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Exclusive Interview | Four Decades of Eternal: Perfume Mogul in Ever Changing Market

CBO | writer:Zhang Huiyuan | time:CBO  2020-12-25  Visits:1198

Guide

The Eternal Group (Eternal), founded in 1980 in Hong Kong, entered Chinese mainland in 1989. Eternal has flourished over the past 40 years, and set China’s trends of imported products for 31 years. It’s fair to say that Eternal is China’s first private brand management company specializing in sales of officially imported products in Chinese mainland, and has left impressive marks in China’s history of imported cosmetic industry.

Chloe Lam joined Eternal Optical & Perfumery (Far East) Ltd. in 1999 when she graduated from university. She thought the company’s bold overall strategy in the Chinese market was incredible.
That year, Eternal planned to open a Burberry perfume counter at a Grandbuy department store in Guangzhou. 

Back then, perfumes were mostly displayed at skincare counters instead of separate perfume counters. More importantly, the average monthly income of people in the bustling Shanghai was RMB 1,400 (source: Shanghai Municipal Human Resources and Social Security Bureau). 

Chloe remembered clearly that the point of contention within the company was if they were able to sell perfume with a unit price of over RMB 500 to those that earned just above RMB 1,000 per month in Chinese mainland.   

The brand was concerned about it, too. Steven Lau, founder of Eternal, persisted with the idea and had a long round of negotiation with the brand. Eternal eventually received the the approval to set up the counter based on a sound and all-rounded analysis of cosmetic market potential in Chinese mainland. As there was no perfume counter for reference, Eternal adopted the brand’s iconic Burberry tartan design for the first batch of Burberry counters. 

△ Burberry perfume counter, Guangzhou, 2020

What happened is as expected: consumers in Chinese mainland yearned for imported quality products, and Burberry perfume took off. The trailblazer led Eternal’s prosperity in the Chinese mainland market. 

Eternal’s ratio of Chinese mainland business was up from less than 10% in 1999 to over 75% in 2020, and it’s still increasing. 

Chloe Lam was growing together with Eternal. 21 years later, she’s a VP at Eternal.

△ Chloe Lam, VP at Eternal

01

Shift of focus from products to distribution channels

Eternal devoted two decades to the Chinese mainland market, and focused on products and distribution channels

Steven Lau founded the Eternal Optical & Perfumery (Far East) Ltd. in Hong Kong in 1980.  

Back then, Eternal was conveniently located in Hong Kong and had better access to top global brands. However, Hong Kong had a saturated market with demographic and geographical limits after a century of development. In contrast, the Chinese mainland was vigorously pushing forward economic reform and opening up. Mainland China’s market started to become commercialized and the economic vitality awakened. Consumption demands were activated as individual income was rising steadily. China then was ready to welcome international brands with its broad and potential market. 

At that time China’s light industry, including the cosmetics industry, was just beginning. There was a huge gap in the domestic market for daily person use products.. Eternal started thinking about how it could put high-quality imported cosmetic products on Chinese mainland consumers’ dressing tables.

Eternal officially entered the Chinese mainland market by the end of 1980s. 

In Chloe Lam’s view, the period of 1990 to 2000 Eternal’s strategy was product-dominant. 

Back then, the domestic cosmetic industry was at the rudimentary stage. Just like Eternal, foreign ventures with high production capacity and aesthetic standards entered the Chinese market when it opened up. As mentioned, consumers with monthly income of RMB 1,000 rushed to buy high-end perfume at RMB 500. The cosmetic market was a seller’s market. Eternal, which just entered the market, realized that there would be sales as long as there were good products. 

Chloe always remembered Steven’s saying, “if Eternal couldn’t fully assure product quality, I’d rather give up the possible revenue or the business”. Therefore, Eternal has adhered to this fundamental rule for four decades since its founding: all the foreign brands Eternal represents must be high quality to ensure customer satisfaction.

In the product-dominant phase, Eternal expanded the brands it represented and established decades of cooperation with many partners. Eternal has cooperated with IP Paris, which includes perfume brands of Van Cleef & Arpels, Coach, and Lanvin, for about 25 years, and Hermès, Prada, and Versace for approx. 20 years.

