Recently, several SK-II users have reported that the skincare brand SK-II has been removing its counters in Shanghai. According to Beijing Business Daily, based on incomplete statistics, over the past year, SK-II has closed at least several counters in Shanghai, including those in department stores such as Paris Spring Pu Jian, Wujiaochang, Pacific Department Store, and Isetan. According to insiders, SK-II is planning to remove counters nationwide.
Public data shows that Procter & Gamble was founded in 1837 and has a history of nearly 190 years. It owns a series of well-known brands such as OLAY, SK-II, Crest, Head & Shoulders, and Safeguard.
In the second quarter of Procter & Gamble’s fiscal year 2024 (October to December 2023), the company achieved revenue of $21.441 billion (approximately ¥153.8 billion), a year-on-year increase of 3%; net profit was $3.493 billion (approximately ¥25 billion), a year-on-year decrease of 11.8%. This is the first double-digit decline in net profit for the company in nearly five years. Among them, the beauty sector where SK-II is located had the slowest growth rate among Procter & Gamble’s five major business sectors, with sales of $3.849 billion (approximately ¥27.727 billion), an increase of only 1%. Specifically, sales of SK-II in the Greater China region dropped by 34%.
Procter & Gamble stated in the financial report that the decline in sales of skincare and personal care products, including the SK-II brand, led to organic sales declining to the mid-single digits, but some of the decline was offset by price increases. Since the fiscal year 2021, Procter & Gamble has mentioned the decline in SK-II’s performance in its financial reports. Meanwhile, since 2018, SK-II has undergone at least four price increases. In February 2023, SK-II announced a price increase of 12%, the highest in nearly five years.
However, the strategy of maintaining performance through price increases does not seem to be accepted by consumers. According to 21st Century Business Herald, industry observer Xie Xiaoying believes that traditional foreign high-end skincare brands are facing significant challenges, with slow innovation and insufficient appeal to younger demographics. In addition, the aura of foreign brands is gradually fading, and the premium pricing ability of high-end brands is not as strong as before. “Part of it is strategically raising prices to achieve the growth targets set by headquarters. However, it is often difficult for the execution level to successfully pass the cost on to channels and consumers.”
According to Xinhua News Agency, the “2023 China Cosmetics Yearbook” shows that in 2023, sales of domestic beauty and cosmetics increased by 21.2% year-on-year, reaching a market share of 50.4%, exceeding foreign cosmetics brands for the first time.