Domestic brands are the future of China’s luxury fragrance market
Key points to remember:
- Despite dominating the market for decades, top-selling imported luxury fragrances are facing stiffer competition from Chinese newcomers.
- A growing number of young consumers associate fragrances like Chanel N°5 with older parents or parents, and look for brands that show cultural awareness and offer personalization and differentiation.
- A new breed of national high-end fragrance brands are rushing to meet the needs of young spendthrift consumers looking for niche fragrances.
For decades, the Chinese perfume market has been dominated by top-selling global names such as Chanel N°5 and Dior J’Adore. And while international luxury giants and beauty groups still account for the lion’s share of fragrance sales in China, changing consumer tastes in recent years have seen a greater willingness to experiment with lesser-known brands. foreign and domestic producers. According to data from Euromonitor, the Chinese perfume market has maintained a compound annual growth rate of 15% from 2015 to 2020, and the compound growth rate over the next five years will exceed 22%, which is three times that of the market. global. This year, the Chinese perfume market is expected to exceed 40 billion yuan (6.29 billion).
As noted in Daily Jingthe recent Insight report, How niche perfumes appeal to young Chinese consumers, Millennials and Gen Z consumers in China are changing the fragrance landscape in what has traditionally been a relatively small market, opening the door for niche brands to gain a foothold and compete with established players like Chanel and Dior . According to local market research firm iResearch, only 2.5% of China’s population of 1.4 billion use personal fragrance, which translates to huge potential for growth. By comparison, nearly 52% of Americans (172 million) use or buy perfume or cologne, according to US Census data and the Simmons National Consumer Survey (NHCS). In France, where the use of perfumes is deeply rooted in culture, 42% use perfumes on a daily basis, while 42% use perfumes slightly less often, according to a 2017 survey.
After weathering the now two-year pandemic, and all the mask-wearing and quarantining it has entailed, some Chinese consumers are cooling off on cosmetics and swooning over luxury fragrances. Even beauty and skincare enthusiasts who are known to spend lavishly on any lipstick influencer as Li Jiaqi hawkers, are turning more to personal perfumes. As Chinese language media noted recently“In the post-pandemic era, perfume has replaced the lipstick economy, and [sales are] to skyrocket.
But this growth is not only benefiting international perfumery brands. Guochao– Younger consumers, especially the “post-95” and “post-00” demographics – those born after 1995 or 2000, respectively – are driving prospects for new high-end Chinese fragrance brands. Over the past year, 10 domestic fragrance brands, including Library of scents, DOCUMENTS, Cosmic Speculation and Scentooze have successfully completed their funding rounds. Perhaps most notably, the Spanish luxury group Puig, owner of Jean Paul Gaultier, Penhaligon’s and L’Artisan Parfumeur, acquired a stake in Scent Library last fall.
Recognizing the market potential, even companies that had never had an interest in fragrances sought to get a foot in the door. Earlier this year, TikTok’s parent company, Bytedance announced the launch from its fragrance subsidiary, EMOTIF, offering three fragrances in 2ml and 9ml bottles at an affordable price of 19.9 yuan ($3.94) and 198 yuan ($31.20), respectively.
But perhaps the greatest activity in China’s burgeoning niche fragrance market is coming from domestic startups aggressively tackling the high-end and luxury segments. The DOCUMENTS brand, which has been around for two years, has quickly established itself in the high-end niche fragrance market despite (or perhaps in part because of) prices approaching some of the big global names. DOCUMENTS fragrances range from 850 yuan ($133.57) for a 30ml bottle to 1,750 yuan ($275) for a 90ml bottle, and the brand’s most expensive product at around 2,650 yuan ($416). $).
Avoiding e-commerce in favor of brand-owned WeChat mini-programs and offline resellers, DOCUMENTS opened its first physical store in Shanghai in July 2021. Over the next six months, the brand claimed shopping value average of 1,500 yuan ($236), a conversion rate of 30% and a redemption rate of 15%. In terms of core consumer demographics, post-’90s shoppers accounted for more than half of DOCUMENTS sales.
The freshness and cultural awareness of local fragrance brands are key factors in their success against incumbents in the import market, which have carved out a strong market presence over the past two decades – which means, in many cases, that they are associated with the parents of young consumers. or older relatives.
Young Chinese consumers, especially post-95s and post-00s, now use fragrances as a kind of cultural code, with the fashion and lifestyle-focused social platform Xiaohongshu containing nearly 200,000 posts on niche perfumes and lesser-known brands, foreign and national. Compared to the demographics of the 1970s and even the 1980s, young Chinese Millennials and Gen Zers are willing to pay more for products that give them personal pleasure and are more personalized, giving them access to niche communities or indicates broader knowledge than the average consumer.
Add to that their relatively weaker economic pressure and strong willingness to try domestic brands that are riding the Guochao wave, and it indicates huge potential for the next generation of high-end Chinese fragrance brands.