Because it’s no longer worth it: Foreign cosmetics-makers are scaling back their ambitions in China
January 12, 2014 1 Comment
Because it’s no longer worth it: Foreign cosmetics-makers are scaling back their ambitions in China
Jan 11th 2014 | SHANGHAI | From the print edition
BEAUTY is big business in China. The country’s cosmetics market is worth $26 billion a year, making it the third-biggest in the world. Euromonitor, a research firm, believes it will grow 8% each year from now to 2017.It would seem surprising, then, that some of the world’s best-known brands are giving up on such an attractive market. This week L’Oréal of France, the world’s biggest cosmetics firm, said that it will stop selling its Garnier line of beauty products in China. This came on the heels of an announcement by Revlon, an American rival, that it would leave the country altogether.
L’Oréal insists that this is not a step back from the Chinese market, of which it commands an 11% share, but rather a shift in strategy. It says it will henceforth concentrate on selling Chinese consumers its L’Oréal Paris and Maybelline New York lines, which are doing better than the flagging Garnier brand. Revlon has done rather less well in China, which accounts for a tiny share of its global revenues. It is said to have suffered a big fall in sales in recent months and blames this on a slowing Chinese economy.
A few years ago, when China’s annual GDP growth was in double digits and its consumers had barely begun to sate their repressed desire for foreign luxury, the firms that sold it set themselves ambitious targets. Now China is coming to resemble a more normal emerging market: still with much potential for growth, but with no guarantee that every fancy foreign product entering it will get a piece of the action. Sales of beauty products grew by just 10% last year, by one estimate, down from 15% two years earlier. Price wars between online cosmetics retailers are causing heavy discounting of brands that are supposed to be reassuringly expensive. Consumers are becoming more sophisticated, and are increasingly unwilling to pay a premium for all but the very best brands.
At the same time costs are high and soaring. Wages for the legions of “beauty assistants” and other saleswomen needed to peddle all these lotions and potions are rising at double-digit rates annually. Marketing and logistics, in such a huge and diverse country, are complex. To cap it all, Chinese cosmetics firms are quickly catching up with the foreign ones.
China’s legal requirement that all cosmetics be tested on animals (which is banned in Europe) not only adds to Western firms’ costs but also causes them public-relations problems back home. Revlon’s announcement of a withdrawal from China was quickly picked up by an activists’ website, which expressed the hope that this would now mean the firm lived up to its “cruelty-free” promise.
As the costs rise and the growth slows, L’Oréal and Revlon are unlikely to be the last foreign cosmetics firms to think again about their ambitions in China. Peddling pots of pricey gunk just isn’t as easy as it used to be.
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The animal testing requirement is backwards and inhumane. China can play it down, all they want, by turning their nose up at “pricey gunk” peddling but that doesn’t mean they’re showing a sophisticated, 21st Century perspective on animal testing. I doubt they’d like the Worldwide distinction of having an antiquated relationship with Science; requiring animal testing for cosmetics gives the impression that China’s scientists don’t even know how certain, previously tested chemicals — deemed safe by the most developed countries on Earth — interact with human tissue. It’s, besides unethical, embarrassing for them.