The Next Big Thing

E-tailer JD.com joins with Sephora in push into China’s booming beauty products market

PUBLISHED : Wednesday, 13 May, 2015, 3:01pm
UPDATED : Wednesday, 13 May, 2015, 3:01pm

JD.com, the largest online direct sales company in China, has teamed up with global beauty products retailer Sephora to launch the biggest cosmetics store on JD.com’s popular e-commerce platform.

The alliance between JD.com and Paris-based Sephora, owned by luxury goods giant LVMH Moet Hennessy Louis Vuitton, is expected to intensify competition in China’s fast-growing online retail market for beauty products.  

Data from Frost & Sullivan showed that online sales of beauty products in China are forecast to grow 33.2 per cent on average annually to reach 94.6 billion yuan (US$15.6 billion) by 2018, up from 22.6 billion yuan in 2013.

“This new JD.com partnership will be an immediate rival to the existing major online business-to-consumer platforms for beauty products on the mainland,” said Ricky Lai, a research analyst at Guotai Junan International.

The top domestic competitors are Jumei.com, the mainland’s largest online beauty products retailer, and Alibaba Group’s Tmall.com, which has about 19 high-end beauty and skin care retail brands on its platform.

On the JD.com marketplace, Sephora will offer more than 1,200 products from 70 top brands, including Christian Dior, Guerlain, Givenchy and Kenzo.

"Sephora is dedicated to providing the best, most trusted beauty solutions for our customers, while making shopping more efficient, intelligent and fun," Anne Veronique Bruel, president of Sephora Asia, said on Wednesday.

Bruel described JD.com as a partner “known for its superior customer service, fast nationwide delivery and longstanding reputation as the online source for guaranteed product authenticity”.

While Sephora operates a network of brick-and-mortar stores on the mainland, JD.com provides larger online-to-offline infrastructure through seven fulfillment centres and 123 warehouses in 40 cities and 3,210 delivery and pick-up stations.

The Chinese company guarantees same-day delivery services in 134 counties and districts, as well as next-day deliveries in 866 counties and districts.

Nasdaq-listed JD.com, in which internet giant Tencent bought a 15 per cent stake for US$214.66 million in March last year, has significantly expanded its business beyond its core market segments of computer, communication and consumer electronics products.

“Solid demand in food, beverage, baby products and cosmetics, as well as mobile and home appliance categories contributed to the 63 per cent [year-on-year] growth of direct sales gross merchandise volume [in the first quarter to 50.9 billion yuan],” Alicia Yap, the head of China internet research at Barclays, said in a report published on Monday.

JD.com last Friday reported a 99 per cent year-on-year increase in total gross merchandise volume, which included sales from its marketplace operation with online merchants, to 87.8 billion yuan last quarter.

In Hong Kong, the impact of JD.com’s partnership with Sephora could add to the woes of local cosmetics retailers, such as SaSa and Bonjour, which have been catering to large throngs of mainland shoppers in the city.

"There's no doubt that e-commerce has had a negative impact on traditional retailers of cosmetics. By building self-owned online platforms or entering well-recognised e-commerce websites, such as Tmall and Jumei, many big-brand companies, such as Lancome and L’Oreal, have been improving their sales performance,” David Lung, the managing partner of Deloitte China’s consumer business industry practice, said last week.

The share prices of beauty products retailers SaSa and Bonjour have recently been hit hard by a drop in the number of cross-border shoppers. The number of such visits in March dropped 10 per cent year-on-year to 3.24 million, the first decline since February 2011, according to Tourism Board data released early this month.

The retailers also face more pressure from Beijing’s decision last month to tighten visa policies by restricting Shenzhen permanent residents to one visit a week, against the backdrop of protests in Hong Kong against parallel trading. In contrast, many other countries and territories have relaxed visa conditions for mainland tourists.