Knocking the Door of Japan, Gaining a Foothold in Europe and America, Adapting to Southeast Asia – How Will Chinese Cosmetics Companies Tap into the Overseas Market? | TiPost In-Depth

Image Source: @ Visual China

Since last year, there has been a sudden increase in beauty brands consulting with Guo Xiruo about entering Japanese markets, but he didn’t pay much attention at first. As the founder of the overseas service provider Moko, the brands had “freeloading” off Guo for many years.

Some brands wanted to work with influencers and have a showcase in the Japanese stores, which helped the companies tell investors and the supply chain in China a brand story.

 A well-known domestic beauty brand approached Moko, expressing their intention to make an all-out effort in the Japanese market. From pricing to resource integration, the CEO and various managers of the brand took turns to learn and discuss, but the overseas market personnel changed frequently. After more than half a year of “classes,” there was no progress in the business.

However, this time it was different.

Many companies’ founders started personally investigating the Japanese market, and some brands began putting real money into market entry, even if they didn’t see results after two or three months, and were prepared to endure for two or three years.

Nowadays, going global is no longer an option for all Chinese enterprises, but has become a must. The “2022 Survey Report on the Current Situation and Intention of Chinese Enterprises’ Overseas Investment” shows that more than 70% of surveyed enterprises maintain or expand their current foreign investment scale, and more than 80% of enterprises hold a relatively optimistic attitude towards the future development prospects of outbound investments.

Among them, the beauty industry, as a typical representative of high-frequency consumption, has become a shining area for Chinese brands in overseas markets due to low brand loyalty among consumers, high market fragmentation, and weak monopoly of leading brands.

After experiencing the early brutal inventory model, the new generation of going global enterprises must learn to be more patient and take a long-term view of the overseas market, and learn to use their brand to win over the rest of the world.

After all, the marvelous success of Perfect Diary in China is hard to replicate, and Chinese beauty brands must seek opportunities overseas.

The Conservative and Elusive Japanese Market 

Entering the Japanese market, one’s Chinese mindset is the first hurdle that all Chinese entrepreneurs need to overcome.

The Japanese market is conservative and slow-paced, and does not prioritize short-term goals like the Chinese market, where effective results must be produced within three months. It requires brands to have a preparation period of at least 5 years, and even up to 10 years of deep cultivation, which makes it difficult for many Chinese entrepreneurs to accept.

Therefore, Guo often confirms with the founders of companies whether they really want to enter the Japanese market and if they have a solid plan for it.

However, it is not enough for Chinese companies to have a solid plan. The damage suffered by Japanese distributors in the past also needs to be repaired one by one.

A few years ago, many Chinese merchants tried to enter the Japanese market. They followed the Chinese approach of entering offline channels extensively to test their effectiveness with the principle of making profits as soon as possible. Since it was a quick test, there was no plan for marketing investment, and it was naturally difficult to see sales. When the three-month observation period was over, the brand side demanded to withdraw from the channel.

This left a shadow on cautious and integrity-conscious Japanese distributors. When facing Chinese brands again today, Japanese distributors have become even more cautious. They not only require specific sales plans from the brand side but also demand an overall plan for the Japanese market.

In some channels, there are still some inventory left behind by Chinese brands. Guo Xiruo has to visit distributors one by one, clean up the inventory, and apologize to the distributors, saying “Sorry, the brand side did not plan well last time, and we hope to start over.”

But the logic is different now than it was a few years ago. Companies care more about brand image and value, which places higher demands on Guo Xiruo.

Hua Xi Zi requires setting up counters directly in department stores instead of entering cheap makeup stores. This choice is a comprehensive consideration of brand image and price. Taking Hua Xi Zi’s carved lipstick as an example, the product’s selling price in Japan is 5600 yen (about 292 yuan RMB), almost the same as Dior’s price.

However, this is almost an impossible challenge for a brand that has just entered the Japanese market.

As a traditional market where offline commerce accounts for more than 80%, Japan’s offline channels have strict requirements for entering brands. This is a difficult barrier to overcome for new consumer brands that are known for their online channels. Japanese offline channels will conduct audits on the qualifications, products, ingredients, market strategies, and other aspects of the entering brands, which can take 2-3 months at the shortest and half a year to one year at the longest. The process is sound but cumbersome, and all operations must comply with the channel’s operating procedures.

