The Chinese beauty market is undergoing rapid changes. To borrow from Charles Dickens, China’s media often refers to the country’s beauty industry as “it is the best of times, it is the worst of times.”

That old saw fits the current state of the Chinese beauty market. On the one hand, beauty brands and retailers are still blossoming at an unprecedented rate, helped along by surging consumer demands. On the other hand, trends are coming and going at an accelerated pace thanks largely to stronger regulations and fierce competition, as well as the rapidly evolving COVID-19 situation. 

This dichotomy begs the question: how does a company best navigate the rewarding, yet challenging, beauty market? To find the answer, look to the domestic brands that top today’s best-selling beauty charts.


Clever Marketing Is Critical

Founded in 2016, Yatsen Holding Limited is widely regarded as a digital marketing trendsetter in China’s beauty industry. The massive success of its Perfect Diary is primarily the result of its incredible social marketing strategy. The company attracts customers through Douyin, China’s version of TikTok, and messaging app WeChat. Selling products through live-streaming by influencers in particular has been a way to reach young audiences.

The tactics helped Perfect Diary soar to the top of the sales charts soon after its debut in 2017. It achieved staggering online sales results during the 2018 and 2019 Double 11 seasons. Also known as Singles’ Day, it is Alibaba’s annual shopping festival.

Following that success, Yatsen launched two more beauty brands. Little Ondine focuses on eye makeup with higher price points than Perfect Diary. The other new brand is Abby’s Choice skin care. In 2020 Yatsen became the first Chinese beauty company to be listed on the US Stock Exchange.

However, the major driver behind Yatsen’s success, digital marketing, is beginning to take its toll. Some analysts note that based on its recent financial reports, heavy reliance on marketing and less investment on R&D are hindering the company’s growth. Yatsen’s sales and marketing expenses are reportedly 32 times higher than R&D expenditures. The industry average is about 25 times.

To remedy the situation, Yatsen is increasing R&D efforts. It is collaborating closely with several big suppliers like Sensient Technologies, as well as international research institutions including the University of Lyon. Very recently it announced a partnership with Engineering Research Center for Nanomedicine in Huazhong University of Science and Technology. Under terms of the agreement, they will create a joint cosmetic application lab that’s focused on active ingredients, such as a nano-based thermal delivery system.

Zhejiang Yige Enterprise Management Group was also founded in 2016. Yige is best known for its leading makeup brand Florasis. Judging by recent online sales, it may soon overtake Yatsen.

Four years ago, Yige embarked on an extensive influencer marketing program by forging a close relationship with Austin Li, China’s top live-streamer/beauty key opinion leader (KOL). For example, during 2019’s Double 11 Shopping Festival, about 64% of Galaxie Lipstick’s $34 million in sales came from Li’s live-streaming efforts.

Equally important for Florasis’s success is its intricately designed product and packaging which were reinvented with traditional Chinese style. One of the best examples is its Love Locks lipstick, which is imprinted with delicate floral designs and packaged in a Miao ethnic minority style. Love Locks is a best-seller in Japan, too. The company has been making forays into the overseas markets with unique social marketing campaigns, like a video featuring a romantic love story between two young women.

Still, the group faced the same headwinds as Yatsen, as it relied on independent R&D facilities and contract manufacturers. Now, Yige is said to be partnering with  Cosmax, one of the biggest ODMs in China. Korea-based Cosmax, along with Shanghai Yige Ningxiang Biotech, is said to be working with Yatsen on biochemical-based formulas. Earlier this year, Yige opened a new R&D center in Hangzhou, Zhejiang province.

Established in 2010, Yunnan Botanee Group is the parent company of Winona, one of the leading sensitive skin care brands. Winona features botanical ingredients in simplified formulas. The brand is also the only domestic player that managed to retain its position among the Top 10 best-selling skin care list for this year’s Tmall 6.18 Shopping Festival. Winona accounted for nearly 99% of Botanee’s sales in the first half; the company’s other brands are Winona Baby and Beauty Answers.

While active in digital marketing, Botanee seems to be doing fine on R&D compared to its Chinese counterparts. It reportedly owns 46 patents and cooperates with many hospitals for clinical studies. However, R&D investment dropped from 3.71% of 2018 sales to just 2.61% in 2020. However, that percentage rebounded to 3.3% for the first half of 2020. To solidify its leading position, in August, Botanee announced it will invest about $15 million in testing technologies and indigenous botanicals in Yunnan Province to further develop cosmetic products.


Others Brands to Watch

Apart from these three companies already mentioned, other beauty names to know include Colorkey, Judydoll and Into You (best known for its lip mud) in makeup category, Little Dream Garden (body scrub) in body care and C+ (mini facial mask) in skin care. 

The vast majority of these popular new players share similar traits:

• Quickly rising and grabbing the spotlight within two years;
• Highly innovative and active with digital marketing across various major e-commerce, social and content platforms; and
• Heavily dependent on the flagship brands (largely with middle to low prices) and/or very limited best-selling SKUs, as well as OEM/ODM-based R&D and manufacturing.

As a result, detractors deride these startups with the observation, “marketing with products in mind, making them mindlessly.”

Still, several established domestic players seem to be following the “marketing first” formula.

Proya Cosmetics, Shanghai Jahwa and Bloomage Biotech are posting good gains in online sales. Jahwa’s Dr. Yu is positioned as a dermatologist brand specializing in skin barrier recovery. Proya’s serum series includes Deep Ocean Energy Wrinkles and Firming Essence. Both are trending on social media by tapping into the sensitive skin care and ingredient-centric (Chen Feng Dang) trends.

Meanwhile, Biohyalux of Bloomage Biotech is one of the first riding on the tide of “Guochao.”  The term means “national wave” and  refers to a mix of contemporary design and nostalgic cues.

When talking about digital/social marketing, domestic players set the trend, lead the way, but often their foreign counterparts adopt similar strategies and quickly catch up. So how can domestic beauty marketers create something more than a short-lived fad?

The answer is obvious, by differentiating offerings and strengthening R&D and manufacturing capabilities. Many local brands are already taking these steps.

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Ally Dai
Freelance Writer
[email protected]
[email protected]

Ally Dai is a freelance writer/independent consultant based in Shanghai. She has covered the beauty industry for more than 15 years. Previously a senior editor and industry researcher, she now works on content creation with publishing houses, event organizers and PR companies in the personal care and life science industries.