Recently, there have been many big-name beauty brands in the Chinese market touting the “lowest price in history” and even a number of star products of ESTEE LAUDER COMPANIES have been unveiled.
As we all know, international cosmetics brands have always been in the leading position in China’s cosmetics industry, occupying most of China’s market share and even hogging the high-end cosmetics market.
In the face of the huge impact of the COVID-19 outbreak as well as the complex and severe market environment, many industries, in particular the beauty industry, have been compelled to shut down. Due to the control of the epidemic, many people have to observe home quarantine and the flow of customers is restricted to the store, leading to the sharply falling sales of many stores as well as a gloomy market.
On April 18, Beijing time, the National Bureau of Statistics released the retail sales data of consumer goods in the first quarter of 2022. In the first quarter, the total retail sales of consumer goods totaled $1.704860 trillion, an increase of 3.3% year-on-year. In March, the total retail sales of consumer goods totaled $537.116 billion, down 3.5% year-on-year.
Specifically, the total retail sales of cosmetics in March reached $5.413 billion, down 6.3% year-on-year. The total retail sales of cosmetics in the first quarter were $14.890 billion, up 1.8% year-on-year. According to the data released last month, cosmetics retail sales totaled $9.696 billion from January to February 2022, up 7.0% year-on-year.
Recently, there have been many big-name beauty brands in the Chinese cosmetics market touting “clearance sale, agent replacement, products nearing their expiration dates” and even a number of star products of ESTEE LAUDER COMPANIES have been unveiled.
It is understood that Taobao, China’s mainstream e-commerce platform, whose official flagship store of Estée Lauder does not sell “Estée Lauder Advanced Night Repair Synchronized Multi-Recovery Complex” (100ml) because the product is especially available in duty-free shops. However, there are a number of personal stores (non-brand official flagship stores) that sell the product at low prices touting the procurement of genuine products directly from duty-free shops, delivery from bonded warehouse, sales promotions at low profits or zero profits and so on, with prices ranging from $31 to $79.
In addition, there are star products such as “ORIGINS MEGA-MUSHROOM RELIEF & RESILIENCE Soothing Treatment Lotion” and “DR.CI: LABO SUPER WHITE 377VC RERUM” that are also sold at low prices. In the official flagship store of ORIGINS on Tmall, the “ORIGINS MEGA-MUSHROOM RELIEF & RESILIENCE Soothing Treatment Lotion” (200ml) is priced at about $56 but priced as low as $12 in other personal stores. The “DR.CI: LABO SUPER WHITE 377VC RERUM” (40ml) is sold for about $34 in its official flagship store on Tmall while for $11 in other personal stores.
So why do these big-name cosmetics rarely on sale have been sold at such low prices at present in personal stores and where do they come from?
Several factors could explain the super low prices, but the one that dominates is the impact of the epidemic on the cross-border trade of cosmetics. Since the beginning of this year, the COVID-19 outbreak once again raged through Shanghai, Shenzhen and Guangzhou. There is a risk of outflow to coastal areas such as Jiangsu and Zhejiang recently, but there are many bonded warehouses in these areas and many cross-border cosmetics traders have goods stored in the local area. In order to avoid product backlogs and rapidly recover the turnover of funds, traders have chosen to sell products by cutting prices.
Another factor lies in the restriction of cross-border travel due to the epidemic. The tourism retail channel has been hit hard, resulting in the outflow of a large number of big-name beauty products from the duty-free shop channels in other countries except for China. Generally speaking, most of the supply of cosmetics in China’s bonded warehouses comes from duty-free shops in South Korea and Japan, of which the goods flowing out of Korean duty-free shops can account for 70%. However, due to the impact of the epidemic, the number of tourists visiting South Korea has dropped sharply, so a large number of big-name cosmetics from duty-free shops have flowed into the Chinese market.
In summary, if the supply increases significantly over a period of time with the glut of supply being clearer than the demand, then the price of products will naturally fall.
