Can Domestic Beauty Brands Shed the “Budget Alternative” Label?

China's domestic beauty industry is undergoing a structural transformation, driven by the rise of local brands and the explosive growth of online channels. Brands such as Florasis, Perfect Diary, and MAOGEPING have capitalized on e-commerce advantages through precise marketing, cultural integration, and cost-effective alternatives to major international brands. In 2023, domestic brands overtook foreign brands in market share for the first time, reaching 52.22%, and further expanded to 56.3% in 2025, signaling a significant shift in the competitive landscape of China's beauty sector.

The beauty industry in China has entered a phase of stock competition and incremental innovation, with competition now emphasizing technological strength, brand value, and global operational capabilities. However, despite the rapid ascent of domestic players, challenges persist in the form of weak R&D foundations, heavy reliance on OEMs, difficulties in premium positioning, and fierce price competition.

From 2017 to 2023, the market size grew from RMB 374.594 billion to RMB 547.924 billion, with a compound annual growth rate of 6.54%. According to iiMedia Research, the market is projected to reach RMB 579.1 billion in 2025. During the 618 Shopping Festival, major e-commerce platforms including Taobao, JD.com, Douyin, and Kuaishou reported beauty product transaction volumes totaling RMB 65.909 billion, a year-on-year increase of over 10%.

According to the 2024 China Cosmetics Blue Book, domestic brands overtook foreign brands in 2023 with a 52.22% market share, and this trend continued in 2025, rising to 56.3%. Leading brands such as MAOGEPING, Florasis, and Perfect Diary have seen rapid growth through targeted strategies and unique brand positioning. MAOGEPING leveraged the personal brand of its founder, a national-level makeup artist, to achieve compound annual growth rates of 35% in revenue and 38.6% in net profit from 2021 to 2024. Perfect Diary, capitalizing on content-driven marketing, rose to the top of Tmall's Double 11 cosmetics list in 2019 and recorded RMB 600 million in sales during the 2024 event. Florasis, meanwhile, set multiple records through livestreaming, surpassing RMB 5 billion in annual revenue in 2021.

Capital markets have warmly embraced the domestic beauty sector. MAOGEPING was listed on the Hong Kong Stock Exchange in December 2024 with its stock price surging over 70% on debut. Perfect Diary's parent company Yatsen completed its IPO in just four years, backed by major investors. Florasis has also signaled IPO intentions since 2021. Companies like Proya, Marubi, and Shanghai Chicmax have followed suit by entering public markets.

MAOGEPING's IPO catalyzed a new wave of capitalization within the sector. In March 2025, Guyu began A-share IPO guidance; in May, Forest Cabin submitted its listing prospectus to the Hong Kong Stock Exchange; and in June, fragrance company Vigon announced plans to go public in Hong Kong. The competitive landscape is shifting from a fragmented field to one dominated by leading players. In 2024, 819 brands achieved over RMB 100 million in transactions, with nine brands exceeding RMB 5 billion.

The emergence of local brands owes much to the strategic missteps of international players. During the 1990s and 2000s, foreign companies dominated the market through department store counters and premium positioning. Brands like Lancôme and Estée Lauder set up early retail presences, capturing key consumer mindshare. However, their slow transition to digital and overreliance on traditional marketing have hindered their competitiveness.

By contrast, Chinese brands like Florasis and Perfect Diary embraced e-commerce. Perfect Diary leveraged platforms like Xiaohongshu and livestreaming to boost sales, while Florasis partnered with top influencers to drive traffic and engagement. Cultural elements such as engraved lipsticks and ethnic designs have further differentiated these brands. The shift in consumer behavior from brand loyalty to efficacy and ingredients has supported the rise of local "affordable alternatives." According to iiMedia Research, 79.3% of consumers now prioritize cost-effectiveness, with domestic products often priced under RMB 100 compared to RMB 300 for international counterparts.