△ Hermès Flagship Counter at Raffles City, Shanghai

In Chloe’s opinion, the period of 2000 to 2010 Eternal’s strategy was distribution channel-dominant. China’s cosmetic industry took off during this phase. Domestic brands were on the rise and the CS channel was booming. The top three distribution channels, namely department stores, KA( Key Account) and CS, were seizing the segments of high-end cosmetics, daily supplies and mass cosmetics respectively.

Chloe recalled how Eternal put so many efforts in the development of distribution channels. As Eternal focused on high-end imported products, the department store channel was the foremost channel. Hence, Eternal built their distribution network through setting up offices in eleven cities nationwide over the course of this decade.

When Eternal became the exclusive distributor of Max Factor in the Chinese territory in 2008, it capitalized on the opportunity to expand its distribution channels, especially the CS channel in second- and third-tiered cities, and established a KA team. 

02

The golden decade was full of crises and opportunities

Determined to start transformation and adapt to demands of Chinese consumers

Taobao launched its first double 11 shopping festival online in 2009. From then on, the online distribution channel became coveted among cosmetic brands. The digitization and new retailing it led to has shaped China’s cosmetic industry in an unprecedented way.

In 2013, China’s cosmetic market exceed Japan and became the world’s second largest market. In addition to new channels and a new market environment, new generations of consumers, constant competition from new brands, and ever changing channels for influence have brought about more than ever challenges and opportunities to China’s cosmetic industry. 

Chloe believes the period of 2010 to 2020 was the golden decade when China’s cosmetic industry took off. 

Apart from the changing external environment, Eternal was adjusting its brands and distribution channels. In particular, between 2015 and 2017, Eternal lost distribution of Max Factor and Bourjois, and perfume brands of Burberry, Gucci and Hugo Boss because of changes in brands’ global operation. 

Burberry was once built up by Eternal into the number one perfume brand in China, and Gucci ranked third after Chanel and Dior.

Chloe confessed that losses of distribution of major cosmetic and perfume brands in 2017 affected Eternals performance. Quickly Steven Lau set the goal of recovering its performance within four years.

In short, Eternal plans to set up a team with an international perspective and good command of the Chinese market, restructure its organizational structure, and transform the company from distributor to all-channel brand operator. It also will shift from traditional offline retailing to new retailing, accelerate its digital transformation, and establish its own CRM membership management system. It will expand brands from perfume to various other products and develop its own private labels. 

Most importantly, it will pay special attention to trends among consumers, i.e. learning about domestic cosmetic market demands through consumers’ insights. According to Chloe, Chinese consumers have been forming their own tastes in the past decade. As the bridge that connects foreign brands and Chinese consumers, Eternal must understand consumers in real time and convey their interests to the brands so as to offer consumers products close to their needs, or push brands to make changes in their R&D and marketing. 

Chloe discussed the example of BVLGARI. It was general consensus with high end brand partners that offline services were necessary for high-end perfumes because consumers would only buy after sampling them. However, Eternal has found out that young consumers would pick products via posts and videos shared on social media, and their consumption habit has changed to “initially learn about a brand through online engagement, and learn more about them offline.”. 

For that reason Eternal took 18 months to persuade BVLGARI’s Chinese team, Asian-pacific team, team in Rome and CEO to open BVLGARI’s online store. In May 2020, BVLGARI became the only high-end perfume brand to open a Tmall shop.

△ BVLGARI’s Tmall shop

As Chloe said, “since the opening of BVLGARI’s Tmall shop, it’s performance has increase twice that of the industry average. Meanwhile, its members online are younger than those offline by 5 to 6 years.  “This also met our objective to rejuvenate the brand and to reach more young consumers.”

03

Fully consolidate our infrastructure for the next decade

And become a guide for international brands entering Chinese market

Eternal had the biggest restructuring of its organization in 2019. The company prioritized subsidiaries and distribution channels, and established co-development of the three major distribution channels of department stores, KA/CS, and e-commerce. 

Most crucially, Eternal set up an e-commerce department to manage operation on e-commerce platforms, such as Tmall and JD.com. It established domestic and cross-border order fulfillment centers in many cities in Chinese mainland and Hong Kong, and founded the customer services and IBA center in Nanjing, all of which constitute its full-fledged e-commerce operation. 

