Niche Perfume Competitive Report：Understand Competition & Predict Sales In China
Updated: Oct 22, 2021
2020 was a tough year and it has been incredibly difficult for many people.
But we survived. We endured the challenges, and some of us even discovered newfound opportunities.
A friend of mine quitted her job last year and she decided to do something new. She is now developing her own brand by leveraging her resources with OEM factories.
Another friend, who lives in Europe, is facing challenges in his own business due to the prolonged pandemic. He then started selling products to China through cross-border e-commerce.
Any new business is risky and there is no guarantee of success, especially when you jump into it completely clueless.
Before you decide to make your own product or sell it to a new market, what questions should you ask yourself before deciding whether to go?
How is the market competition?
How many can I sell?
How much initial capital is needed?
To answer these questions, you may need to hire a professional consulting firm to conduct a comprehensive study. At the beginning of a new business, not all entrepreneurs can afford it.
Are there other options that can help you do your assessment in a more cost effective way?
E-commerce is open and real-time. A more direct approach is to analyze the benchmark competing products in Tmall stores. However, it is not possible to access the backend system of your competitors so we need to use some data mining tools to get the data.
Let's use an example of a niche fragrance brand to illustrate how desk research can help make market entry decisions.
The analysis in this article only comes from the open source data of Tmall flagship stores and official websites, and does not involve any internal information.
Understanding Market Competition
How is the market competition in my category?
How is the sales performance of the key players?
First, we need to identify a list of brands to use as a benchmark.
We determine the list of brands, either by filtering the SKUs with the highest sales in a particular target market, or by selecting products that are similar to your brand positioning, features, and pricing structure.
For niche fragrance, we pick 10 brands to study and find that only four have opened Tmall flagship stores.
Tmall official overseas flagship stores: Penhaligon’s and Acca Kappa
Tmall official flagship stores: JoMalone and Diptyque
JoMalone has the most SKUs and the highest sales, with 44 SKUs generating 11 million RMB sales in the past 30 days.
Penhaligon's ranked the second with 35 SKUs and 4.35 million sales. Acca Kappa and Diptyque are far behind in both the SKU quantity and sales.
Next, let's take a look at how each individual brand performs in Tmall. For simplicity, we use Penhaligon’s as example to illustrate.
The Penhaligon's Tmall overseas flagship store has 45 SKUs, of which 35 are fragrances and the rest are personal care products. We need to sort out fragrance specific information for data analysis.
Penhaligon’s has three fragrance collections selling in Tmall:
Portraits: 16 SKUs, 75ml, 2000 RMB or above
Trade Routes: 15 SKUs, 30ml and 100ml, 100ml sold at 1000-2000 RMB and 30 ml at about 600 RMB
Gift Sets: 4 SKUs, 2ml, 5ml and 10ml, 200-700 RMB
The Penhaligon Tmall flagship store has sold 6,646 units in the past 30 days with sales of 4.35 million RMB. The fragrance product line has 35 SKUs, which are mainly divided into single products (30ml, 75ml, 100ml) and sample gift sets (2ml, 5ml, 10ml).
Its main sales are from 75ml and 100ml products. The 75ml products contribute the highest sales revenue, with over 800 units in 30 days, accounting for 41% of the sales. 30ml sales is the worst, with less than 10 units.
Gift sets are an important source of sales for fragrances. In this case, gift sets account for 35% of total sales. The most popular is the smallest size 2ml sample, a gift box of 10 pieces priced at 236 RMB. More than 3,500 pieces are sold in 30 days, accounting for 20% of sales. The largest sample size, a 10ml x 5 units gift box, sells fewer than 60 units.
The best-seller is a 75ml portrait fragrance - COVETED DUCHESS ROSE priced at 2178 RMB. Although it is the most expensive model, its sales is also the highest, 650k RMB for one single SKU in past 30 days.
Understanding Product Strategies & Price Segmentation
How do the competitors set their prices for different lineups?
How is the competition in the different price segments?
The pricing strategy of Penhaligon's Tmall flagship store is basically close to the retail prices in the UK. Only the price of 2ml gift sets are three times the UK price.
Penhaligon's pricing is divided into three levels: below 1,000 RMB, above 1,000 RMB and above 2,000 RMB.
The hero product above 2000 RMB is the 75ml portrait collection, an iconic product of the Penhaligon’s brand, which is positioned as a high-end product with price more expensive than 100ml. It accounts for only 12% of total sales quantity, but contributes more than 41% of total revenue.
The Trade Routes series are positioned at a mid- priced range, including 100ml and 30ml. There are 14 SKUs for 100ml selling at three price levels: 1,890 RMB, 1,560 RMB and 1,135 RMB. The 100ml products are the second best-selling products, generating 25% of total sales revenue.
The brand also introduced a 30ml SKU to China, which is the lowest-selling model, with only 9 units sold in the last 30 days.
We can see that Penhaligon's consumers are less price sensitive and prefer to choose the brand’s signature product, the portrait collection, regardless of its higher price.
Gift sets are sold in an opposite way. Consumers are more sensitive to price. The lower the price is, the more it sells.
The function of gift sets is to give consumers a product to try or buy as a gift. Consumers prefer gift sets that contain more products with beautiful package design. They can try more different scents at the same time. The price of gift sets is very low in order to attract traffic to the flagship store.
Penhaligon's 2ml gift sets sold at 236 RMB, the lowest price in the store, contribute the highest sales quantity of 3,600 pieces. The other three gift sets, priced at over 400 RMB, sell far less.
In the gift market, some fragrance brands even sell gift sets below 99 RMB, with monthly sales over 10,000 pieces.
The average price of Penhaligon’s is 21.4 RMB. The lowest average price is 2ml gift sets, only 11.8 RMB per ml. The highest average price is the portrait collection, 29 RMB per ml.
The overall average price per ml of the four competitive brands is 15.8 RMB per ml. The most competitive segment is 100ml.
Penhaligon’s is the most expensive brand. The average prices of its 30ml and 100ml are slightly higher than JoMalone’s, 1.9 RMB more expensive for 30ml and 1.2 RMB for 100ml.
In general, people believe that the larger the volume, the cheaper is the price. In fragrance market, it seems that these four brands don't follow this logic to set their prices. The average price of Penhaligon’s 75ml is more expensive than 30ml and 100ml, while the average price of JoMalone’s 50ml is higher than 30ml.
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The above is just a simple example of how to analyze data obtained from e-commerce platforms. In most cases, we need to do more complex and in-depth analysis from open source data.
Simply by using desk survey, you can get a general idea of the competition in China and how your competitors are doing at different price segments. Then, you can assess whether your products are competitive and how many sales you expect to achieve.
Once you decide to enter this market, you need to calculate cash flow and P&L. You can find a business partner in China and prepare a more detailed financial and launch plan.
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