitalize. Secondly, the development of new consumption has brought about many changes and opportunities for offline channels. Thirdly, traditional brands must improve their structure to adapt to offline channels anew. Lastly, emerging brands cannot rely solely on online channels; they need to develop offline channels as a new support point.”
Countless successful brand cases prove that offline channels are the answer to a brand’s upward growth trajectory and an indispensable part of the brand itself. The withdrawal of foreign brands like IPSA and BeneFit from counters not only reflects the complexity of operating offline channels but also once again underscores the importance of brand innovation. As for which brands can seize the opportunity left by these departures, it remains to be seen.
