Jing Bing, Meng Fanyi/Wen

Over the past 20 years, the Chinese cosmetics market has undergone a tremendous transformation from a desert to a rainforest, becoming one of the largest and most competitive cosmetics consumer markets in the world. In 2022, the market share of local brands exceeded 50% for the first time, and continued to grow thereafter, reaching 57% by 2025.

One of the key factors for the rise of local brands is to embrace new channels in a timely manner with a keen sense of smell and quick response ability, seizing opportunities brought by round after round of channel innovation. In the context of cultural self-confidence and the rise of China-Chic, the brand power of local brands is also improving with their rapid penetration in new channels.

However, as time passes, the dividends of each new channel will eventually fade away, and local brands periodically face the dilemma of "channel prosperity leads to brand prosperity, channel decline leads to brand mourning". Anti audience foreign brands, although unable to embrace new channels first, will always catch up. This article will explore the sustainable development path of local cosmetics brands in the era of stock competition from the perspectives of channel opportunities and mental construction.

Channel Iteration

The evolution of China's cosmetics channels is not only a history of competition between local and international brands for consumer reach, but also a commercial history of the continuous transfer of channel discourse power and the ups and downs of brand fate.

Before 2000, department store counters were both the mainstream sales channel for cosmetics and the high ground for brand image, long dominated by international brands; Local brands have weak product strength and user mentality, and can only seek a way out in cosmetics specialty stores (CS channels) in lower tier cities.

After 2000, personal care chain stores and comprehensive supermarkets emerged as the main force in the distribution of mass cosmetics in high tier cities. At the same time, local brands such as Han Shu have keenly seized the opportunity of the "traditional big screen" era and laid out TV shopping channels. The language oriented marketing model, although crude, has helped the brand establish a wide range of popularity.

During the dividend period of each new channel, there is always a group of local brands with a keen sense of smell, relying on high-density layout of emerging channels to achieve scale breakthroughs. After 2010, shelf e-commerce platforms such as Tmall accelerated their development. Compared to offline channels, e-commerce has lower hard thresholds for capital reserves and long-term operations, and both mature domestic products and start-up brands can quickly enter the market.

With the help of e-commerce, local brands have broken down channel barriers and gained the opportunity to compete on the same stage as international brands. With the help of the platform's traffic dividend and long tail effect, local brands such as Yunifang, Afu, and Mofa Shijia have achieved a breakthrough in sales scale.

Around 2018, content platforms represented by Xiaohongshu, Tiktok and Kwai ushered in rapid growth. From 2017 to 2019, Perfect Diary fully enjoyed the dividends of "planting content on Xiaohongshu+receiving traffic conversion on Tmall" and quickly gained popularity in the mature cosmetics market.

The more disruptive channel transformation in the cosmetics industry lies in the comprehensive outbreak of live streaming e-commerce during the 2020-2022 pandemic. Live streaming e-commerce has reconstructed consumers' decision-making paths with its characteristics of interactivity, entertainment, and precision. Tiktok, Kwai, etc. have built a commercial closed loop of "grass planting content live broadcast conversion".

During this period, Han Shu cooperated with tens of millions of fans of Tiktok to create short plays with the combination of "big item+short play marketing". The broadcast volume of several works exceeded 1 billion, bringing massive exposure and sales growth to the brand. Winona is deeply involved in the professional skincare track of Xiaohongshu, and has launched a batch of KOL and KOC test content seeding, as well as connected e-commerce to receive traffic.

Emerging channels and local brands coexist and grow in synergy. According to Jiuqian consulting data, from 2024 to 2025, the sales of Tiktok skincare category exceeded Tmall for two consecutive years. On the brand side, according to the statistics of Glaucous Intelligence, a data agency in the cosmetics industry, in 2025, local brands will occupy five of the top ten GMV rankings of Tiktok cosmetics. Among them, Han Shu led the way with a GMV fault of nearly 8 billion yuan, maintaining the top spot; L'Oreal Paris and L'Oreal Paris ranked second and third respectively, with GMV exceeding 3 billion yuan.

Whether it's the "Pingti Carnival" of Perfect Diary in the past or Han Shu's "Red Revolution Myth" in recent years, they have sent a clear signal to the market: in China's rapidly responding supply chain, frequent channel iteration, vast and layered market, every emergence of new channels and media is an opportunity for brands to challenge the existing industry competition pattern. Brands that can seize the short window period and fully enjoy the dividends of the times have the opportunity to achieve leapfrog development in a relatively short period of time.

