Pechoin accounts for the largest share of the skin care market in China. Sales of skin care have kept increasing over the years, reaching CNY 244.4 billion in 2019. It’s projected to grow by 4% in 2020 in light of COVID-19’s impact on the beauty industry. Pechoin (百雀羚), a brand of Shanghai Pehchaolin Daily Chemical (SPDC) is leading the skin care market in China with the highest brand share.
Some emerging trends helped support the dynamic growth of China’s skin care market. For instance, domestic brands are growing in popularity as a result of a new wave of national pride among millennials and Gen Z. Anti-aging products see significant growth as anti-aging awareness rises among Chinese customers. Moreover, decision-making based on a product’s ingredients for more advanced formulas appears to be a key trend in the market.
Data Source: Euromonitor, daxue consulting analysis, Pechoin accounts for the largest brand share in China’s skin care market, 2019.
Pechoin added anti-agers to product profile as anti-aging awareness rises
Pechoin’s product categories are body lotions, hair care, hand care, lips care, facial care, makeup, with a focus on skin care. This year, Pechoin managed to catch the emerging trend of anti-aging among Chinese customers. The new product line targets customers in their late 20’s. It’s said that the anti-aging product line is particularly designed for Asian women’s skin with breakthrough technology ProVTATM. Pechoin Group has also entered into strategic cooperation with the American multinational pharmaceutical company Merck to develop herbal technology. The two will collaborate to launch a new anti-wrinkle repair series. Besides, the brand is also addressing the growing male market through skin care products for men.
Image Source: Taobao, Pechoin’s products share similar visuals across product category.
Pechoin’s rich product profile displays an undifferentiated visual from one product packaging to another. The brand has good consistency. However, the peril of having similar packaging is that it’s hard to distinguish different products when making purchase decisions. It’s also impossible for one product to stand out from the profile. The ramification of this is that it leaves customers to choose products based on price.
Pechoin’s price is affordable, resulting in economies of scale
Pechoin applied a mix of cost-plus pricing and product line pricing. Prices range from CNY 50 (male facial cleanser) to CNY 1,399 (limited edition makeup set). The price of the anti-aging product line is set relatively higher, while 70% of the products are under CNY 200, which defines the brand’s position as an affordable local brand for the mass market. The pricing is set to penetrate the market with low prices to secure high volumes. It’s believed that such a pricing strategy will reduce the risk for new customers to make a trial purchase and enter the brand system.
It remains unknown whether Pechoin’s price will stay in the cheaper end as more anti-aging products with advanced formula will be introduced. However, it’s reasonable to predict that as the premiumization trend prevails, the unit prices are likely to increase.
Data source: Taobao, daxue consulting analysis, the Perceptual Map shows how (potential) customers view Pechoin and its competitors’ offerings.
Diverse promotions on digital channels to penetrate the younger market
The brand employed a variety of promotional tactics on digital channels, including sponsorship, celebrity and KOC endorsement, co-branding, and social campaigns to target younger customers who spend a significant amount of entertaining time online. To further amplify the power of young customers, the brand leveraged the booming fans’ economy by using different celebrities in marketing communications with huge young fan bases. It signed Wang Yibo, one of the most famous male idols, as the brand ambassador to endorse the new anti-agers product line to attract younger customers. However, the fact that Wang Yibo was also signed by HomeFacialPro, one of Pechoin’s competitors, dilutes Pechoin’s share of voice.
Image Source: Left: Pechoin’s Weibo, Popular celebrities with huge fan base were selected to endorse Pechoin’s products to leverage booming fans’ economy. Right: Two competing brands use the same brand ambassador, diluting the effect of celebrity endorsement.
Moreover, to further expand its reach, the brand also attends to the emerging game market through sponsoring an online variety show that features electronic games competition. It’s also the first electronic game competition for female players in China. Besides, using KOC (key opinion customers) to promote products by posting product reviews is also one of Pechoin’s tactics.
Image Source: Pechoin’s Weibo, The motivation for Pechoin to sponsor the competition might be related to the booming talent show industry in China.
Like other local brands, Pechoin is also trying to reinforce its image of a national brand and leverage the new wave of national pride. It did it through co-branding. For instance, Pechoin collaborated with Dunhuang Museum (敦煌博物馆) and Chow Tai Fook (周大福) to market its products that have distinctive characteristics of Chinese style.
Image Source: Taobao, Pechoin aims to reinforce its image of a domestic brand through co-branding to leverage the new wave of national pride.
Overall, the brand is quite responsive in terms of its online promotions. It’s evident that the brand’s promotional tactics evolve with the market trends. Pechoin aims to penetrate a younger market through product, price, and promotions. Consistent though these factors are, the fact that the bigger picture of Pechoin is still far from being young, cool, and fashionable shows a weaker connection with its targeted customers. What’s worse, the fact that Pechoin broke the partnership with the top live streaming KOL Li Jiaqi tainted its reputation to some extent.
Moreover, other domestic brands are applying similar strategies. Therefore, the challenge for Pechoin is to differentiate itself from its competitors not only product-wise but also from a brand meaning perspective to induce a positive brand response that leads to purchase preference.
Image Source: Taobao, A new entrant and competitor of Pechoin (right), Florasis (花西子left), is growing rapidly to compete in the market. Florasis was founded in 2017 and applied similar strategies with Pechoin.
Online and offline distributions ensure market coverage
Pechoin products are sold through traditional distribution channels, including supermarkets, convenience stores, and pharmacies to tackle the mass market. E-commerce platforms such as JD, Tmall, Pinduoduo, and Suning are also Pechoin’s major distribution channels as e-commerce has become the main channel for Chinese customers looking to purchase skin care. The expansive distribution ensures Pechoin’s market coverage.
As leading international and local brands are moving online, e-commerce has become the new battleground. For domestic brands, the competition is fiercer, because these brands are usually cheaper and competing on cost-effectiveness. With a similar price, customers are prone to choose products that provide a better price-quality ratio. For example, L’Oréal introduced Pro-Xylane (anti-aging) and nicotinamide (skin whitening) into its mass skin care products and enjoyed a boost in sales. Thus, attracting customers through price and promotions is only the first step, it’s of importance for Pechoin to retain its customers by offerings additional benefits.
Image Source: Taobao, Pechoin collaborated with KOL to sell its products through Taobao live streaming, wherein the brand offers price-off to push sales.
How Pechoin, with a traditional image, will keep up with the changing modern market
As a brand for the mass market, Pechoin’s pricing, distributions, and promotions match its brand position. It has begun to move from satisfying the basic needs of its customers to live up to the emerging trends in skin care market, through product innovation. However, as the brand tries to reach the younger market through active online promotions, follow-up action is needed, which is to retain these customers. It’s suggested that Pechoin needs to work through an in-depth segmentation that goes beyond demographics and fans’ economy. By doing this, the aim is to know how the potential and current customer make their purchase decisions to convert them into buyers. It’s unwise to homogenize the younger market simply based on age and interests. By studying its targeted segments, Pechoin might also find its value proposition that could help differentiate the brand from its competitors.