The future of beauty in China is green. However, a recent report by AlixPartners demonstrates that cosmetics brands chasing the Chinese market with natural, clean, and ethically sourced products must navigate a complex web of consumer aspirations, purchasing behaviors, and product definitions to find success.
The report, titled Naturally Beautiful: Millennials and Preferences in Beauty and Personal Care Products, asked consumers how much importance they place on beauty products being “healthy,” “clean,” and “natural.” Researchers surveyed a combined 4,500 consumers in five countries: China, France, Germany, the United Kingdom, and the United States.
Green beauty products are still a niche segment within the global industry for beauty and personal care products, accounting for around $11 billion of a $500 billion market. But growth in the green sector is outpacing the industry as a whole, and sales of natural and organic beauty products are predicted to reach $22 billion annually by 2024.
The AlixPartners survey found a common interest in natural and organic beauty products across the five surveyed nations, but Chinese consumers are more committed to green beauty than consumers in the other four nations. While 72 percent of all respondents said purchasing “healthy or clean products” was important to them, 90 percent of the Chinese consumers surveyed fell into this category. In contrast, only 56 percent of British consumers regarded green beauty products as important. Unsurprisingly, the report found millennial and Gen-Z respondents (18-34, by the report’s parameters) to be more concerned with the green attributes of beauty products than older consumers.
Brands are used to hearing that consumers want their beauty products to be “clean,” “natural,” and “safe,” however, defining terms is one of the challenges for brands developing a presence in the green beauty market. Standards for these terms may vary across borders (take “organic” for example) or there may be no standard definitions or regulations at all. This allows unscrupulous brands to mislead or confuse consumers, making it difficult for well-meaning brands to build consumer confidence.
Brands should start by understanding what consumers want. AlixPartners asked consumers how important each stage of the value chain is to them: ingredient sourcing, ingredient quality, manufacturing, logistics, and marketing. Quality of ingredients was the most important attribute to 77 percent of millennial and Gen-Z consumers, while a majority of 18-34-year-old respondents also cited the source of ingredients and type of manufacturing as important. Logistics and marketing were considered comparatively less important. Older respondents held similar preferences but were less likely to regard each of these factors as “important.”
“Not only do [millennials] look for transparency and traceability of product ingredients, but they are also curious about where ingredients originate and how products are made,” the report states. Product labeling is one arena where brands can demonstrate transparency, as beauty retailer Sephora’s “Clean at Sephora” initiative in the U.S. aims to do. The brand has developed a list of 50 ingredients it regards as incompatible with its “Clean by Sephora” standard, and products that meet the standard are given a “Clean by Sephora” seal. An initiative like this helps the retailer build “green” credibility by providing consumers with transparent, actionable information and by setting a standard for what should and shouldn’t be considered “clean.”
Labeling is crucial, but social media is another key forum where brands can demonstrate transparency and build trust with consumers. In this context, transparency can mean telling the story of how the products are created, thereby demonstrating the brand’s quality of ingredients or ethical sourcing practices.
Brands are already engaging Chinese KOLs to help them assist in this storytelling process. The number of KOLs mentioning green beauty brands on Chinese social platforms has increased by 134 percent between Q1 of 2018 and Q1 of 2019, according to a recent report by PARKLU. Interestingly, much of that growth was driven by “micro” KOLs with smaller followings rather than influencers with huge followings. This is likely because “micro” KOLs have built up a more authentic level of trust and intimacy with their fans than larger ones. Weibo and Xiaohongshu (the latter of which was recently pulled from Chinese app stores by the Chinese government) were the sources of most of this rise of activity, not including a fairly negligible contribution from WeChat. To date, mentions of ‘green beauty’ on Chinese platforms are currently being dominated by three companies: South Korea’s Innisfree, the American brand Origins, and the homegrown brand Chando.
There are other barriers to purchasing that consumers may experience that beauty brands must address, whether they are real or imagined. Cost is one obvious issue. Most consumers say they are prepared to pay higher prices for green products, but price sensitivity can leave brands working with very thin margins. Natural products also have a shorter shelf-life, so sustained use costs consumers more in the long-term. Fortunately for beauty brands, the millennials that were surveyed by AlixPartners said they would willingly pay 18 percent more for green products. Chinese respondents were significantly less likely than other nationalities to report cost as a barrier from purchasing, clocking in at 36 percent against an overall average of 56 percent.
But brands still have work to do to convert customer enthusiasm into actual sales. The survey revealed a gap between consumers’ stated enthusiasm for buying greener beauty products and their actual purchasing behavior. This discrepancy was relatively similar among all the nationalities surveyed. Of the Chinese respondents, 11 percent fewer had purchased green beauty products than those who said they wanted to. At the upper end, this gap was 15 percent (France).
Access to green products is a bigger issue for Chinese consumers, and 38 percent of Chinese respondents agreed that “products are not readily available where I shop,” as compared to an overall average of 27 percent. Indeed, some green beauty brands that have earned a loyal overseas following are not available in China. This may change in the future, but in the meantime, the absence of some of the Western trailblazers in this category has created opportunities for local brands to fill the gap. One of them, Shanghai skincare brand Inoherb, has incorporated natural ingredients that have been used in traditional Chinese medicine to create green beauty products while also playing on popular perceptions in China that Western brands use excessive chemicals. Another new-to-the-scene brand to watch is Native Beauty, developed by Lisa Qi, the founder of the e-commerce platform Daling Family.
Chinese consumers also reported having difficulty telling the difference between products that are “good” and “bad” for them. While an average of 31 percent of all respondents admitted problems in this area, 37 percent of Chinese consumers reported difficulties. Only 22 percent of American consumers said they had trouble identifying products that were good for them. This has given rise to a group of bloggers known as “Cheng Fen Dang” who have made their reputations by discussing the ingredients used in beauty products. These include male bloggers like Fang Junping and Huang Yan, who discuss the science of beauty products in depth. Brands may explore partnerships with influencers like these, who are authorities in the eyes of regular consumers in China.
The potential for green beauty brands in China is there, but beauty companies have no room for error. Brands have to carefully understand what “natural, clean, and safe” really means to Chinese consumers, and they have to be transparent and sincere in telling their stories. Not only are consumers increasingly discerning, but the government has kept an eye on how beauty brands are marketing themselves nowadays. Brands that can align their products and values with consumers’ aspirations stand to gain ground in this blossoming segment.