Jinwucn | Bank of America Securities recently held a meeting, inviting leading online cosmetic distributors to share insights. The november 11 shopping festival-related in 2024 started about 10 days earlier than in 2023, divided into three waves of promotions. The first wave in October was the most effective, but the marginal utility of the subsequent two waves gradually weakened. According to Syntun's data, the retail sales of the beauty category during the november 11 shopping festival-related reached RMB 96 billion, a year-on-year growth of 22.5% (the base in 2023 was low at -4.0%). Proya (603605) performed well, becoming the top player in Tmall's beauty sector (GMV growth 10%) and Douyin's beauty sector (GMV growth 60%). The second to fifth beauty brands on Tmall are L'Oreal (LRLCY), Lancome, Estee Lauder, and La Mer; on Douyin, they are Hanshu, L'Oreal, Kefu Mei, and Estee Lauder.

The report shows that the market share of local Chinese brands continued to rise to 52-53% in 2024 (higher than 40% in 2023), while the share of European and American brands decreased to below 40%, and Japanese/South Korean brands decreased by 2-3% compared to the previous year. Experts believe that local brands will continue to take market share from international brands in the coming years. However, compared to brands in developed markets, local brands in China are still fragmented, currently focused on certain niche categories, competing through low stock price strategies, while international brands more broadly meet consumer needs, focusing on high-end brands. Experts believe that due to factors such as shorter product lifecycles, brand restructuring, lower return on marketing expenses, and enhanced bargaining power on online platforms, the market concentration of local brands in the future will increase.

For international brands, the report points out reasons for the decline in market share in China, including: 1) channel inventory clearance in duty-free channels leading to price instability and brand image dilution; 2) International brands started offline and are slower to transition online. Even now, most leading international brands only have official flagship stores on Tmall/JD.com/Douyin, and not on PDD Holdings, vipshop, and other platforms. This leaves space for unauthorized retailers on PDD Holdings/vipshop; 3) Lack of customized products for Chinese/Asian skin; 4) Affected by consumer downgrading due to higher pricing.

Experts believe that international brands can increase sales by: 1) Instead of spending on marketing expenses, focus more on research and developing innovative ingredients, and tailor products to Chinese consumers; 2) Instead of catering to broad consumer demands, focus on niche/customized markets and become experts in these areas, such as sensitive skin care; 3) More communication between overseas headquarters and Chinese management teams can better understand the changing dynamics of the Chinese market and respond more quickly to local market changes; 4) Setting reasonable growth targets and stable pricing are crucial for long-term growth. Brands can consider setting up flagship stores on all major online platforms to access consumer data and set official pricing/discounts. Distributors do not believe that international brands entering lower-tier cities with small-scale and sample-sized SKUs is the right choice because it may further disrupt price stability.