BEIJING: L'Oréal, the cosmetics giant, is expanding into lower tier cities, creating market-specific products and tapping underexploited categories like electronic devices as it seeks to grow in China.
The French company has set the target of attracting a billion new customers globally by 2020, and believes that China will play a crucial role in achieving this goal.
"Right now, China is the third-largest market for L'Oréal worldwide," Alexis Perakis-Valat, chief executive officer of L'Oreal China, told the China Daily. "We are sure that China will be [our] number one [market] one day. There is no doubt about it."
A key factor supporting this view is the trend towards premiumisation in many areas, especially large urban centres like Beijing and Shanghai, where the cosmetics category has become entrenched.
However, this shift is also working alongside rising demand for both high-end and more entry-level lines in second, third and fourth tier cities, meaning geographical diversification could pay dividends.
"The country still has a lot of cities that do not have luxury beauty brands and have room for mass products," Perakis-Valat said. "Luxury is expanding geographically in China while mass is already everywhere.
"The lower-tier cities are giving us a big opportunity at the moment. We have our mass-market brands, including Maybelline and Garnier, in more than 300 cities. And for luxury brands, we have opened in more than 70 cities for Lancôme."
L'Oréal now sells 20 brands in China, a list incorporating global offerings like Garnier and Vichy. However, over 70% of the products available locally have been created specifically for local shoppers.
"Beauty is not a one-size-fit-all business," Perakis-Valat said. "We have to respect diversity and should not come up with one brand that serves all the needs."
As part of this process, it acquired Yue-Sai, a domestic brand, in 2004. Other such strategic moves are using constituents from traditional medicines in products, and leveraging detailed consumer insights.
"Chinese women want their skin to look much more natural, with much less covering and more hydrating," Perakis-Valat said. "We work with labs to see what ingredients from Chinese medicine are really effective on the skin."
Another current priority is entering or developing new segments, like electronic skin care devices, a sector the firm describes as "instrumental cosmetics".
Data sourced from China Daily; additional content by Warc staff