Inside Revlon’s China re-entry playbook

“At the time, cosmetics were not as big there, and China really started booming with skin care, so the decision was made to exit,” said Revlon global brand president Silvia Galfo. “Now the market has shifted so much that it’s the right moment for us to reconsider. [China] is going to become the [brand’s] biggest Asian market [in the next two years], and the goal is to make it our No. 2 global market after the U.S.”

Revlon is seeking growth in the China market as it has struggled in the U.S. in recent years. It reportedly reached a refinancing agreement for a $1.8 billion loan, after implementing layoffs in March and taking other cost-cutting measures in response to coronavirus. 

Delayed by a month and a half due to Covid-19, Revlon’s brand ambassador announcement is key to the brand’s new China plan, said Galfo. Jung, a former member of K-pop girl band Girls’ Generation, was chosen to appeal to the “younger generation” in China, according to Galfo.

Revlon started crafting its re-entry plans in the spring of 2018. In July 2019, the brand held a soft-launch of its Tmall store in China, with a limited assortment of products, as it thought through whether or not to have an online-only business. Galfo said that the brand relied on insights from its Tmall Global sales to prepare for its domestic Tmall launch. Revlon was the sixth most popular U.S. brand on Tmall Global for the 11.11 e-commerce shopping festival in 2017. Before its exit from China six years ago, the brand largely relied on a local distribution model similar to the U.S., with a focus on physical stores.

This time around, the brand is taking the exact opposite of a physical store model.

“We are only on Tmall, which is obviously a fast-growing platform, and [taking part in] the whole digital ecosystem is what brings success in China today,” said Galfo. Brands that focus on “the old model” of physical retail, she said, “cannot succeed.” Tmall is the main priority for the brand for now, due to its status as China’s largest e-tailer as well as its digital marketing capabilities and consumer insights.

“E-commerce represents the least expensive and lowest-risk way” to enter China, said Frank Lavin, founder and chairman of Export Now, a company that helps global brands enter China through Tmall. “The relative cost of an e-commerce launch in China versus a superstore launch in Shanghai is a 10-to-one cost savings.”

But the re-entry will not be without its challenges. Revlon’s play comes at a time when the beauty landscape in China is changing in terms of the onslaught of brands competing. The brand faces competition from not only active global beauty brands and local stalwarts, but also a contingent of rising startups. That includes digitally-native Chinese beauty brand Perfect Diary, as well as many foreign indie brands.

According to Jason Yu, the Greater China managing director of Kantar Worldpanel, “The market is more competitive than when [Revlon] exited.” 

The pandemic is making the environment even more cutthroat. China’s cosmetics sales decreased by 14.1% in the first quarter of 2020, according to the National Bureau of Statistics. But that does not mean brands should hold off on entering the market, said Lavin.

“Even if the weather’s bad, you have to find a way to move ahead,” he said. “And the worst decision you can make in bad weather is to freeze 100%, with no movement at all, because the consumers are still out there.” 

For now, “it is going to remain a very challenging time for all the beauty brands to restore their business in China,” said Yu. And Revlon’s success “depends on whether they are able to actually secure the finances they need to invest in China. It still represents a quite a significant commitment. It’s going to be a very tough game this year.”