At the same time, products can reach a broader range of consumers. Supermarkets are typically located in bustling areas or densely populated areas, thus attracting more consumers. Cosmetic brands can reach a wider range of potential customers, increasing sales opportunities.
Furthermore, the supermarket model can attract different consumer groups. Supermarket customers usually come from different age groups, income levels, and consumption habits. Therefore, cosmetic brands can appeal to a more diverse range of target consumer groups.
In addition to the supermarket channels, the CS channels, KA channels, as well as channels such as beauty salons/beauty spas, are indispensable components of the cosmetics channel ecosystem.
Wu Yifan, General Manager of YOSEIDO, stated at the conference that YOSEIDO’s most advantageous channel is through the CS channels. This is because it can ensure price stability, protect quality (through stable supply chains), and maintain consistency between online and offline channels.
Hangzhou Huaxi Extreme founder Chang Kai mentioned a set of data: the CS channel, with roughly tens of thousands of outlets in China, can become the most extensive, penetrating, and humanistic offline channel. From the perspective of profit and sales scale, the CS channel is undoubtedly an indispensable channel for brands. He also noted that the KA channel, with its large number of stores and high foot traffic, particularly enhances the brand’s offline penetration.
In conclusion, although online channels in the cosmetics industry have rapidly risen in recent years, offline channels remain crucial. Under the trend of holistic channel development, online and offline channels need to develop synergistically, with diverse channels such as supermarket channels emerging as a new trend. Through comprehensive channel construction, cosmetics brands can break barriers and achieve greater influence.
Hangzhou Huaxi Extreme founder Chang Kai mentioned a set of data: the CS channel, with roughly tens of thousands of outlets in China, can become the most extensive, penetrating, and humanistic offline channel. From the perspective of profit and sales scale, the CS channel is undoubtedly an indispensable channel for brands. He also noted that the KA channel, with its large number of stores and high foot traffic, particularly enhances the brand’s offline penetration.
In conclusion, although online channels in the cosmetics industry have rapidly risen in recent years, offline channels remain crucial. Under the trend of holistic channel development, online and offline channels need to develop synergistically, with diverse channels such as the supermarket model emerging as a new trend. Through comprehensive channel construction, cosmetics brands can break barriers and achieve greater influence.
How to effectively manage offline channels?
In a situation where offline channels still play a pivotal role, how can brands effectively manage offline channels?
The construction of offline channels begins with the reconstruction of the supply chain.
“I believe the biggest challenge for offline channels is the reconstruction of the supply chain. Regardless of the industry, products are always the soul of offline channels. Service is another topic, but service alone cannot save offline channels. Only by reconstructing a strong supply chain and providing consumers with truly cost-effective products can there be development,” said Chen Gang, General Manager of Huanyan Cosmetics in Panzhihua, Sichuan, in an interview with CHAIEEDO.
Supply chain construction is of paramount importance in any industry, especially in the fast-moving consumer goods sector such as the cosmetics industry. Supply chain mistakes can sometimes deal a fatal blow to companies. For example, cosmetics brand Revlon went bankrupt and delisted due to supply chain issues that led to increased costs. Similarly, Estée Lauder’s performance has suffered in recent years due to delays in supply chain construction in the Asia-Pacific region.
Optimizing the supply chain can first and foremost improve production efficiency, reduce production cycles, and lower costs. Through supply chain management, companies can optimize raw material procurement, production planning, inventory management, and other processes, thereby improving production efficiency and reducing production costs.
Secondly, supply chain construction can provide companies with more flexible and efficient production and supply capabilities, supporting innovation and market competitiveness. By establishing stable and efficient supply chains, companies can better respond to market changes, quickly launch new products, meet consumer demands, and enhance market competitiveness.
Furthermore, supply chain construction can promote long-term, stable cooperation between companies and suppliers. Through supply chain management, companies can assess and manage suppliers, select appropriate partners, reduce risks, and ensure supply stability.
Regarding supply chain issues, Ding Lan, Director of CHAILEEDO Intelligence, stated: “On one hand, optimizing the supply chain system can improve overall inventory turnover efficiency; on the other hand, online tools can help cosmetic stores integrate online and offline processes.”
The next aspect of offline channel development is price control.
In fact, in the recent development of offline cosmetics, the confusion in pricing between online and offline channels has been a persistent issue for brands. For example, the pricing confusion in Estée Lauder’s travel retail channels has led to a slump in its travel retail channel performance and has also damaged the brand’s value.
Controlling prices offline first and foremost protects the brand image and value. Price control offline ensures consistency in product prices across different sales channels and stores, avoiding damage to the brand image and value due to price confusion.
Secondly, it is conducive to maintaining partner relationships. Price control protects the interests of retailers, avoiding price wars and price-skewing phenomena, thus maintaining partnerships with retailers.
Chang Kai, founder of Hangzhou Huaxi Extreme, mentioned, “The most important point is price control, which is the aspect we are most concerned about in our offline channels.” He stated that inconsistent pricing between online and offline channels has been a recurring issue in recent years, and industry insiders are very concerned about this issue.
