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Strength in Digital Key to Winning in China's Beauty Market

Posted: January 15, 2014

Digital think tank L2 has released a report on the digital presence of personal care and beauty brands in China called “Digital IQ Index: Personal Care: China.” This study, from NYU Stern professor Scott Galloway, quantifies the digital performance in China of 73 global and local beauty and personal care brands across six key categories: bath and shower, men’s grooming, oral care, hair care, tissue and hygiene, and deodorant.

An excerpt from the report notes, that, according to Euromonitor International, “The $41 billion personal care market in China has enjoyed mid-double digit growth rates over the last decade.” And growth in the third quarter of 2013 slowed, along with China’s GDP. The report also notes, “While foreign brands dominate [the personal care business in China], and in many cases have introduced the product category, there has been mixed success. … Global brands all face the same dilemma: how to continue to grow while protecting their rear flank from local brands in a market with tepid IP protections and requiring highly local marketing.”

L2 theorizes that some of that gap could be protected by digital efforts. “Digital competence may be the moat as e-commerce’s share of retail in the personal care category is four times greater than in mature markets (8% vs. 2%), and domestic brands struggle online. Local Chinese personal care brands registered the lowest average IQs for native brands in any L2 Digital IQ Index to date. With personal care commerce up tenfold in five years and some categories (e.g., diapers) registering 25% of their sales online, they are going to have to figure it out.

“Competition is severe, and brands are setting up flagship stores on native e-tailers and collaborating with global e-tailers to broaden their retail footprint online. Rapidly improving online payment and fulfillment infrastructure signal continued growth…. Mobile social platforms including WeChat leverage mobile payment and loyalty programs to blur the line between online and offline sales,” the report explains.

According to L2’s study—which weights brands’ scores with site and e-commerce as 30%, social media as 25%, digital marketing as 25% and mobile as 15%—the top 10 brands in its Digital IQ ranking for personal care brands in China are:

  1. Olay (P&G)
  2. L’Oréal Paris (P&G)
  3. Rejoice (P&G)
  4. Whisper (P&G)
  5. Pantene Pro-V (P&G)
  6. Sassoon (P&G)
  7. Pampers (P&G)
  8. Nivea (Beiersdorf)
  9. Gillette (P&G)
  10. Clear (Unilever) and Head & Shoulders (P&G)

According to the report, 65% of personal care brands in China are constrained by outdated sites, limited social media integration and a fragmented approach to e-commerce. As local Chinese brands focus on traditional media, global entrants best them online. The men’s grooming segment fairs best, as it has been less affected by the slowdown in China, while oral care and deodorants fair the worst.

Learn more about social media, mobile and online integration outreach by personal care and beauty brands in China by downloading an excerpt of the L2 report here.