China is open – what does this mean for foreign brands

2022 was tough for Business in China

2022 was a challenging for businesses in China, as a number of factors contributed to a difficult operating environment. Biggest of all was the ongoing COVID-19 pandemic that continued to disrupt business operations and supply chains across the country.

The huge swing from Covid Zero policy to opening up left consumers shocked and many sick – a huge wave of Covid hit the country in December and January. Luckily by Chinese new year towards the end of January the cases were coming down certainly in major cities.

All this disrupted China and dented consumer confidence. Consumers saved more than ever before which in turn hit businesses as spending decreased and GDP fell well short of government predictions.

Despite these challenges, some businesses in China were able to adapt and succeed, and the country remains an important and dynamic market for companies around the world.

L’Oreal bucked the trend in China

Despite the challenges facing foreign businesses in China, L’Oreal’s success shows that there are still opportunities for companies that can adapt to the local market and meet consumer needs.

L’Oreal FY 22 results are out despite the North Asia division having the slowest growth weighed down by the covid disruption in China, it still grew. Active Cosmetics was highlighted as performing very well in China with Skinceuticals in double digit growth.

Premium haircare brand Kerastase and the ultra-premium skincare segment with Helena Rubinstein were also highlighted as key performers.

Strong performance during Tmall 11.11 campaign was also singled out with L’Oreal taking 30% market share amongst its brands in the Luxe division during the shopping festival.

China is set to rebound in 2H of this year and L’Oreal remains well placed to reap the benefits.

🌬Threats remain from local competitors in the mass market skincare and makeup segments.

Also with economic uncertainty and consumer confidence low will consumers continue a downgrading trend that can ultimately hit the Luxury brands.

2023 China economic outlook is brighter

Here are some reasons to be optimistic:

🚀 The middle class is growing fast

🚀 Consumers still want premium goods – but at the best possible price

🚀 The government are very keen to increase consumer spending

🚀 Chinese are starting and will continue to travel again both domestic and abroad

Indeed, the economic outlook for China in 2023 is looking brighter, as the country continues to rebound from the COVID-19 pandemic and implement policies to support growth. While challenges may still exist, many experts are optimistic about China’s economic prospects in the coming year, and the country remains a key driver of global growth.

Opportunity for Foreign beauty brands in China

Foreign beauty brands have a significant opportunity to grow in China, as the country’s rapidly expanding middle class becomes increasingly interested in skincare and other personal care products.

With China’s economy rebounding and outbound tourism expected to take off again in 2023, there will be more opportunities for foreign beauty brands to reach new customers.

For example, Chinese students are heading overseas again. They will be exposed to new brands and products that they may want to try when they return home. Similarly, they will have the chance to discover and purchase foreign beauty brands that are not yet available in China.

Why Chinese students:

🔔 They are the core target audience for many beauty brands – young but willing to spend

🔔 They are highly influential to their peers and families back in China

🔔 They make suggestions, recommendations and in many cases even the purchases on behalf of others back home

Brands looking to China in the future should actively seek out this student demographic in your 🏡 market

Some ideas on how to engage with them include:

✍️ Talk to the local university – Get your products on campus for trial

✍️ Go a step further and recruit some on campus brand reps

✍️ Get a Chinese student in for an internship and get them to open doors to their network

✍️ Work with organisations who have access to students to try and write online reviews on Chinese social media

With careful market research, strategic partnerships, and a strong digital presence, foreign beauty brands can tap into this opportunity and succeed in China’s dynamic and growing beauty market.

Is it the right time for your brand?

With China’s economy rebounding and consumer demand continuing to grow, many foreign brands are considering entering the Chinese market for the first time or expanding their existing presence.

However, before making the move, it’s important to carefully evaluate whether it is the right time for your brand to enter China.

Some key considerations include:

  • Market fit
  • Competition
  • Regulatory requirements
  • Availability of local partners and resources.

Whilst there is not set stage or size of business these are how I assess the likelihood of success:

1️⃣ Are you well established in your home market – good traction, strong sales, in key retailers?

2️⃣ Do you have a strong product story – your USP is it fluffy? Is it product related? Can you back it up with science? Reviews?

3️⃣ Do you have money to invest – even well-established brands need to invest to get known in China. You can’t expect to do it for free. Most distributors will require support for marketing

4️⃣ Do you have anyone inside China selling your product on the grey market? This is a good sign if you do…means there is demand

5️⃣ Are any overseas Chines talking about you on Chinese social channels?

If you say yes to all of these you are on a good track – if yes to some and not others then there maybe some steps you need to take before jumping in.

By carefully assessing these factors and developing a clear market entry strategy, foreign brands can enter China at the right time and maximize their chances of success.

My Final Thoughts

China has been pushed to the back of many investors’ and boards’ radar over the last 12 months with its internal struggles.

We are now coming out of this phase – China is open for business and its consumers are going to be travelling, studying and exploring more foreign brands.

Chinese Beauty brands are not to be dismissed as they are an important part of the market and provide strong competition in most categories. But Chinese people do not want to exclusively buy Chinese brands. They want to buy the best solutions for their personal needs.

Brands who will succeed in China over the next 12 months will understand this. There is no quick win in this market you need to adapt, create and understand your local consumer. You need to invest time and money and you need a lot of patience but the rewards are there.

Good luck with your China journey and do get in touch if you want to discuss more.

You may also read this article about brands in China

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1 thought on “<strong>China is open – what does this mean for foreign brands</strong>”

  1. The shift from a strict Covid Zero policy to opening up in China indeed brought about significant challenges for businesses in 2022, as highlighted in your blog. The impact of the COVID-19 pandemic on operations and supply chains was felt across the country. The sudden wave of cases in December and January added to the complexity, leaving consumers shocked and contributing to a dent in consumer confidence.

    It’s encouraging to note that by the Chinese New Year towards the end of January, cases were on the decline, especially in major cities. The adaptability of some businesses in China during these trying times is commendable. Your insight into how the pandemic led to increased savings and a subsequent decrease in spending, impacting GDP, provides a comprehensive understanding of the economic landscape.

    As China reopens, it will be interesting to observe how businesses, both local and foreign, navigate this evolving market. The resilience and adaptability displayed by some businesses during the challenges of 2022 hint at the potential for recovery and growth. Looking forward to more updates on how foreign brands are approaching and capitalizing on the opportunities in the now open Chinese market.

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