This is the third post of “Weishang Knows Cosmetics.” In the previous posts, we explained how weishang are gaining more influence in the cosmetic sector and gave an example of a weishang based in Shanghai that leverages their internet celebrity salesforce to build their brand. In this post, we talked with Korean cosmetic OEM/ODM company based in Shanghai to discuss the challenges of weishangs in China and its opportunity for foreign brands.
One major challenge for weishang is building the brand. Weishang (微商, WeChat sellers) that focus too much on quick sales don’t usually last long. This weakness affects not only the weishang itself but also foreign cosmetic companies in China that are helping fill in the gap between traditional cosmetic and the new economy.
“They need to build up the brand to make people crave their brand identity. Currently, weishang have no long term plan. In order to build a brand, they need to establish a long-term plan, and plan their marketing accordingly,” said Eunhee Kim, marketing representative at BT-COS.
Normally an international cosmetic company would plan and manufacture a line of products, consisting of skin, lotion and cleaning foam, for example. China’s weishang only focus on one product and try to spread it out fast.
“They are quick to catch the latest trends and then push marketing efforts on the item. Weishang really care about what’s popular and what the trends are,” said Ms. Kim. “The problem is that the message is not consistent.”
For instance, a weishang will plan out a new facial cream in a green case, then come up with a skin product in a red case, with a different design. Their products have different concepts, even though they are from the same weishang.
“Many weishang operators were previously working in sales or distributors; they only focus on quick sales. They don’t care about building a long-term relationship with their brand,” Ms. Kim said.
“It’s hard for foreigners to compete against weishang. All the online sales are done by Chinese, using their relationships. I don’t think foreigners can act as a weishang to build such a trusted network,” said Soung-oun Jung, CEO of BT-CO. “In Korea, you can easily search cosmetic distribution channels through the internet. But in China, there’s just too many cities and distributors. How would you know sales channels of third and fourth tier cities?”
Founded in 1993, Korean cosmetics company BT-COS focused on door-to-door sales. To build competitiveness in the China market as a foreign player, the company built smart OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) in China in May 2014 to manufacture cosmetics on behalf of other brands. Since then, the yearly sales of the company have gone over 1 million USD.
“China’s big cosmetic brands have factories to produce their cosmetics, but weishang do not. So that’s why we help them to plan, design and manufacture the cosmetics,” Mr. Jung says.
The Shanghai-based smart ODM company has about a hundred clients; 90% are Chinese clients, mostly weishang, and the rest are Korean cosmetic brand clients. 80% of the products are made for Chinese clients and 20% are for Korean cosmetic brands. According to Mr. Jung, Chinese clients make 10,000 to 1 million product orders at a time.
“In the next five years, China will be the biggest market in cosmetics. Just like Taobao and WeChat, China will be able to develop new distribution channels in the future,” Mr. Jung says.