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On August 26, Sephora, a cosmetics retailer under the LVMH Group, announced that it would lay off 3% of its 4,000 employees in China, or about 120 people, with a focus on streamlining positions at its headquarters.

It is reported that this is part of the company's extensive restructuring plan amid the economic slowdown. The layoffs also include some retail and e-commerce business managers. The purpose is to turn losses into profits as soon as possible and optimize the organizational structure to better adapt to market demand.

In addition, in January last year, Sephora also announced the closure of its Tmall overseas flagship store.

In terms of personnel appointments, the company appointed Ding Xia, former head of JD Fashion, as general manager of Sephora Greater China in April this year. The change of leadership was also due to the continued downturn in the Chinese market. Management hopes to appoint a new manager to lead the next stage of growth.

Coincidentally, Japanese beauty giant Shiseido is also facing similar challenges. In order to cope with the decline in performance and intensified market competition, Shiseido's senior management launched the "Japan Comprehensive Transformation Plan" last year, planning to reduce nearly 1,500 global employees through voluntary resignations to reduce costs and accelerate transformation.

Beauty giants have been laying off employees, and the reason behind this is inseparable from the decline in performance. This trend has undoubtedly sounded the alarm for the entire industry, and the future structure may need to be adjusted.

Image source: IC photo

International giants’ performance suffered setbacks

This year, the market performance of international beauty brands seems to have entered a "severe winter". The latest financial report of LVMH Group shows that although the revenue of the Select Retail Division, where Sephora is located, increased slightly by 3% to 8.6 billion euros in the first half of the year, the organic growth of 5% in the second quarter to 4.5 billion euros still failed to meet the expectations of market analysts. Behind this data, there is a signal of weak growth in the industry.

Shiseido Group's performance is even more astonishing. In the first half of the year, although the group's sales increased by 2.9% to 508.536 billion yen, its core operating profit fell sharply by 31.3% to 19.3 billion yen, and its operating profit fell into a loss, decreasing by 16.4 billion yen year-on-year to negative 2.7 billion yen, and its net profit attributable to the parent company plummeted by 99.9% year-on-year. This series of figures undoubtedly adds a chill to the cold winter of the beauty industry.

The root cause of the decline in performance of international beauty brands is closely related to the overall weakness of China's high-end beauty market. Estee Lauder Group admitted in its financial report that although the overall performance of the Chinese market has increased, the high-end beauty sector has shown signs of fatigue.

The Chinese market has always been the most important market for high-end cosmetics manufacturer Cosmax Korea, but it showed a downward trend in the second fiscal quarter of this year. The sales of the East Region market, which is mainly based on China, was 147.6 billion won, a year-on-year decline of 4.1%. Among them, the sales in the main market of Shanghai fell by 12.8%.

Domestic products gradually become the new favorite of consumers

As the performance of international beauty giants is experiencing fluctuations, domestic brands are rising with a momentum that cannot be underestimated, and are gradually becoming the new favorites of consumers. This trend is fully reflected in the financial report of Shangmei Co., Ltd. in the first half of 2024. The company's revenue reached 3.502 billion yuan, a year-on-year increase of 120.7%, and its net profit also jumped to 412 million yuan, a year-on-year increase of 308.7%.

As a star brand of Shangmei Co., Ltd., Hansu has a particularly eye-catching market performance. According to statistics from data platforms such as Chanmama and Feigua, Hansu's total GMV on the Douyin platform reached 3.44 billion yuan, and it has been ranked No. 1 in Douyin beauty for six consecutive times, showing its strong competitiveness in the market.

At the same time, another domestic giant, Proya, also showed strong performance growth. Its revenue in the first quarter of 2024 reached 2.182 billion yuan, a year-on-year increase of 34.56%; its net profit attributable to the parent company increased by 45.58% to 303 million yuan. In addition, Proya's gross profit margin and net profit margin also increased, reaching 70.11% and 14.44% respectively.

According to the BeautyInc Top 100 list, China and Japan tied for fourth place in the number of companies on the list in 2023. The number of Chinese beauty brands on the list reached a historical high. According to iMedia Research, the market size of China's cosmetics industry reached 516.9 billion yuan in 2023, a year-on-year increase of 6.4%, and is expected to increase to 579.1 billion yuan in 2025.

This data trend shows that with the continuous expansion of the domestic market and the growing consumer demand, Chinese beauty brands will usher in a broader development prospect. At the same time, this also provides more opportunities and challenges for local brands, driving them to continuously improve their own strength, expand overseas markets, and enhance brand influence.

Increasing investment in the perfume market is the key

Among the many sub-sectors of the beauty industry, the perfume track is attracting the attention of global beauty giants with its unique charm.

On August 20, Coty Group, a world-renowned perfume and beauty product manufacturer, released its performance report for the fiscal year ending 2024, with sales increasing by 10% year-on-year to US$6.118 billion, a growth rate that exceeded the average level of the global beauty market. It is particularly noteworthy that Coty Group's high-end beauty department sales increased by 13% year-on-year, with perfume sales contributing significantly. In many markets around the world, including China and the United States, perfume has become one of the fastest growing categories.

Specifically, Coty's Burberry brand achieved the top sales ranking in the United States, Canada, Germany and other markets with its Goddess perfume series, which directly drove the overall sales of the Burberry brand to increase by more than 50%.

At the same time, other international perfume brands also delivered impressive results. French perfume giant Inter Parfums achieved revenue of US$342 million in the second quarter of fiscal year 2024, an increase of 11% year-on-year, setting a new record for the same period; revenue in the first half of the year reached US$666 million, an increase of 7%. L'Oréal Group also emphasized the strong development momentum of its perfume department in its financial report, which is growing significantly faster than the medical skin care market.

The upstream industry of perfume, the fragrance industry, has also ushered in a period of prosperity. The latest data shows that Symrise's fragrance and care sales reached 993 million euros, a year-on-year increase of 12.1%, of which both the high-end perfume business and the consumer perfume business achieved double-digit growth. IFF (International Flavors & Fragrances)'s flavor and fragrance business sales reached 603 million US dollars, excluding the impact of divestitures and acquisitions, and the growth rate reached 16%. This growth was mainly due to the strong performance of the consumer perfume and fragrance ingredients business and the growth of the high-end perfume business.

In the global market, the perfume industry is entering a new development cycle. According to the research statistics of DIResaerch, the global perfume market size will be 43.33 billion yuan in 2023, and is expected to reach 79.10 billion yuan by 2030, with a compound annual growth rate (CAGR) of 8.98%. This data shows that the perfume market will maintain a steady growth trend in the next few years, providing broad development space for major brands.

Faced with such an attractive market prospect, major global beauty brands have stepped up their investment in the perfume market, not only increasing investment in product research and development, but also constantly innovating in marketing strategies.

Faced with the adjustments of international giants and the rise of domestic brands, the perfume market has become the focus of competition among major brands. In the future, as consumer demand becomes more diversified and personalized, the beauty industry will face more challenges and opportunities.