Alibaba's Singles Day live tracker hits midnight, showing the company sold 268.4 billion Chinese yuan, or about $38.4 billion, worth of goods.
Every Nov. 11, Chinese consumers stay glued to their smartphones for Alibaba Group Holding Ltd.'s Singles Day, the 24-hour shopping festival where they can buy products ranging from properties to purses. In 2019, the e-commerce company raked in total sales of 268.4 billion Chinese yuan, or about $38.4 billion, with beauty and cosmetics products especially capturing shoppers' attention.
The cosmetics and skin care category accounted for 63 of the 299 brands that recorded at least 100 million yuan in sales on the day, according to figures Alibaba provided. L'Oréal SA, L'Oréal-owned Lancôme, The Estée Lauder Cos. Inc. and The Procter & Gamble Co.'s Olay were the best performers, making it into the "hall of fame" of brands that pulled in at least 1 billion yuan in sales during Singles Day. In contrast, no brands in the category were billion-sellers the previous year.
The number of European and U.S. cosmetics and skin care brands that sold more than 100 million yuan worth of goods totaled 26, doubled compared to a year earlier, according to Shanghai-based research company CBNData. Asian skin care brands that joined the 100 million-yuan-club include Japan's Shiseido Co. Ltd., South Korean beauty group Amorepacific Corp.-owned brands Innisfree, Laneige and Sulwhasoo, as well as 19 homegrown Chinese brands such as Pechoin and OSM.
Cosmetics and skin care are higher-margin businesses that deliver bigger online sales volumes, unlike other items such as electrical appliances. One of the sector's largest companies, Zhuhai-based Gree, announced in a Nov. 9 Weibo post that Singles Day discounting would deal a 3 billion yuan blow to its profit.
The strong performance of the beauty category was aided by Chinese consumers' familiarity with the products, according to Jacques Penhirin, retail and consumer goods partner at consultancy Oliver Wyman.
"Most of the top-selling brands are imported and widely available. Consumers know the products well, like SK-II's Pitera essence. They do not have to hesitate and try on the products first. They just want to get a good deal," said Penhirin.
During the festival, also known as "Double 11," L'Oréal sold 100 million units of its Youth Code and Revitalift sets in just 15 minutes. The French brand dethroned its luxury subsidiary Lancôme to become the best-selling skin care brand on Singles Day, moving up two spots from 2018. An early mover into digital channels, L'Oréal pulled off the feat with the aid of "influencers" who livestreamed during the sales, as well as an elaborate behind-the-scenes augmented reality video on the beauty products.
Alibaba said L'Oréal, Lancôme and Estée Lauder were among the 17 brands that generated at least 100 million yuan in transactions through livestreaming. The Hangzhou-based company recorded 20 billion yuan of transactions through its livestreaming unit Taobao Live on Nov. 11. Meanwhile, CBNData estimated that livestreaming accounted for 16% of the total sales in the beauty category, with brands such as L'Oréal livestreaming for over 600 hours beginning from the presale, Oct. 21-Nov. 11.
"Livestreaming becomes super important in the marketing mix for a lot of brands, and I think for cosmetics in particular, where things are moving really fast," said Pascal Martin, a Hong Kong-based retail partner at OC&C Strategy Consultants.
Penhirin said livestreaming gained traction because Singles Day was presented not just as a day of discounting but as a live event, citing its "See Now, Buy Now" fashion show that precluded the sales in previous years.
"It is kind of fun. It's like reinventing the department store experience. It gives another buying experience, which is more fun and personal," said Penhirin.
Increasingly, beauty brands are offering limited edition items during Singles Day. Some, including Procter & Gamble-owned SK-II, released limited edition gift sets that formed the focal point for influencers' "unboxing" videos. Not only does this approach create more buzz, it saves brands from having to discount heavily during the event, Martin said.
"I think more and more brands are trying to benefit from Double 11 without discounting because you don't want people to compare prices. You don't advertise it as a special price, you advertise it as a special product. I think a lot of cosmetics players are doing it these days," said Martin.
It is no surprise that the beauty category saw huge sales volumes during Singles Day. L'Oréal Group CEO Jean-Paul Agon noted during the company's most recent earnings call that its strong third-quarter results were driven by high demand from China.
"I think there are many factors today in China that drives this growth. ... What's most amazing in China is that you see very young consumers going directly to a very established brand and big brands, like, of course, L'Oréal, but also Lancôme or Yves Saint Laurent or Giorgio Armani. ... And so this is clearly a very good sign," Agon said.
Alibaba's Tmall platform had earlier noted that sales of beauty products soared 60% on its site in 2018 and that it would add 1,000 beauty-focused stores to its platform in 2019.
Makeup products drove the growth of the beauty sector in 2018, according to Euromonitor, with sales increasing 24.3% year over year to 42.8 billion yuan, although skin care items accounted for a larger volume of sales at 212.2 billion yuan, a 13.2% rise.
"The interesting phenomenon is really the explosion of makeup, especially lipstick. A few years back, women used to have only one or two lipsticks and they seldom used it. And today they have [numerous] lipsticks, they buy it, they change the colors. They are very sensitive to fashion, the new brands. Makeup, especially lipstick, is really one of the drivers of growth," Penhirin said.
JD.com catching up
Beyond the beauty counters, Alibaba's Tmall and Taobao are not the only online platforms for Chinese consumers to purchase skin care items. Social e-commerce platform Xiaohongshu has drawn a following among female users and popular beauty influencers, while JD.com Inc. has been taking action to grow its beauty sales.
"JD has been lagging behind the in the cosmetics and beauty category in the previous years because its mainstay has been consumer electronics and IT gadgets, but we can see that it is doing better in this category during the Singles Day sales," said Shawn Yang, managing director at research house Blue Lotus Capital Advisors.
The Alibaba rival, which reported 204.4 billion Chinese yuan in sales throughout its own 11-day Singles Day promotion, said sales of beauty products surged 79% year over year, with skin care items growing 86% and the perfume and makeup category advancing 80%. L'Oréal again took the top spot as the best-selling skin care brand on JD.com, according to a post on the brand's official Weibo account.
"JD has always had this advantage of a larger male user base, so it is more electronics-focused and tends to do quite well in the wine and spirits category. But it is keen to catch up," Martin said. Unlike Alibaba's consumer-to-consumer Taobao marketplace and its business-to-consumer Tmall site, JD.com's purely retail business model creates no confusion for brands that want to sell on its platform, he added.
JD.com's recent expansion into lower-tier cities may allow the retailer to sell more beauty products, given that 55% of users of its newly launched social e-commerce platform Jingxi are female and more than 70% are from lower-tier cities.
The retailer said its logistics advantage will help upmarket beauty brands to reach consumers in lower-tier cities, a relatively untapped market with less exposure to premium products in local department stores.
"For brands, department store counters in first- and second-tier cities are occupied by high-end brands, and small brands and domestic brands have not been able to find suitable channels to contact consumers," JD.com said in a statement.
JD.com could address the uneven distribution of beauty products in the lower-tier cities, but it faces a tall order against Alibaba's Tmall, which has built a strong user base in the sector, together with a sticky system of digital payment and livestreaming, according to Oliver Wyman's Penhirin.
"The way they can do it is by bringing different brands and different assortments ... but lower-tier cities are still about price and affordability," said Penhirin.
As of Nov. 20, US$1 was equivalent to 7.04 Chinese yuan.