China’s cosmetics industry is made up of a motley bunch of players, especially in the lower end of the market where firms vigorously undercut one another on prices.
Yicai.com reports that while the selling prices of some Chinese-made beauty products are marked at about 200 yuan (US$32) in the counters at department stores, similar offerings could be had for as low as 20 yuan on e-platforms like Taobao.com. And the firms still make money despite the low prices.
Most of the domestic players have been reluctant to invest in research and development, and thus failed to upgrade their products and brand image. To stay profitable, they would rather squeeze costs. Therefore, quality is far from guaranteed.
In fact, even for products of similar quality, overseas brands can sell at a price 10 times higher than the domestic ones, an industry insider told the mainland media. Customers are willing to pay up because they have stronger confidence in foreign labels.
Owning some best known brands like Chando and Maysu, Jala Group could totally grasp the idea of how important quality and branding are.
Zheng Chunying, president of Jala — a domestic leader dubbed as the “invisible champion” of the cosmetics industry by mainland media — said domestic brands need to invest in brand building and work their way up.
The potential of the Chinese market is indisputable. Notable global and high-end beauty brands have been actively acquiring local brands in order to expand and gain access to distribution channels in the country.
For example, industry leader L’Oreal acquired Chinese cosmetic facial masks maker Magic Holdings International (01633.HK) for HK$6.5 billion this August. And L Capital Asia, a private-equity fund backed by French luxury conglomerate LVMH, has acquired a stake in Chinese firm Marubi cosmetics group in July, becoming its second largest shareholder.
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