All Eyes on Beijing
- Chinese New Year begins on Feb. 1, while the Winter Olympics commence in Beijing on Feb. 4
- China’s “zero Covid” policy will likely reduce the number of domestic travelers; international visitors are mostly barred from the games
- Worsening US-China relations are complicating Western brands’ marketing efforts and creating opportunities for Chinese competitors
This is a big week for fashion brands with designs on the Chinese market. The Lunar New Year holiday begins on Feb. 1, and the Winter Olympics kick off a few days later. The pandemic has put a damper on both events; some cities are under lockdown, while the general public, let alone international visitors, are barred from attending the Olympics. That hasn’t stopped brands from engaging in their usual marketing bonanza around both the holiday and the games, from Bottega Veneta’s Great Wall takeover celebrating Lunar New Year to last fall’s “Prada on Ice” pop-up in Beijing.
For Western brands, the pandemic adds to a growing list of complications that have made marketing in China increasingly fraught over the last few years. Another unknown is how deteriorating relations between the US and China, including the US ban on cotton from the Xinjiang region, will play out in the market. With a few exceptions, brands have tried to avoid engaging on the topic, but governments on both sides of the Pacific are making a truly neutral stance increasingly difficult to maintain.
The Bottom Line: The lack of an international presence at the Games, as well as growing tensions with the US, would appear to play to the advantage of local brands. Chinese activewear giants such as Anta and Li Ning could see sales rise domestically if the patriotic spirit fostered by the Olympics carries over into spending habits.
-Robb Young contributed to this item
Embracing the Renaissance
- The Estée Lauder Companies Inc. reports quarterly results on Feb. 3 and elf Beauty reports on Feb. 2, the first makeup companies to do so in 2022
- Consumers are buying more color cosmetics than earlier in the pandemic, but Omicron and supply chain issues are complicating the industry’s outlook
- Both skin care and prestige cosmetics sales rose sharply in 2021, and experts are predicting both will continue to see growth this year
In May, Estée Lauder chief executive Fabrizio Freda tempered underwhelming financial results with predictions of an impending “makeup renaissance.” He wasn’t wrong – consumers who had adopted “natural” looks earlier in the pandemic were eager to stock up on color cosmetics as soon as they stepped out of the house again. Yet it’s proven surprisingly difficult for makeup brands and retailers to fully capitalize on this welcome shift. Last fall, Estée Lauder and others reported strong sales, but flagged supply chain issues as a major headwind, indicating they would need to hike prices to compensate for rising transportation and logistics costs. The industry may be turning a corner; Sephora surpassed 2019 sales in the fourth quarter for the first time since the start of the pandemic. Rival Ulta Beauty’s holiday sales were up a modest 7 percent from 2019, according to Earnest Research, while US prestige beauty sales as a whole soared 30 percent last year, according to The NPD Group.
The Bottom Line: Glossier’s recent troubles, including declining sales and layoffs, point to the challenge of maintaining momentum in a market where tastes change fast and new brands launch constantly. Estée Lauder has tried to insulate itself from market shifts with a series of acquisitions, including last year’s purchase of a majority stake in Deciem, maker of The Ordinary, and other “masstige” brands.
- The US Bureau of Labor Statistics releases monthly employment data for January on Feb. 4
- Retailers have struggled to hire enough employees to staff stores and warehouses, leading some to close facilities or delay orders
- Many companies have raised pay, but inflation and worsening job conditions complicated hiring
There’s an ongoing debate over what’s driving the “great resignation,” or if it’s even real. But there’s no question that retailers are struggling to find enough staff to keep their stores open and warehouses humming. We’ll get a new snapshot of just how tight the labor market has become with Friday’s employment data covering hirings and firings in January. The data will also offer a snapshot of wages, including whether anecdotal reports of retailers raising pay represented an industry-wide trend (and whether those raises kept up with inflation). Money isn’t everything – retail jobs got harder during the pandemic, as employees were asked to risk their health while taking on new tasks, even as a tide of angry customers and a crime wave made the core job more unpleasant. The pandemic remains a force to be reckoned with, though as Omicron recedes the temperature around the question of vaccine requirements for employees and customers is likely to go down as well.
The Bottom Line: It’s still too soon to say how long the labor shortage will last. If it fails to resolve itself soon, retailers will need to start making some hard choices.
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