Chinese product makers have eaten away international mass brands’ share of the Chinese beauty market in recent years. They were up to 29% share in 2020 from 19% in 2015, while international mass brands fell to 28% from 52%, and high-end international brands rose to 44% from 29%.
The agile techniques used by these “C-beauty” companies could be applied by a range of global consumer-product manufacturers that would benefit from rapid turnaround times when testing new products or advertising. The lessons are relevant to operations in China and outside – and to both the beauty segment and a wide range of consumer products.
C-beauty brands collaborate with external parties – such as experts and consumers – to gain feedback and then use this in rapid product iterations. This way of working is evolving into open-source ecosystems that form a basis to increase speed and competitiveness. International beauty brands usually have an R&D cycle of between 15 and 24 months, from concept generation to production. But the cycle for C-beauty products is typically between six and nine months – and sometimes less.
C-beauty companies typically divide the product cycle into five stages: concept generation, packaging, design, formula development, testing, and production. Here are three ways in which the brands make improvements at these stages.
Work With Consumers
C-beauty brands recruit consumers via WeChat and other social platforms to build a participant pool, which collaborates at various stages of the product cycle. At the concept generation stage, one brand released its creative product ideas on social media and invited consumers to vote for their favorites. Another crowd-sourced ideas on eye palette color.
For testing, international brands typically engage external research companies. These use focus groups and questionnaires – sometimes with hundreds of questions – to gauge opinions on brand awareness, packaging, and purchasing decision processes. But this kind of consumer feedback is slow and backwards-looking: International brands often take two or three months to complete consumer product testing.
C-beauty brands believe that small-scale consumer tests are unlikely to be objective or enable decisive product changes, and they don’t see the need for comprehensive research of this nature. In contrast, they use simplified questionnaires and direct consumer recruitment to shorten consumer tests to two or three weeks. They cut questions around branding and purchasing, focusing closely on product feedback, which they get from their participant pool.
Use Agile Processes
International brands often discuss product concept generation for months, but C-beauty brands identify many of their next products through social listening – by mining data from beauty-related social media and e-commerce platforms. A dedicated team analyzes the data to find out which products are trending and what customers think of them. These findings serve as guides to create a category-leading product. The process usually only takes a month.
The aim is not, however, to come up with copycat versions of trending products; it is to go a step further, especially when it comes to formula development. One popular sunscreen had excellent moisturizing performance, but comments shared on social media indicated that it did not feel refreshing enough. In reaction, the brand launched a new version that achieved a similar moisturizing effect but with a refreshing, non-sticky texture.
Agile production allows companies to experiment with small batches and gauge consumer responses until the product is right. One brand registered 42 new products in 2020, about four times the number of most other brands, and launched about 30 of them. Four were among the year’s top-10 products in their respective categories.
Another C-beauty player produced a first batch of 10,000 units for a new lipstick category over the course of a week and launched it as a limited edition. The lipstick sold well, so the brand increased production, first to 20,000 units and then 50,000. In contrast, international brands usually produce first batches of between 100,000 and 300,000 units.
Work With Experts
C-beauty brands tap streams of ideas from outside collaborators. Some form exclusive cooperation agreements with art institutions. The brand proposes an initial concept, after which artists take charge of the specific design: the product format (the shape of the tube or pot, for example), the exterior appearance, and the packaging design. When the brand selects a design, the artists get a share of the revenues the product generates.
For all their marketing skills, C-beauty brands still have relatively limited capabilities in product formula development, and most buy in formula from outside manufacturers. To improve their R&D capabilities and move upmarket, some C-beauty players are now working closely with suppliers of cosmetics ingredients, original equipment manufacturers (OEMs), independent R&D institutions, and industry experts.
These arrangements are evolving into formal development ecosystems centered on the brands. Perfect Diary has established “Open Lab,” while Florasis has set up the “Eastern Makeup Research Center.” Both setups help the brands make the most of different capabilities in formula development, and they will help them come up with proprietary formula, which is a major competitive advantage.
The Future Of C-beauty
Innovations at all stages of the product cycle have the potential to propel C-beauty brands to further gains in their home market and perhaps expand overseas too. While international beauty product makers are still ahead in formula development, C-beauty brands could make strides in coming years thanks to their new development ecosystems.
The success of C-beauty brands is an example of China showing the way in new, agile methods of product innovation, and the techniques suggest ways forward for international brands in many categories. Collaboration and opinion gathering can be leveraged into higher-quality products that resonate with consumers.
Essie Zhou also participated in this article.