High-end beauty brands owned by top international conglomerates like LVMH and Estée Lauder are flocking to China’s top e-commerce marketplaces, according to a new report by digital intelligence firm L2 Inc.
“The Digital IQ Index: Beauty China 2018” report released at the end of February 2018, ranked Estée Lauder as the most digitally competent brand in China for the second year in a row. L’Oréal Paris followed in second, with three of the top five brands owned by L’Oréal Group. The highest-ranked Chinese brand was Chando, which also made the top five.
The report found that 82 percent of premium beauty brands in its index now have an official store on Alibaba’s Tmall, which is China’s largest B2C e-commerce platform. The rate is up from 55 percent in 2015. LVMH saw its portfolio brands Fresh and Benefit open shops on the platform in 2017, while its Givenchy beauty label launched a Tmall store in February of this year.
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Premium beauty brands are following in the footsteps of their mass-market counterparts, which have a Tmall adoption rate of 97 percent that has remained constant since 2015. High-end cosmetics companies are more willing to launch on the platform than luxury fashion, watch and jewelry labels, but only 24 percent of luxury brands in L2’s index had Tmall stores as of June 2017. To address brands’ concerns that the platform is too mass-market, Tmall rolled out its Luxury Pavilion platform in 2017. Beauty brands that have been made available on it include La Mer and Guerlain, joining luxury brands like Loewe, Tod’s and Burberry.
Tmall’s main rival JD.com also unveiled its similar luxury platform Toplife last year as it competes to attract high-end labels, signing on Alexander McQueen, Yves Saint Laurent and Derek Lam. While the only beauty brand available is LVMH’s Cha Ling, the percentage of premium index brands on JD.com’s main platform increased from 50 percent in 2015 to 77 percent in 2018.
These increased adoption rates come at a time when more consumers are using Tmall instead of a search engine as a first stop for brand research. L2 found that searches for beauty brands on China’s top search engine Baidu declined by 19 percent between January 2017 and January 2018, following a trend of decreasing Baidu brand searches across sectors. WeChat’s recently introduced search option is also a threat to Baidu, and brands including Lancôme and Jo Malone have signed onto WeChat search’s new brand zone feature.
Tmall isn’t necessarily an automatic win for luxury beauty brands as they struggle to gain visibility over top-selling mass-market names on the platform. For example, only 8 percent of first-page search results for color cosmetics-related terms were premium beauty brands, while results on searches for skin-care terms only turned up 4.1 percent premium brands when sorted by best sellers. The top 10 brands with the highest rank, visibility and real estate for skin care were all mass brands.
To overcome the visibility obstacle, brands are tapping into celebrity-driven promotions on social media and Tmall. Young, attractive male pop stars and actors known colloquially in China as “young fresh meat” are particularly effective in gaining social traction with China’s female beauty consumers, as all but two of the top 10 most popular Weibo posts for brands featured a male celebrity. Estée Lauder’s announcement of 28-year-old pop star Hua Chenyu as its new brand ambassador was the most popular of all beauty brand Weibo posts for the second half of 2017.
L2 also found that Weibo-connected video platforms like short video platform Miaopai and live-streaming platform Yizhibo earned attention for beauty brands. Weibo posts with video took up only 8 percent of brand content on the platform but 36 percent of all engagement. Tmall’s own live-streaming platform has also attracted beauty brands with direct links to purchase below the video. Celebrity presence was the most powerful driver of engagement on Tmall live-streams, generating 23 percent more engagement for premium brands than live-streams without celebrities.
Celebrity beauty product collaborations were especially popular for generating both social engagement and Tmall sales. L’Occitane’s special-edition products featuring brand ambassador Lu Han were designed with deer antlers in reference to his surname and promoted by him on social media. The promotion caused the brand’s biggest Baidu Index spike of the year, and was cited by L’Occitane as a reason for its 250 percent online marketplace sales jump for its fiscal first quarter.
Beauty brands are also shifting their loyalty programs away from their brand sites and onto Tmall, as premium brand site loyalty program adoption decreased from 60 percent in 2016 to 56 percent in 2018, while rising from 48 percent to 71 percent on Tmall over the same time.
WeChat loyalty program adoption is up as well, the study found, with 83 percent of mass beauty brands and 85 percent of prestige brands now offering WeChat loyalty. Most brands still aren’t allowing users to earn and redeem points across platforms: Only 18 percent of all beauty brands have synchronized Tmall loyalty programs with WeChat.
WeChat is another platform where brands are upping their e-commerce availability, with the number of premium brands offering some form of WeChat commerce increasing from 50 percent in 2016 to 70 percent in 2018. Rather than opening standalone WeChat stores, brands are more likely to use their WeChat accounts to link to their mobile site e-commerce and offer WeChat Pay at checkout. In fierce competition with Alibaba, WeChat parent company Tencent makes it difficult for brands to link to their Tmall stores via WeChat, but offers the ability to directly link to their JD.com shops thanks to the companies’ partnership.
Tmall and JD.com don’t just have each other to compete with as a range of highly popular up-and-coming apps are vying to carve out territory in China’s beauty e-commerce market. Meitu, which operates a portfolio of famous selfie-editing and AR makeup try-on apps, recently unveiled the MeituBeauty e-commerce app. Ranking 14th the iOS China App Store for shopping, it uses AI skin-detection technology to recommend products based on users’ selfies and recently signed K-beauty conglomerate LG as an official partner. Meanwhile, cross-border e-commerce continues to be a crucial area for international brands, with Kaola and VIP.com taking significant market share, while successful app RED is rising in the space with a combination of social and shopping features.
L2 offers key recommendations for brands to capitalize on digital trends in China, stating that brands should go beyond a simple e-tailer presence to take advantage of platforms’ marketing and functionality opportunities, such as Tmall live-streaming, loyalty, or Super Brand Day promotions. They should also synchronize their loyalty programs across channels to make point redemption easy on not only e-tailers, site, and WeChat, but in off-line stores as well. In addition, promotions with celebrities should focus on cultivating sustained interest in the brand rather than short-term spikes in engagement that go back to their previous levels once the campaign ends.
Liz Flora is editor of the Asia-Pacific region at L2.