China Business Daily (Reporter Ma Jia) Recently, Heyan, a high-end brand under the Korean cosmetics giant Amorepacific, has completely closed offline stores in China, and the official WeChat mall will also be closed.
When its brands Etude House and Innisfree "retreat", Amorepacific said that the move was to focus on the mid-to-high-end and online fields in the Chinese market.
After the withdrawal of high-end brands this time, what chance does Amorepacific have in the Chinese market?
Close offline stores in China
After abandoning popular brands, Amorepacific's high-end brands may be difficult to operate in the Chinese market.
Relevant staff of Heyan brand publicly stated that due to the adjustment of the company's strategic level, all offline stores of Heyan brand in the Chinese market have been closed.
"On the one hand, the offline store closure is due to the poor sales performance of the product, which cannot cover the cost of offline operation. Therefore, the brand chooses to focus all its energy on online channels, which can attract consumers with more favorable prices and also Save operating costs." The relevant person in charge of the procurement business of an international well-known brand admitted to a reporter from China Business Daily. Consumer attention is drawn to online channels.
Generally speaking, mass brands that take the cheap route are more likely to close stores and withdraw.
It is worth noting that Heyan is already the third brand under Amorepacific to withdraw from the Chinese market. Previously, the retreats were all mass brands that took the affordable route, while Heyan was the first brand under Amorepacific to withdraw from China. high-end brands in the market.
In 2021, Innisfree closed more than 170 stores; Etude House, another makeup brand under Amorepacific, closed all offline stores in the Chinese market in March 2021.
According to the 2021 financial report released by Amorepacific, its current performance in the Chinese market may be mainly supported by Sulwhasoo.
In its financial report, it said that more than 70% of the revenue in Asia came from the Chinese market, and the sales of the high-end brand Sulwhasoo increased by about 50%.
"Poor performance is the main reason for closing stores and withdrawing cabinets." Kong Sihan, a beauty marketing practitioner, told reporters that Heyan's closing of stores may also show that Amorepacific is facing fierce competition in the Chinese market.
Since 2022, international cosmetics giants such as Shiseido and Unilever have actively bought high-end brands after selling off popular brands, and introduced more high-end brands to the Chinese market.
For Amorepacific, not only is it difficult for popular brands to operate, but its position in the high-end cosmetics market may also be threatened.
The layout of high-end brands has fallen behind
In terms of sales performance and brand awareness, L'Oreal in France, Estee Lauder in the United States, Shiseido in Japan, and Unilever in the United Kingdom are all rivals on the same stage.
However, compared with other giants, Amorepacific may have fallen behind in the Chinese market, especially in the layout of high-end brands in the Chinese market.
When competitors of the same type are introducing high-end brands, Amorepacific is "retreat".
The high-end cosmetics department has become the largest business unit of L'Oreal Group. L'Oreal Group has introduced four high-end brands to the Chinese market only by virtue of the opportunity of the 2021 China International Import Expo; Shiseido has successively sold nearly 20 low-end and mid-end brands to China Market introduction of high-end brands.
Amorepacific has successively deployed brands such as Sulwhasoo, Laneige, Mengzhuang, Innisfree, Etude House, and Heyan in the Chinese market. Currently, Innisfree, Etude House, and Heyan have all closed their stores offline.
According to Amorepacific's 2021 financial report, Asia is the region with the slowest revenue growth. In the fourth quarter, revenue from the Chinese market fell by about 10%.
Amorepacific said that it is natural for the Chinese market to bid farewell to the high-speed growth period, but the important position of the Chinese market has not been shaken.
Online channels face fierce competition
When Etude House and Innisfree "retreat", Amorepacific said that the move was to focus on mid-to-high-end and online fields in the Chinese market.
According to Amorepacific's 2021 financial report, the increase in store and marketing costs in the Asia-Pacific region is an important reason for its fourth-quarter loss.
At the beginning of 2022, Xu Qingpei, president of Amorepacific, said that the company is planning to deepen its digital transformation to attract Gen Z consumers, and emphasized the need to restructure its business to move forward.
"For Amorepacific, switching to online channels is also a battle." Kong Sihan said that at present, international cosmetics giants are sharing the e-commerce channels in the Chinese market, and each brand has formed a dedicated e-commerce team.
At the same time, domestic cosmetic brands also occupy a certain proportion of online channels.
Compared with the price, the products of domestic cosmetic brands are obviously cheaper; compared with the marketing, the competition among the international cosmetics giants is very fierce, and Amorepacific may not have a clear advantage.
At present, in the Chinese market, high-end brands such as Estee Lauder, Lancôme, and Lamarine are all ranked ahead of Sulwhasoo in e-commerce channels.
After layers of retreat, how did Amorepacific win the initiative in the Chinese market?
China Business Daily reporters will continue to pay attention.