This article was originally written by Chao Zhang and published by All Weather TMT on 04-13-2020. Translated from the Chinese by First Link LLC. Translator’s notes are provided in brackets.
The pandemic has stopped the vast majority of people from setting foot out the door, but not even a homebound lifestyle is enough to restrain our passion for consumerism. One emerging dark horse: the beauty industry.
According to data from market research firm Kantar, while the beauty industry’s overall performance fell 13% between January and February, online channels maintained a growth rate of 7%. This means that e-commerce is now the fastest way to grow market share in China’s beauty industry.
Consumer enthusiasm for beauty is especially apparent on Tmall. During their Beauty Awards on April 13, Tmall released a set of data: cosmetics on the platform grew 40% between January and February and 50% in March. And leading up to International Women’s Day on March 8th, 10 top makeup brands including Estee Lauder and Clarins broke Tmall sales records for new product launches.
Looking back across 2019, the performance of Tmall’s beauty category is just as impressive: 16 brands broke 1 billion RMB in annual sales, while multiple domestic brands reached over 500 million RMB.
Without a doubt, this is a strong moment for cosmetics on Tmall. And in 2020, Tmall will increase support for SME’s on the platform. Plans include assisting export-focused factories with brand transformations and incubating 1,000 new brands to help them surpass 10 million RMB in annual revenue.
Tmall Beauty 2019 Growth Approaches 60%
Everyone loves to look good, and consumers in the rapidly emerging “beauty economy” have spurred consistent growth for the industry that has continued to be an enormous driving force even in the midst of stagnation in the offline economy.
During the pandemic Tmall launched a series of support measures including the 20 initiatives listed in a letter to all Tmall merchants and the Spring Thunder Plan [version 2.0 of a response plan first launched under the same name in response to the 2008 economic crisis]. These measures helped shore up cash flow difficulties faced by many brands while also spurring an early recovery for the beauty and personal care industries.
Reports show that in early March over 20,000 brands on Tmall had surpassed sales revenue from the same period last year, with combined YoY growth of over 100%. Beauty and personal care led all industries in YoY growth rates: 71% for body care products, 92% for hair products, 86% for face creams, 108% for facial essences, and 55% for perfume.
Even when stuck at home, data shows that the younger generation is willing to “buy the most expensive skin care products to stay up all night” [with the products mitigating the effects on your skin caused by lack of sleep, a saying made famous by Chinese celebrity Yang Mi] and wear lipstick underneath a face mask. Over the last two months on Tmall, 11 million units of lipstick and 6 million units of eye cream were sold, with many sales occurring after midnight.
“E-commerce already has the most sales revenue of all channels (in beauty and personal care). This is a new development coming out of 2019, which was a special year” says Mai Gu, President of Fast-moving Consumer Goods and the Fashion and Apparel Division at Tmall. “E-commerce has the fastest growth and the largest market share, once again establishing the importance of the internet for the beauty industry.”
In 2019, online channels led Tmall’s beauty category to nearly 60% growth. Personal care, on the other hand, is repeating beauty’s growth path from three years ago, predominately driven by high-end, trendy brands. Tmall also gained many new accounts brought in by the household category, providing opportunities for increased growth.
Jiyun, General Manager of Beauty for Tmall, says that there were 41 core product types that maintained 200% YoY growth, 91 sub-types that maintained 300% YoY growth, and 430,000 new product launches.
These impressive numbers reflect significant changes in market penetration. According to Mai Gu, Tmall’s beauty category is now at 33% penetration. “We are extremely confident in reaching 40% penetration this year,” he said. The personal care and household categories are also well on their way towards meeting goals of 30% and 40% penetration.
Plans to Incubate 1,000 New Brands to 10 Million Annual Revenue in 2020
As the epidemic spreads globally, it’s not only smaller brands that are negatively impacted; export-focused factories also face the risk of operations coming to a halt.
Mai Gu says that, in order to achieve greater inclusiveness and alleviate pressure for more companies, “Tmall Beauty will be implementing Alibaba’s Spring Thunder Plan. Tmall will increase support for small brands in 2020, assist export-focused factories with brand transformations, and incubate 1,000 new brands at an accelerated pace to help them surpass 10 million RMB in annual revenue.
Tmall has created a new battle plan to achieve these goals. They will expand product supply to include content and service. The marketing calendar tool will be upgraded to a marketing map that allows for more detailed marketing planning. Content infrastructure will be enhanced to allow video and livestreaming to become new engines of growth for the industry. Tech improvements will include the use of augmented reality to enhance consumer experience, and deepening consumer insights with barcodes and basic product attributes.
Stuck indoors during the pandemic, users are instead shopping on the cloud. Testing lipsticks, mascara and eyeliner at home have all become new points of consumer interests. Data shows that after the launch of Tmall’s augmented reality cosmetics tester, the number of consumers willing to try out new products has increased more than tenfold.
In 2020, Tmall also took the noteworthy step of focusing their sights on Generation Z. According to Jiyun’s analysis, Generation Z is now the core driver of consumer growth, a shift that represents the passing of the torch to a new generation of consumers.
“Our core consumer group has changed from the 90’s generation to Generation Z, or consumers born after the year 2000,” says Jiyun. “The products that excite them, the features they want, and methods of communication are completely different from the products and brands of the past. This is our greatest opportunity, and our greatest challenge.” Jiyun hopes that merchants and Tmall can innovate together to face this new challenge.
Tmall Beauty is also increasing innovation by partnering with RT-Mart, Hema and Ele.me to increase customer experience with services like same-city delivery in under one hour.
But Mai Gu also recognizes the trauma that the current pandemic is inflicting on global cosmetics supply chains. Global trade will also be impeded, posing a challenge to Tmall as it looks to introduce more international beauty products. Based on this assessment, Tmall plans to help brands search for more export opportunities. But if international opportunities prove hard to come by, it may have to shift focus to the domestic market.