Niche skincare brands aren't anything new in China, and new ones pop up near daily in leading marketplaces such as Tmall, Little Red Book, and even the more recent Gen Z targets such as Bilibili. A whitepaper on Chinese beauty consumer behavior by Kantar Consulting surfaced that niche brands make up 30% of the country's overall beauty consumption. Currently, China is the second-largest market after the US, but the skincare market in China is expected to reach $61,249 billion by 2025, growing annually by 8.78% (CAGR 2021-2025).
One of the more straightforward ways for Western beauty brands to enter the Chinese market and test the waters is through the cross-border ecosystem. In 2020 more than 3,000 beauty merchants launched new stores on Tmall alone, according to data from Alibaba. Unlike their Western counterparts, many of the Chinese marketplaces are social media, e-commerce, reviews, and brand websites and applications wrapped into one. While each marketplace has a specific angle and consumer target, they all operate on complex and sophisticated algorithms, making entering them difficult for outsiders.
Without a traditional in-store presence, cross-border trade shifts the emphasis from where brands engage consumers to how they keep them engaged. A crucial element in creating this engagement, and critical to a brand's success, are the integration of KOLs and KOCs. As with all of these elements, strategy is everything—waiting too long to kick off a plan, underestimating the investment required, or developing the wrong partnerships can spell early ruin for a brand.
German skincare brand Amala sits at the intersection of soul and science. Leveraging over 40 years of pioneering research, they pair advanced biochemistry, such as the inclusion of Pre+Probiotic infusions and bio-ferments made from whole plants, seeds, and the earth's purest minerals, in their formulations. Like most brands, tapping into the growth of the China market was a strategic priority, but they had a healthy respect for what a successful launch would require. As such, they partnered with the China retail experts at Azoya to enter the market.
Since launching the market in December of 2020 Amala has experienced sustained growth in China. "Collaborating with Azoya helped us boost brand reach and speed-to-market, and mitigate risks of foreign expansion as global e-commerce booms," said Amy Daugherty, Global Head of Marketing at Amala Beauty.
The brand shared Amala x Azoya: A Niche Beauty China Launch Playbook launch learnings with BeautyMatter.
The Timeline. Amala Beauty officially launched on Tmall with its own branded store in early December 2020 as the world was about to enter its first year of the global pandemic. While the worldwide beauty market experienced significant growth in 2020, particularly in skincare, the premier marketplaces in China were experiencing explosive growth. Local trends, such as a growing appetite for high-efficacy German skincare brands, an increasing interest in natural and organic ingredients, a booming luxury market, and strict travel limitations all made for the ideal environment to launch Amala Beauty. However, despite the size of the opportunity and what would appear to be perfect timing, entering the digital ecosystem in China is risky and required the right strategy, support, and know-how.
After an exhaustive near-year-long search, Amala selected Azoya as its Trading Partner (TP). While some brands set up local, China-based teams, Amala needed a turnkey, fully integrated solution that would handle nearly every aspect of the business in China and had the internal capabilities to work as an extension of Amala's US-based team.
Working with their TP, they developed a fully integrated plan to break past the challenges that new brands face, including:
- Get beyond the platform algorithms that essentially punish new entrants for their low awareness.
- Have enough brand awareness so that on-platform ads work harder (a.k.a. not blow the budget right away).
- Quickly scale so that branded page ranking would improve. Page ranking is critical because consumers can easily access this information and are less likely to buy from a low ranking / newer page.
With these considerations in mind, Phase I kicked off in December 2020, merely months after they signed the trade agreement. This phase consisted of a two-and-a-half-month soft-launch period, beginning with launching the branded Tmall store and organic partnerships, focusing on the equivalent of gifting programs with micro-influencers or lower-level KOLs. This strategy allowed Amala to carve out a digital footprint on the various marketplaces, creating buzz and stretching investment dollars during a low-return period. The brand also chose to launch with a limited product portfolio. This strategy ensured lower inventory exposure until they had the growth needed to support a larger portfolio and provide the newness required to keep the Chinese consumer interested.
Phase II began in late February 2021, where the brand quickly began engaging with higher-level KOLs whose reach exceeded 500K–1MM followers on various platforms. The goal was to create enough brand heat to lure the interest of top KOLs in time for the critical 6/18 Holiday livestream periods, as well as the 11/11 and 12/12 holidays later on in the year.
