“This is the most dismal point in my over 20-year career, worse than during the epidemic.” Recently, when talking about her feelings towards the performance of the beauty market in the third quarter of this year, senior beauty industry practitioner Wang Qi candidly expressed to CHAILEEDO.
Various signs indicate that, as Wang Qi said, the “bubble and shadow” of the cosmetics market has quietly been “burst” by the poor performance in the third quarter.
On one hand, there has been an unprecedented continuous decline in the overall market. According to data from the National Bureau of Statistics, since June this year, the retail sales of cosmetics have seen a rare “four consecutive declines,” showing a series of downturns. On the other hand, the performance of top listed beauty companies in China is no longer “strong.” According to CHAILEEDO’s analysis, among the 8 listed beauty companies that have released financial reports, 6 have seen negative growth in their net profits attributable to shareholders after adjusting for non-recurring items, with the largest decline reaching 421.81%. At the same time, half of the companies experienced a year-on-year decline in revenue, with some falling as much as 30.87%.
Despite the overall decline in the consumer market, the collective “collapse” of the domestic beauty market in China in the third quarter has its own set of circumstances beyond the broader environment. CHAILEEDO is attempting to explore what kind of “breakthroughs” and “establishments” lie behind the widespread troubles of the third quarter.
The “decline” has become the main melody in the third quarter without “winners”
“I am very surprised. I expected the performance to generally be weak, but I did not expect it to be so bad,” an industry insider who has long been following the performance of listed beauty companies in China commented on the third-quarter financial reports released by top domestic beauty companies.
An analysis by CHAILEEDO of the financial reports of major beauty companies revealed that describing the performance in the third quarter as a “collapse” is not an exaggeration.
In terms of revenue, Shanghai Jahwa, Bloomage Biotech, Freda, and S’Young all experienced declines in the third quarter, accounting for half of the top listed beauty companies that have released financial reports. In terms of the magnitude of the declines, S’Young and Shanghai Jahwa saw significant decreases, both exceeding 20%. Specifically, S’Young experienced a sharp decline of 30.87% in the third quarter, with revenue dropping to 752 million yuan.
However, several companies saw revenue growth in the third quarter, including Proya, BTN, Marubi, and Fuerjia. Proya and Marubi both achieved growth of over 20%, continuing their upward trend in the mixed feelings of the third quarter, showing impressive performance.
However, compared to the situation of “some joy and some sorrow” in revenue in the third quarter, the decline became the “main theme” when it comes to the net profit changes of listed companies, reflected in the data of the net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses (referred to as “net profit attributable to shareholders excluding non-recurring items”). According to CHAILEEDO’s statistics, as many as six out of the eight listed domestic beauty companies in China saw a decline in their net profit attributable to shareholders excluding non-recurring items, with some companies experiencing losses for the first time, while only Proya and Marubi maintained continuous growth.
Specifically, Shanghai Jahwa recorded a net profit attributable to shareholders excluding non-recurring items of -115 million yuan in the third quarter of this year, a year-on-year decline of as much as 421.81%, marking the first loss for Shanghai Jahwa since its listing. Meanwhile, S’Young and BTN both saw declines of over 100% in net profit attributable to shareholders excluding non-recurring items in the third quarter.
Overall, only Proya and Marubi were the top listed beauty companies that truly achieved double growth in profitability.
In fact, the collective decline of top listed beauty companies in China in the third quarter actually reflects the “chilling” state of the domestic beauty market. According to data released by the National Bureau of Statistics, from July to September this year, the retail sales of cosmetics were 24.5 billion yuan, 31.9 billion yuan, and 32.9 billion yuan, respectively, with year-on-year declines of -6.1%, -6.1%, and -4.5%.
Among them, CHAILEEDO’s analysis of the total retail sales of cosmetics in July over the past decade (2015-2024) revealed that since 2018, the growth rate has been slowing down, with July of this year showing the highest decline in nearly 10 years.
However, the decline in the third quarter is just a microcosm of the weak growth in the beauty market this year. Data from the National Bureau of Statistics shows that from January to September, the total retail sales of cosmetics were 306.9 billion yuan, a decrease of 1% year-on-year, while the total retail sales of consumer goods increased by 3.3% year-on-year. The beauty market can be said to be comprehensively underperforming the overall market.
The beauty market cooling trend has become a basic consensus, with many industry insiders saying that the short-term outlook is “difficult to be optimistic.”
So, under the not-so-optimistic sales data, is the domestic beauty market in China really as “difficult” as the data reflects in the third quarter, and what are the changes that are difficult to reflect in the data?
In this regard, CHAILEEDO communicated with nearly 10 beauty industry professionals who have been deeply involved in the market for many years, including founders of well-known beauty brands and senior channel distributors with over 20 years of experience, in order to comprehensively present the true side of the domestic beauty market in China.
According to Chen Xu, a senior distributor representing multiple internationally renowned brands for over 20 years, the difficulty faced by the domestic beauty market in China in the third quarter of this year is “unprecedented.”
