By the end of December 2024, the hair care brand SALA under the Shunhua Group officially announced its closure. The announcement stated, "SALA has decided to cease sales by the end of December (2024). Once the inventory in stores and online stores is sold out, sales will be immediately terminated."

The Japanese cosmetics giant I-ne also held a board meeting not long ago and announced that, considering the market trends in China, it has decided to dissolve and liquidate its wholly-owned subsidiary, Ai-Ni (Shanghai) Cosmetics Co., Ltd. (hereinafter referred to as "Ai-Ni Company"). It is reported that this company was established in 2020 and mainly engaged in cosmetics production and sales in China. It sold brands such as Botanist BOTANIST (a hair care brand), YOLU (a night hair care brand), and SALONIA (a hair appliance brand) through platforms such as Tmall, Douyin and Watsons.

It is worth noting that the performance of Aineyi Company plummeted sharply in 2023 and it was unable to make a profit. The dissolution of this company by I-ne has inevitably sparked speculation in the industry: I-ne may withdraw from the Chinese market due to its anxiety over growth.

According to incomplete statistics from Cosmetics News, in 2024, a total of 24 foreign cosmetics brands either closed their stores or were rumored to have "withdrawn from the Chinese market", while 11 domestic cosmetics brands either closed their stores for clearance sales or their parent companies entered bankruptcy liquidation procedures.

Under the impact of fierce competition, the cosmetics industry has undergone a rapid reshuffle, with the Pareto Principle (the 80/20 rule) playing a prominent role. A few leading brands have emerged victorious by relying on this principle, while numerous brands are caught in an "internal competition" mode. Accepting the cyclical changes of uncertainty might have become a fact that brands must confront nowadays.

01 "Dark clouds loom", foreign brands are no longer "mythical"

In 2024, as many as 24 foreign cosmetics brands faced store closures. Among them, 15 were from major brands. Not only did major cosmetics brands such as Shunen, Goshu, Shiseido, and Procter & Gamble collectively stall in the Chinese market; but also new and niche brands gradually ended their period of rapid growth.

The reasons for this are mainly as follows:

1. The market demand for foreign brands has declined.

2. The competitive landscape has changed, with domestic brands gaining more market share.

3. The profit margins of foreign brands have shrunk.

4. The brand building efforts of foreign brands have failed to keep up with the times.

Firstly, under the influence of the broader environment, after the actual performance in China fell short of expectations, major groups all chose to reorganize their businesses and take timely measures to minimize losses. Generally speaking, they either temporarily withdrew some non-core brands from the Chinese market or closed stores, and redirected resources to core brands, focusing on the development of high-end businesses.

The premium skincare brand BAUM of Shiseido and the sensitive skin care brand d program of An Kexin Yu respectively announced in July and December this year that they would stop selling in the Chinese market and the mainland Chinese market. The official explanations for this were both "strategic adjustment". Not long ago, Shiseido released its third-quarter report for the fiscal year 2024. In the first three quarters, the net profit attributable to the parent company declined by 96.3% year-on-year, and it was pointed out that the continuous sluggishness in the Chinese market became one of the main factors dragging down Shiseido's overall performance.

Based on this, Shiseido lowered its performance expectations for the fiscal year 2024 and released its mid-term strategic plan "2025-2026 Action Plan" at the end of November this year. The group proposed three priorities: strengthening the brand foundation; rebuilding the profit foundation; and enhancing operational governance. Among them, the focus on strengthening the brand foundation lies in "more focus"; for brands with limited profitability and growth potential, a "strategic withdrawal" is chosen.

Secondly, amid the pervasive atmosphere of growth anxiety across the entire industry, international beauty product groups are actively seeking more effective and targeted strategies. By reducing the number of brands and enhancing concentration, they aim to gain greater competitiveness in the fiercely competitive beauty industry.

In 2024, three brands under Shiseido - the budget cosmetics brand AUBE with a history of over 30 years, the mid-to-high-end cosmetics brand COFFRET D'OR with a dazzling luster, and the high-end skincare brand EST - will close their stores or be shut down one after another. Among them, only EST is a G11 global strategic brand that Shiseido has prioritized. Previously, Shiseido publicly disclosed to the media that due to structural reforms, those brands that were not selected as part of the G11 global strategic brands and the eight key brands in the R8 Japanese regions would be considered for merger, abolition or sale.

For another example, the high-end skincare brand Sigeo under LG Health and Life, according to the announcement made by its group agent, has been operating under the concept of a Korean brand as "Hou" and "Sigeo". To improve the efficiency decline caused by the duplication of brand concepts, in the future, it will focus more on selection and concentration under the "Hou" brand.

Thirdly, with the fragmentation of distribution channels, the cost of acquiring customers through online channels has gradually risen. The increase in operating costs and the rise of interest-based e-commerce and new retail channels have led some foreign brands to no longer consider traditional e-commerce channels as a must-have option.

