Why Tmall Plans to Incubate 1,000 New Beauty Brands

On April 13th, executives from Alibaba’s Tmall platform announced that it would incubate 1,000 new beauty brands this year, with plans to help them surpass 10 million RMB in annual revenues.

This comes after top brands such as KKW Beauty, Fenty Beauty, and Huda Beauty have all successfully launched stores on the platform, with many of them working with top livestreaming influencers to help promote their businesses.

We explain why the beauty category is so important to Tmall and why it makes sense for imported beauty brands to launch a store on the platform.

Alibaba vice president Li Gu speaks during an event to announce that Tmall would incubate new brands.

Why Tmall is Pushing the Beauty Category

Beauty is a major category for e-commerce and Tmall. Last year there were 16 cosmetics brands that reached over 1 billion RMB in annual revenues on Tmall. Even throughout the coronavirus crisis, the YoY growth rates of Tmall cosmetics products reached 41% in the first two months of this year, and 50% in March, according to a joint study conducted by Kantar Retail and Tmall.

For an e-commerce platform, beauty & cosmetics are simply a good business. The products are light, easy to ship, and relatively high-margin products. They’re also highly visual products, which makes it easier to market them online, and people are always willing to try out new products and brands. This is in contrast to, say, health supplement or milk powder brands, which are more difficult to differentiate from one another and customers have little impetus to switch to a new brand.

Selling through cross-border e-commerce is a common channel for beauty brands, largely because of the cruelty-free principles that prevent international beauty brands from exporting their products to China through general trade channels.

This is the main reason why many foreign brands cannot be found in department stores or Sephora stores in China – because they would have to undergo animal testing processes to register their products.

Why Tmall Global Over Other Cross-Border E-Commerce Platforms

Tmall Global has since become the top cross-border e-commerce platform for beauty brands to launch in China. Compared to its competitors JD Worldwide and Kaola, Tmall Global has a much broader user base and wider reach.

JD.com and JD Worldwide historically have suffered from their lack of appeal to female customers. The platform began as an electronics platform and has since failed to sell well amongst the fashion, apparel, and beauty categories.

Kaola, on the other hand, is a pure cross-border e-commerce platform, so users going to the app are those that already know how cross-border e-commerce works and are specifically searching for imported items. Because of this, their user base is smaller but higher-end and premium. Many mothers in Tier 1-2 cities with high incomes, as well as gray-market daigou sellers, tend to buy from Kaola.

Customers on both Taobao and Tmall platforms, on the other hand, can find Tmall Global products in their search results, enabling new brands to reach 666 million mobile monthly users. Tmall Global products are denoted with a purple trim around their images to differentiate them from products shipped from within China.

Tmall Global also offers highly advanced advertising tools with which brands can use to reach new customers. Brands can use search ads, display ads, retargeting ads, affiliate ads, and, as of recently, livestreaming to target customers. Kaola, on the other hand, has very limited advertising options; the platform tends to sell more well-known brands and drives traffic through heavy discounting.

What Have New Brands Been Doing to Launch on Tmall?

Livestreaming has become a major marketing channel for brands to promote more visual objects such as apparel and beauty products. Consumers can see how different shades of eye shadow can be applied in a real-life setting, or ask livestreaming hosts to try on a piece of clothing as a part of different outfits. For cross-border e-commerce, livestreaming can be especially useful as Chinese consumers have no way to test out the products in an offline setting.

For last year’s Black Friday campaign, Kim Kardashian’s KKW Beauty worked with top influencer Viya's Taobao livestreaming channel to promote its goods, selling out 15,000 bottles in just a matter of minutes. Over 13 million viewers tuned in to the livestreaming session, during which Kim Kardashian herself made a guest appearance.

Kim Kardashian in Viya's Taobao live streaming

Top influencers such as Viya play a core role in adding a personalized touch to brand marketing, as they can give valuable tips on how to use the products. They oftentimes have loyal customer bases that are more likely to make purchases when products are recommended, and brands can work with different influencers, big and small, to target different niche customer bases.

Before its Tmall launch in March, Huda Beauty partnered up with Austin Li, who recommended Huda Beauty's products during a Taobao livestreaming session. Over 300,000 people visited Huda Beauty’s Tmall Global store on its opening day. The brand’s eyeshadow palettes have proved to be particularly appealing to China’s millennial customers.

Key Takeaways

1. Tmall plans to incubate over 1,000 new beauty brands this year on its platform, hoping that each will be able to reach 10 million RMB in annual revenues

2. The beauty category is a strong category for Tmall, given that the products are easy to ship, high-margin, and more visually marketable than other categories. Tmall Global and cross-border e-commerce are particularly appealing due to animal testing requirements that restrict international brands from selling offline in China.

3. Brands such as KKW Beauty and Huda Beauty have been using top influencers and livestreaming to help promote their stores on Tmall Global. Partnering with such influencers is a good way to drive immediate sales conversions.