US cosmetics magnate Elizabeth Arden Inc is expanding its makeup and skin care counters to China's second-tier cities, even as it penetrates deeper into existing markets in more affluent cities such as Beijing and Shanghai.
"We have gone to all the key cities in China and are already in some second-tier cities, where we think consumers have a need for prestige beauty products," said Sebastian Clifton-Welker, the Asia Pacific & Oceania marketing director for Elizabeth Arden International.
Even though they lack the disposable income of consumers in first-tier cities and have not been as exposed to Western lifestyles, Elizabeth Arden hopes its testing counters will allow new customers to try out the company's cosmetics products.
"We are enthusiastically expanding our testing counters so they can have access to Elizabeth Arden products for whenever they are ready to buy our products," said Smith Chih-Hsin Chen, president of Elizabeth Arden Greater China.
Elizabeth Arden already has established locations in 77 cities. The company has 150 beauty counters, which they plan to expand to 200 in 2010.
"In China, average spending on our products is 800 yuan for each transaction," Chen said.
The numbers and expansion plans are impressive given that Elizabeth Arden joined the Chinese market only in late 2005, much later than other international cosmetics brands such as Estee Lauder, Lancome, Chanel and Dior.
Growth market
Elizabeth Arden Inc opens a new counter in a premium department store in Beijing. The US-headquartered cosmetics giant is striving to enter China's second-tier cities and offer more Chinese consumer-tailored products.
Like many of its competitors, Elizabeth Arden is now focusing on China as a growth market, Clifton-Welker said.
The report "Cosmetics and Toiletries Market in China" from the market research firm RNCOS stated that China's skin care market is expected to grow 12.5 percent annually from 2008 through 2012.
Much of the focus for Elizabeth Arden will be on skin care versus makeup.
"Skin care products make up 80 percent of the beauty industry's product share and cosmetics only about 10 percent," Chen said.
Since Chen joined Elizabeth Arden in early 2006, he said he has sought to make the company a trusted brand.
Testing, or "first-touch", counters are an important way to allow consumers a chance to personally try the Elizabeth Arden brand, he said.
That is why I set up more counters in the past three years for people to get a first-hand touch," Chen said.
"It's also important to maintain brand value," he added. "If faulty products appeared on the market, there would be no brand value left."
Chen said he is not worried about competition from inexpensive domestic brands.
"Those who use those inexpensive local brands today might turn to Elizabeth Arden another day," Chen said.
Chen said Elizabeth Arden now only accounts for about 1 percent of the market for beauty products in China.
"In addition to getting a larger share from that untapped 99 percent, I will also work to maintain the 1 percent I've got," Chen said.
Chen conceded it's difficult to build and maintain customer loyalty when two-thirds of women make "irrational" purchases.
"Therefore, we have to set up counters so that customers can reach us whenever they want to buy skin care products, either rationally or irrationally," he said.
Since China adds on charges of 10 percent for duty and 17 percent for value-added taxes on imported beauty products, many domestic consumers turn to duty-free shops in foreign countries or in Hong Kong.
But Chen said he is not worried whether the practice is affecting sales on the Chinese mainland.
"I'm happy, because Hong Kong sellers are helping by nurturing and educating a potential consumer base for me," he said.
Adding 'whitening'
Understanding that Chinese women favor cosmetics that produce "whiter" skin, Chen said Elizabeth Arden developed "whitening" skin care products for the market.
"We understand that if our brand wants to make a splash in the Chinese market, we have to invest more in research and development of whitening products," Chen said.
To that end, the company in 2007 in Asia launched its White Gloves line, which later became a popular seller in the Chinese market.
Elizabeth Arden also is introducing anti-aging skin care products to China.
The company introduced its Prevage line of anti-aging facial products to China on Aug 18 to increase its market share in this fast-growing skin care sector.
Prevage products contain the anti-oxidant ingredient Idebenone, which is a bioengineered molecule that is 60 percent smaller than Co-Q10, which is naturally found in the human body and works to combat the damage caused by harmful free radicals. But the Co-Q10 molecule is too large to cross the barrier of human skin, researchers said.
"In essence, we are not aging, we are oxidizing - rusting in our suits of armor," said Joseph A. Lewis, a cosmetics research scientist who developed Idebenone.
In China, where many consumers believe natural ingredients such as herbs are of higher quality than synthetic ingredients, Lewis said it's a matter of letting consumers know that synthetic ingredients can be safer and more effective.
"The assumption that a natural molecule is always good is not exactly correct. There are a lot of very toxic natural molecules such as the venom in bee stings and snake bites," Lewis said.
Lewis said Idebenone can penetrate skin and mitigate the same kind of oxidative stress that can cause metal to rust or apple slices to turn brown.
"No other natural molecules have the same effect," he said.
