INSIGHTS
Offline Beauty Players Resurge in the Battle for Traffic
BY Rita BaoDec 19, 2022
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China's retail market is undergoing changes. As online traffic gradually reaches its peak, the costs of online retail are rising while the growth and profits are shrinking. Based on retail sales data released by the National Bureau of Statistics, the year-on-year (YoY) growth of online retail sales in goods declined from 25% in 2018 to less than 10% in 2022. Besides, the proportion of online retail sales in goods has almost stopped growing since 2020. 

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In the beauty industry, GMVs on e-commerce platforms show sluggish growth. According to Guoyuan Securities, in 2021, the total GMV of beauty products on Ali platforms declined by 8.72% to 254.3 billion yuan.1 Nint data shows that from Nov 2021 to Oct 2022, the GMVs of beauty products on Tmall and JD.com are 212.2 and 43.9 billion yuan, down 11.31% and 6.52%, respectively.2 In the meantime, offline beauty channels and brands have discreetly revamped their outdated operation strategies, trying to form differentiated competitive advantages over e-commerce platforms to create space for growth. 

Department Stores

Win Consumers' Trust through Professional Services and Effective Communication

Makeup service is not a novelty in the Chinese beauty industry. Most beauty brands at department stores have been providing this service to consumers to convey brand concepts and attract more consumers. However, it didn't function well in the past. Instead, beauty advisors left consumers with stereotyped impression such as annoying, arrogant and snobbish. 

In Aug 2022, videos about professional and considerate makeup services by beauty advisors at department stores became popular on Chinese social media. Most of those videos were produced as beauty brands' KOL marketing campaigns to impress consumers with professionalism and change their stereotypes. The popularity of the videos reveals:

  • Consumers still have a strong demand for beauty services at offline stores;

  • Offline stores begin to revamp beauty advisor management to regain consumer trust;

  • Offline stores begin to leverage social media to show differentiated advantages.

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Online and Offline Integration Has Gradually Become the Way to Survival

Department stores attach increasing importance to digital transformation. Many department stores have launched digital membership systems covering membership information, online shopping, and reward points collection, etc. In addition, the data of consumption behavior and preference shown through digital channels will help department stores launch precise marketing. In the Double 11 Shopping Festival of 2022, department stores' online and offline shopping attracted more consumers with more favorable discounts comparing to the previous year. 

To attract more consumers, beauty advisors fully utilize traffic from public and private domains. On the one hand, beauty advisors push discount information to the established customer community through Wechat groups and moments. On the other hand, by posting on social media, they can attract and transfer public traffic to the private domain. 

From department stores to brands and beauty advisors, they collaborate under a shared goal—to attract customers and facilitate transactions with favorable prices and convenient shopping experience.  

图片3-5.jpgFamous Department Stores'  Digital Marketing and Online Shopping

Trendy Beauty Specialty Stores

With diversified product categories and creative visual design, trendy beauty specialty stores represented by THE COLORIST, WOW COLOR, and HARMAY are occupying the Gen-Z market. According to iResearch, the market size of trendy beauty specialty stores will rise from 1.9 billion yuan in 2019 to 12.9 billion in 2023, with a five-year CAGR of 46.68%.3 

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Diversified Product Categories with Delicate Samples of Famous Brands

Trendy beauty specialty stores are mostly warehouse stores covering an area of over 500㎡. There displays a wide range of products, including skincare, makeup, hair care, body care, fragrance, male skincare, etc., under well-known global brands, niche brands and emerging Chinese brands. Diversified product categories cater to consumers' demand for one-stop shopping. In addition, being aware of consumers' interest in product samples of well-known brands, these stores adopt product samples as one of their selling points to attract customers and boost sales. IResearch data shows that 73.5% of consumers choose trendy beauty specialty stores because they can buy brands and products that are not sold in department stores or traditional beauty specialty stores, and 49.5% express their interest in beauty samples.3

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Photogenic Store Design and Self-service Shopping Mode

Trendy beauty specialty stores also meet young consumers' social needs. With creative and fashionable decorations, those stores become photogenic places that attract many young consumers and receive high exposure on social media, such as Douyin and Xiaohongshu. Moreover, stores' visual designs are crucial factors likely to promote consumption. The more consumers like the visual design, the longer they stay in the store, and the more likely they will buy products. 

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In addition, aiming at Gen-Z consumers who have strong self-awareness, these stores build self-service shopping environments so that consumers can have relaxed and immersive experiences as they wish. Beauty advisors will appear only when consumers ask for help.

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Instant Retail Platforms

Instant retail means that consumers receive products about 30 minutes after placing an order on local-based platforms represented by Meituan Shangou. In today's fast-paced society, consumers have higher requirements for convenience and timeliness, which has fostered the rapid development of instant retail platforms. As a new sales channel, instant retail is supplied by and brings new growth opportunities for local offline beauty stores.

Since 2020, beauty specialty stores, such as Watsons, Sephora, Colorist, Wow Colour, Gialen, and Mannings, have joined Meituan Shangou. Besides, some beauty brands' department stores, such as Perfect Diary, Chando, Florasis, and Innisfree participated in this track. By far, over 10 thousand offline beauty retail stores and 40 beauty brands have settled in Meituan Shangou, utilizing this platform's digital capability to reach more consumers. 

Instant Retail of Beauty Products in Three Major Scenarios: Gift-giving, Travelling, and Shopping from Home

Gift-giving is the most distinctive scenario in instant retail. The quality assurance, packaging and greeting card writing services, and the fast delivery capability provide consumers with good experiences in gift-giving. On May 20, 2022, Meituan Shangou and Sephora launched a 5-2-0 campaign (the digits "5-2-0" have a homophonic pronunciation of "I love you" in Chinese), which achieved over 400% growth in turnovers.

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Instant retail also meets consumers' demand for beauty products during travel. During the May Day holiday of 2021, Meituan Shangou collaborated with P&G and Watsons to launch small-packaged beauty & care products to meet consumers' instant needs during travelling. Related topics received high exposure on social media. 

9-3.jpgPart of Watsons' Small-packaged Beauty & Care Products for Travel Convenience

As many young consumers are busy on weekdays and prefer to stay at home on weekends, consumers have become more accustomed to purchasing some frequently-used and low-priced beauty & care products on instant retail platforms. According to Meituan, since October 2022, orders for affordable hand and facial creams have increased by 52% and 154%, respectively.

Although the development momentum of offline beauty channels in the past ten years is not as strong as that of e-commerce, these channels are irreplaceable because of the diversified business modes and the shopping experiences they can provide. In recent years, offline channels have been exploring new opportunities for traffic and growth. With upgrading of digital transformation and consumer-experience-oriented service, the importance of offline beauty channels will be further manifested.

 

Rita Bao
ChemLinked Market Research Analyst
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