As China transitions away from a zero COVID policy, there may be a light at the end of the tunnel to finally overcome the pandemic-induced market uncertainty. Financial markets have mainly forecast a difficult quarter or two for China, citing the experience of overseas reopenings.
The Office of the Central Economic and Financial Affairs Commission (CFEAC) said of the transition from China’s strict zero-COVID policy: “This will unleash tremendous vigor and ensure that economic activities continue to circulate and reach its full growth potential. We must have good management for the transition period. The finish line is now in sight.”
Navigating the market will require foreign brands to have the agility to navigate political, commercial and cultural changes as China reopens. BeautyMatter reached out to four of our China beauty experts for their predictions. Their responses represent the complexity and nuance of what will drive the beauty industry in 2023.
Franklin Chu, Managing Director – USA at Azoya International
The Rise of Global Duty Free Businesses: Chinese consumers have been the key factor driving the growth of the duty-free industry in recent years. International duty-free retailers will continue to suffer from the inability of Chinese consumers to spend abroad. However, we note that Global Blue released a monthly update that travel retail in Europe is almost back to 2019 levels. If China really relaxes foreign travel restrictions in 2023, we expect global duty-free sales to return to 2019 levels or even exceed them in 2023.
Digital technologies transform omnichannel and immersive shopping: The uncertainty of offline traffic has accelerated the pace of digitization, as companies in different industries are forced to adopt online sales channels. During the post-COVID era, many consumers may continue to be active with online shopping as one of their daily habits. Physical stores are seeing foot traffic rebound to pre-pandemic levels, even as online shopping continues to be an essential alternative for consumers. Additionally, digital consumers will engage with new technologies when searching for products or consuming entertainment content. For example, AR/VR, virtual testing, AI, live streaming, and other innovative technologies are transforming the customer experience.
Supply chain and inventory management remains a challenge: Due to a sharp drop in sales in 2022, global retailers are taking advantage of methods to reduce inventory levels. In the short term, the market is facing a huge amount of unsold stock, which could affect the profitability of retailers and brands.
Brandon Pemberton, President of Market Advocacy
Purchasing decisions are increasingly intentional: We are seeing a major shift in the way Chinese consumers make purchasing decisions, paying more and more attention to product ingredients and benefits. Consumers are now researching purchases and are well aware of authoritative testimonials. Historically, beauty purchasing decisions in China were more driven by emotion and impacted by lay influencers. In 2023, beauty brands will shift marketing efforts to promote objective product benefits. This will not only have an impact on marketing content, but also on the platforms used for promotion and sales with a strong shift to platforms that support detailed product education.
Arbitration between channels: China’s savviest consumers search a wide range of shopping platforms to find the lowest price on offer once they’ve decided to buy a product. As this arbitrage trend continues through 2023, brands and retail platforms will work to achieve greater price parity and greater consistency in discounts, shifting platform preferences from price to consumer experience.
Demand for benefits to improve health: Chinese consumers have been severely affected by zero COVID policies and have a widespread belief that COVID is here to stay and will spread. They are actively looking for food supplements that boost the immune system and ingredients in beauty and wellness products that can provide additional resistance to the virus. By 2023, products with ingredients and benefits that can directly or indirectly boost the immune system or reduce the perceived threat of virus spread will be in high demand among Chinese consumers.
William Lau, CEO Bonnie&Clyde, USHOPAL Senior Vice President
The spirit of customer service will drive brand and retailer innovation: As consumer attention becomes increasingly fragmented and the search for self-expression unfolds online and offline, retailers and brands will become much more creative in personalizing connective content online and in the shop. Delivering highly personalized and curated retail and brand experiences, like free in-store facials from your favorite skincare brand or access to special events with brand founders, favorite makeup artists or content creators, not to mention sneak peeks and previews. of products, 2023 will be the year to mark connectivity.
Health and wellness is the new luxury: The pandemic has reordered consumer priorities and expanded the traditional definition of health, wellness, and prevention. Increased awareness of mental health, work/life balance and a return to simplicity mean that consumers will increasingly prioritize brands whose ethos reflects their values and will demand products and solutions that promote health and wellness and provide prevention. anti-aging all over the skin. hair and body.
Efficiency-focused innovation: As seeing is believing, consumers expect efficiency and results. As clean beauty has become table stakes, efficiency has become the new luxury in all beauty categories. Consumers will prioritize science-based brands with compelling formulations driven by proven ingredients and benefits that effectively harness biology and chemistry in the service of creating performance-driven solutions.
Jack Porteous, Director of Client Services at Samarkand Global Limited
Austin Li will debut on Douyin live broadcast: After years of platforms protecting their traffic, clients, and live streaming talent, regulators began targeting anti-competitive practices in 2022. Some platforms removed exclusivity clauses for their stars, and some of the biggest names in Douyin and Luo Yonghao broadcast live on both the Alibaba platform and Douyin during this year’s Double Eleven festival. We haven’t seen a major move the other way yet, but could 2023 be the year Austin embraces an upsell platform? If it does, it could be the shopping event of the year.
Color cosmetics to recover (eventually): It’s been a torrid time for color cosmetics this year in China. Sales at Double Eleven were reportedly down 25% compared to 2021 figures, as people were spending more and more time at home. The first half of 2023 doesn’t look rosy either: large waves of COVID infection will keep people relatively confined, but by the summer months consumers will want to look and feel good after a harsh winter. All of this should lead to big growth numbers in key sales periods in late 2023 as old habits reset and lives adjust to a new normal.
The rise of social commerce: 2023 could be a rocky year in terms of pandemic control and economic performance, weighing heavily on consumers’ minds. Many labels will have a hard time adapting quickly to consumer moods: it will be increasingly difficult to appear authentic and human in official brand communications. How can brands navigate that and maintain momentum? Work with the decentralized professional network of boutique social commerce providers who are closest to their customers and can be more agile in their approach. With total social commerce sales forecast to be half a trillion dollars in 2023, it’s too big a segment to ignore.
Source: news.google.com