As the global economy continues to experience the reverberating effects of the coronavirus pandemic, companies across virtually every business sector are facing unprecedented challenges. In the beauty industry, the retail landscape is uncertain, services and treatments are being put on indefinite hold and consumers appear far less motivated to splurge on a new fragrance. How can cosmetics brands weather these circumstances?
According to Julian Reis, the founder and CEO of SuperOrdinary — an incubator which helps international beauty brands adapt for the Chinese market — China may hold some answers and opportunities for struggling beauty players.
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SuperOrdinary’s expertise lies in bridging the gap for independent, digitally-native beauty and wellness brands looking to expand their businesses into China. The company has worked with the likes of Supergoop, Drunk Elephant, Farmacy, Malin + Goetz, HUM Nutrition and Ouai, among many others. “Our mission is to help companies navigate the complexities of China,” explains Reis. “Within our wheelhouse, we’re experts at import border controls and executing e-commerce and social strategies for brands attempting to crack the Chinese code.”
As countries around the world consider whether to reopen and how to economically rebound from the coronavirus crisis, Reis shared insights he has gleaned from his work in China, where people have been coping with lockdown for several months longer than in the U.S. Ahead, he discusses how Covid-19 impacted Chinese consumer behavior, the ways in which the pandemic upended category preferences and why struggling American beauty brands may want to look to China for valuable lessons and potential opportunity.
From your perspective and brand experience, what impact did the lockdown in China have on consumers’ buying habits, particularly in the beauty space? Where do you see things heading now?
China is still in the recovery phase and isn’t quite out of the woods yet after months of country-wide lockdown. While consumers are starting to return to stores in real life, we’ve seen that beauty — across the board — is an inelastic good for the Chinese consumer.
The Chinese consumer relied on live-streaming during the lockdown, which subsequently drove 40% of our sales during February and March, and we forecast that this online-first shopping trend will continue throughout April. Within the Chinese market (in comparison to the U.S. market), live-streaming is a powerful sales vehicle and drives incredible conversion. And in the shopping-heavy culture, the beauty category continues to dominate consumers’ purchases, per McKinsey.
What do you think brands in the U.S. can learn from the way the Chinese retail economy — and beauty in particular — were impacted during the outbreak? What lessons will help retailers and brands cope and rebound?
The Chinese retail economy and beauty category were adversely impacted by the coronavirus. However, the lockdown drove an uptick in live-streaming that proved consumers are still searching for content, and that shoppers still feel the desire to purchase products.
From a lesson perspective, we doubled down our ad spending to prioritize live-streaming (now accounting for 40% of our ad budget, up from 15% of our original budget), and we leaned into the holidays to push product sales.
Are there any product categories that have weathered the storm particularly well so far?
In particular, we’ve seen skin care perform exceptionally well during the lockdown and we forecast it will continue to do so as Chinese businesses resume to a truncated normalcy. As people have more time indoors to add to their skin- and body-care routines, we are seeing consumers deeply invest in their skin care in comparison to other categories, like color cosmetics and fragrances.
What is the number-one piece of advice you would give to beauty brands that may be struggling right now?
From a lifeline point of view, China is, and will be, the biggest market for the next decade. I’d recommend going now — don’t wait six months or a year. Our team projects that by entering the market now, you can “beat” the rush ahead for whenever the country eliminates [its requirements surrounding] animal testing.
What’s your advice if the notion of international expansion seems daunting or unfeasible to struggling beauty brands right now?
China can serve as a financial displacement of the lost revenue incurred as a result of poor U.S. retail sales. We are quickly seeing that some of our brands are hitting $10 million in sales within the first year, and that is a testament to the size of the market. Therefore, [they’re] replacing a substantial loss from the U.S. forecasted revenue through our efforts in China.
The majority of our brands span both brick-and-mortar and online, and with the brick-and-mortar sales channel nearly decimated for the time being, brands have an inability to forecast inventory correctly. It forces brands to make big bets with very little information in front of them and therefore, they are looking for a channel to displace lost revenue — and China is it.
This interview has been edited for clarity.