P&G and L'Oréal Join China's New Consumption 'Alley Fight'

Editor's Note: As the 2019 Singles' Day shopping festival approaches, it's said that 'Lipstick Brother No.1' Li Jiaqi has raised his sales target to 1 billion yuan—last year, he sold 300 million yuan alone, becoming an overnight sensation. Now, his confidence comes from the surge in traffic pools this year, and the fact that livestreaming has officially become a standard sales tool for merchants. With the vigorous promotion of Li Jiaqi and others, a batch of new internet-famous brands have seized the opportunity to rise. Young, trendy, low-priced, and high-energy, they combine word-of-mouth and experiential consumption to hit the pain points of young people, capturing some of the territory of big brands, and giving rise to the term 'new domestic brands.' Thus, starting in the second half of the year, discussions about 'new consumption' have been rising one after another. This transformation has not only arrived but is already in the middle game: on one hand, new marketing relies on new demographics, new models, and new scenarios; on the other, new channels rely on payment technology and social platforms. Consumers can buy higher cost-performance products with less money, and use short videos and e-commerce to sell local specialties nationwide. The concepts of technology equality and consumption equality have been proposed for the first time. But at a deeper level, under the dominance of traffic, platform hegemony, and marketing tactics, who is the real winner in this new wave of consumption? 'Prism' has talked with livestreaming influencers, emerging brands, established giants, social platforms, and even villagers selling tractors and pesticides in this 'huge wave,' starting from typical cases of brand and sales transformation, to try to restore the mid-game battle of this new consumption era.

-01- A spending competition is underway. Since late October, every night, influencer hosts have been promoting products for five or six hours with eloquent tongues; every store you follow is rushing to stuff coupons at you; even if you have no shopping plans, you'll spend some time confirming whether not buying means missing out on billions; brand merchants are even more nervous, shipping bestsellers from global inventory to China. Profit is secondary; losing face on the leaderboard is not acceptable. Especially for international big brands. During the 2017 Singles' Day, 'new domestic brands' in the beauty industry rose abruptly, catching big brands off guard. According to data from Xingtu Data, in the top 10 personal care products across the entire network, two domestic daily chemical brands, Baijiaque and Chando, took the top two positions, surpassing Estée Lauder, Lancôme, and OLAY. After being stunned, the big brands were unwilling to fall behind. In 2018, they finally fought back. That year's Singles' Day, OLAY, L'Oréal, and Lancôme took the top three spots. For the 2019 Singles' Day, the concept of 'new domestic brands' has become a promotional focus for major platforms. For international big brands after a win and a loss, this will be a crucial battle. Of course, to conquer China's booming consumer market, it's not just about throwing money and brand endorsement; more importantly, it's about who can adapt to Chinese-style gameplay faster.

