Niche fragrances are booming in China, and global brands are paying attention

With China’s economic outlook still cloudy due to China’s zero-COVID-19 policy and its unpredictable lockdowns, deepening real estate crisis and devaluation of the yuan, and declining consumer confidence, luxury brands in one of its more important markets may struggle to achieve a future. year. However, even as the health of Chinese consumer demand is questioned, recent investments suggest that China’s personal fragrance market could still be a bright spot, even amid a marked slowdown in the luxury market.

Fragrances are experiencing rapid growth in mainland China as they are more affordable and relatively subtle compared to accessories with a logo. As we pointed out in our previous market report, How Niche Fragrances Win the Favor of Young Chinese Consumers, In China’s huge population of 1.4 billion, only 2.5% of people currently use personal fragrance, while the proportion of Americans is close to 52%. According to a 2017 survey, in France, 42% of consumers use personal fragrances on a daily basis, while another 42% use fragrance products slightly less frequently.

Even in the crowded beauty space, fragrance’s growth potential stands out. According to a survey by Chinese market research firm iResearch, among Gen Z female consumers, fragrance ranks first in fashion and beauty (excluding cosmetics and skin care), ahead of clothing and accessories.

Driven by these young consumers, the Chinese fragrance market is expected to maintain double-digit growth over the next few years, with Mintel expecting sales to double from 6.9 billion yuan ($1.1 billion) between 2020 and 2025 to 15.4 billion yuan ($2.4 billion). Meanwhile, Euromonitor International expects fragrance sales to reach 30 billion yuan ($4.7 billion) by 2025. The growing demand and use of fragrances is not only benefiting mainland China’s most established and established brands – which include Chanel N°5 and Dior J’ cult. In recent years, as consumer tastes have changed, they have become more willing to try lesser-known brands from overseas and domestic producers.

The growing interest in niche fragrances among Chinese consumers is closely related to the larger “niche” trend permeating the fashion and beauty industries, with millennials and Gen Z consumers looking for products that can serve as tools for self-expression. Because individuals are easily identified by their scent, fragrance has become a key sign that can be used to stand out from a crowd.

This particular appeal has been exploited by influencers and celebrities on social media, where niche fragrance products have become the most popular recommendation topics. On Xiaohongshu, internet celebrity Doudoubao (3.5 million followers) chose fragrances from Diptyque, Penhaligon’s, Kilian and Replica; actress Jiang Shuying (3.3 million) favored Jo Malone and Cire Trudon’s scented candles and aromatherapy; actress Li Xiaolu (3.4 million) said that L’Oreal’s Atelier Cologne is her first choice for afternoon tea with friends.

The candy-scented fragrance collaboration between White Rabbit and Scent Library taps into consumers’ nostalgia, national pride, and growing interest in fragrances.Photo: Smell Library

However, this trend is not only in favor of foreign fragrance brands. Over the past five years, a number of local startups have entered the space, building their reputations through savvy nostalgic marketing and brand collaborations. Among these domestic niche fragrance brands, the most notable include Scent Library, Cosmic Speculation and Scentooze – all of which have received millions of rounds of financing in recent years and have successfully tapped the online and offline needs.

Even tech giants with no previous experience in the field have entered the market, with TikTok parent company ByteDance announcing the launch of its fragrance subsidiary Emotif earlier this year.

Global established companies are also paying attention to the rise of Chinese local perfume brands. L’Oréal China has acquired a minority stake in two-year-old brand Documents through its new China-focused investment fund, Shanghai Mercy Corps, backed by L’Oréal’s private equity fund Bold to acquire a minority stake in the innovative beauty space. Startups).

Launched in 2021, Documents has captured the attention of Chinese millennials and Gen Zers due to its focus on using raw materials that are produced in or originating in China, with prices ranging from 450 yuan ($64) to 2,250 yuan ($320) per bottle not wait. In July 2021, Documents eschewed e-commerce in favor of brand-owned WeChat mini-programs and offline retailers, opening its first brick-and-mortar store in Shanghai. Over the next six months, the brand claimed an average purchase value of 1,500 yuan ($236). In terms of core consumer demographics, post-90s shoppers account for more than half of Documents’ sales. The brand also showed itself as a skilled brand partner, launching a critically acclaimed collaboration with Chinese accessories brand Yvmin ahead of this year’s Qixi Festival.

If the economic slowdown continues to dampen consumer enthusiasm for big-ticket purchases in the year ahead, more accessible (not to mention personal and private) high-end purchases such as fragrance, skincare and beauty are likely to see some of the luxury industry the strongest growth. Does this mean we could see L’Oreal and other leading global groups investing in China’s fast-growing local startups?

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