At the same time, Eternal expanded its omni-channel channel marketing department, especially the digital marketing function, which includes creativity center and E-hub so as to empower its brand incubation. 

In addition, Eternal consolidated other aspects of infrastructure for the future. It set up a quarantine inspection team that may handle customs declaration on its own based on its in-depth study of product R&D and related laws and regulations, and ensures that new products can pass quarantine inspection in the shortest time frame. Eternal also built a team of quality assurance which continues to monitor all the products and makes sure they are compliant with Chinese laws and regulations, thus safeguarding consumers’ interests.

As for IT, Eternal made huge investment to set up its own CRM system and operation platform so as to speed up its digital connection with all stakeholders. 

The new retailing department is proactively engaged in online and offline interaction to offer more diverse experience and services for their consumers. The company has built four logistics centers in Shanghai, Guangzhou, Beijing and Chengdu to support supply and dispatch in all distribution channels to make sure that consumers may get their products in a timely fashion. Last but not least, Eternal sorted through the cross-border logistic supply chain, enabling more high-quality foreign brands to reach Chinese consumers sooner.  

As Chloe stated, “All these are our strategies for future investment. It’s rather difficult for any foreign brand to enter the Chinese market, and a guide is necessary. That’s exactly what we do. The above-mentioned transformations may generate more bilateral added values for our partners and consumers.” 

04

Omni-channel operation and omni-domain marketing

Quick actions during the pandemic contributed to surge in annual performance

It is worth noticing that Eternal has built their own channels and also cooperated with external partners in all of the channels. As Chloe indicated, it seemed most economical to outsource all the work, but China is such a huge market. Eternal would prefer  keep all the consumer insights to themselves. “All our partners know we’d insist on win-win cooperation. Under such circumstance, we undertook the most challenging work by ourselves.”

At present Eternal runs the omni-channel operation. There are more than 600 counters in the department store channel, and 2,000 stores in KA and CS channels. All the department store and shopping mall counters in first-tier cities, Tmall shops, and KAs such as Sephora and AFIONA are operated by Eternal itself to ensure that they may learn about consumers’ needs and changes first hand, and empower their partners. 

The “golden decade” Chloe referred to seems to have become the decade of transformation for Eternal. 

Such transformation let to early fullfillment of the goal of “recovering its performance in four years” set in 2017 by 2019. More proudly, despite the pandemic’s impacts on the cosmetic industry, Eternal still achieved great performance because of its all-rounded e-commerce preparation and full utilization of the CRM system. It’s fair to say that Eternal’s excellent market performance and quick growth proved its strong ability to navigate through a crisis. 

All of these could not be possible without its restructuring, institutional innovation and teamwork within the company. As Chloe recalled, on January 29, the senior management noticed front-line staff income plunged because of dropping sales during the lockdown. To ensure their livelihood, and boost the company’s morale, Eternal launched a mini-program in 9 days which enabled the beauty advisers to serve VIPs online to ensure they maintained their basic income. 

Chloe felt proud to tell us that while perfume retail turnover in the first half (by June) dropped 19% in China on the whole, Eternal’s retail business did not drop. Thanks to e-commerce and assistance of the CRM system, Eternal’s performance is the same as last year in the Q1 of 2020, and the sales volume between January 1 and 20 grew by 40% compared to the same month last year. It resumed double-digit growth in Q2; and all the online and offline channels grew in Q3. 

It is estimated to grow by 30% or so by the end of 2020.

05

Eternal is a perfume mogul and all categories giant

Eternal introduced 8 new brands into China in 2020

At present, Eternal represents more than 40 international brands in perfume, skincare, cosmetics, eyewear and other products.

According to Chloe, BVLGARI has been one of it best performers in the perfume category in recent years. In less than three years, Eternal managed to elevate BVLGARI from below 10th place to one of the top 5 best sellers in the top-tier high-end perfume category by upgrading perfume counters, opening of a Tmall shop and adjusting distribution channels of offline flagship shops. 

As Chloe offered, “BVLGARI’s growth rate has been twice that of the market in the past three years, especially in 2020.” 