This phase was also when a significant investment occurred from a financial, inventory, and time standpoint. The time required to nurture relationships with top KOLs is substantial. Livestreams require considerable coordination between you, your Trading Partner, and the KOL/MCN agency. To have a successful livestream, you must ensure that the KOL feels confident in the brand and product—here, time is your friend, except that you don't have much. Additionally, KOLs will come to you with clear ideas and a point of view about your brand and product. You will need to be prepared to listen and educate, thereby ensuring that engagements are secured and mutually beneficial.
Amala is now entering Phase III of the brand launch. In this phase, the brand actively engages in livestreams with top KOLs, continuing the organic seeding program, supporting both on- and off-platform content and marketing efforts, and ramping up for the critical 11/11 and 12/12 holidays, which are the equivalents of Black Friday and Cyber Monday in terms of expected sales volumes. Additionally, to support the back half of the year, they are expanding their product portfolio to introduce newness, creating anticipation and excitement for some of their future hero SKUs.
Since its launch, the brand has experienced sustained growth, growing 10x (December 2020 vs. May 2021). Since December, Amala has engaged with hundreds of KOLs across the top three platforms (WeChat, Weibo, and Little Red Book). Amala has much to look forward to in the Chinese market, and below are the brand’s top takeaways for new brands seeking to enter the most dynamic marketplace in the world.
Top 10 Lessons Learned:
- Trading Partner vs. on-the-ground workforce: How you enter China in terms of infrastructure is key to how quickly you may be able to step into the market. There are pros and cons to each path; however, the decision needs to support your long-term business goals as well as what you can realistically support. It is growing more and more common for brands to engage with Trading Partners that can offer complete solutions to brands without the complexity, time, and costs associated with setting up fully independent local teams. For Amala, it was a no-brainer. Their ability to capture pent-up demand and do so as quickly as possible was the #1 priority.
- Budget + Inventory flexibility: In most cases, wherever your initial inventory and budget estimate is will be wrong. You will need to have enough stock to support the surges from livestreams and the capital to support the activations fully.
- Be prepared to educate: Both the consumer and KOL have a far greater appetite for learning about the brand, products, and technology than what you might be used to in other markets. As a result, it isn't unusual for long-format articles to pepper the pages of KOL's social media pages. Arm your KOL with information that you are willing to have them share directly; otherwise, the internal-facing training documents may end up in front of your consumers.
- Reviews matter: Yes, we all know the value of a good review, but the level of scrutiny a Chinese consumer applies to what they read is far beyond what we may be used to stateside. A simple, sentence-length review might be all that a consumer needs to make an informed decision in the US. For the Chinese consumer, they are increasingly discerning and savvy before making a purchase. Chinese consumers will research product reviews across multiple social media platforms, look for in-depth technology and ingredient information, and seek the validation of trusted KOLs and KOCs before they give a new brand a try. In the comments section of many beauty product reviews, it's common to find users directly asking bloggers about their product experience or soliciting solutions based on specific skin issues, such as acne and wrinkles.
- KOLs are a BIG business: KOLs in China are an inevitable and indispensable part of successful business, particularly in beauty. They are, in many cases, celebrities themselves. Unlike US-based influencers, they are likely aligned with an MCN (KOL representation agency) and have an entire handling team that schedules and negotiates on their behalf. Therefore, direct access to the KOL is not as easy as “slipping into their DMs” on IG as it may be in the US. Be prepared for scenarios where you may negotiate for months and months on a single post or livestream, and be prepared for big upswings when you finally go live.
- Develop a continuous test-and-learn environment: Knowing what will work and what to scale can become a guessing game unless you adopt an agile mindset. The key is to stay true to the brand vision and not allow for that to falter in the process.
- Be relevant. Stay relevant: You can't have a focused period of activation and then drop off the face of the earth, hoping to create a lasting impression. Instead, keep an open mind and do your best to adapt to change. Stay informed! Stay on top of trends and don't assume that what you see in the US or Europe reflects where the market is in China—they are many years ahead in nearly all cases.
- Product Alignment: Ensure that the product that you are offering aligns with regional taste. The product that may be your hero in one region may not be in China. Study the market, the needs, and perceptions of the consumer.
- Their value equation is not your equation: The consumer in China seeks incentives and patiently waits for the most significant national holidays to get generous GWPs from brands. Thus, the average GWP offering for a livestream or S-level campaign may look like our brand's GWP offering over the Christmas holiday. Special shopping holidays such as 11/11 and 12/12 take GWPs to new levels. Additionally, this buying behavior applies to luxury brands, not just mass or prestige brands.
- Partnership: Be prepared to partner very closely with your TP or China-based team. China's digital ecosystem is not a hands-off model that can only be thought of once a quarter. You will need to have daily interaction, particularly with the speed at which the market moves.
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