Emerging local beauty brands in China are doubling down on their “inner self” including research and development (R&D) and market positioning to stay relevant in a competitive market with increasingly discerning consumers. Florasis, a home-grown brand founded in the eastern city of Hangzhou and known for its traditional Chinese aesthetics, announced last Friday that it was investing over one billion yuan (US$158 million) over the next five years in R&D. Established in 2017, the brand found national fame when China’s top live-streamer Li Jiaqi featured its carved lipstick – inspired by Chinese sculpture – in his live-streams in 2019. In recent years though, there has been market scepticism that the brand can continue its success without the Li connection. Elsewhere, the co-founder of rival beauty brand Girlcult recently reflected on the mistakes the four-year-old brand had made with an overeager “embrace of the mass market”, which involved collaborations with famous TV shows such as Sesame Street. Chinese TikTok merchants look for ‘first pot of gold’ in overseas markets “It not only overturned our branding and positioning, it also made us feel lost,” said Suo Zhi, chief operating officer and co-founder of the brand, in an article for trade publication Brand Of The Future last Thursday. Although Gircult increased sales in the short term, the boost did not “endure” with a niche audience, and the move partially contributed to a decline in sales to eight million yuan per month on average last year from 20 million yuan per month in its glory days. The self-reflection in the industry comes after some golden times for home-grown direct-to-consumer beauty brands including Perfect Diary, Florasis, Kaleidos, Judydoll and Girlcult, which saw exponential growth online with cut-price offerings relative to international brands. These brands all have one thing in common – almost all of them were born online and after 2016, the year seen as the beginning of “the new consumption era”, according to research firm Analysys. “Traditional channels such as department stores, supermarkets and quality dealerships were dominated by established giants, which had not paid enough attention to newer online channels,” said Li Yingtao, a senior branding and retail analyst at Analysys. “Moreover, with the rising consumption power of Gen-Zs, emerging brands that can fulfil the needs with online seeding, social and live-streaming have stood out.” Chinese beauty brands expand e-commerce footprint in Southeast Asia China was the world’s second-largest beauty market in 2020, and the brand power of domestic beauty brands is expected to grow over the next few years, market research firm iResearch wrote in a 2020 report. The market size for domestic beauty brands is forecast to reach around 252.7 billion yuan in 2023 from 157.6 billion yuan in 2020, the company said. However, there are questions over whether these emerging brands can take on established international players over the long term. Quarterly net revenue growth for Guangzhou-based Yatsen Global, a New York-listed company that owns Perfect Diary, Little Ondine and Eve Lom, slowed from 71.7 per cent in the fourth quarter of 2020 to 6 per cent in the most recent one. At least a dozen online beauty brands including Apinkbaby and Two Space closed last year, media reports show. Li from Analysys said new beauty players are facing internal and external pressures. “The external problem is caused by stronger competition and an element of beauty fatigue among consumers, but the most problematic issue lies within the companies themselves,” he said, adding that certain companies are too reliant on factors such as marketing and packaging, and lack core strength in product and management capability. Inside the wealth and power of China’s e-commerce influencers Florasis, a brand that has topped that charts on Douyin e-commerce and recently ranked the highest among domestic beauty players on Tmall’s inaugural “most powerful brands” list this year, appears to be knuckling down for the long game. With a 6,000-square-metre science and innovation centre in operation since last August, the brand’s new investment is focused on product innovation in both colour cosmetics and skincare products, artificial intelligence-driven management of materials and its supply chain and green packaging among other things. “China does not yet have a premier beauty brand in either colour cosmetics or skincare that can compete with first-tier global brands,” said Li Huiliang, Florasis’s chief scientist who joined the company this year from previous stints at domestic beauty giants Shanghai Jahwa United and Bloomage Biotech, at a press conference last Friday. “But over my 30 years of experience, I believe we can be a world-level brand if we follow the right path that is to work on our own technology.” Li Huiliang leads the brand’s R&D team of over 200 people in Hangzhou. Florasis’s chief product officer Shang Lu told the South China Morning Post that the sales contributed by Li Jiaqi are “no higher than 5 per cent” and he is contributing mainly by co-creating products. In 2021, the company saw its gross merchandising value hit 5.4 billion yuan, five times higher than in 2019. As for Girlcult, it has decided to return to the “niche” strategy that got it this far. “Only when we get the niche culture, do we have the capability to tap into the mass culture,” wrote Suo in her article, pointing to celebrated streetwear brand Supreme as an example. “Of course, we need to endure loneliness and stand the test of time. After all, Supreme was founded in 1994 but only rose to fame in 2017.”