Cosmetics are not just personal care products but also an essential part of daily life for many people. With the rapid advancement of technology and changes in consumer shopping habits, the cosmetics market in Vietnam is becoming a vibrant and competitive landscape.
UpBase will delve into the market potential, from the high consumer preference for natural and organic products to the increase in product personalization and the strengthening of brand-customer engagement. Let’s explore how businesses can leverage opportunities and tackle challenges in the cosmetics industry in Vietnam to achieve sustainable success.
Market Potential Analysis of the Beauty Industry in Vietnam
Market Overview
The 2023 overview report of the beauty industry across five e-commerce platforms in Vietnam (Shopee, Lazada, TikTok Shop, Tiki, Sendo) reveals that the total industry revenue reached 37.7 trillion VND, with sales amounting to 341 million products, reflecting a growth of over 50% compared to 2022. Approximately 137,000 businesses are operating within this sector.
According to data from the General Statistics Office, Vietnam is currently in a golden demographic period, with females accounting for 50.1% of the total population of 100.3 million people. Among them, the age group from 15 to 59 years old is expected to make up 62.2% in 2023. In a developing country like Vietnam, the demand for beauty products always constitutes a significant portion. This is evident in 2023 despite Vietnam's economic challenges due to the global economic downturn.
According to Statista's report, Vietnam's cosmetics industry revenue is projected to reach USD 2.66 billion this year, with e-commerce channels accounting for 20.2%, and expected to increase to 24% by 2027. However, given the actual growth rate, this figure may be even higher due to the expansion of livestreaming and multichannel sales activities. The proportion of women using beauty products has increased from 76% to 86% between 2018 and 2022 and is expected to continue rising in the coming years.
Based on the above analysis, it is clear that the cosmetics market in Vietnam, particularly for e-commerce channels, has a very large market share and significant potential for development in the coming years. The growth rate may be slower compared to 2022 and 2023 due to macroeconomic difficulties affecting people's income, which could partly impact spending on beauty products.
However, the revenue growth rate for the cosmetics industry through e-commerce is expected to remain at 20-30% over the next five years.
Product Segmentation
In terms of market segmentation, skincare and makeup products account for nearly 50% of the market share, indicating that Vietnamese consumers are particularly focused on maintaining and enhancing facial beauty.
Perfumes also hold a significant market share, ranking third after skincare and makeup products, reflecting interest in fragrance and personal style. Beauty tools, hair care products, and body care items also generate substantial revenue, indicating a diverse interest in maintaining and enhancing overall body beauty.
In terms of average revenue per product, perfumes currently have the highest value compared to other products. Additionally, categories such as facial skincare, men’s grooming, and hair care also show relatively good average revenue. Based on this data, fragrance, skincare, and haircare categories are promising areas for manufacturers and retailers to focus on in order to achieve strong business results in the coming years.
Price Segmentation
The most successful price segments in terms of revenue and sales volume in the beauty industry are in the range of 100,000 VND - 150,000 VND and 200,000 VND - 350,000 VND. For Shop Mall, products priced between 350,000 VND - 500,000 VND, 750,000 VND, and 3,500,000 VND - 5,000,000 VND generate the highest revenue for the industry.
The average price consumers are expected to pay for a beauty product in 2023 is 110,000 VND per product. This indicates that online sellers are becoming increasingly professional, with effective business strategies to optimize and increase product prices online.
Brands Holding Market Share in the Beauty Industry in Vietnam
According to a report from Metric:
- 90% of Vietnamese cosmetics companies are distributors of foreign brands.
- Products priced under 500,000 VND account for 80% of the market share in the cosmetics industry, with 35% of sales coming from products priced between 200,000 - 500,000 VND.
La Roche-Posay
Positioning itself as a premium dermocosmetic brand and collaborating with many celebrities, La Roche-Posay accounts for 18.4% of the industry’s total revenue. Among this, skincare products represent 78% of the brand's total revenue.
The standout products of this brand are La Roche-Posay Sunscreen Oil Control (sunscreen) and La Roche-Posay Cicaplast Baume B5+ Soothing & Restoring Cream 100ml (B5 recovery cream). These products are priced between 200,000 VND - 500,000 VND and are suitable for Vietnamese skin.