As a higher-end sales channel, department stores have even more complex and lengthy processes.

From February 15, 2021, Hua Xi Zi has been collaborating with influencers and media in Japan. The one-year promotion period has allowed Hua Xi Zi to accumulate a certain degree of popularity and fans in Japan.

Guo Xiruo calculated that it took more than a year just to communicate with @cosme (a famous offline beauty store in Tokyo) to enter this channel. And the cooperation process between Moko and another top department store channel may last for up to a year and a half.

In addition to the difficult offline channels, Japanese KOLs also have their own personalities.

Japanese celebrity makeup artist Odagiri Hiroshi had never collaborated with a Chinese brand before. In order to convince him, M&G and the team communicated with him for a long time for half a year. Once a long-term partnership is established, the other party will provide advice from product to promotion resources and even actively promote it on television media.

This is a market that is both conservative and full of opportunities. Local old-fashioned companies always stick to their traditional ways, providing new Chinese brands that are good at playing social media with a new opportunity to seize the market. However, new things in the conservative Japanese market also hide unknown risks.

Take TikTok as an example. As a commercial form that is popular all over the world, TikTok has not developed smoothly in Japan. In this conservative market, emerging formats will be suppressed by conglomerates to avoid impacting traditional business models.

Guo Xiruo told TiPost App that Japan is not only a springboard to help brands establish global influence, but also a “fatty meat” that can reap real benefits. However, China and Japan have different understandings of human relations and marketing. If you always use past experiences and replicate them in Japan, you will encounter obstacles. “China and the United States belong to a slightly carefree work style, and the Japanese are just the opposite, and we need to respect their national character.”

Finding a Foothold in Mature European and American markets 

“Americans are indeed carefree, but China is very cost-conscious.”

Zheng Boya, who once worked for a certain beauty tool brand, has a different understanding of the character between China and the United States. She told TiPost App that it is impossible to bring foreign prices to China to sell. The foreign price is several times the domestic price. If Chinese consumers compare domestic and overseas platforms and find price differences, they will come to the brand for theory.

This is a Chinese manufacturer that has been operating overseas for more than 10 years. With its supply chain and price advantages, it has achieved the first place in the regional sales of nail products in the niche North American market with only online operations.

This is the operating strategy of a typical foreign trade company. According to Zhang Yue, a Google international growth consultant, these companies focus on platform-based operations, and the supply chain is their main advantage, which is also a group of companies that sees business opportunities first. In contrast, many vertical brand merchants often react slowly.

That’s right, keeping quiet and striving to remain unknown is a strategy that many early offshore brands have adhered to.

Some organizations have attempted to invite early successful offshore companies to give lectures for a high price, but they have all been refused.

“In our industry, we avoid talking too much. On the one hand, it’s easy to be taken advantage of, and on the other hand, there is a risk of being copied or encountering unfair competition. Most businesses that truly make money will not share their methods of making money.”

Not to mention giving lectures, some entrepreneurs in the European and American markets are even unwilling to disclose their company and brand names to the public. It is said that a friend created a nail polish brand on Amazon with considerable sales, but Zheng Boya couldn’t even ask for the name of the company, and eventually found relevant information on a remote website. “There are many such companies, but people just don’t know, and they don’t want people to know.”

But with the increasingly fierce offshore trend, the strategy of keeping quiet and making a fortune is no longer applicable. In the face of fierce competition, how to impress European and American consumers with new models has become a problem that old brands must face.

Online investment is an opportunity for new brands to break into mature markets. According to Zheng Boya’s practical experience, among all advertising platforms, Google Ads has the best conversion rate. Targeted investment in KOLs requires more specific and detailed calculations.

According to Zheng Boya’s investment strategy, after investment, the profit gained by each KOL is calculated to evaluate whether the blogger can be reinvested. With this finely calculated operating strategy, Zheng Boya spent no more than $20,000 on a single KOL (with two million fans) in over a year. Sometimes, when some internet celebrities like the brand’s products, even if they don’t charge, they are willing to promote them voluntarily.

In addition to traffic investment, the bigger challenge for Chinese offshore brands is how to do well in independent stations. This is a self-owned platform that requires operation, analysis, and product display. Faced with this unfamiliar form of independent stations, the first reaction of many offshore companies is to ask Zhang Yue for a comprehensive plan, how much money they need, how much flow they need, which looks like they have a lot of money, but in reality, they lack basic technical ability and operational ideas. “You can’t use the same mindset as in China to do offshore, it’s completely different.”

