Jurlique underperforms when natural concept products usher in an era of opportunity.
Recently a reader let a message on Cosmetics Business Online (CBO) that "Jurlique, Aesop's arch rival back in Australia, is about to withdraw from the Chinese market.". According to CBO's investigation, though Julique has not withdrawn from the Chinese market yet, Julique's business in China is indeed in peril.As China rises to be the most important market and the priority for major cosmetic groups, and as natural skincare products usher in a more robust consumption market after the Covid pandemic, why is Jurlique, the Australian natural skincare leader, on the decline?
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With 10-year cooperation with Hengcheng, Jurlique's performance once led the global marketJurlique was founded in 1985 by Dr. Jurgen Klein, a chemist and naturopath, and his wife Ulrike Klein, a botanist, and is named after them. The brand was honored as "the purest Australian organic & natural skin care brand". It has established itself early in the global market, with a presence in the top commercial districts of many international metropolitan shopping districts.As an unique high end imported brand, upon entry to China Jurlique signed with Beijing Hengcheng to be its exclusive representative in the Chinese market. Beijing Hengcheng is a perfume agency with abundant resources within department store channels.In 2010, Jurlique increased its counters to 13. Quickly the brand was endorsed by many department store channels, where quality brand resources were scarce and its performance was therefore on a steady rise. As was said by Zhao Xin, the CEO of Beijing Hengcheng Industrial Development Co., Ltd. in an interview from CBO in 2014, China had overtaken Australia to become Jurlique's top market in the global arena with its annual sales in China over 400 million yuan and the number of counters over 90.Unfortunately, despite Jurlique's robust momentum in Chinese market, its fate to be sold did not change, because its Australian headquarters had continuous losses over the years.At the end of 2011 the POLA ORBIS HOLDINGS announced a $300 million USD of Jurlique, which at the time was jointly controlled by the U.S. private equity firm JH Partners and billionaire James Packer. Pola Orbis was expected to lead Jurlique to achieve sales of $3.2 billion USD by 2020 through its entry into the international market.In response to this major change Zhao Xin said that Hengcheng wished to renew Jurlique's agreement in China through a mutual investment company, which was, however, declined by the brand's new owner POLA Group. Despite some fiascos such as the Tmall flagship store selling counterfeit goods, the representative cooperation was continued into 2019.
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Large-scale store closing after POLA ORBIS turns to direct sales
An insider close to Jurlique spoke to CBO's journalist and stated that POLA ORBIS set up an independent brand team in China, officially taking over Jurlique from Hengcheng in 2019.According to business database Qichacha, the brand is currently owned by Beijing Jurlique Commercial & Trading Co., Ltd. (under the former name "Beijing Cairunyuan Commercial and Trading Co., Ltd." from Jan. 2012 -Mar.2014）with a registered capital of 8 million US dollars, whose legal representative and president Tohru Yamamoto is the head of Jurlique in the Chinese market.Optimizing the sales network was the first priority developed by Yamamoto's team after the brand changed to directly managed operations.It is reported that after taking over Jurlique, the Japanese side decided to remove more than one hundred counters with a flat sales performance out of around 150 existing counters, only retaining the major department counters in each province. Currently, the remaining 44 counters include 7 in Jiangsu province, 6 in Beijing, 4 in Shanghai, 3 in Zhengzhou and 3 in Guangdong, and basically only one counter was retained in all other provinces, except for provinces like Yunnan, Guizhou, Inner Mongolia, Tibet and Fujian where the whole store network was removed.While top brands such as Lancome are accelerating entry to the lower-tier markets, POLA ORBIS completed a large shut down of its department store counters with the goal of increasing yield per counter.However, right after shutting down a large number of counters, the outburst of the pandemic in 2020 left Jurlique with no break. The decline of customer flow seen in most offline stores further reduced Jurlique's yield per counter. It is reported that many of the counters in the store network have trouble gaining 300,000 yuan in monthly sales, while Maoye department store in Shenzhen, among the best in terms of sales performance, achieved only 500,000 yuan per month per store.In fact, before Jurlique closed the large number of its department store counters it was forced to remove some counters due to bad performance. An operational manager in a high end Beijing department store cosmetic section said "In 2015 and 2016 Jurlique counters had a high turnover of BA staff, and the operations team lacked professionalism. Monthly sales dropped to only 100,000 yuan. As a result Jurlique had to remove their counter.".It appeared to this manager that, unlike brands such as Clinique, Biotherm, single brands like Jurlique do not have the benefit of enterprise groups to negotiate advantageous counter space, and are susceptible to being cleared out due to poor sales performance.
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Deficient Marketing, Short Supply, Mediocre Online PerformanceFor Cheng Luo, a senior imported beauty distributor, Jurlique's Achilles heel is deficient marketing. Together with low recognition and little livestreaming cooperation with celebrities, it is prone to be consigned to oblivion.This was accepted by the above-mentioned industry insiders that are familiar with Jurlique. One said that Jurlique missed market opportunities step by step due to its out-of-date marketing strategies and a lack of investment in context marketing. It is worth mentioning that despite the efforts Jurlique has made, the official announcement of choosing Lei Jiayin as a spokesman in 2018 has unfortunately been dismissed by netizens as "unimaginably odd and totally irrelevant".△ In 2018 Jurlique announces Lei Jiayin as the spokesperson in China.For the retailers, there is nothing more troubling than product shortages. It is reported that recently in the department store counter, some of Jurlique's star products are frequently out of stock, and some are out of stock for as long as a month. Official information shows that Jurlique has more than 200 single products in 12 series listed in China, among which the star products are Rose Hand Cream, Rosewater Balancing Mist, Rose Carrier Oil, and so on. In regard to pricing, Jurlique is slightly more expensive than L'OCCITANE, which also is a natural brand. However, the disparity between them keeps growing in terms of online transactions and the layout and output of offline department store channels.To illustrate, official Tmall flagship stores show huge disparity in strength between them: with 6.12 million fans, L'Occitane has various limited edition products and set promotions, while Jurlique performs poorly, having only 685,000 fans.Not long ago, with 233 counters in China, L'Occitane announced that its business in China once again achieved double-digit growth. Their e-commerce continued to be the engine with a 62.1% growth year over year. In China, the brand's number one global market, L'Occitane is receiving further investment and support from its headquarters."It has something to do with the commercial ideology of Japanese companies." A distributor of Japanese brands in Shanghai points out. The distributor goes on to observe that without the layout and radiation of the online channels it is difficult to achieve the offline linkage effect even for high quality mid to high end brands.Previously, Huang Tao, Chairman of Shanghai Lilly & Beauty Cosmetics Co. (who has operated the Jurlique TMall flagship store) told the reporter of CBO that low sales the of Jurlique TMall flagship store was related to its parent company POLA ORBIS's online growth plan for the brand. To illustrate: Jurlique TMall store sales were 10 million RMB in 2017, but the brand's annual planning growth was only 2 million RMB. The low performance target was the main reason."Jurlique's business in the Chinese market is small, and they receive limited support from their head office." The above mentioned industry insider close to Jurlique laments that currently the brand business team is rather anxious.Obviously, similar natural brands such as Kiehl's, Fresh and L'Occitane, which are competing in the market, are no longer the company's biggest threat; Jurlique's biggest enemy might be itself.