Anessa
Facial skincare products account for 95% of Anessa's total revenue. The highest revenue is recorded in March, June, and November. This brand is one of the leading names in the premium segment with prices exceeding 500,000 VND.
Sunscreen products with oil control functionality contribute to nearly 70% of Anessa's sales.
Cocoon
Cocoon is the only Vietnamese brand in the top 10 best-selling products of 2023, holding a market share of 10.3%.
The grapefruit hair tonic has the highest sales, with over 285,000 units sold in the past 365 days, marking a 35% increase compared to the same period last year. It is the best-selling product across leading cosmetics distribution systems such as Hasaki, Guardian, Matsukiyo, BeautyBox, and Sociolla.
Marketing Strategies of Major Brands
To achieve their current level of success, these brands require flexibility in their strategies and channels to effectively reach their target customers. Let’s explore the strategies that major brands are employing!
Focus on Building Brand Stories
A customer’s journey begins with their discovery or awareness of a product and brand.
Today, major brands run advertising campaigns that people love to engage with through social media. Brands like Cocoon and Anessa build their brand culture by targeting specific customer segments, who then naturally become advocates and spread the brand’s message to a broader audience.
Cocoon leverages cultural beliefs and sustainability trends to enhance its brand value through initiatives and campaigns that benefit society, specifically targeting a niche audience of nature enthusiasts, vegetarians, and animal lovers.
This commitment is reflected in Cocoon's unwavering promise: 100% vegan, cruelty-free, and made from plants grown in Vietnam, reinforcing consumers' trust in Cocoon's integrity and dedication.
These activities create momentum for customers, who believe they are contributing to Cocoon’s mission of building a better Vietnam. This strategy has helped Cocoon earn consumer trust, rather than focusing solely on ROAS and ROI.
Leveraging Celebrity Influence
The impact of KOLs has become a crucial factor in consumers' purchasing decisions. It not only helps cosmetic brands reach a large potential customer base but also builds and strengthens relationships with consumers through interactions and shared experiences on social media platforms.
Anessa, a premium brand, collaborates extensively with beauty influencers to enhance its brand recognition through various activities. Influencers are tasked with telling the Anessa brand story. The narrative of 100 years of UV research is central to the strategy as it drives brand recognition and value.
- Brand Collaboration: Utilizing brand ambassador Ninh Duong Lan Ngoc.
- Enhancing Reach: Using short videos with 80% of the content on the fan page. Focus more on KOLs and KOCs rather than doctors and pharmacists. Examples include Ninh Duong Lan Ngoc, Thao Nhi La, Hannah Olala, Le Ha Truc, Chloe Nguyen, etc.
Promotion Strategy on E-commerce Platforms
After gaining consumer favor through spreading their unique stories, brands also implement daily and monthly promotional programs on e-commerce platforms to stimulate purchasing behavior:
Create Flash Sales and Special Promotions:
- Daily Flash Sales: Organize daily flash sales with attractive discounts to draw in customers.
- E-commerce Campaign Days: Leverage major campaign days like March 3rd, April 4th, and May 5th to launch significant promotional events. Offer special discounts at the start of summer (May - July) with reductions up to 40%.
Daily Livestreams and Mega Lives:
- Collaborate with Brand Experts or Influencers: Partner with brand experts or influencers for livestream sessions that provide consultations, answer questions, and introduce products.
- Host Mega Livestreams: Conduct Mega Livestreams lasting 12 or 24 hours with KOLs featuring great deals.
- Flash Sales During Livestreams: Integrate flash sales into livestream sessions to enhance appeal and drive purchases.
- Giveaways of New or Related Products: Offer new or related products as giveaways to enhance customer experience and increase Average Order Value (AOV).
What Should Companies Do to Succeed in the Cosmetics Industry?
1. Focus on Product Quality
Consumers in Vietnam are increasingly favoring organic and natural skincare products that are safe for the skin and environmentally friendly. This demand is rising due to growing concerns about skin issues such as allergies, sensitivity, and premature aging, leading people to believe that natural products are a better choice compared to traditional cosmetics. This trend is creating new opportunities for companies in the industry. Brands specializing in organic and natural skincare products, such as Cocoon, L'Oréal Paris Botanicals, and The Ordinary, are becoming increasingly popular in the market.