Among the offshore brands that Zhang Yue has come into contact with, the idea of wanting to replicate the Chinese model overseas, and directly occupy the sales rankings abroad, is basically impossible.

Although the European and American beauty markets are highly mature, they are also very fragmented, and even large enterprises have a very small market share. For beauty products that require constant innovation and appeal to impulsive consumers, there are still many opportunities for new brands.

Even a giant like L’Oreal Group only occupies 14% of the global beauty market. At the same time, as an impulsive consumer product, beauty is a category that is constantly driven by the desire for novelty and change. Consumers always have a strong demand for new products, new brands, and new concepts.

However, despite this, Eastern characteristics are still a niche category that needs to be educated. Although many well-known European and American beauty bloggers have praised Chinese beauty products by name, and have successfully aroused the interest of many Western users, it still requires a lot of work to overturn existing consumer habits.

Many European and American beauty bloggers often say when trying Chinese beauty products that the product is good in every way but the color saturation does not meet their expectations. Chinese people prefer a lighter and more transparent look, with products that have weak color saturation but can brighten the complexion, while Westerners prefer exaggerated colors and contouring, and eye shadow that is more striking. The all-neutral Kardashian-style makeup look is a favorite of foreign girls.

In addition to adjusting product thinking, there are also various misconceptions in operational thinking.

Many cross-border e-commerce bosses like to hire people with a background in big factories, but they often come from the domestic e-commerce business. Under their leadership, the company’s overseas brand website presents a strong “Taobao style”, displaying discount information every day, much like the previous Facebook product explosion station. Even if the Tik Tok account is restricted, they still insist on using the restricted account to run ads.

“Maybe the bosses feel that the domestic e-commerce system is relatively mature, but the thinking of running a platform and running an independent website is too different. Even if you used to work on Tmall, it takes a long time to adapt to Amazon and change your thinking,” said Zheng Boya.

Many brands, when they find Zhang, will immediately name the European and American markets as their target. However, after a period of actual operation, it is easy to be discouraged because the expected results are not achieved, and then switch to other markets, waiting for other markets to mature before attacking North America, because this market is too big and brands are often reluctant to give up.

However, in the cases handled by Zhang, as long as you can persist for a year, you will definitely see results. She told TiPost App that the European and American markets are relatively scattered, and even L’Oreal finds it difficult to monopolize. Moreover, as a market with a very high online penetration rate, complete basic infrastructure such as logistics and air transportation, and mature and sound laws and regulations, its overall cost and threshold are relatively low.

“Consumers are always looking for novelty and change, hoping to see new brands and new concepts. This is the charm of consumer goods.”

Passive Southeast Asia—Live Streaming Sales

Milky’s killer move for dealing with unreliable bloggers is to ring their doorbell.

The KOL market in Southeast Asia is still immature, and bloggers’ professionalism is relatively low. Some bloggers don’t want to shoot after accepting an order, don’t return the samples they received, don’t respond to messages, and some even choose to disappear. As the Southeast Asia operations manager of cross-border enterprise service provider TiPost, Milky has to personally knock on the doors of these “laid-back” bloggers and retrieve the samples that were sent out.

It will take a long time for these bloggers to mature. Milky also needs to accelerate the growth of live streaming business and cultivate more qualified local anchors.

In Southeast Asia’s live streaming market, beauty products occupy the top spot. According to the “2022 TikTok Eco-Development White Paper” released by FastData, in the TOP20 live streaming in Southeast Asia in 2022, 85% of the main categories are beauty and personal care products.

Nevertheless, Southeast Asia’s e-commerce market still has enough room for growth. According to data from Bain Consulting, the e-commerce penetration rate in Southeast Asia is expected to reach 6.5% in 2025.

In this context, beauty has become one of the largest sectors in TiPost’s Southeast Asian business layout. As the region closest to China in terms of culture and habits, although Southeast Asia’s live streaming market is far from mature compared to China, market penetration and consumer acceptance are both very high.

Therefore, since 2022, TiPost has already established local live streaming teams in Malaysia and Indonesia.