“In many well-known domestic and international beauty companies that I have been in touch with, the decline in performance is very obvious. Several brand operators I’ve encountered have had much less smiles this year. Moreover, from what I understand, a well-known international beauty giant may significantly reduce channel supply costs in response to market changes,” said Zou Bin, a consultant at the Hong Kong International Business Development Council to CHAILEEDO.
A senior beauty channel distributor who has been deeply involved in offline channels for many years and has close connections with several well-known department stores expressed, “The current situation for offline beauty is far from optimistic. Taking a well-known domestic department store as an example, based on recent discussions with their internal staff, foot traffic has decreased significantly compared to before, and many consumers only engage in activities like dining, with very little significant spending at offline beauty counters.”
For Luo Yun, founder of the Xianji brand, despite the overall cooling trend, beauty companies still face different situations. “Weak consumer growth is a common phenomenon given the overall environment. However, there are still distinct characteristics between companies. While companies like Shanghai Jahwa, Bloomage Biotech, and S’Young have seen varying degrees of performance decline, some emerging players in new tracks are rising, achieving double growth in sales and profits.”
It is worth noting that most of the interviewees maintain a basic consensus that, influenced by the overall consumption environment, the domestic beauty market in China will further cool down and is likely to continue for a considerable period of time.
“This is an overall consumption tightening. I believe this situation may persist for a period of time, and it’s not something that a single brand can decide,” said Cheng Yingqi, founder of Bingquan Probiotic Toothpaste, to CHAILEEDO.
Lele, a beauty science popularization enthusiast, believes, “The trend of the cosmetics market is indirectly related to the macro economy, reflecting the public’s conservative expectations for the future and a more cautious consumption willingness. At the same time, the price competition among various e-commerce platforms is pulling down the overall selling prices of cosmetics, which means that compared to the past, consumers can increase their purchasing power with the same amount of money spent.”
However, some beauty industry professionals believe that in the face of the cooling consumption environment, favorable policies are also being introduced synchronously, which could lead to improvements in the future.
Luo Yun stated, “From a macro perspective, the country introduced multiple measures at the end of September to emphasize the importance of the economy and boost consumer confidence. I believe these measures will gradually feed back into the beauty consumption sector, promoting healthy and orderly economic development.”
It is urgent to return to business logic, and only by not being eliminated can there be a future.
However, facing the rapid changes in the beauty market, some industry insiders also indicate that this signifies an unprecedented transformation period for the beauty market. Companies need to quickly revert to business logic, find opportunities in crises, and truly win the “turnaround battle.”
In the view of Qian Qi, General Manager of Hangzhou Mei Yitian Brand Management Co., “I think this is a good thing, it’s a period of transformation in models. The previous sales strategies, promotional rhythms, and the efficiency of capital flow have all undergone fundamental changes.”
Nod, the founder of Jiubian Cosmetics, believes, “For a long time in the future, without traffic dividends or marketing dividends, in the era of stock competition, it will be about the competition of company teams and refined operations. At the same time, enterprise transformation will be very difficult. Rather than easily achieving high growth rates, it will be single digits in the future, and some companies may even experience negative growth.”
In fact, as Nod mentioned, CHAILEEDO’s discussions with several brand operators have revealed that companies that overly relied on traffic strategies in the past, as well as those with path-dependent approaches like heavy investment in research, are facing significant difficulties in transformation.
Recently, a former Sales Director for a billion-dollar brand, now in charge of a new skincare brand under a listed domestic beauty group in China, expressed helplessness to CHAILEEDO, saying, “Our group is finding it difficult to provide too much financial support to new brands. We can no longer replicate the heavy asset-building approach from before, spending a lot on market education. Now, we can only reposition ourselves and see if there are still new opportunities.”
According to CHAILEEDO’s analysis, the decline of many enterprises today is related to their excessive reliance on past successful paths and failure to timely transform. Specifically, these paths include: First, an “excessive” focus on research and development, where operators believed that heavy R&D would give them core competitiveness, leading to increased investment, bloated R&D teams, difficulty in transformation, and ultimately massive layoffs. Second, solely focusing on building a “brand” while neglecting the “business.” Doing branding became the market’s “politically correct” trend, causing many companies to overlook the underlying logic of the beauty business. They heavily invested in branding without truly establishing a viable business model or achieving profitability goals, leading to difficulties in sustaining growth in the long run.
It is noteworthy that currently, “profitability” is reemerging as a focus for beauty operators, and “stability” has become a new goal for many businesses.
In a recent public discussion, the founder of a multi-billion-dollar beauty brand emphasized the importance of “making money” repeatedly. “Great companies can balance business and art. Companies must first have a stable money-making ability to ensure the world is not dominated by profit-centric enterprises and to ensure that good money drives out bad money.”
As renowned investor Zhu Xiaohu stated, “Today, we must operate companies with extreme caution. We clearly see that ‘survival of the fittest’ is the rule.” “Companies that have survived today and achieved scalable profits all have opportunities, such as cosmetics, food, including offline channels.”
Patience, decisiveness, perseverance, and innovation are the keywords that several beauty professionals have provided when facing a declining market. Looking towards the future, avoiding elimination will become the primary goal for beauty companies to achieve.