Entering 2026, AI agents are rapidly becoming the new generation of traffic entry points, driving a new round of channel transformation. During the "618" promotion this year, both Taotian and Tiktok platforms equipped businesses and consumers with AI tools. AI agents such as Qianwen and Doubao have become a new starting point for shopping, bringing a whole new experience by understanding users' intentions.

With the continuous evolution of artificial intelligence technology, more and more consumers will shop through AI agents. In the future, consumers' purchasing behavior may be handled by their AI agents. Without a doubt, brands that can first master the recommendation logic and traffic rules of AI will once again have the opportunity to overtake on the bend.

The 'counterattack' of international brands

It is certainly gratifying for brands to seize channel dividends, but if they mistakenly regard their outstanding performance in a certain channel as a core competency, it is very dangerous. After bidding farewell to the extensive expansion stage of new channels, it is now the time to truly test the strength of the brand.

From this year's "618" cosmetics promotion transcript, we can clearly see that international giants have launched a strong counterattack after adapting to the game rules of new channels.

On the Tmall platform, international big brands rely on their long-term accumulated user mentality and strong membership repurchase system to firmly hold onto the basic market of the big promotion. Xiuli, a subsidiary of L'Oreal Group, will directly climb to the top of Tmall beauty rankings from the sixth place on the 2025 list; Last year, local brands still held this position.

Tiktok used to be the core position for local brands to seize the flow dividend, and now international brands are also showing amazing growth potential here. Glaucous data shows that in 2026, the top three of the Tiktok "618" cosmetics GMV list are all international brands: Estee Lauder, Helena and Mystery of Hailan.

The competition pattern of the top ten and even the top twenty on the list has undergone significant changes: although the international major brands have lagged behind the Tiktok channel for several years, they have become familiar with their game rules and have demonstrated their late mover advantage. By optimizing and increasing resource allocation, and improving the operational capabilities of content e-commerce, we have achieved catching up and surpassing sales. After the trend of domestic products dominating the list last year, only a few top local brands such as L'Oreal and Hanshu remain in the top ten of this year's list.

If we extend the cycle and review the development history of the top domestic products such as Xizi and Perfect Diary, we can also see clear ups and downs. Huaxizi was deeply tied to top anchors in the early days, and its GMV once exceeded 5.4 billion yuan in 2021, but it relied too much on a single super traffic entrance. With the decline of online traffic dividends and external public opinion turmoil, brands have entered a period of continuous adjustment, and GMV has almost halved in the past two years.

On the other hand, international giant L'Oreal started relatively late in the digital transformation of channels, but successfully caught up through later "remedial courses". In the 2013-2014 Tmall "Double 11" beauty sales ranking, L'Oreal Paris ranked fourth and fifth respectively; The top three brands on the same period list, except for Meiji acquired by L'Oreal, are all local brands. In 2014, L'Oreal China's sales growth rate fell back to single digits for the first time since 2000. Since 2017, L'Oreal has established partnerships with e-commerce platforms such as Tmall and JD.com. During the 2018-2019 Tmall Double 11 shopping festival, the group's brands Lanc ô me and L'Oreal Paris topped the beauty category rankings respectively.

Faced with the pursuit of international brands and their own fluctuations, what strategic measures should local brands implement to achieve sustainable growth and break the curse of internet celebrities who have been leading for two or three years?

Four sustainable growth paths

In the face of the new normal of the industry with intensified competition and declining flow dividends, enterprises should not rely on the "next Tiktok", but should consider the following four dimensions for strategic optimization.

Firstly, diversify and balance channels, not putting all eggs in one basket.

The development of any new channel is subject to marginal constraints. While seizing the dividends of new channels and achieving short-term growth, brands also need to supplement their multi-channel operational capabilities. Binding the fate of a brand to a single channel carries high risks. Diversified channel layout can effectively reduce brand operational risks and help achieve steady revenue growth, rather than fluctuating with the rise and fall of a certain channel.

It is difficult for a brand to maintain an absolute advantage in a certain emerging channel in the long term. With the continuous influx of peers, traffic congestion in the channel is inevitable. With the intensification of competition among merchants, the customer acquisition cost and investment cost of brands will continue to rise, and the profit margin will be continuously compressed. Ultimately, the incremental dividends of new channels will gradually diminish and eventually transform into normalized and standardized mature channels.