Despite their success, domestic brands face structural challenges. According to the National Bureau of Statistics, total retail sales of cosmetics fell 1.1% in 2024 to RMB 435.7 billion, highlighting macroeconomic pressures. Unlike international giants that follow the OBM model, many Chinese brands still rely on OEM/ODM suppliers. For example, MAOGEPING's products are manufactured by Intercos and Cosmax, while Marubi sources from Vicky Technology. Perfect Diary and Florasis also outsource significant portions of R&D and manufacturing.

R&D spending remains low. Most domestic companies allocate under RMB 500 million annually to R&D, with marketing expenses often exceeding 40%. MAOGEPING spent only 0.8% of its revenue on R&D in 2024, but nearly half on marketing. In contrast, L'Oréal's R&D budget in 2024 was RMB 10.57 billion, with a higher R&D ratio and lower marketing spend. Chinese brands also lag in patent portfolios. MAOGEPING holds just two invention patents, while L'Oréal and Estée Lauder have over 90% and 58% invention patent ratios, respectively.

Profit margins are another concern. Despite gross margins above 50%, most domestic beauty companies report net margins below 20%, with over half under 10%. The reliance on "affordable alternatives" has also made it difficult for brands to move upscale. Pricing controversies have erupted, such as Perfect Diary's lipstick priced at RMB 136 per gram versus Armani's RMB 53.8, or Florasis's eyebrow pencil at RMB 980 per gram, sparking public backlash.

Furthermore, domestic brands now face competition from even lower-priced local players like Judydoll, Flower Knows, and Ukiss, as well as budget Korean brands. On platforms like 1688, imitation products sell for as little as RMB 2, highlighting the intense price competition.

To sustain growth, domestic brands are pursuing high-end transformation. Major players are targeting products priced over RMB 1,000. Proya and Bettaine have launched or acquired premium lines. Shanghai Jahwa's "Twin Sisters" and Kans's "X-Peptide" series focus on urban professionals. Proya and Winona are reducing low-end SKUs and expanding offline channels, with brands like Biohyalux and Quadha opening brick-and-mortar stores.

The shift has yielded mixed results. Yatsen's acquisition of premium brands led to 59% skincare revenue growth in Q1 2023, while S'Young's acquisition of French brand Evidens saw daily online sales rise over 50%. However, annual revenue declined 5.69%, and net profit dropped 62.63%. Bettaine's premium line Akeman achieved RMB 60 million in 2024 but accounted for only 1% of total sales. Shanghai Jahwa's premium segment saw revenue fall 29.81% year-on-year.

International brands still dominate the high-end segment. According to Frost & Sullivan, the top five luxury beauty companies held 55.4% of the market in 2023. On Tmall's 2024 "618" event, four of the top five brands were foreign. Citic Securities reported that leading Chinese brands like Proya and Winona are priced between RMB 200-500, while global peers like SK-II and Estée Lauder exceed RMB 1,000, with Helena Rubinstein and La Mer products priced over RMB 2,000.

Beyond premiumization, overseas expansion is a critical growth driver. In 2023, China exported RMB 45.824 billion in beauty and personal care products, up 22.8% year-on-year. From January to November 2024, exports rose to RMB 46.395 billion. Over 50 Chinese brands have ventured abroad. Florasis opened a flagship store in Tokyo in January 2025, and Winona has entered over 40 stores in Thailand. Channels include Amazon, Shopee, Lazada, and social platforms like Facebook and TikTok.

Nevertheless, challenges remain. Between 2015 and 2024, export volumes far exceeded imports, but export value lagged significantly. In 2024, China exported 1.32 million tons of beauty products worth RMB 51.2 billion, compared to 320,000 tons imported at a value of RMB 116.1 billion, indicating low average export prices and limited added value.

Tariffs also weigh on competitiveness. In Southeast Asia, average prices are around USD 0.50 per facial mask, but tariffs raise end prices in the U.S. by 30-50%, eroding the value advantage. Rising material and logistics costs further compress profit margins, with reports indicating margins have shrunk from 15% to under 5% for USD 50 product sets.

Experts note that China's beauty industry has entered a "deep water zone" in overseas markets, where success now depends on technological capability, brand sophistication, and global management. Only companies that build integrated strengths in technology, branding, and supply chains will be positioned to lead the next phase of industry reshaping