With beauty and personal care ranked among the top 4 online shopping categories worldwide in 2023, it is no doubt a booming industry. The global beauty industry market will increase to $579 billion US, up 7.8% year over year (YoY), in 2023. China is the biggest e-commerce market in the world. In 2022, China’s revenue from the online beauty market reached $10.4 billion, followed by the US with $9.28 billion.
While more US beauty brands have successfully entered China and continued to invest in both a digital and offline presence, more Chinese beauty (C-beauty) founders are in a wait-and-see position. There is a mix of both good and bad news from C-beauty brands in the US. Early adopters—such as Florasis Beauty, a cosmetics brand that originated in China with elaborately carved eye shadow palettes, and Perfect Diary, a fast-growing digital native Chinese cosmetics brand—have also delivered mixed results.
In this article, we have interviewed insiders from both the US and China beauty industries to hear their opinions of these markets. We also compare the e-commerce landscapes, business models, and cultures to analyze the opportunities and challenges for brands from China to break into the US market, and vice versa.
China: A Highly Digitized and Competitive Landscape
China boasts a robust domestic e-commerce sector, driven by burgeoning consumer demand, mature infrastructure, and a high level of trust in online shopping. Cross-border e-commerce (CBEC) also provides an easy gateway for US brands to enter China, without the need for National Medical Products Administration (NMPA) registration or the establishment of entities in China. iResearch predicts that the Chinese CBEC import market will surge to $60.4 billion, marking a 24% YoY increase in 2023. This high growth rate presents a significant opportunity for US beauty brands to enter the vast China market.
In China, most online beauty sales are dominated by Alibaba's Tmall and Taobao platforms and, increasingly, Douyin (the Chinese counterpart of TikTok). A recent report from Shanghai Securities indicates that Tmall and Taobao's beauty revenue experienced a 6.1% decline to $2.2 billion in the first half of 2023, while Douyin witnessed a significant 60.4% increase to $1.9 billion, ascending to the no. 2 online destination for Chinese beauty customers.
Furthermore, livestreaming has become a major trend in the Chinese beauty industry. Live commerce now accounts for 19.2% of retail e-commerce in China in 2023, with 373.7 million digital buyers making purchases through livestreams. Many Chinese beauty brands collaborate with top key opinion leaders (KOLs), such as “Lipstick King” Austin Li, Wosun Chen, and Monica. Alternatively, they establish their own live-selling teams assisted by AI-driven hosts to effectively promote their products.
Chinese beauty brands prefer to infuse local culture into their products, aligning with consumer aesthetics. For example, Maogeping, renowned for its founder's exceptional makeup art and exquisite packaging with traditional Chinese elements, recorded over $227 million in revenue in 2022, and a noteworthy 23.01% YoY growth. The success of brands like Maogeping is based on omnichannel strategies, placing the products on leading marketplaces such as Tmall and JD.com, and social commerce platforms such as Douyin and Little Red Book, a leading fashion and beauty shopping platform. Meanwhile, popular brands also develop a significant offline presence in high-end department stores, travel retail points of sale, and shopping centers.
In many respects, Chinese beauty brands adopt innovation and new technology much faster than Western brands. Their marketing practices on the Chinese social and e-commerce platforms also become great showcases for Western brands who want to capitalize on the Chinese beauty boom.
US Beauty Market: Home to Diverse Beauty Players with an Inclusive Culture
The market situation in the USA significantly differs from China. With a more diverse culture and a rainbow of ethnicities, the US market attracts global beauty brands such as L'Oréal, Shiseido, and Amorepacific, while providing a significant return for domestic beauty players like Estée Lauder, Unilever, Johnson & Johnson, and numerous indie beauty brands.
For most American beauty consumers, Amazon, Walmart, Sephora, and Ulta are the go-to retailers to shop for beauty products. Simeon Gutman, a Wall Street analyst at Morgan Stanley, predicts that Amazon is expected to surpass Walmart as the biggest US beauty retailer by 2025. For Amazon’s October Prime Day sale, a NielsenIQ survey confirms that beauty was the #1 CPG category that 27% of shoppers purchased during the sale. Other top categories included vitamins and supplements, haircare, and cosmetics, which accounted for 26%, 24%, and 18% of shoppers, respectively.
"For many beauty brands, when done right, Amazon is their largest and most profitable channel. But it’s more than just a space for transactions," says Lisa King, an early pioneer in beauty e-commerce, and founder of Imagine Beauty.
"Young brands that leverage Amazon to scale must understand that branding cannot be compromised. Winning brands understand that, today, establishing a strong brand presence on Amazon is critical. That wasn’t always the case in the past."
Social media plays a pivotal role in introducing new beauty brands to consumers. In the US, brands are also actively leveraging Facebook, Instagram, and TikTok to communicate with consumers.
"Social media channels, such as TikTok and Instagram, remain key levers in driving sales to Amazon and they will continue to do so during the upcoming holiday season. Smart brands are investing in content that converts into sales. Over 84% of TikTok users have been convinced to buy a product or service from watching a branded video," says Lisa.
For Both US and C-Beauty Brands, Formulation Matters
"Today it is a minimum requirement for a beauty product that the formulations perform well," says Lisa. She has worked with numerous beauty founders in her career, and noticed the increased access to high-quality ingredients and manufacturing has resulted in an overwhelming choice of beauty brands for consumers.
China faces the same situation, with the rise of "成分党" (typically referred to as ingredient-centric consumers). Thanks to social media, Chinese consumers are becoming more aware of how ingredients and formulas function with their skin, and they have turned to international brands for high-quality manufacturing standards and pure ingredients. This shift in demand has resulted in a boom among imported beauty brands from the US and around the world since 2016. In addition, brands like SkinCeuticals, The Ordinary, and Obagi have launched their e-commerce flagship stores in China.
