Five Key Channels in China’s Cosmetics Market: Analysis
OKOMP Marketing • 27 May, 2015
Any cosmetics company that wants to break into China’s cosmetics market needs to understand and choose the right channels. In this article, we analyse the pros and cons of the major Chinese cosmetics channels.
As a basic overview, department stores and chain stores are still the major channels for cosmetic products. However, the market share for department stores declined from 31% in 2008 to 22% in 2014, and from 37% to 31% for chain stores. Meanwhile, online sales have increased sharply from 0.7% in 2008 to 17% in 2014.
Five Key Cosmetics Market Channels in China
1. Department Stores
Normally stock around 20 to 30 brands, so competition is fierce.
- Large traffic, but the time to engage with consumers is limited
- Can provide quality product consultation to potential customers
- Only have a counter to represent the brand
- Price range: £20 – £200
- Good for brand image, especially the exposure in high-end department stores
- Cosmetic products sold in department stores are considered more trustworthy
2. Chain Stores, Supermarkets, Hypermarkets and Professional Stores
- Lots of brands, depending on the size of the store, ranging from tens to hundreds
- High traffic in the store
- Limited brand exposure, as most of the brands are displayed together, without clear separation
- Limited time and space to provide consultation
- Price range: £2 – £30
- Brands normally have less control over the display and services, etc.
- Need to pay high slotting fee to enter the chain stores
3. Brand Store
- Exclusive for own brand, like Herborist, Fancl, L’Occitane en Provence, Shiseido
- The advantage of the brand store is easy to control
- Very flexible on the range of services and promotions that can be conducted in store: consultation, promotion, membership, product presentation
- Price: £10 – £100
- Store design is sophisticated, can be a channel or medium to improve brand awareness
4. Beauty Salons
- When it is a branded spa, it will be exclusive to its own brand. If it is not branded, then there can be several brands featured
- Have more time to educate customers. Customers from this channel are loyal and mid- to high-end
- Mainly focus on face and body treatments, so products and services are limited
- Price range: £20 – £300
- A branded spa is good for brand image and also customer experience
- Requires sophisticated design and advanced operation management. Service quality is important
- Almost every brand, from low- to high-end products
- Customers expect a high discount when they buy online
- Easy to provide more information about the product
- Very competitive
- Brand websites or online flagship shops are easy to control. Other websites will be difficult to control
- Product quality and fake products are the main concerns for customers
- Customers’ online reviews are important
Note: In 2014, WeChat rose as a hot channel to sell cosmetics, mainly domestic skin care products such as face masks. The entry barrier on WeChat is very low, and product quality and agents’ quality are major concerns. Thus, this channel has received quite a lot of criticism.
The Internet is a very effective channel for companies to test and enter the China market. Physical stores are still the best way to provide high-standard customer service, but establishing a physical store will require more time and effort for a company to enter the market.