The trend towards personalization in the cosmetics industry continues to evolve, requiring businesses to understand Vietnamese consumer insights, including skin types and preferences. To address this, cosmetic brands need to diversify their product offerings to cater to various skin types and customer needs. For instance, with a successful and effective key product, companies can develop additional scents and formats (such as creams, lotions, sprays, etc.) to suit a wide range of individuals and enhance user satisfaction.
Additionally, allowing customers to create their own customized products is also an important part of this trend.
2. Build a Brand Story and Brand Identity
A strong brand identity is a key factor in driving consumer purchasing decisions across all age groups. This explains why the top 10 best-selling brands are predominantly international brands.
Building a strong brand story and brand identity is crucial in Vietnam's dynamic market, where social media usage is prevalent, reaching 73.3% of the population as of January 2024. Despite this significant potential, small businesses often struggle to compete with larger brands due to a lack of clear strategies for brand development and positioning. Many small businesses focus solely on promotions and sales tactics, resulting in short-term benefits.
Cocoon is a prime example for small businesses to follow. By nurturing a compelling brand story and targeting specific customer segments, Cocoon has created advocates who naturally spread the brand's message, thereby enhancing brand recognition and driving widespread growth.
Building Owned Platforms to Avoid Dependence on E-commerce Marketplaces
Brands operating on e-commerce platforms often face dependency on the policies, algorithms, and promotional programs of these platforms. Their products are placed alongside thousands of similar items from competitors, making it challenging to stand out. Users on these platforms frequently compare prices to make purchasing decisions, leading e-commerce sites to emphasize competitive pricing and encourage sellers to lower prices to attract customers. This can undermine brand value and make it difficult to maintain a premium brand image.
The solution to this issue is for businesses and brands to proactively build, optimize, and focus on their own websites, treating platforms like Shopee, Lazada, or TikTok Shop as channels at the end of the sales funnel, helping convert prospects into customers. This is the best way to build a sustainable business.
Learn more about building owned platforms.
3. Develop a Comprehensive and Holistic Implementation Plan for the Brand
To achieve success in the cosmetics industry, businesses need a comprehensive and holistic implementation plan that covers market research, product development, budget allocation, and effective marketing campaigns that drive revenue.
Market and Customer Research
- Market Analysis: Understand trends, consumer needs, and desires.
- Competitor Analysis: Examine competitors’ strengths and weaknesses to identify competitive advantages.
- Customer Surveys: Gather feedback from customers on existing and potential products.
Product Development
- Focus on Quality: Use natural, organic, and skin-safe ingredients.
- Innovation and Diversification: Continuously research and develop new products to meet diverse customer needs.
- Product Personalization: Offer personalized products and services tailored to specific skin types and customer needs.
Brand Building and Storytelling
- Create a Brand Story: Develop an engaging and consistent brand story that connects emotionally with customers.
- Develop Brand Identity: Create a recognizable and cohesive brand identity, including logos, packaging, and website design.
Marketing and Promotion Strategies
- Digital Marketing: Utilize SEO, Google Ads, Facebook Ads, Instagram, and other social media platforms to reach customers.
- Collaborate with KOLs and Influencers: Leverage the influence of KOLs and influencers to promote products.
- Quality Content: Produce high-quality content, including articles, videos, and images about the products and their benefits.
- Email Marketing Campaigns: Send promotional emails, offers, and information about new products to potential customers.
Diversified Sales Channels
- E-commerce Website: Build a dedicated e-commerce website to control customer data and optimize the shopping experience.
- E-commerce Platforms: Sell products on platforms like Shopee, Lazada, and Tiki to broaden reach.
- Physical Stores: Open physical stores in strategic locations to enhance brand presence.
Customer Care and Loyalty Building
- Quality Customer Service: Ensure customers receive excellent support before, during, and after purchase.
- Loyalty Programs: Create loyalty programs to encourage repeat purchases.
- Listen to Feedback: Collect and respond to customer feedback to improve products and services.
Monitoring and Optimization
- Data Analysis: Use analytical tools to track the effectiveness of marketing and sales campaigns.
- Strategy Adjustment: Adjust strategies based on collected data to optimize effectiveness and achieve the best results.
By implementing a comprehensive and holistic plan like the one above, businesses can differentiate themselves, compete effectively, and achieve sustainable success.