Apart from working with mature brands, Eternal excels at discovering and developing niche brands. For instance, “4711”, a popular cologne among off-stream young people, was introduced into China in August and many of its products were sold out.

 △4711, German cologne brand 

Eternal wishes to have its own tactics for its perfume brands, and own top brands in niche, high-end and artistic perfume brands. Perfume brands that Eternal represents take up more than 20% market share currently. It possess absolute advantage in the domestic market.

Eternal wishes to be a brand management company that brings the biggest value to its partners and Chinese consumers. It has been specialized in perfume brands which have generated high added value for all its partners. Eternal represents more than just perfume brands. 

In 2020, when the cosmetic market was quite sluggish in the post-COVID era, Eternal introduced 8 brands covering skincare, cosmetics and perfume categories.

Eternal is very professional at representing cosmetics. It started operation of cosmetic brands in 2005 with YSL; it became the exclusive distributor of Max Factor in Chinese territory in 2008, and managed to raise its turnover to  1.2 billion RMB over 9 years. 

Eternal has expanded its cosmetic category in recent years. In 2019, it introduced the beautiful cosmetic brand—Les Merveilleuses LADURÉE (known for its pressed check color series), and Amplitude, a luxurious Japanese cosmetic brand, and opened its overseas Tmall shop towards the end of 2019 .


△Amplitude, luxurious cosmetic brand


In addition to representing other cosmetic brands, Eternal launched its private cosmetic label Smiley this year. The logo is a yellow smiley face, which is an image that has been popular for more than 50 years. It symbolizes distinctive personality and carefreeness, aimed to attract young people. The company accelerated Smiley’s development because of the global pandemic. The Tmall shop was opened in June and offline counters started expansion.

 △ Smiley, Eternal’s private label

Eternal set its eyes on skincare brands featuring compact and stylish products with specific functions. It introduced Collistar, a popular Italian national skin care brand in September. Collistar is well known for its effective slimming products. Eternal also introduced the Bellessence  ampoule brand founded by DOCTOR BABOR based in Germany. Chloe revealed that “both brands would customize their products for Chinese consumers, which is the key premise of our partnerships.”

In terms of channels, Chloe emphasized that while Eternal will focus on selective distribution channels for some brands, it will run omni-channel development for leading brands. Strategies for development will be adjusted in accordance with consumers’ needs.

Chloe seemed certain about Eternal’s future, “In terms of definite goals, Eternal is determined to further grow its perfume divisions, however from the company’s strategic standpoint, it aims to become an omni-channel brand management company in the cosmetic industry. It will strengthen skincare and cosmetics representation in addition to perfume brands, and in the following three years, it plans to improve its market share of perfume brands from the current 20% to between 25-30%.” 

Journalist’s notes

Chloe Lam has been working in Eternal for 21 years. She looks ageless, nice and witty with big smile. She speaks Mandarin fluently, and she sounds clearly logical and relatable. That is my first impression of her. 

The exclusive interview was postponed for 10 months because of the pandemic. The pandemic prevention and control measures required us to adjust our schedule multiple times. Nevertheless, we met via video conference. I did not know it was the 40th anniversary of the founding of Eternal when I requested the interview.

Chloe explained how Eternal has persisted with its ground rules and transformed itself: ‘observe market ethics and business bottom lines; never trade in long-term interests for short term profits, and foresight and sensitivity about the market’… It is through the values and evolution that I can tell how Eternal has kept respect for products and consumers throughout its history, and that is what gets Eternal through the four-decade business cycle. 

Eternal has clear-cut plans for future. In addition to consolidation of brand management and omni-channel operation, Eternal is accelerating its digitalization. Take E-hub as an example. It is an in-house team made of more than 20 experts from different fields, and they are full committed to studying trends in the cosmetic industry, product R&D, crowd management, brand building, development of hits and other core strategic areas.  

Outwardly, Eternal wishes to become an industry watchtower to provide cutting edge observations to grasp market opportunities quickly; Inwardly, Eternal would like to serve as war room that uses its experience to polish their methodologies for success, and build their tactical systems that are easy to replicate and benefit future development.

Eternal set sail from perfume, and now they brave the winds and the waves in the ocean of cosmetics.

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