A customer uses a mobile app to select cosmetics for trial at a Tmall pop-up store in a shopping mall in Shanghai. (Photo provided to China Daily)
L'Oreal, others teaming up with Tmall as online, offline sales begin to merge
For some of the top-notch beauty brands, China is playing a vital part in reshaping the perception of the role of online sales.
Once fearful that the internet's mass access could damage the exclusivity of brands, fashion houses are now racing to embrace digital, thereby pampering demanding customers from the world's largest consumer market.
The pivot to digital makes sense: Online sales are expected to drive future growth in the luxury goods market, making up 25 percent of the market by 2025 from an estimated 9 percent last year, according to a 2017 report from Bain & Co.
Such projections serve as a wake-up call to high-end cosmetic firms that have long relied on partners such as department stores－and their own boutiques－to sell products.
Lancome, a premium brand under French cosmetics firm L'Oreal Group, is riding on a trend in which the lines between offline and online sales are being increasingly blurred in China.
L'Oreal will team up with Tmall to install 50 augmented realty-powered "Magic Mir-rors" across its physical stores in China, which allows users to virtually try on new hairstyles, lipsticks, eye shadow and blush.
And that's just one example. E-commerce is disrupting the beauty sector in China and companies are riding the wave of the change, according to Hagen Wulferth, chief digital officer of L'Oreal China.
"Digital is at the heart of everything in China," Wulferth said. "This is evident from the fact that total e-commerce has surpassed that of the US and Western Europe combined … creating a first-in-class new retail revolution."
"New Retail" is a term coined by Alibaba Group Holding Ltd founder Jack Ma in 2016. In short, it refers to the integration of online and offline shopping experiences by utilizing a cohort of technologies to analyze and predict customers' preferences and in turn improve service.
"New Retail allows the usage of data analytics to understand consumer preferences in order to create an optimal and consistent shopping experience across different channels－physical stores, company websites and mobile commerce," said Jessie Qian, head of Consumer & Retail at KPMG China.
"This enables consumer retail companies to be extremely customer-centric ... (and) meanwhile, build up a demand-driven supply chain system and optimize overall operation."
From 2015, Tmall, the Alibaba-owned business-to-customer site, has delivered a suite of new retail solutions to help beauty brands pinpoint, attract and retain customers.
In an annual ceremony awarding new retail practices for beauty products in March, Tmall featured technologies such as "Cloud Shelf", a service that enables customers to pre-order an item online, go to a physical store for free trial, pick the product up by scanning a QR code generated through the online order, and pay using a mobile wallet.
"We've upgraded our bonus system to beauty assistants by combining online and offline sales data," said Ma Xiaoyu, general manager for Lancome China. "Such dichotomy is becoming obsolete as data generated online can effectively drive offline sales."
A total of 10 beauty brands, from Estee Lauder to SK-II, will join hands with the e-commerce giant, aiming to cross 1 billion yuan (9 million) of annual sales on the platform.
To break that threshold, Tmall will also kick off a number of initiatives that include a new "try-before-you-buy" function, where users pay a 10 percent deposit to test a product with the promise of a simpler and faster refund process, said Jing Jie, general manager of Tmall.