Forced clearance discounts even if they are not closed down, this is a new marketing method for the beauty industry

Reporter | Editor Chen Qirui | Lou_Qin "Clearout" is becoming a new business in the beauty industry. Drunk Elephant, a brand owned by Shiseido Group, recently announced the temporary closure of its Tmall overseas flagship store due to a change of dealers. The brand emphasized that this move was a strategic adjustment and not a withdrawal from the Chinese market. However, it caused many Taobao stores to clear out Drunk Elephant products, and classic essences and creams were quickly sold out. On social media such as Weibo and Xiaohongshu, some netizens called this an opportunity to "pick up bargains." China's beauty market is highly competitive, and every once in a while, brands will withdraw due to improper management. Taking a fancy to the discount space, clearance sales have become a channel for some netizens to purchase beauty products, and various "saving money" and "planting grass" bloggers also provide relevant information as content. Taobao stores are the main channel for purchasing clearance products, and some Taobao stores are agent sellers of delisted brands. Another common operation is that after the brand completes the expected special sales on the official website or Tmall flagship store, it will sell the remaining products to Taobao stores for processing. At this time, the brand has weak control over prices, and Taobao stores can clear and sell at lower prices on their own. Some brands choose clearance sales because their products do not meet regulatory requirements. Despite all the concerns about quality, this obviously cannot stop consumers from buying. Some underperforming brands returned to normal operations after announcing clearance sales because they gained sympathy from consumers. Domestic cosmetics brands Woodzbeauty and Dramo said they would close due to operational problems in 2021. However, due to the attention of a large number of netizens, popular products were born, and their Taobao stores are still in operation to this day. Another domestic brand, Girlcult, has used clearance as a marketing tool. In January 2022, Girlcult posted a message on its official WeChat public account, stating that it would hold a "funeral" for products that were not selling well. This discount event, which was actually a stock-clearing event, brought attention to Girlcult. Many consumers expressed their "touch" in the comment area of ??Girlcult's brand article and encouraged the brand to "come on" and "keep going." Affected by the epidemic, consumption through discount channels has grown rapidly. The consulting firm McKinsey recently released a report stating that the discount retail industry is growing faster than the entire fashion industry; between 2025 and 2030, the growth rate of discount channels may be five times higher than that of full-price retail channels. In the luxury goods industry, this trend is reflected in the rapid development of second-hand luxury goods channels and outlet channels. The "2020 China Outlet Data Ranking List" released by Outlet Link Show Media Big Data Center shows that the sales volume of China's outlet industry in 2020 exceeded 80 billion yuan, and the number of projects with sales exceeding 1 billion yuan was 39 , 5 more than in 2019. The performance of outlet operator Value Retail's two Bicester shopping villages in Shanghai and Suzhou has exceeded the same period in 2019 in the first half of 2021. Second-hand luxury goods channels are also showing an explosive trend. Second-hand luxury e-commerce companies Hongbulin and Zhier both announced the completion of tens of millions of dollars in financing in 2020. After completing Series C financing of US$50 million in 2021, Fat Tiger Technology will open a large-scale offline flagship store in Sanlitun, Beijing. According to 36Kr’s report, Fathu Technology’s product circulation in 2020 exceeded 150,000 pieces, and its GMV exceeded 1 billion yuan. In the beauty industry, a more common discount sales model is temporary sales. The so-called "imminent expiry date" refers to products that are about to expire, but also include products that are visually defective due to transportation. Not many brands sell expired products through official channels, but beauty collection stores use this as an important way to clear inventory. The beauty collection store brand Hua Mei will release information on its upcoming discounts in the member WeChat group from time to time, and sells products that are on sale through the "Hua Mei Black Market" mini program. Some discounts can be as low as 50% off. "Lingmei Selection", which is positioned as discount beauty products and snacks, received 10 million yuan in Pre-A round financing in 2021. Lingmei Selection has now opened stores in cities such as Hangzhou and Zhengzhou. There are many well-known brands such as SK-II, Estee Lauder and Dior on the shelves, and beauty discounts are around 50 to 60% off. However, unlike platforms such as Huamei that sell their own inventory of products that are on expiration date, collection stores such as Lingmei Youxuan that focus on expiring sales are more likely to be questioned due to their supply of goods. In order to maintain their image, international brands usually do not disclose their partners for clearance products.

Since the authorization process is not transparent, sellers of expired products will find themselves in a dilemma of confronting brands if problems arise, which will also affect future cooperative relationships with other brands in the long run.