Warc, 12 February 2013
BEIJING: Big discounts and a broad range of products from online
retailers of beauty products are attracting growing numbers of Chinese
consumers.
"Direct sales and department stores are outdated,"
Leo Chen, chief executive of Jumei.com, told the Wall Street Journal.
His assessment was shared by a Procter & Gamble
executive, Andrew Li, P&G's associate director of greater China, who said
online sales were key to the FMCG giant's strategy.
Digital players benefitting from this trend include
Jumei.com, an online retailer offering discounts of up to 15% on international
cosmetics brands, which claimed its revenues quadrupled in 2012 to $400m.
Bricks and mortar channels are suffering as a result. For
example, Sephora, part of LVMH, recently closed stores and plans to launch a
new website later this year.
Avon, best known as a direct sales operation, saw revenues
in China decline 31% during Q3, at which time its chief executive said the
company would be "taking a step back with the management team there and
... taking a holistic approach to understand how best for Avon to compete in
China".
"It's a different market, different way of doing
business and if you don't adapt to the way people are used to shopping there,
you're not going to succeed," said Jeremy Goldman, former director of
global e-commerce and new media at Kiehl's, a skin-care brand owned by L'Oréal.
Goldman suggested that in China, sites selling multiple
brands are key; L'Oréal already operates such a site for its luxury brands like
Kiehl's and Shu Uemura.
Esteé Lauder, meanwhile, is one of the global brands that is
performing markedly well in ecommerce, with online sales up 40% in the year to
June. A spokeswoman explained to the Wall Street Journal that more than
two-thirds of the company's online sales come from cities in which it has no
physical distribution.
Chinese women are among the biggest spenders on cosmetics
and skincare products. A recent survey by Elle magazine found that for 85% of
Chinese women, it was their biggest expenditure.
Data sourced from Wall Street Journal/China Daily; additional
content by Warc staff
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