Will 2020 be a watershed year for Gucci and Hermes in China? Based on market trends and data collected by our cosmetic industry analysts at MeasureChina, we certainly believe so.
Gucci and Hermes are both relative newcomers to the beauty industry. Gucci launched its beauty line in 2014, but it lay mostly dormant until 2018 when the fashion house hired Gucci’s veteran creative director Alessandro Michele. Hermes only recently announced that its first beauty products, a range of lipsticks due out this March.
Now both companies are teasing the Chinese market with hints about their upcoming spring cosmetics lines.
Gucci Relies on Third-Party Sellers
In 2019 Chinese buyers could already buy Gucci beauty products on Alibaba’s platforms, but 95% of these sales were on Taobao. If you’re not familiar with Taobao, it’s a peer-to-peer shopping site where individuals sell directly to each other. Only 5% of sales were on Taobao’s sister site Tmall, where customers buy direct from manufacturers or distributors.
Gucci’s sales nearly doubled from about CNY 3 million in November to CNY 6 million in December of 2019, after a lavish event launching the brand’s extensive line of lipsticks. This coincided with Gucci opening an e-commerce portal on its Chinese website and a concept store in Beijing, where consumers can buy lipstick directly from the brand.
In 2020, our experts expect to see Gucci make a bigger push into China’s cosmetics market and sell their products through a wider variety of channels. One thing they won’t do, according to an announcement by CEO Marco Bizzarri in October 2019, is open a flagship store on Tmall, itself. This may be because Tmall’s highly competitive atmosphere requires hefty discounts and the UI doesn’t allow for the types of heritage marketing videos and graphics that luxury brands use to reinforce their haute couture image.
Hermes is Just Getting Started
Hermes has announced a new line of lipsticks with 24 designer colors. This is not a China-specific range but will roll out globally starting in March. While the company has not yet announced when the line will be available in China, rumors have spurred a raft of speculative posts on Weibo.
Gucci and Hermes are Following a Proven Model
Luxury brands YSL and Givenchy have already opened flagship e-commerce stores for their cosmetics products on Tmall, spurring a strong response from Chinese consumers.
The benefits of luxury houses extending their lines into the beauty space are well understood in the industry. They are able to give potential customers a lower price-point item to try within the brand line-up, capture extended loyalty from existing customers, and generate additional profit. (Cosmetics typically have higher margins and sales volume than clothing or leather goods.) As the cosmetics lines are not core business areas, they can also provide low-risk areas for experimentation.