While overall online sales of personal care and cosmetics in China in July fell by 4% year-on-year, figures indicate some shifts in selling dynamics across channels and brands – with the JD.com channel gaining ground on market leaders Taobao and Tmall, two platforms that are part of the Alibaba Group, and Douyin, a subsidiary of Bytedance, and domestic brands outperforming those of overseas multinational corporations (MNCs).
Tracking the data from three of China’s mainstream online sales channels – Taobao and Tmall, JD.com and Douyin – an equity research report by US investment bank Jefferies finds the overall sales for skincare products fell by 6% year on year (yoy) to 18 billion yuan, while that of the cosmetics increased by 3% yoy to 8.4 billion yuan. This is because, Jefferies reckons, a mid-year e-commerce promotion event – the “618” shopping carnival – ended in June, and July is, therefore, a weaker month for online shopping.
Splitting sales by channels, Taobao and Tmall still took the largest merchandise share at about 47% for skincare, with Douyin following close behind with 40%. And JD.com, while taking only 11% of the market, showed a significant 49% yoy growth, grabbing share size mainly from Douyin, which experienced a 19% yoy drop in July.
For makeup products, Taobao & Tmall and Douyin compete with each other in a market that is essentially a duopoly, as they both equally shared about 95% of the market. JD.com held the remaining 5%, but is notable because of its steadfast 15% yoy growth.
The aggressive growth of JD.com is attributable to the e-commerce group’s aggressive discounting of its personal care and cosmetic goods. In August, it announced a new round of discounts that represents a 3-billion-yuan (US$419.86 million) subsidy of cosmetic products that is geared towards attracting customers from other platforms.
On the brand side, the growth rate crown, the report shows, goes to Proya, a Chinese local brand headquartered in Hangzhou, whose yoy sales grew by 42%. The second and third place went to Beiersdorf and P&G, whose yoy sales grew by 39% and 36%, respectively. Other popular MNC brands like L'Oreal, Shiseido and LVMH saw their sales reduced by 9%, 7% and 2%, respectively, in July. Overall, the shift in brands shows that Chinese customers, Jeffries notes, are substituting mass brands with premium ones in search of higher value for money.
Skincare and makeup products are part of the fast-moving consumer goods sector, which is defensive throughout economic cycles. Therefore, their sales tend to be relatively flat; and, as the report indicates, their year-to-date growth remained at around 0%. The pattern also coincides with the weak consumption momentum in China nowadays.
The good news is Chinese consumption has started to pick up. China’s CPI in July, official data show, grew by 0.5% yoy and is the highest it has been in the past 12 months. And with more shopping carnival events set for the second half of 2024, it will be interesting to see if the performance of China’s consumer goods sector picks up.