-02- Li Jiaqi and Lancôme: Love-Hate Relationship At least so far, 'Lipstick Brother' Li Jiaqi hasn't really banned Lancôme. On the evening of October 26, during the hot Singles' Day pre-sale, Li Jiaqi was vigorously promoting Lancôme's second-generation Advanced Génifique in his livestream. The original price for 30ml was 760 yuan. He said it was only after negotiating with Lancôme that he decided to feature this product and secured extra benefits: 'Why didn't we broadcast on the first day of pre-sale? Because it was only buy-one-get-one-free, no (extra) discount, so I said I wouldn't broadcast. The second-generation Advanced Génifique makes skin supple, bouncy, and moisturized... It's a product with great reputation. It's equivalent to 4.6% off. All girls, pay the deposit directly, 100 yuan deposit.' That day, Li Jiaqi sold two Lancôme products. The other was the Advanced Génifique Eye Cream, 15ml, 520 yuan. Li Jiaqi's livestream pre-ordered over 4,200 units, with sales of about 2.22 million yuan. Li Jiaqi livestreaming Lancôme Advanced Génifique The story between 'Lipstick Brother' and the Lancôme brand is a long one. Low prices are generally the 'lifeline' for hosts to maintain fan loyalty, especially between Taobao's two top traffic hosts, Viya and Li Jiaqi. Earlier, when recommending a Lancôme product, Li Jiaqi found that his price was slightly higher than Viya's, causing a rift with Lancôme. A similar incident occurred in April 2019. In another livestream, a snack was 5 yuan more expensive than in Viya's livestream, and Li Jiaqi directly called on fans to return the product. But the relationship between Li Jiaqi and Lancôme—one being the top beauty traffic influencer, the other belonging to L'Oréal's Luxury Products division, the world's largest cosmetics group—is not something that can be cut off easily like with a snack manufacturer. And it's well known that Li Jiaqi's current top status owes much to L'Oréal's initial boost. China is L'Oréal's second-largest market globally, accounting for about 13%-15% of its share. And Li Jiaqi himself emerged from L'Oréal's 'BA (Beauty Advisor) Influencer' project in collaboration with MCN agency. This plan began in early 2017. L'Oréal selected 200 beauty advisors, trained by Mei One, to livestream on Taobao. Li Jiaqi persisted, going from a handful of viewers to millions watching every night. This project won the first prize in L'Oréal Group's NEXT Innovation award at the time. A frequently cited statistic is that in the first half of 2018 alone, Li Jiaqi did 80 livestreams for L'Oréal, with 10 million views, bringing in over 10 million yuan in direct sales. By September 26, 2019, Li Jiaqi and L'Oréal also held a special livestream, promoting more than 10 products from Lancôme lipsticks to Magic masks. Symbiosis has become the main theme of the relationship between established consumer giants and newly emerging traffic influencers. It was in 2018, when they fully embraced new marketing methods like Li Jiaqi, that L'Oréal and Lancôme fought their way back to the second and third positions in the top 10 personal care products across the entire network during Singles' Day. That year, Li Jiaqi also skyrocketed to fame. A set of research data cited by Yu Jian, General Manager of Kantar Worldpanel Greater China, illustrates this necessity: In the first half of 2019, declining categories accounted for 26% of the FMCG market, but at the same time, 20% of brands were in 'explosive expansion'—meaning growth rates more than twice the category average. The rapidly changing consumption landscape provides opportunities for both large and small brands—large brands refine their big scenarios, while small brands fully develop their niche scenarios. One of the cases Yu Jian cited was Lancôme's 618 livestream sales. During Tmall's 618 shopping festival in 2019, Lancôme had its own brand livestream day, with 14 hosts including Viya promoting for three consecutive hours. In Viya's livestream, Lancôme's Advanced Génifique sold over 4,700 bottles in one hour, surpassing the total sales during the 618 period last year. That day, Lancôme's livestream accumulated over 6 million views, over 10 million likes, and transactions guided by livestream exceeded 13 million yuan. On the livestream beauty product ranking, 6 of the top 10 products were from Lancôme. L'Oréal Group, which owns 36 brands, had 4 brands exceed the 1 billion euro sales mark in 2018, with double-digit growth, led by Lancôme.

-03- The Reversal of Fortune for 180-Year-Old P&G Compared to L'Oréal, another international daily chemical giant, P&G, has had a more tortuous experience in recent years. From toothpaste, facial cleanser, and hair dye to diapers, sanitary pads, and razors, P&G's products are deeply embedded in almost every household, with well-known brands like Pantene, Head & Shoulders, Rejoice, OLAY, SK-II, Safeguard, and Crest. But in recent years, this behemoth has faced brand aging issues in China and globally, once becoming synonymous with 'products for mothers' in the minds of young people. Since 2013, P&G's global sales have nearly stagnated or even declined. In fiscal 2017, P&G's sales were $65.1 billion, even lower than in 2006. Starting in 2015, P&G's top management launched a $10 billion cost-cutting plan, reducing brands from 170 to 65. 2015 and 2016 were difficult times, with only 2 of P&G's 7 divisions in China still growing. Later, P&G management admitted mistakes in the Chinese market and tried to revitalize it by selling more high-end products and adopting younger, more personalized marketing. In China, P&G's OLAY and SK-II began large-scale collaborations with Xiaohongshu, Weibo, and various KOLs for 'grass-planting' (recommendations). Opening Xiaohongshu, the latest splash ad is the limited-edition SK-II Facial Treatment Essence endorsed by Dou Jingtong; and Whisper's new liquid sanitary pads recently collaborated with the well-known science self-media 'Bi Dao.' In this process, the beauty division, which was the first to experiment, indeed helped P&G, especially OLAY and SK-II, maintaining higher and more sustained growth than their categories. In fiscal 2019, ending June 30, 2019, P&G's global revenue reached $67.684 billion, up 1% year-over-year. On October 22, P&G announced its fiscal 2020 first-quarter (July-September 2019) results, showing net sales of $17.798 billion, up 7% year-over-year, and net income of $3.593 billion, up 12%. P&G CFO Jon Moeller specifically mentioned in the earnings call: 'In the first quarter, the Chinese market continued to grow steadily, especially high-end skincare brands SK-II and OLAY, which were well received by Chinese consumers and achieved rapid growth.' Now, P&G Greater China Communications and Public Relations Vice President Rene Xu checks apps like WeChat, Weibo, Xiaohongshu, Douyin, Bilibili, and even Sina Weibo's new app Oasis every day. Rene has worked at P&G for over 30 years. He says that in his many years of brand building, there has never been a period when he felt more uneasy, because he must always understand what's happening now and how to play on various new platforms, or he'll fall behind. The 180-year-old P&G is continuing its efforts, signing a wave of young idols as spokespersons: In October, Wang Yibo became the spokesperson for P&G's Safeguard; Xiao Zhan was signed as Braun brand ambassador before his rise to fame with 'The Untamed'; TFBOYS' Yi Yangqianxi is the spokesperson for Oral-B; Ayanga and Zheng Yunlong collaborated with OLAY; Hua Chenyu endorses HairRecipe... Fans of these stars privately message Rene to thank him, joking that 'the highest level of celebrity chasing is becoming the star's sugar daddy.' Xiao Zhan also collaborates with P&G's OLAY, serving as the Chief Player for Double 11 It's not just P&G; snack seller Mondelez International has also tasted the power of young idols. In the summer of 2018, Oreo announced Wu Lei as its new brand ambassador and launched unprecedented spicy and salty new flavors; Wu Lei revealed that the spicy chicken wing flavor was his creation, triggering a wave of stockpiling, with major e-commerce platforms briefly out of stock, making it hard to find. Mondelez took the opportunity to interact with consumers on creating new Oreo flavors, and netizens with wild imaginations came up with garlic crayfish flavor, milk tea flavor, etc. The most popular red bean honey flavor directly entered production.

