On January 28, Benefit Cosmetics closed its online flagship stores on Tmall, JD.com, and Douyin in China. Despite having accumulated nearly 2.5 million followers across the three Chinese e-commerce platforms, the LVMH-backed beauty brand faced insurmountable challenges as it sought to establish a foothold in China's dynamic and competitive beauty market.
Benefit isn't exiting the Chinese market entirely; the brand will continue to be available in stores and online at Sephora (also owned by the LVMH group), which operates 322 brick-and-mortar stores across 88 cities in China. Local press reported that Benefit has decided to reduce its presence in China, citing a shift in business objectives within mainland China aimed at enhancing operational efficiency.
Known for its best-selling brow products and tongue-in-cheek product names, Benefit Cosmetics has garnered a loyal fan base since its founding in 1976. In 2003, Benefit launched its first “Brow Bar,” a boutique that specializes in brow shaping. Since then, the brand has expanded globally, now boasting 3,000 Brow Bars and 85 boutiques worldwide. Currently, Benefit maintains its operations at five beauty counters in Mainland China, situated in Shenzhen, Chengdu, Kunming, and Xi’an, with no indication of closure.
So, where did Benefit go wrong with its China strategy? BeautyMatter spoke with experts in the Chinese beauty industry to uncover Benefit’s missteps in this massive beauty market.
In 2007, Benefit made its debut in China by opening its first store in Shanghai, but as the years went on, the Western brand struggled to achieve significant success. Benefit opened a Tmall store for just six months in 2011 and didn't join it again until 2017, which put the beauty brand at a significant disadvantage when it came to gaining traction in China. During the six years when Benefit had no presence on Tmall, the platform rose to become one of the largest e-commerce platforms in the country. Consequently, when Benefit finally reopened its Tmall store in 2017, the era of lightning-fast growth on the marketplace had concluded, and Benefit faced an uphill battle to attract and maintain a captive Chinese audience.
The first real sign of trouble for the brand came in 2021 when Benefit closed the 275 physical points of sale (outside Sephora) across 81 Chinese cities, shifting its focus to Sephora and online distribution channels. However, industry experts say the writing has been on the wall for years.
“The decline of the brand has been clear for some time,” says Clean Beauty Asia founder and Chinese beauty market expert Allie Rooke. “Whilst certain products sell well—Dandelion Blush, Pore Primer, and eyebrow pencils all sold between 10,000 to 20,000 units in last month on Tmall—the brand has failed to adapt to the changing market.”
Five years after rejoining Tmall, Benefit made a similar mistake and was late to the game joining Douyin, the Chinese version of TikTok, in 2022. Benefit wasn’t alone; many international beauty brands hopped on the Douyin train late, causing Chinese domestic (also known as C-beauty) brands to dominate the platform and gain more popularity among Chinese consumers.
Benefit’s decision to withdraw from Chinese e-commerce platforms may be indicative of a broader trend, according to Frisson Beauty CEO Elizabeth Kopelman. “C-beauty and, in particular, makeup, is outperforming international makeup brands,” she says. “During Singles Day [a shopping festival that originated in China and was popularized by e-commerce giant Alibaba], Chinese makeup brands displaced legacy international brands across Tmall and Douyin in the top 20 rankings across makeup and skin, and this trend shows no signs of abating.”
Kopelman cites the phenomena of Douyin’s unstoppable rise—over 43% YoY growth—and the Chinese consumer’s insatiable appetite for content as some of the key reasons behind Benefit’s underperformance in this competitive market—and it isn’t the only beauty brand that’s struggling.
“The evolution of the homegrown Chinese beauty market and the emergence of increasingly sophisticated brands across makeup, skin, and fragrance taken together with the post-pandemic economic dislocations have not favored international beauty brands.”
C-beauty brands are hugely popular in China due to their lower price point and ability to quickly adapt to domestic trends. Consumers naturally gravitate towards C-beauty brands on Douyin, where creators and influencers cultivate communities of loyal brand followers. Brands like Florasis, Perfect Diary, and China Chic (国潮) are a hit with the kind of young Chinese consumers that Benefit considers its target audience. Why are these C-beauty brands succeeding while Benefit is falling off?
“Benefit is suffering an identity crisis in China,” argues Franklin Chu, Managing Director of Azoya USA. “Benefit's pricing is close to premium and luxury ranges, and the target audience at this price range prefers other international beauty brands.”
Rooke is of the opinion that Benefit’s branding isn’t resonating with its intended younger demographic, and older consumers who may have used Benefit in the past have potentially “aged out” of the brand. Young Chinese consumers have moved away from the classic American vintage style that once made Benefit so popular overseas.