C-beauty brands are also aware of these trends, and have started to collaborate with global institutes to access high-quality ingredients. Proya, a leading Chinese beauty manufacturer, signed a deal with Spanish active ingredients research institute LipoTrue S.L. in 2020 to cooperate on the development of new anti-wrinkle products. More recently, Proya China released the latest facial cream infused with cyclopeptide 161. By innovatively connecting the ends of the peptides, cyclopeptide 161 can deliver better results in delivering signals to skin cells for anti-wrinkle efficacy.
Innovative ingredients and formulas among C-beauty brands, and the successful capitalization of the vast Chinese beauty market have also led these brands to think beyond the border. While there are proven skincare technologies developed by Chinese brands and their supply chains, most of them are not directly operating in the US market as a brand. They are more like ingredients suppliers. American brands also have a long history of securing ingredients from Chinese suppliers, where price and value help to drive down corporate costs. For many C-beauty brands, the US market is a very different landscape than China; similarly, US brands notice China’s distinctions.
Be Mindful of Cultural Barriers
Anna Mayo, Vice President of Beauty & Personal Care Thought Leadership at NielsenIQ, said that “Consumers think about beauty products more in terms of value than strictly cost.” Today, US Amazon consumers are also loyal to beauty brands that offer community, trust, culture, and vision. Creating content that executes on these ideas is what will separate the brands who make it from those who don’t.
In their latest 2022 annual earnings report, Proya reported the brand has 1.08% offshore sales, mainly contributed by Hong Kong, Japan, and the South East Asian market. Even though the brand launched on Amazon US after passing the rigorous FDA registration for ingredients, Proya has earned limited social media buzz in the US. There are only a dozen ratings on Proya's top-selling Supramolecular Retinol Serum for Face, while on Tmall the brand had sold over 200,000 units.
While it may sound like a cliché to most U.S. brands attempting to break into the China market: when it comes to foreign brands wanting to launch on Amazon US, the most common mistake is not doing their homework in advance. For example, a brand that is wildly successful in China, may or may not be successful on Amazon US. The key assumptions behind are mostly likely the lacking of brand recognition in the U.S. While the brand may have accumulated influence and awareness in Chinese social media platforms, their voices are not heard or present on Facebook, Twitter or Instagram. Vice versa, Western brands' also need to develop China social media effort – because their Chinese target audience are probably having difficulties to access the western social media platforms.
"Many Chinese beauty founders lack understanding of the true demand from U.S. market," said Monica, an ex-Alibaba veteran, had consulted numerous Chinese domestic beauty brands who wanted to expand overseas, "they will need better effort in localization to crack the U.S. market."
The functional claims, product concepts that work in China may not be working to the U.S. audience. American beauty brands place a strong emphasis on universal beauty trends and cater to a broad range of ethnicities and skin conditions to meet the diverse demands of local consumers. For instance, the official website of Estée Lauder in the U.S. offers a broader range of foundation shades, including those suitable for various skin tones, whereas its Chinese counterpart focuses on lighter or medium tones. Similar to many U.S. brands who do not want to change packaging, ingredients and formulas for the Chinese market, Monica also mentioned that some of the Chinese brands are reluctant to do so for the U.S. market.
From the perspective of the U.S. beauty expert, Lisa King advises C-Beauty brands to complete a comprehensive analysis of prices, search terms, and competition landscape to see if the brand has a chance to win. If the brand doesn't have a wider brand recognition, it's either competing on price, or the functionalities.
Another Chinese expert (who prefers not to be named) assisting notable Chinese brands to expand overseas, highlights that the FDA talent and localization could be the biggest hurdle for C-Beauty brands to win on Amazon. Simple translation of the products and function is not enough to persuade U.S. customers – they need to think as a local brand and act as a local brand.
Common Grounds: Shared Strategies & Mindset
The success stories such as Florasis Beauty winning customer attention on TikTok and Instagram has been widely circulated in China, but most C-Beauty brands have not yet to have found a success formula to crack into the U.S. market. Founders are still figuring out whether they should highlight their traditional Chinoiserie features, or to become an international brand but only with supply chains rooted in China.
There are brands such as CATKIN, a China traditional artisan cosmetics brand, which prides itself on its collaborative products with Summer Palace of Beijing, continuing its journey to introduce the Chinese culture to the beauty lovers globally. But the question remains – how many traditional Chinoiserie brands are needed in the West?
More founders and investors are looking into the possibilities of creating an international brand with 'Chinese' supply chains – such as SKINTIFIC, a Canadian formulated skincare brand taking South East Asia by storm. SKINTIFIC was launched in 2021 by a Chinese company Fimedia Networks, and was quickly ascending as the TikTok Shop global sales champion in 2022 with GMV over 50 million USD. The brand targets consumers who are ingredient centric, and adopt a similar pricing & packaging design as The Ordinary. The factory behind SKINTIFIC's immense success is Bawei Cosmetics, one of the 2,000+ cosmetics and personal care manufacturers offering flexible supply chain solutions. These suppliers are the backbone of the C-Beauty brands who have ambitions to go overseas.
Unlike J-Beauty or K-Beauty, it is too early to form a consensus on how to define C-Beauty in the West. Chinese beauty companies should learn from U.S. counterparts to dive deep into the local markets, leverage Chinese local talents, e-commerce tools and distributors to grow their presence. And for any new businesses, it takes courage & commitment to grow from 0-1, and partnership support from 1-10.