-04- The Magic of the 'China Sample' In the Chinese market over the past few years, international brand giants have faced the dilemma of numerous new marketing models, such as social e-commerce, private domain traffic, information feeds, short videos, etc. These fragmented new marketing resources make marketing more challenging. Wu Minghui, founder of MiningLamp Technology Group, summarized the challenges enterprises face: 'The biggest challenge in marketing today is that the dividend of new media traffic is gone, and customer acquisition costs are rising. Marketing methods are constantly changing, and even the underlying principles will change and adjust, but the marketing formula—ROI equals consumer Return divided by Investment—will never change. The relationship between enterprises and consumers is transforming from a consumption relationship to a symbiotic interest relationship. Customers are not guests, but family.' Treating customers like family and communicating more is part of Marc Pritchard's job. He is P&G's Global Chief Brand Officer and has worked at the world's largest advertiser for 37 years. Now, Marc Pritchard knows about WeChat official accounts, the importance of China's new generation of KOLs and KOCs, and also knows Xiaohongshu—which was shown to him by a 28-year-old male consumer when he came to China for consumer research in August this year. 'All our new ideas and operations come from consumer insights. We want to communicate effectively with them,' Marc Pritchard told 'Prism' on October 15. Marc Pritchard said that in building brands, P&G is using technological innovation to achieve one-to-one precision marketing; now 80% of P&G's media placements are done digitally; all collaborations are based on partnerships with local partners like WeChat, Alibaba, and JD.com to reduce waste. The company's operations are also undergoing significant changes. Previously, P&G completed some work through partners; now much has been moved to internal teams to make the pace faster and more precise. In short, the goal is to 'make the entire brand operate like an entrepreneur's (new) brand and win a larger market in China.' In early November, L'Oréal Group Chairman and CEO Jean-Paul Agon said in an interview with China News Service that China's influence on the world has never been as comprehensive, profound, and long-term as it is today, and the world's attention to China has never been as broad, deep, and focused as it is now. For us, China is not just a market, but an innovation hub for L'Oréal Group. The 'China experience' and 'China sample' in e-commerce and new retail innovation have been promoted globally. L'Oréal management has long reached a consensus that e-commerce has entered the new retail era, which includes new distribution models and services. A typical feature is the explosive growth in sales driven by influencer recommendations. In addition to the BA influencer project in China, L'Oréal has also established partnerships in the Middle East directly with beauty e-commerce platform Boutiquaat. This multi-brand e-commerce platform has over 200 beauty influencers, and consumers can directly purchase influencer-recommended products on the platform. Lubomira Rochet is L'Oréal's Chief Digital Officer. In summarizing 2018, she mentioned that L'Oréal's e-commerce grew by 40.6% that year, with transactions nearing 3 billion euros. E-commerce accounted for 11% of L'Oréal's total revenue, ranking second in business scale; in 2017, it was only 8%. In 2018, L'Oréal accounted for one-third of all beauty traffic on YouTube, 25% of beauty content on Facebook, and 12% of global beauty website traffic. In the exploration and operation of various new platforms, the operators of major consumer players are accumulating experience: Photos on Xiaohongshu without text are hard to gain attention; the first five seconds of a Douyin video are crucial, and if not done well, they won't catch the eye; on Weibo, accounts with many followers have influence, but Douyin is different—big accounts don't guarantee 'box office' success; the reach depends on the content itself... Constantly updating knowledge reserves has become the norm. The latest phrase Rene from P&G learned is 'the house collapsed,' which in fan circle slang means 'your idol is dating.' Source: Prism (ID: lengjing_qqfinance) If a tip is adopted, a reward of 400-2000 yuan will be paid.