Global brands struggling as their lustre fades in China

[WORLD] The Chinese beauty market has long been one of the most lucrative for global beauty giants like Estée Lauder and L’Oréal. However, recent trends indicate that these global brands are facing significant challenges as their appeal in China starts to fade. Once the epicenter of growth for luxury brands, China’s consumer market has become increasingly unpredictable, with shifting preferences, changing economic conditions, and growing local competition reshaping the landscape.

In this article, we delve into the factors contributing to the decline in the fortunes of Estée Lauder and L'Oréal in China, exploring the evolving dynamics of the market and how these global giants are adjusting their strategies to stay relevant in a rapidly changing environment.

The Rise of Local Competitors

In the past, global beauty brands like Estée Lauder and L’Oréal were the gold standard in China’s beauty market. Their high-quality products, established brand recognition, and effective marketing strategies allowed them to dominate the market. However, local competitors have gained substantial ground in recent years.

Chinese beauty brands such as Perfect Diary, Herborist, and Pechoin are rapidly gaining popularity, offering consumers similar products at a fraction of the price of luxury international brands. These local brands have an inherent understanding of Chinese consumers’ preferences and have benefited from their ability to adapt quickly to changing trends. Many of these brands also leverage e-commerce platforms and social media influencers, enhancing their visibility and driving sales.

According to a report, the rise of homegrown beauty companies has forced international brands to rethink their approach. “The competition from local beauty brands is intensifying, and international brands are no longer able to rely solely on their past success,” says a beauty industry analyst. This shift has made it harder for global players like Estée Lauder and L'Oréal to maintain their previous market dominance.

Changing Consumer Preferences

The preferences of Chinese consumers are evolving, and the beauty giants have found it increasingly difficult to keep pace with these changes. Over the years, Chinese consumers have developed a preference for products that cater specifically to their cultural needs, which has created a gap for international brands.

While Estée Lauder and L’Oréal once thrived by offering high-end, luxury skincare and makeup products, younger Chinese consumers are now gravitating toward affordable, innovative products that address their specific beauty concerns, such as products tailored for skin types unique to Asian populations.

As these consumers become more discerning and conscious of how beauty products align with their lifestyles, they also seek brands that embrace sustainability and social responsibility. Global brands have found it challenging to catch up to these new demands, especially when compared to the agility of local players who are quick to adapt to such trends.

Economic Slowdown in China

The broader economic conditions in China are another critical factor in the declining fortunes of global beauty brands. Following years of rapid growth, the Chinese economy has slowed in recent times. With the ongoing trade tensions between China and the United States, as well as domestic challenges, consumer sentiment has turned more cautious.

In response, many consumers are scaling back on luxury purchases and prioritizing more practical spending. Beauty products, particularly high-end ones, are often seen as non-essential, making them more vulnerable to economic shifts. As Estée Lauder and L'Oréal face declining sales, they are increasingly targeting lower-income segments to maintain market share. However, this has proven challenging as local brands have already established a strong foothold in these segments.

In fact, the economic slowdown has forced companies like Estée Lauder to reevaluate their pricing and marketing strategies. In an interview, Estée Lauder’s CEO noted, "We have to rethink our approach to pricing and marketing in China to align with the changing economic environment." This statement underscores the pressure on global brands to adjust their strategies as the market shifts.

The Impact of COVID-19 on Consumer Behavior

The COVID-19 pandemic has had a profound impact on consumer behavior in China. With lockdowns, social distancing, and a shift to online shopping, the traditional beauty shopping experience has changed dramatically. Luxury beauty brands like Estée Lauder and L’Oréal have been forced to adapt quickly to the rise of e-commerce and direct-to-consumer sales models.

While these companies have invested heavily in online retail strategies, they have found it challenging to recreate the luxury in-store experience that once set them apart from local competitors. The rise of livestreaming and influencer marketing has created a new paradigm for beauty product marketing, and local brands have leveraged these tools more effectively than their global counterparts.

"Livestreaming has become a key sales channel, and local brands are better positioned to use these platforms to connect with Chinese consumers in real-time," says an e-commerce specialist. Global brands, in contrast, have struggled to match the level of engagement and authenticity that local brands are able to achieve through social media and influencer partnerships.

Adapting to the Digital Era

China’s digital landscape is evolving at a rapid pace, and brands are increasingly being pushed to focus on building a strong online presence. While global brands like Estée Lauder and L’Oréal have made strides in their digital efforts, local beauty companies are far more integrated into Chinese digital ecosystems.

Platforms like WeChat, Weibo, and Tmall are integral to any beauty brand's success in China. Local competitors have been quick to integrate their products into these platforms and to use data analytics to personalize consumer experiences. In contrast, international brands are still catching up in terms of using these platforms effectively to create seamless digital experiences.

"Local brands are able to tap into the pulse of Chinese consumers with a level of intimacy and understanding that global players struggle to replicate," says a Chinese tech consultant. “They have the advantage of being native to the Chinese market.”

Strategies for Reviving Growth in China

To combat the decline in their market share in China, Estée Lauder and L’Oréal are taking a number of strategic steps to revitalize their positions. For example, both companies are doubling down on their efforts to appeal to younger consumers by introducing more affordable product lines, collaborating with Chinese celebrities and influencers, and increasing their presence on e-commerce platforms.

Estée Lauder has been experimenting with virtual beauty consultations and interactive online experiences to cater to tech-savvy, younger consumers. Similarly, L'Oréal has focused on sustainability and eco-friendly packaging to resonate with the growing environmental consciousness among Chinese consumers.

While these moves are promising, it’s clear that the competitive landscape has shifted. The key challenge for global beauty brands will be finding the right balance between maintaining their premium image and offering products that meet the new demands of China’s evolving consumer base.

The challenges faced by Estée Lauder and L’Oréal in China underscore a larger trend in the beauty industry: the once-thriving Chinese market is no longer the guaranteed goldmine it once was for global brands. With local competitors rising, consumer preferences shifting, and economic uncertainties looming, global brands must pivot their strategies to stay relevant.

As China’s beauty market continues to evolve, international brands must embrace digitalization, sustainability, and local customization to reconnect with Chinese consumers. Whether these giants can regain their lustre or are outpaced by agile local brands remains to be seen, but the path forward will require innovation, flexibility, and a deep understanding of the Chinese consumer’s changing desires.