Chinese Beauty Brands Surpasses International Brands for the First Time

In the past year, the beauty and cosmetics industry in China has experienced rapid development, creating numerous new records for brands. During the Chinese Double 11 Shopping Festival in 2023, Proya surpassed L’Oréal to become the top beauty brand on both Tmall and Douyin platforms. Additionally, Hanhoo also achieved several viral sales records on Douyin, consistently ranking as the top skincare category for five consecutive months.

Recently, according to data from the upcoming “2023 China Cosmetics Yearbook” by CHAILEEDO, the Chinese beauty market has surpassed international brands in terms of market size. It is worth mentioning that this marks the first time Chinese brands have surpassed international brands in both online and offline channels. For Chinese brands, this is undoubtedly a significant turning point.

Market share of the Chinese beauty has reached 50.4%, surpassing international brands for the first time

According to data from the upcoming “2023 China Cosmetics Yearbook” by CHAILEEDO, the overall size of the cosmetics industry in China in 2023 was 797.2 billion yuan, with a year-on-year growth of 5.2%. Among them, the online channel, driven by the rapid growth of platforms like Douyin (Chinese version of TikTok) and Kwai, reached a market size of 404.59 billion yuan, surpassing the offline channel. At the same time, in 2023, the sales of the Chinese beauty industry grew by 21.2%, capturing a market share of 50.4%, surpassing international cosmetics brands for the first time.

The data from the “2023 China Cosmetics Yearbook” also reveals that among the top 20 companies in terms of sales in 2023, Chinese brands occupied 7 positions, while international brands held 13. The top 5 Chinese brands were Proya, Winona, KANS, OSM, and CHANDO, with annual GMVs of 7.541 billion yuan, 4.963 billion yuan, 4.228 billion yuan, 3.825 billion yuan, and 3.454 billion yuan, respectively, with year-on-year growth rates of 44.49%, 20.74%, 120.91%, 30.71%, and -2.57%.

On the other hand, the top 5 international brands were L’Oréal, Lancôme, Estée Lauder, OLAY, and SK-II, with GMVs of 10.878 billion yuan, 8.464 billion yuan, 7.89 billion yuan, 6.162 billion yuan, and 6.073 billion yuan, respectively, with growth rates of -0.78%, 6.60%, -9.15%, 33.22%, and -5.80%. Three of the international brands experienced a decline in performance.

It is evident that 2023 was a year of comprehensive rise for the Chinese beauty and cosmetics industry. The performance of Chinese beauty brands during the 2023 Chinese Double 11 Shopping Festival was particularly remarkable. According to a report by CITIC Securities, the market share of skincare products during the event increased from 20% in 2022 to 38%, while makeup products increased from 25% to 33%. Notably, Chinese brand Proya reclaimed the top spot in Double 11 Shopping Festival sales, ending the era of international brands dominating Tmall’s beauty category. Additionally, Winona, CHANDO, and Kefumei also performed impressively during the Double 11 promotion.

The trend of Chinese beauty brands surpassing international giants can also be seen in the financial reports of major beauty conglomerates. Looking at the financial reports for the first three quarters of last year, only L’Oréal and P&G achieved positive revenue growth among major international beauty conglomerates, including L’Oréal, Estée Lauder, Shiseido, P&G, Amorepacific, and LG Household & Health Care.

Many international beauty conglomerates attributed their declining performance to the fact that the Chinese market has been gradually replaced by other emerging markets. For example, Unilever stated in its financial report for the first three quarters of last year that the Chinese market experienced a single-digit decline due to slower-than-expected market recovery and weak consumer confidence. Additionally, leading Japanese cosmetics companies such as Kao and POLA faced pressure on their performance in the first three quarters of last year, with one key reason being the decline in the Chinese market due to the background of “nuclear wastewater discharge.”

As international beauty brands experienced significant performance disparities in China, it provided ample market space for the rapid development of Chinese beauty giants. According to publicly available data, in the first three quarters of 2023, among the eight leading Chinese beauty companies listed on the A-share market, six achieved revenue growth. Proya, BTN, Freda, and Marubi all achieved double-digit growth.

Another noteworthy phenomenon is that in the past two years, international beauty brands have seen large-scale closures of their flagship stores in China, providing additional growth opportunities for the Chinese beauty industry. According to incomplete statistics from CHAILEEDO, at least 20 international brands have closed their overseas flagship stores since 2020.

Furthermore, with the continuous rise of the Chinese beauty industry and the strengthening of import regulations on cosmetics, there has been a downward trend in the quantity and value of cosmetic imports. According to statistics released by the General Administration of Customs of the People’s Republic of China, from January to November of this year, China’s cumulative import volume of cosmetics was 334,881.6 tons, a year-on-year decrease of 13.8%, and the import value was 117.51 billion yuan, a year-on-year decrease of 14.8%.

