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With the spread of coronavirus (COVID-19) under control, a large number of companies have resumed work. As shopping malls and restaurants reopened, people that have self-quarantined at home for nearly one month are now flowing onto the streets.
On February 22nd, a video clip about long lines of people waiting outside a hot pepper soup restaurant went viral on WeChat Moments. A barbecue restaurant in Lanzhou sold more than 6,000 skewers per day after it resumed business, and one customer wolfed down 40 skewers while standing. In Hangzhou, Zhejiang, a shopping mall saw its sales figure rocket to more than RMB 11 million within 5 hours following its reopening.
Under the shadow of the epidemic, going outside for shopping is not what we should advocate. However, the powerful purchase power demonstrated is without any doubt a convincing predictor of a rapid economic recovery after virus containment. As for the cosmetics sector, an integration of all possible channels accelerated by the outbreak of the epidemic as well as increased investments from high-end brands are boosting confidence in the sector’s growth.
Channels online and offline, many cosmetics products are now out of stock.
According to the survey data from Kantar, offline retailers including hypermarkets and supermarkets were faced with tremendous challenges during the first few weeks following the outbreak of the epidemic, with traffic flows reduced by 15% and 12% respectively. The sales of fast moving consumer goods were seriously affected.
However, driven by effective control of the virus, business is coming back to life. According to data published, a shopping mall in Hangzhou made its first transaction 5 minutes after its resumption of operations on the 22nd. After quarantine for more than half a month, people are flooding into shopping malls to make purchases of beauty products with a vengeance. Within just 5 hours following its reopening, the top 3 best-selling brands were CPB, VALMONT and Kiehl’s. 40 CPB skincare facial mask sets priced at RMB 1,180 per package were sold out immediately.
The sales figure of the shopping mall exceeded RMB 11 million on the first day of operation, with the highest-priced item being a luxury watch sold at RMB 350,000. Of all cosmetics categories, lipsticks were the most hotly sought after.
In addition to the recovery of offline retailing, online retailing is also flying high.
As people have to wear masks every day, a live streamer on Taobao showed how to have a proper makeup look while wearing a mask, attracting more than 8.2 million online viewers. On February 20th, Taobao Jingji Nuan Bao indicated that 9-color eye shadow palettes on Taobao Global are the most popular among female white-collar employees, with the sales figure up by nearly 150% when compared with the previous month.
While physical stores are affected by the spread of the epidemic to some extent, the booming of online retailing is driving retailers to integrate different channels. As early as the Lantern Festival on February 7, Intime, an offline retail giant, started to encourage nearly 1,000 shopping assistants to sell products through live streaming back at home, which enabled its sales to grow exponentially.
In fact, the beauty sector’s combination of different channels started much early before the outbreak of the epidemic. In particular, explorations into new retailing and WeChat Mini Programs that attract traffic flows were the center of attention for the beauty sector in 2019.
At the 2019 CBE Business Alliance Central Plains Conference and the Central Plains Retail Summit (hereinafter referred to as the “Central Plains Conference”) sponsored by China Beauty Expo (CBE), nearly a thousand outstanding professionals in the beauty sector gathered together to discuss hot topics such as new retailing based on social media, how to operate imported cosmetics enjoying great popularity, how new cosmetics brands in China are empowering channels, and how to attract traffic flows in creative ways.
Among the participants, Jing Yan, Chairman of the Board of Directors of YESA China, said, “New retailing, omni-channel retailing, e-commerce based on social media, community group purchases, imported goods, and retailing by live streamers are all trends of retailing in an era of big changes.” In such a context, YESA eventually decided to form a revolutionary system composed of new retailing based on social media, dual-beauty omni-channel retailing, and integration into the big ecosystem.
At the same conference, Min Jie, a WeChat intelligent retailing expert and founder & CEO of EZR, made a detailed analysis of private domain traffic, and identified three opportunities for cosmetics brands to increase private domain traffic, including strengthening the operation of the public account, boosting retailing through key opinion leaders and purchase communities, and official flagship stores based on mini programs.
It’s because of those meaningful explorations and experiments that the beauty sector was able to make quick responses upon the outbreak of the virus and speed up the transformation from merely offline retailing to omni-channel retailing.
A silver lining is shining through the dark clouds caused by the “Black Swan”,
as international brands are helping to boost confidence in the Chinese market.
Some people describe COVID-19 as a “Black Swan”, which has caused immeasurable impacts on the Chinese society and brought about negative results, including suspension of operation and production, unemployment and salary cuts. As a result, the whole cosmetics industry has also been affected. In spite of that, there has been good news recently, especially for the beauty industry, which has greatly helped people to regain confidence.
According to the 2019 financial report released by L’Oréal, the Group’s sales witnessed a peak increase of 10.9% since 2007 to 29.87 billion euros (equivalent to approximately RMB 228.4 billion), which was higher than it had expected. The sales growth rate of its high-end products topped the list, reporting a year-on-year increase of 17.6% to 11.02 billion euros (equivalent to RMB 84.3 billion). Four brands, including Lancôme, Yves Saint Laurent, Giorgio Armani and Kiehl’s, all achieved a double-digit growth.
When talking about the impact of the epidemic on the beauty market, L’Oréal highlights in the financial report that there’s no need to be over-worried about the prospects of the market. It says, “Based on our past experience in dealing with the SARS and the outbreak of MERS, we believe that after some short-term shock, sales will soon bounce back significantly, so we are optimistic about the long-term growth of the Chinese market.”
In the same period, Estee Lauder also announced on its official platform a strategic move to build a world-class research center in China. Fabrizio Freda, President and Chief Executive Officer of Estee Lauder Companies, Inc., expressed confidence in the prospects of the Chinese market, “In order to further help improve the leading position of the Chinese beauty industry in the global research field, we plan to build a world-class research center in China and employ cutting-edge technologies and equipment to fuel ground-breaking cosmetics innovations in China, the Asia-Pacific region and even the world.”
Estee Lauder’s plan to build a world-leading research center in China during such a special period not only indicates its confidence in the prospects of the Chinese market but also promises positive significance for the local cosmetics industry to reshape its full chain, including manufacturers, research bases, the supply chain, production processes of raw materials and testing.
While the epidemic is still around, it’s foreseeable that consumers will make purchases with a vengeance after the epidemic is driven away. As for the future business landscape, polarization is clearly inevitable. Just as the Gospel of Matthew says, “To everyone who has, more will be given, but as for the one who has nothing, even what he has will be taken away.”
Through the test of the outbreak, it’s clear that leading companies have been fully prepared for new increases after the dark clouds are dispelled. Therefore, stay strong, and a sunny spring will soon come.