Shuiyang Group, which started with Taobao e-commerce in its early years, provides a sample of channel transformation and self rescue. In 2020, Taobao channels accounted for over 50% of the company's overall revenue, and the main brand, Yunifang, heavily relied on the Taobao platform. In 2023, content e-commerce will rapidly rise. In the same year, the revenue of the whole group of Shuiyang Group's Taoyu system dropped 26.7% year on year, and the two channel GMV of Yunifang Taoyu system and Tiktok both dropped by more than 40%. In the face of the crisis, in the first half of 2024, Shuiyang Stock Co., Ltd. will close its inefficient Taoshi stores and tilt its budget to Tiktok; In the current period, Tiktok's revenue rose to 860 million yuan against the trend, and the output of a single store exceeded that of Taoyu. In 2024, the Group's business scale of Tiktok surpassed that of Tmall for the first time. In 2025, Yunifang will further move towards omnichannel refinement and decentralized operation, and the revenue growth rate of the group's Taobao series will turn positive.

Similarly, Tmall has long been the largest online channel for L'Oreal. However, since 2021, the GMV gap between the Tmall and Tiktok channels has been narrowing. Based on the data from a number of third-party monitoring institutions, in 2021, the GMV of Tmall of Pelaia brand will be about 4 times that of Tiktok, but in 2025, the proportion has dropped to about 1.3 times. Its online channel has changed from "Tmall single core drive" to "Tmall+Tiktok dual core drive", effectively reducing channel risk.

Secondly, quickly step out of your own high-profile channels and achieve brand breaking and channel label stripping.

When a brand relies on a specific channel to quickly generate volume, it is easy to leave a clear channel label in the minds of consumers, and titles such as Taobao brand and Douyin brand are the best evidence. Brands with strategic foresight will break through their barriers and enter other channels ahead of schedule during the peak period of channel dividends. In addition to reducing business risks, the more important significance of channel breaking is to help brands achieve consumer mindset breaking, allowing brand power to penetrate a wider range of people and scenarios.

Afu essential oil, founded in 2003, quickly became popular after entering Taobao in 2009. By leveraging a single essential oil category to capture Taobao search traffic and combining it with buy and get promotions, Afu has grown into the first generation Taobao brand and won the sales champion in the beauty category on Tmall's "Double 11" in 2013. However, after the failure of large-scale offline stores, Afu missed out on the development window of content e-commerce and efficacy skincare, and its mindset gradually aged among young people, facing outstanding challenges for brand rejuvenation.

The Han Du Clothing House in the clothing industry also provides a lesson from the past. Han Du Yi She was founded in 2008, initially relying solely on Taobao stores and Korean women's clothing purchasing agents. In 2010, the brand fully connected with domestic clothing OEM factories and adopted the "small order fast response" model to sell its own styles. In 2012, Handu Yishe topped the women's clothing category list on Taobao. In 2014, Handu Clothing became the number one women's clothing brand on Tmall's "Double 11" shopping festival. The brand has accumulated over 50 million female users and achieved a peak pure online revenue of over 1.6 billion yuan in wireless stores.

However, the turning point began in 2016. With the influence of geographical factors such as the ebb of the Korean Wave and the Thad incident, as well as the rise of the China-Chic, the aesthetic of the young generation of consumers has rapidly turned. Even more deadly is the huge change in traffic patterns: traditional offline brands counterattack online; The traffic dividend of Taotian platform is at its peak; Content e-commerce and short video with goods such as Little Red Book, Tiktok, Kwai began to divert customers. Han Du Yi She, which heavily relies on Taobao shelf e-commerce traffic, has been weak and lagging behind in its transformation towards short videos and live streaming, missing the strategic window period for new e-commerce growth. The challenges faced by Handu Clothing after 2016 mainly stem from the failure to timely remove the dual labels of "Taobao Brand" and "Korean Wave" and establish new value recognition.

Thirdly, it is important to strengthen product and brand strength in a timely manner. Traffic can be bought, but mindset can only be won.

The strong performance of international big brands in this year's 618 promotion has taught local enterprises a vivid lesson: the moat between brand equity and consumer mentality is irreplaceable.

Brands with strong cognitive barriers, even if they fail to immediately respond to changes in emerging channels, will quickly achieve growth by improving their layout and increasing resource investment in emerging channels with their strong brand power.

From the perspective of the interests of the channel itself, top brands with high premiums and high visibility can bring high and certain deductions to the platform, and enhance the platform's tone. Therefore, no matter which platform, it will open the door for such brands.