K-beauty sales have experienced a decline of 26.1% in China, with emerging e-commerce platforms becoming important growth drivers

By countries, according to data from the “2023 China Cosmetics Yearbook,” Korean, European, American, and Japanese cosmetics sales in the Chinese market all saw year-on-year decreases, with growth rates of -26.1%, -0.6%, and -17.0% respectively. Their market shares were 6.6%, 30.9%, and 9.7% respectively. From the data, it can be seen that Korean and Japanese cosmetics experienced double-digit declines in the Chinese market, while the fluctuation of Western cosmetics in the Chinese market was relatively small.

“In many European and American cosmetics conglomerates, numerous brands belong to the high-end cosmetics category, which is less affected by cyclical changes. Therefore, sales of European and American cosmetics show less fluctuation. On the other hand, popular Korean and Japanese cosmetics are more influenced by cyclical changes, resulting in greater fluctuations,” said the founder of an emerging cosmetics brand in Hangzhou.

Regarding the decline of Korean cosmetics in China, an industry expert in the cosmetics field analyzed, “The main reason is that Chinese beauty and cosmetics products are now on par with Korean cosmetics in terms of product design, technological research and development, and product strength. Additionally, Chinese beauty and cosmetics brands are closer to first-tier markets in terms of market promotion and sales, which has led to a significant decline in Korean cosmetics.”

From a channel perspective, the rise of Chinese beauty and cosmetics products is also due to numerous brands seizing the flow of emerging platforms such as Douyin and Kwai. This is an area where international beauty brands still need to strengthen their presence.

Currently, emerging e-commerce platforms have become the most important growth drivers for brand sales. According to data from the “2023 China Cosmetics Yearbook,” in terms of growth rates across various channels, cosmetic sales on Douyin increased by 47%, while Kwai saw a growth of 69.7%. However, both the Taobao ecosystem and JD.com experienced a slight decline.

The data from the “2023 China Cosmetics Yearbook” also revealed that in 2023, among the top 20 beauty and skincare brands on Douyin, 11 were Chinese brands. This includes well-established Chinese brands like KANS and Proya, as well as emerging brands like Florasis and Grain Rain. It is worth mentioning that the top-ranked KANS achieved sales of 3.325 billion yuan, with a year-on-year growth rate of 332.06%, and maintained its position as the top skincare brand on Douyin for at least five consecutive months. Among the top 10 brands on Kwai, apart from Sulwhasoo, the other nine brands were all Chinese, including OSM, DoraDoSun and DINESSR.

During last year’s Double 12 shopping festival, many brand representatives mentioned to CHAILEEDO that Douyin is an important growth point for beauty and cosmetics brands. “Unlike Tmall, which focuses on major promotional events, Douyin platform places more emphasis on daily fine-tuned operations and maintaining stable growth targets,” said Mandy, the head of brand marketing at a cutting-edge Chinese brand, in an interview with CHAILEEDO.

The aforementioned founder of a cutting-edge cosmetics brand also mentioned, “There are indeed significant differences in strategies between emerging e-commerce platforms in China and overseas. Many decision-making departments of international brands are located overseas, making it difficult to respond quickly to market changes. After experiencing one or two rounds of pain, international beauty brands will adapt and catch up.”

Seizing global cosmetics market share

It is worth mentioning that currently, Chinese beauty and cosmetics products are not only favored in the Chinese market but have also become popular overseas, attracting the attention and love of overseas consumers. An obvious trend is that in recent years, more and more Chinese beauty and cosmetics brands have started to expand into markets such as South Korea and Japan in a reverse manner, quickly gaining a foothold in these markets.

On December 24, 2023, according to a report from the Economic Information Broadcast program on CCTV Finance, in the first eight months of 2023, China’s exports of cosmetics to South Korea increased by approximately 190% compared to the previous year, reflecting a significant rise in South Korea’s demand for Chinese cosmetics. According to statistics from the Japan Cosmetic Importers Association, in the first half of 2023, Japan’s imports of cosmetics from China in the color makeup category increased by about 45% to around 6.1 billion yen, ranking second. Among them, the import value of eye makeup products reached 3.4 billion yen, with a year-on-year growth of over 51%, ranking first in terms of growth rate.

However, in terms of overall market performance, there is still a certain gap and a significant catching-up space for Chinese beauty and cosmetics compared to international luxury brands. According to a research report from CITIC Securities, the current Chinese beauty and cosmetics industry has passed the high-speed growth stage and is now in a platform period. Afterwards, there will be another round of rapid growth and maturity. During the platform period, the uncertainties faced by the Chinese beauty and cosmetics industry are highlighted, including bottlenecks in consumer upgrading and insufficient consumer willingness, the end of the traffic dividend on the supply side, and stagnant innovation in business models, as well as stricter regulatory supervision on the supply side.

In fact, in the third-quarter financial reports of last year, many Chinese beauty and cosmetics companies showed a trend of slow growth, with overall growth rates slowing down. Some companies experienced single-digit growth, and there were even instances of negative growth.

Overall, the Chinese cosmetics market is currently accelerating into a highly competitive stage. For Chinese beauty and cosmetics brands to maintain a leading position in the market in the long term, there is still a long and arduous journey ahead, requiring full efforts to improve product quality and shape brand value. Only then can Chinese cosmetics truly gain a place in the global beauty and cosmetics market.