“A key element is the brand has not adapted, and its nostalgic American retro feel does not appeal to today's Chinese consumers,” says Rooke. “When it first came to China, its positioning was girly in style, which worked well among students at the time. But the image didn't change, and those fans grew up and wanted something more sophisticated, and it no longer appealed to the younger generation.”
Like Chu, Rooke also believes that Benefit’s pricing puts it in an awkward position within the beauty market. This has been an issue for several international beauty brands in China, she says, citing Too Faced, which exited the Chinese market entirely in 2022.
“People are willing to spend a premium but only if your target audience and payoff is very clear,” says Rooke. “Benefit had a mass market feel to many consumers but at a premium price point.”
Benefit’s main product categories, blush and eyebrow products, face stiff competition from domestic brands that are more affordable. Benefit’s price puts it closer to prestige, but the branding and packaging isn’t on par with other prestige brands. The color makeup category has been faced with strong competition from local Chinese brands for several years now, especially in the mass market. While some international brands like Charlotte Tilbury and Urban Decay have been able to carve out a clear niche, others, like Benefit, have floundered.
Benefit relied heavily on its classic best-selling products to keep the cosmetics brand afloat in China. Benefit’s brow products and blushes have been on the market for years, and while they still make up a significant portion of the brand’s sales, these products have gone stale in China, where consumers value novelty and newness. Benefit’s lack of innovation meant fewer new product launches, which made the brand less relevant in the eyes of the Chinese consumer.
China’s post-pandemic economic woes proved difficult to succeed in, particularly for international brands. Maybelline shuttered its stores in China in 2022 and is today only available at Watsons. Australia’s Mecca Cosmetics soon followed suit, closing its Tmall flagship store in November 2023 after spending four years trying to break into the Chinese market. Brands backed by L’Oréal, Estée Lauder, and Proctor & Gamble have slowed their efforts, closing online flagship stores and brick-and-mortar boutiques in China.
China’s beauty market moves quickly, chewing up and spitting out brands that fail to adapt to the needs of the Chinese consumer. Even domestic brands in China are feeling the economic pressure. Since 2021, more than 20 Chinese brands have shut down, bowing to the weight of such a crowded market.
“The reason for the Benefit closing is obvious; they are under-performing in a contracting market segment,” says Chu. “Benefit’s largest e-commerce channel is Tmall, and their flagship store 2023 turnover is negligible.”
The luxury group LVMH acquired Benefit Cosmetics in 1999. Under LVMH’s stewardship, Benefit became the world’s leading eyebrow makeup brand, with one brow product sold every two minutes. In recent years, LVMH has been investing heavily in China, and the strategy is paying off. China accounted for 22% of LVMH's total revenue in 2022, making it the company's largest market. Sales in China grew by 30% in the same year, during which China’s e-commerce market took off, with retail e-commerce sales valued at around 2.68 trillion US dollars. In 2023, LVMH appointed Stéphane Rinderknech as Chairman and CEO of LVMH’s Perfumes and Cosmetics division. Rinderknech has extensive experience in the Chinese market, having previously served as President and CEO of L’Oréal China, where he increased the company’s China business by 30%. With Rinderknech at the helm, LVMH is well-positioned to increase its market share in China with a few strategic shifts, and Benefit is just the latest sacrificial lamb.
LVMH is quick to cut low-performing brands in China that have the potential to hamper its lofty goals in the region. In 2022, the luxury group closed all physical retail locations across China for its domestic high-end skincare brand, Cha Ling, after five years of operating in the market. This move was seen by many as part of LVMH’s plan to reallocate resources towards brands with stronger positioning in China, such as Blankme, a Chinese cosmetics brand that recently secured an investment from L Catterton. L Catterton also invested in Chuangjian (Trautec), which manufactures recombinant human collagen.
Despite Benefit's decline in China, certain North American makeup brands like Make Up For Ever and Fenty Beauty are performing well, winning over the discerning Chinese beauty consumer. Globally, LVMH’s Perfume and Cosmetics Group is on a solid upward trajectory, reporting a 13% growth in organic revenue in the first half of 2023. LVMH’s momentum is particularly strong in the Middle East, North America, and Europe, prompting a need for strategic adjustments in the Chinese market.
“In a contracting market, it makes sense to lower operating expenses,” says Chu. “LVMH's Sephora China has a robust digital and offline presence, which can easily incorporate Benefit.”
While Sephora operates over 300 stores in China, its online presence is nowhere near as prevalent as Tmall, JD.com, and Douyin, which are the three most popular e-commerce retailers in the country. Nearly 99% of China’s young consumers regularly purchase products there, and removing Benefit from these retailers significantly reduces its market share.
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