Harnessing the potential of China is vital for the growth of international beauty brands. As the market changes rapidly, success does not happen overnight. It has become increasingly competitive and costly to support. What does a brand need to start and grow a successful business in China?
It’s true that China has become more expensive, and that means having realistic, long-term goals is more important than ever. Finding a partner who aligns with these long-term goals is essential. At Samarkand, we aim to build a sustainable and profitable business for both our brand partner and for us. To develop a new brand in the incubation phase, the key is to enter the consideration pool of major consumer groups of beauty products. This means being present on the right social channels, having the right distribution network and choosing the right activations to gradually build awareness. For established brands in the acceleration phase, combining well-managed brand windows with selective distribution through influential channels is at the heart of our strategy. In this phase, pricing and brand control is essential, and our specialist market teams allow us to monitor this closely throughout the process.
The cross-border has traditionally been the first and, for some, the only point of entry into the market. As international brands have gained a better understanding of the market and animal testing requirements evolve, brands seek to seize all opportunities online and offline. What is your strategy for channel cadence?
The changes to animal testing regulations are really exciting – it’s the first step in opening up the domestic market to more international brands. Challenges remain, including requiring a local entity to act as a responsible party, which can represent a lot of control for the brands to be ceded. In addition, âspecial purposeâ cosmetics and anything with new ingredients still require animal testing to enter the market, which remains a significant barrier for many beauty brands. While the changes to General Import are exciting, the cross-border will remain the predominant channel for Chinese consumers to discover new international brands. This natural entry point gives brands the opportunity to identify key messages and flagship products before committing to investing heavily and bringing large amounts of inventory to market. Of course, there is nothing quite like a product experience, and the increasingly sophisticated O2O ecosystem in China will play an important role in boosting brand awareness for international beauty in China.
The DTC channel has become crucial for brands not only in their home market but also internationally. While the e-commerce opportunity is huge, beauty brands rarely consider a DTC strategy in China. Could you find out about the DTC opportunity in the market?
There is a perception that the market dominance and prevalence of resellers and Daigou in China is due to consumer demand, which means that brands are abandoning their DTC strategy for the market. In reality, consumer confidence in marketplaces is low and DTC opportunity in China is large, in 2020, 19.1% of Chinese consumers shopped on international (overseas) websites. This number is high given that international websites often do not provide a good experience for Chinese consumers, with basics like site speed, logistics and payment options often overlooked. Many beauty brands are already seeing good traffic from mainland China, even if they haven’t done anything to optimize their site. The opportunity is to convert that traffic and implement some of the tools that will turn those search visits into conversions. If international brands can convince consumers that they are reliable, reassure them that they are genuine, and ensure that their prices are fair, then there is a huge opportunity to take market share. Consumers want access to the latest products at fair prices, and getting products directly from the branded site can provide the best branded customer experience.
Can you explain the technological solution you have developed to allow brands to sell directly to Chinese consumers?
Nomad Checkout reduces the barriers Chinese consumers face when shopping on international websites. It combines China-specific solutions for payments, site speed optimization, traceable logistics and automated cross-border clearance to improve the customer experience. Along with a better on-site experience, the post-purchase customer experience is enhanced with faster delivery times, clear returns processes, and reduced customs stop rates. Nomad Checkout is used by both small brands and large multi-brand beauty retailers, and thousands of transactions have been processed since its launch. Nomad Checkout can be implemented as a Shopify app or directly integrated with any e-commerce platform, meaning that international brands can now sell directly to Chinese consumers using their existing e-commerce ecosystem, and no investment should be made in additional stock. or new e-commerce showcases.
â¨â¨This year’s Singles Day shopping event unfolded under the cloud of a sweeping government crackdown on private businesses in China, and a shift from a focus on pure sales numbers to sustainability and inclusiveness, reflecting the âcommon prosperityâ agenda. Are there any lessons brands should take away from Singles Day this year?
Singles Day always has something new and the focus on sustainability is a fascinating development. Changing social attitudes, coupled with top-down legislation such as strict recycling laws, are starting to impact the way people shop and some of the selling points consumers look for in beauty brands. , but these are still secondary considerations; the effectiveness of the product and the history of the brand remain paramount.
Another key learning came from the fallout between big international brands like L’Oreal and Austin Li. It was found that the brands had broken their commitment to provide the live streamer with their best price, offering a bigger discount later in the day. during the Double-Eleven promotion period. The power of live-streaming talent, especially Austin and Viya, is incredible, and the argument has generated over 500MM of views on Weibo. I think this issue also sheds light on two more important strategic questions: First, when live streamers can offer big discounts and amazing deals all year round, is Double-Eleven as relevant? And second, if you regularly work with a large live streamer offering large discounts, how does that impact your pricing strategy on other channels?
What are some of the emerging trends or market shifts that companies should be aware of as 2022 approaches?
One market change that excites us is the increased diversification of cross-border shopping channels and the ability to reach different customers by accessing their engaged consumer base. We’re particularly excited about Douyin, where we already operate a cross-border store focused on high-end beauty brands such as 111 Skin, Iconic London, Omorovicza and Philip Kingsley. In 2020, Douyin’s 600+ million daily active users spent, on average, 88 minutes on the app. That’s four times longer than the average Taobao user, who points to 22 minutes. With Douyin’s big strategic push into e-commerce and the launch of cross-border stores earlier this year, we’ve had a great start and see great potential to engage with consumers through live streaming and content, and for sell to consumers where they spend. time.
All brands of beauty products should also be aware of the Guochao trend – a growing preference for buying Chinese brands and products, which for beauty started strongly in color cosmetics, but are now rapidly expanding into skin care, hair care and into other beauty categories. The competition is getting more intense, but we’re also seeing signs that some of the stratospheric marketing budgets of brands like Perfect Diary are returning to more normal levels.