During the conference, Fu Zichong, Sales Director of the Distribution Division at Chicmax, discussed Chicmax’s considerations for offline channels in the future. He emphasized the importance of strict control over products and prices. Ensuring the cleanliness of goods in the market and maintaining a robust pricing system is essential to ensure profitability for partners. Fu Zichong mentioned that among China’s top 100 chain stores, 126 chains cooperate with Chicmax. However, due to unauthorized changes in product prices, Chicmax terminated cooperation with 18 stores last year. This illustrates Chicmax’s emphasis on price control.
Yang Zengyan, General Manager of the Offline Business Division at Peley Corp, stated in an interview with CHAILEEDO that the brand’s pricing control capability is crucial when entering the offline market. Price positioning is vital to the brand’s survival, and stable product and price positioning are necessary for channels. Establishing a sound pricing system ensures profitability at all levels and contributes to long-term business sustainability and brand development.
Overall, in the construction of offline channels for cosmetic brands, the key focus lies in supply chain reconstruction, digitalization, and price control. Optimizing the supply chain improves efficiency and reduces costs, digital applications enhance shopping experiences and operational efficiency, while price control maintains brand image and partner relationships.
The reconstruction of offline channels in the Chinese cosmetics industry faces long and challenging paths ahead
In recent years, due to the impact of the pandemic and the changing consumer habits and market demands, competition in the Chinese cosmetics industry has intensified. Online shopping has gradually become deeply ingrained in the habits of Chinese consumers, posing both challenges and opportunities for brands in offline channel construction. How to address these challenges and seize opportunities has become an important issue that cosmetics brands cannot afford to ignore.
In comparison to other major cosmetics consumer markets such as Europe, the United States, Japan, and South Korea, offline sales still account for a larger proportion. Looking at individual companies, the offline sales ratio of top Chinese cosmetics enterprises is significantly lower than that of international beauty giants. For example, L’Oréal has an offline sales ratio of 72%, Shiseido 66%, while domestic companies like Marubi have an offline ratio of 28%, BTN less than 10%, at only 9%, and Betsey less than 19%.
On one hand, the construction of offline channels for cosmetics faces numerous challenges. Firstly, supply chain reconstruction is a daunting task. The quality and safety of cosmetics directly impact consumer health and trust. However, supply chain disruptions may lead to issues such as poor product quality and counterfeit products, damaging brand reputation. Secondly, fierce market competition and the rise of various channels have widened consumer choices, making it challenging for brands to stand out among numerous competitors.
Moreover, the operating costs of offline channels are relatively high, with expenses such as rent and labor remaining high. The pressure of reduced offline foot traffic adds significant financial strain to brands. Additionally, the diversification of consumer demands presents challenges for brands, as different consumer groups have varied requirements for products and shopping experiences. Meeting these diverse needs has become a test for brands.
However, amidst these challenges, cosmetics brands have also discovered numerous opportunities. Firstly, with consumers’ increasing focus on product quality and safety, high-quality and safe products will be more favored by consumers. By strengthening supply chain management to ensure product quality and safety, brands can earn consumer trust and support. Secondly, the diversified development of offline channels provides brands with more sales opportunities.
Traditional channels such as department stores and pharmacies in China still hold significant potential, while emerging channels such as instant retail and social e-commerce bring new growth points for brands. Furthermore, the development of digital technology provides more possibilities for the operation of offline channels. Chinese consumers are accustomed to using mobile technology in various aspects of life, and the application of technologies such as smart shopping assistants and virtual try-ons enhances the shopping experience, attracting more consumer attention and participation. Digitization will be one of the biggest advantages for the offline reconstruction of the cosmetics industry in China.
Meidd founder and CEO, Wen Min, stated: “In 2024, instant retail will experience an explosive outbreak, which will have a disruptive impact on cosmetics stores, leading to a complete reconstruction. Instant retail needs to be based on digitization.”
At the same conference, Beauty Choice founder Wang Kai also emphasized the importance of digitalization. He stated, “Digitalization is the common foundation of new retail products and the steel of the new retail era. Digitalization includes the digitization of the supply chain, decision algorithms + data, and the digitalization of the status of goods in time and space. Additionally, store digitalization involves the decomposition of complex tasks and the digitization of simple tasks. Furthermore, customer digitalization involves using mobile products as a medium to form a closed loop of interaction and transactions.”
“Digital technology applications are becoming increasingly common in offline channels. For example, the introduction of technologies such as smart shopping assistants and professional skin problem identification instruments has enhanced shopping convenience and accuracy,” said Xu Xiaoming, Director of the Fuerjia Channel Center, in an interview with CHAILEEDO.
In summary, facing challenges and opportunities, Chinese cosmetics brands need to take effective measures to achieve the healthy development of offline channels. Firstly, they need to strengthen supply chain management to improve product quality and safety and ensure smooth and efficient supply chains. Secondly, they need to increase the application of digital technology. Finally, they need to strengthen cooperation with partners to jointly explore the market and achieve mutually beneficial development.
Overall, the construction of offline channels in the Chinese cosmetics industry faces both challenges and opportunities. Brands need to innovate continuously, actively respond, and achieve the goal of sustainable and healthy development of offline channels while keeping pace with the times and steadily moving forward.