Last year, the budget cosmetics brand NYX under L'Oréal and the former top-selling facial mask brand Meei both closed their stores. The latter retained its sales through offline channels. It is worth noting that in 2014, L'Oréal officially acquired Meei; four years later, Meei was completely removed from the shelves of Watsons, announcing a shift to online sales and reorganizing the brand's development trajectory. Now, however, the brand has withdrawn from the online channels and returned to offline ones.

For another example, Marc Jacobs (a perfume brand under the Coty Group) and Peter Thomas Roth (an American efficacy-based skincare brand) have both closed their flagship stores on Tmall and chosen to retain or cooperate exclusively with the Sephora channel. Among them, Peter Thomas Roth has responded to the false rumors about the brand's withdrawal from the Chinese market, stating that the brand has never had a plan to leave the Chinese market. The online channels are making adjustments to their business layouts, and the reason for the brand's rapid growth in the online channels is mainly attributed to its comprehensive layout in Sephora.

Fourthly, when domestic cosmetics brands have gradually gained a certain share in the mid-to-low-end domestic market and international big brands still maintain their competitive edge in the high-end cosmetics market, small and medium-sized foreign brands can only compete in a limited survival space. At the same time, due to insufficient localization operations, such as limited access to funds and technology, unclear or homogenized brand positioning, slow product update and iteration, and imperfect channel management, they have difficulty establishing a long-term presence in the Chinese market.

Looking at the 24 foreign cosmetics brands that closed their stores last year, many of them have relatively limited influence in the Chinese market or are positioned as niche brands, such as Matter of Fact, PAUL&JOE BEAUTY, Dr.brandt博瑞特， 3LAB, Lirene琳芮， etc. This has led to increasingly obvious differentiation among these brands.

02 "Windy and rainy, where are the new and emerging brands stuck?"

Not only have foreign brands closed their stores or quietly left the Chinese market, but many domestic beauty brands are also facing similar predicaments.

According to incomplete statistics from Cosmetics News, a total of 11 domestic cosmetics brands closed down in 2024. Among them, as many as 9 brands were founded after 2018 and had relatively low popularity.

It can be seen that emerging or tail-end brands that are still in the initial stage often face survival difficulties from the very beginning due to a lack of financial support and scientific research backing. At the same time, as resources, benefits, and talents held by major brands become increasingly concentrated, it is even more difficult for small and medium-sized brands to "share a piece of the pie" in the market.

According to the Nielsen report "Trends and Outlook of China's Beauty and Personal Care Industry", with the annual sales reaching 100 million RMB as the benchmark, the market share of small brands with annual sales below 100 million RMB increased by 12.3% year-on-year, reaching 50.5%, while that of medium and large brands decreased by 3% year-on-year, with a market share of 49.5%.

It has been proved that countless small and medium-sized brands have formed the foundation of the market. However, when looking at the fates of these brands, they are astonishingly similar - after rising, they replaced other brands that had fallen and together accounted for more than half of the market share. When they declined, they were replaced by other brands again and again, in an endless cycle.

Last May, the mid-to-high-end fragrance brand Odysseus closed its stores and cleared out its inventory; in August, the domestic skincare brand Kexin also closed its stores. Both of these brands were established in 2023. Kexin had stated in its closure announcement: "The team's operation has always been in a state of expenditure exceeding income."

It is worth noting that last year, two up-and-coming domestic brands that collapsed attracted much attention. They were VNK, which closed its flagship store on Tmall in June, and HEDONE, which announced its closure in October.

Among them, HEDONE, founded in 2018, was once extremely popular. Shortly after its debut, it received A-round investment from Pao Pao Capital and B-round investment from Sequoia Capital. Its products also ranked among the top three on the corresponding category best-selling list on Tmall. However, before the brand announced its closure, HEDONE had not launched new products for two years.

As a makeup brand under Lanfang Cosmetics, the decline of VNK was pointed out by the industry as the failure of Lanfang Cosmetics' strategy of attempting to expand into the makeup sector. In 2020, VNK was acquired by Lanfang Cosmetics. In the year following the acquisition, VNK's performance saw a significant year-on-year growth of over 315%, but subsequently, affected by factors such as product lag and aging channels, the brand gradually faded from the public eye.

On the one hand, the withdrawal of capital has become the direct cause for the demise of new brands. In 2018, the beauty industry witnessed an investment boom. However, by 2022, as the market in China cooled down, capital became quiet and adopted a more cautious attitude towards brands.

On the other hand, after the traffic advantage has run its course, comprehensive strength has become a major constraint for emerging brands. Besides channel management, brands also face considerable challenges in organization, operation, research and development, and supply chain. Only by having a strong competitive edge in the market or finding a niche field to achieve a breakthrough can they survive in the fierce competition.

From "big water, big fish" to "big wind, big rain", the Chinese beauty products market has entered a watershed. Facing the rapidly changing market, brands can only adapt to the changes, respond promptly to market demands, build their own "moat" and establish deep connections with consumers in order to survive the cycle and gain a firm foothold in the industry transformation.