The salary for anchors is stable, ranging from 3,000 to 8,000 yuan. Sitting in the office, the working hours are relatively fixed, and being an anchor is a highly sought-after position among local people in Southeast Asia.

However, in the eyes of Chinese companies, the play of local anchors is still too simple. Milky needs to teach them some more effective methods.

The most commonly used operation mode for domestic live streaming e-commerce is to set up products- dividing them into traffic-generating and profit-making items, using traffic-generating items to drive volume, and using profit-making items to drive revenue.

Specifically for Southeast Asian live streaming rooms, more diverse forms of promotion are typically used. Southeast Asia is a place with frequent promotions. March 3rd, April 4th, May 5th, June 6th, and the 25th of every month are all promotional nodes. Especially at the end and the beginning of the month, people have just received their salaries and these days are the best nodes for concentrated shopping. After all, by mid-month, everyone’s money is all spent.

The timing of live streaming also needs to match the local customs. In Southeast Asia, there is a large Muslim population who needs to pray every day, and the prayer times are not the same every day. Therefore, not only does the live streaming time need to be adjusted accordingly, but the company also needs to prepare prayer rooms for colleagues who need to pray.

The arrival of Chinese people is changing the operational logic of the Southeast Asian e-commerce market, and the local people’s attitude towards life is also reshaping the work rhythm of Chinese companies to some extent.

Milky asked the Chinese HR in the company if local young people would be willing to work overtime if they were given overtime pay. The answer is no. Local people are not very concerned about overtime pay. They prefer to finish the designated work within the designated time and don’t want to be bothered after work. Therefore, Chinese managers in Southeast Asia have gradually learned to make agreements with local employees to define working hours and job content.

During her stay in Malaysia, Milky was infected by the local people and became much more relaxed. “It’s not that local people are lazy, it’s that Chinese people are too hardworking. Their way of life is normal.”

Even so, when it comes to major promotions, it is still inevitable to do 24-hour live streaming in three shifts. Most beauty anchors are female, and in Southeast Asia, married Muslim women who need to work at night will choose to bring their husbands to work with them. Therefore, not only do they need to provide relatively high taxi fares, but they also need to prepare rest areas for the husbands who come to accompany them.

Although it is a relaxed market, it is still a market with huge potential. Online sales in Southeast Asia account for only 20%, and both penetration rate, market size, and content models are waiting to be explored. Although the live streaming market is developing vigorously, looking at the entire Southeast Asian market, there has not yet emerged a Li Jiaqi or Wei Ya of their own.

This is also a market that needs to mature. Regardless of live streaming functions, transaction processes, and cash on delivery capabilities, Tik Tok is the most comprehensive live streaming platform. However, influenced by Douyin’s low-price strategy, the Tik Tok platform in Southeast Asia is still in the stage of competing on price.

In addition, due to the limitations of local manufacturing and supply chain capabilities, the shortage of goods and heavy reliance on overseas supply is also one of the reasons that affect the rapid development of the local e-commerce market.

As a market that is currently most favored by Chinese brands, underdeveloped development is just one aspect of the complex nature of the Southeast Asian market. The key to winning the market is how to deal with the diverse aesthetics and preferences of the 11 countries in Southeast Asia.

Due to the strong local beauty market, Thailand is the most fiercely competitive area for beauty products in the entire Southeast Asian region; Indonesia and Malaysia have similar cultures, so they can often share a product line; Vietnam and the Philippines prefer European and American aesthetics.

Complex demands require brands to prepare more detailed products and personnel.

Milky told TiPost App that some successful brands will set up a business leader in each country to take charge of all online and offline channels in a single market. However, there are also some brands with very crude methods in the market. They are not even willing to do localized design for the market, and just stick an English label on Chinese products and try to sell them to Southeast Asia. “I think those with too vague management cannot do well.”

This year, the overseas market is still hot. From supply chain to white-label, more and more beauty brands are pouring into Southeast Asia, trying to dig for gold here.

The brands that Milky has contacted have basically set a goal of doubling their GMV this year. Although not every brand can succeed, this is still a huge market with an average age of 25 and a total population of 200 million. Whether it is the segmented skincare field or high-end beauty products, it is a tempting opportunity for Chinese brands.

(This article was first published on TiPost App, author | Xie Xuan. Disclaimer: Zhang Yue’s personal views are not related to his employer Google.)

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