Chinese beauty brands woo Southeast Asian customers on TikTok and Shopee as saturated home market stagnates
- Neighbouring countries such as Indonesia and the Philippines are top choices for cosmetics brands, which point to similar consumer aesthetics and market rules
- China’s domestic consumption fell to single digits after 2017, and contracted in 2020, in a market that remains highly competitive
Over the last two years, Chinese cosmetics companies that sell online have been eyeing neighbouring markets like Japan and Southeast Asia for expansion before trying their luck in more competitive Western markets.
These companies may have an easier time finding success in Southeast Asia, where Chinese brands often have an edge because of knowledge gained from operating in China’s highly competitive market, along with their access to flexible supply chains that allow them to produce cost-effective products, according to industry insiders.
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“International brands lack local consumer insights. With their relatively high prices and limited product range in Indonesia, local competitors cannot adapt to consumer needs with popular products online,” Sita Hu, vice-president of branding at Hebe Beauty, said at an industry forum in Shanghai on Friday. “That gives us an opportunity.”
The Hong Kong-incorporated company was started by Chinese entrepreneurs in 2018, when it launched in Indonesia. Its cosmetics brand You has since become one of the bestselling brands on Shopee and TikTok in the country.
As the internet economy slows in China, overseas e-commerce has provided new opportunities in booming markets such as Indonesia, Malaysia and the Philippines. Even amid slowing global economic growth, the internet economy has remained resilient in Southeast Asia, where it was expected to exceed US$100 billion gross merchandising value (GMV) in 2020, according to a report that year by Google, investment firm Temasek Holdings and consultancy Bain & Company. The report estimated that GMV would triple for the region by 2025.
In China, however, things are headed in the opposite direction. Domestic consumption contracted in 2020 for the first time since 1978 amid the Covid-19 pandemic. Total retail sales of consumer goods reached 39.2 trillion yuan (US$6.2 trillion) that year, sliding 3.9 per cent from 2019.
While consumption bounced back in 2021 to 44.1 trillion yuan, growth was much slower than the double-digit increases China was used to before 2017, according to numbers from the National Bureau of Statistics.
For China’s online cosmetics brands, there are other reasons for looking abroad beyond just escaping stagnant growth at home. Overseas markets have less competition, they say, and consumers in neighbouring countries like those in Southeast Asia appreciate similar consumer aesthetics. E-commerce rules in these markets may also be easier to incorporate into their platforms.
As these e-commerce platforms seek to expand their influence, partnering beauty brands are looking to grow with them.
“We started from Southeast Asia because that’s where our executives are based, but in later stages we decide to launch in markets such as Brazil and Mexico based on their population size and prospects in e-commerce,” said Christy Wu, a business development executive for beauty brands in East China at Shopee, which she said aims to be a leading global e-commerce platform.
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Expanding to new markets always comes with challenges, though, no matter the similarities. Wherever a company decides to set up shop, the team must pay close attention to the local culture, Hebe Beauty’s Hu said.
Hebe once ran an advertisement in Indonesia showing a woman wearing an off-shoulder top, which it was required to take down in the predominantly Muslim country.
“We made a big mistake in Indonesia and paid for it,” Hu said.
