Amid a somewhat involuntary and reluctant reopening, and as China faces the daunting prospect of an avalanche of COVID-19 cases, few industries have been immune to the economic impact of monthslong lockdowns, and beauty retail is no exception.
That said, as we look ahead to 2023, there is something of a tale of two retails shaping up in China. Amid diminished foot traffic affecting mass and premium beauty retailers alike, luxury specialty retailers have withstood and even thrived during the slowdown.
Notably, COVID-related lockdowns are only part of the story. While traditional mass beauty players like Watsons have seen store closures due to reduced footfall, it is the headline-grabbing news about store closures of the turbo-charged new guard of Gen Z–driven multi-brand beauty collection stores / specialty beauty retailers that is most striking.
Venture capital–fueled retail expansion of new retailers like The Colorist, Wow Colour, and Haydon upended pre-COVID traditional beauty retail. With social media–worthy, eye-catching décor, open sell environment, price-friendly international and domestic indie makeup and, more recently, skincare brands, these multi-brand specialty beauty banners changed the retail landscape.
However, as lockdowns have taken hold, cracks in the business model began to appear. Operating with smaller margins than traditional mass beauty retailers due to lack of scale and purchasing power, these newer entrants are finding it hard to compete at scale, much less sustain expansion. Even frothy promotions and steep discounts weren’t enough to drive store traffic, and as capital began to dry up, retrenching and store closures became inevitable. An additional factor driving these closures is the inexorable march of online commerce as it takes an ever-bigger bite out of traditional offline retail.
Year to date, it’s estimated that over 700 mono- and multi-brand beauty doors have closed, ranging from The Colorist, Wow Colour, and Haydon to Maybelline and Korean skincare brand Innisfree. LVMH-owned luxury skincare brand Cha Ling, rooted in traditional Chinese medicine, is closing its stores and will be sold only in Sephora. At the same time, Sephora has kept a low profile, maintained their store count, and held pricing in check.
The Chinese retail landscape is ripe for reinvention. Enter luxury beauty retail players like USHOPAL-owned Bonnie&Clyde. Their elevated consumer-centric model based on immersive, personalized in-store experiences and curated around their exclusive luxury beauty brand assortment, delights their community of Gen Z beauty cognoscenti. Bonnie&Clyde’s core luxury retail ethos is rooted in continuous pre- and post-purchase customer service, both in-store and online through social media, and laser focused on driving repeat purchases.
And, notably, unlike other specialty multi-brand beauty retailers, Bonnie&Clyde has continued to expand its footprint, increasing the total number of doors in high-end shopping malls next to brands such as Hermès and Prada in Tier 1 cities and inaugurating their collaboration with Duty Free Shops (DFS) in Chengdu.
Underscoring USHOPAL’s commitment to bring the latest in luxury skincare to their loyal and growing community of skincare connoisseurs is their exclusive partnership with 111Skin, co-founded by globally renowned plastic surgeon Dr. Yannis Alexandrides, MD FACS, and Eva Alexandrides. USHOPAL will leverage their end-to-end omnichannel brand-building capabilities to amplify the brand’s unique value proposition based on bridging the gap between plastic surgery and advanced skincare. And with regional expansion in the works for 2023, the future is bright for their omnichannel luxury beauty model.
At the same time, the outlook for traditional mass and multi-brand beauty retailers is mixed. The reopening will take time, overhead costs including rent and labor won’t be coming down any time soon, and in this challenging environment, e-commerce continues to have the upper hand. That said, these new disruptors, like Wow Colour, understand the imperative of elevating the customer experience, and are taking a page from luxury beauty retailers like Bonnie&Clyde who keep the customer at the forefront of everything they do. More specifically, they will need to diversify away from a price-centric, discount-driven model and inject more excitement into their assortment. At the same time, luxury beauty retailers will continue innovating on personalization and customer loyalty to deliver a meaningful customer experience.