Product strength and brand strength determine how long a brand can become popular in the channel. Brands lacking research and development expertise can only survive by relying on investment, and therefore often become "working for the platform". Perfect Diary once seized the window period of online social traffic dividends and helped its parent company Yixian E-commerce successfully land on the New York Stock Exchange, but later faced the dilemma of a significant decline in investment efficiency. The fundamental reason is that the brand adopted a light asset OEM model in the early stages and failed to pay timely attention to the construction of product and brand strength, resulting in a decreasing ROI of investment flow, and the enterprise had to enter a long and painful transformation period.

Therefore, while cheering for the short-term surge in traffic through new channels, local brands must also invest sufficient profits back into research and development.

Currently, the "ingredient party" and "efficacy party" are prevalent in the Chinese beauty market, and developing exclusive core ingredients is one of the important means to establish awareness.

Winona has been deeply cultivating the unique plant active ingredients in Yunnan for a long time. By using purslane extract (which mainly relieves redness and pain, soothes and soothes the skin) and prickly fruit oil (which mainly repairs the skin barrier and promotes ceramide synthesis) as the core patented ingredients of the brand, Winona has established a mindset of "finding Winona for sensitive skin repair" in the minds of consumers.

Han Shu's exclusive anti-aging patented ingredient "Hexapeptide-9" is the world's first cyclic peptide developed by a brand rather than a raw material manufacturer. The addition of this ingredient has upgraded the anti-aging effect of the Han Shu "Red Man Waist" gift box, raising the brand's quality price ratio and technological value.

Fourth, make up for the shortcomings offline. Channels are not only about selling goods, but also about establishing a mental field.

Although online channels have natural advantages such as light assets, fast volume, and timely market feedback, companies must recognize that offline channels are not only selling goods, but also important places for brands to provide comprehensive experiences, complete high customer unit price conversions, establish emotional connections with consumers, and build long-term intelligence.

Currently, the proportion of online revenue for top local brands is generally high. This is in sharp contrast to the mass market brand L'Oreal Paris under the L'Oreal Group. According to data from Euromonitor International, L'Oreal Paris' omni channel retail sales in China are expected to reach approximately 14.2 billion yuan by 2025, with online and offline sales accounting for approximately 55% and 45% respectively. On line, Tmall, Tiktok and JD are the three major platforms, and offline, relying on brand counters, supermarkets and CS beauty shops, achieve global coverage. The relatively balanced proportion of omni channel sales provides a certain brand defense for it.

For the cosmetics category, the value of offline channels is more prominent. Maogeping, a local high-end cosmetics brand, can maintain a high average order value and good profit margin for a long time. One of its moats is the offline professional cosmetics counters spread throughout the country. Relying on the face-to-face service system of offline counters, the brand provides consumers with immersive experiences such as skin quality testing, one-on-one makeup customization, professional makeup technique teaching, and product trial guidance, establishing a brand awareness of "professional makeup experts" in offline scenarios. In 2025, Maogeping Group's total revenue was 5.05 billion yuan, of which offline revenue was 2.426 billion yuan, a year-on-year increase of 24.5%. After optimizing and upgrading existing counters, same store revenue increased by 16% year-on-year.

Local mass market brands have low pricing for individual products, and offline stores need to bear large rigid costs such as rent and labor, which can easily lead to the business dilemma of "insufficient space efficiency to cover costs". In this regard, brands can create appropriate experiential spaces in the core commercial districts of cities that can elevate their brand tone, positioning offline stores as "experience disseminators" and "brand image amplifiers" rather than simply "distribution channels".

Channel is a lever, mind helps with long-distance travel

Looking back at the channel changes in China's cosmetics industry over the past 20 years, we will find a clear pattern: every new channel emergence will help a group of brands rise or revive; But every time the channel dividend fades, a group of players who overly rely on channels and neglect brand building will also be eliminated or stranded.

Channels are levers that can amplify the potential of a brand. But the brand is the fulcrum, determining how much value leverage can leverage.

As international brands fill the gaps in content e-commerce, traffic costs continue to rise, and consumers become increasingly rational, only those enterprises that have laid out in advance in channel diversification, product hardcore, and brand intelligence can maintain a place in future channel changes. The channel dividend is ultimately phased, and once a stable consumer mindset is established, it will become the core confidence for brands to cross industry and channel cycles.

(Associate Professor of Marketing at Changjiang Business School, Jing Bing Department, Senior Researcher at the Case Study Department of Changjiang Business School, Meng Fanyi Department)

(Author's Business School Observation)