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Revlon is a brand name that resonates strongly in the Chinese language， being picked up by renowned Hong Kong advertiser and lyricist， Wong James from the famous poet Li Bai’s poem. But this U.S. cosmetic brand failed to carry the poetry in China. On the last day of 2013， Revlon， which had been steadily growing in China for 37 years， announced its plan to leave the Chinese market.
Revlon has claimed that its drop in sales and increase in costs were the main factors behind this very sudden decision. But， Zhang Heng， board chairman of Guangzhou Thindo Consultancy， disagrees， claiming that Revlon’s failure was due to its commercial strategies. “The neither high-end nor low-end positioning” of its products and price meant it lacked a specific target market， resulting in its rejection by both highend shopping malls and ordinary supermarkets.
Many people are outraged at Revlon’s seemingly rash decision. In particular 1，100 employees Revlon has planned to fire in China， 940 of whom are beauty advisors employed through third-party companies. Compared with its spokesman’s statement about “leaving Chinese market being the best choice”， Mr. Zhang believes that China possesses a grand cosmetics market which could grow at 10%-12% annually. Thus， it is unwise to give up the market just yet.
The 1100 Layoffs
Naturally， when the global economy slows down， economic growth follows， meaning， companies are forced to cut jobs to save on costs. However， Revlon’s plan to lay off 1，100 workers is actually part of a restructuring plan aimed at reducing annual spending by US$11 million. In addition， Unilever， another major personal care product producer， has also announced their plan of cutting 2000 positions in the Chinese market.
But before the plan of reducing expenditure takes effect， Revlon is expected to pay additional US$22 million for the initial restructuring， from which US$10 million is to be used as compensation for those laid-off， while the rest is to be used for sales discount and reducing inventory. The company expected the restructuring plan to take effect as of 2014， expecting to save up to US$8 million.
So far， the restructuring has been a success， with many directors of Revlon department stores receiving the notice from the headquarters about clearing the shelves. The job was expected to be finished in February 2014. However the e-commerce platform is yet to be influenced， as the two online distributors of Revlon at Tmall， an online Chinese market board claims that as of yet， “no notice had been received”. The Impotent Business
So， was it a good idea to leave the Chinese market？ At least Revlon believes so. “We generally weighed the opportunities of expanding business in China and the cost of these activities. The conclusion we gained is that the wisest choice was to leave the Chinese market，” said Revlon spokesman on January 1.
Chang Yizhi， a researcher from China Investment Consultancy （CIC）， has supported this move stating that Revlon’s business in China only accounted for a small part of its global market.
What’s really behind the restructuring of Revlon is the slowdown of its business development in the world. The financial data of the company showed that Revlon’s total revenue amounted to US$1.021 billion in the first three quarters of 2013， down 1.3% from a year before. Apart from the U.S. mar-ket which had a slight 0.2% year-onyear growth， Revlon suffered negative growth in Asia， Europe， Middle East， Africa， Latin America and Canada.
The longer business history did not bring back the glory as the business development in the recent three years was quite uncompetitive. In 2010， Revlon saw a 2% growth in its total revenue which hit US$1.321 billion. The net profits amounted to US$327 million， up 571% dramatically. But in 2011， Revlon’s net profits dropped 84% to US$53 million even thought its total revenue had a 5% increase. The same thing happened in 2012 too. When its revenue went up 3.3% compared with a year before， the net profits dropped 4.3% to US$510 million.
Another notable point is that the net sales in Asia increased by 2.4% to US$239 million in 2010. Apart from the exchange rate factor， the sales increased by US$4.4 million. The Japanese and other regional markets contributed to 4.1 percent growth point while the Chinese market had a 2.1% decrease in the sales amount. This was quite different from the year of 2011. That means the recession in China started in 2012 and got worse in 2013.
Neither High- Nor Low-end Positioning
In spite of its 37-year existence in China， coverage of 50 Chinese cities，and a developed and deep distribution network， its brand awareness and business performance were not up to scratch.
According to an expert of cosmetics marketing， Revlon was quite conservative in the product and lacked innovative power， leading to old-fashioned products. In addition， it failed to appropriately market and advertise itself in competition with other leading cosmetic brands， such as Maybelline. This caused Revlon’s existential crisis in the Chinese market， leading to it being considered neither a high-end， nor low-end brand. “It has not become a brand for exclusive counters. Nor is it a brand for the ordinary consumers who can buy them in supermarkets. It failed to establish a profile as a professional skincare brand or cosmetics brand，” said Mr. Zhang.
Mr. Zhang has stated that Revlon could have a better place in shopping malls due to the cheaper prices offered compared to those of other more‘high-end’ products. However， these expensive retail outlets are refusing to supply Revlon products as they believe they will not generate the same income provided to them by other， more costly， more renowned products. But the price is not welcome in supermarkets either as Revlon products are typically more expensive than other products available.
This is the key influencing factor in Revlon’s drop out of the Chinese market： neither the high-end shopping malls nor the common supermarkets are will- ing to stock them.
Au Unwise Choice to Leave China
In spite of all these problems， Revlon is considered foolish to give up the Chinese market so easily. In Mr. Zhang’s opinion， the products of Revlon are of a very high quality. What’s to blame for its harsh situation is the companies flawed positioning and distribution strategies.
“It has met recession globally. The Chinese market just had a faster decrease. This is not a problem of the Chinese market， but its own defects.”Mr. Zhang said.
“You should know that the Chinese market is a big one， with the annual growth rate of 10%-12% every year，”Mr. Zhang added. “It is unwise to leave the Chinese market so easily.”
The fractures in distribution channels are not exclusive to Revlon in China. Many other cosmetics brands had to fight against them as well. Some of them have already won the fight.
The cosmetic brand， Max Factor had a similar problem to Revlon， according to Mr. Zhang. Previously， its distribution and marketing were run by its parent company Procter & Gamble（P&G）， which failed to bring it to the level of “first-class cosmetics brand”in China. These problems rested with P&G’s slow reaction to market changes， leading to a slow strategy adjustment.
Max Factor is now run by a Chinese local dealer appointed by Singaporebased UOB which bought it from P&G. This local dealer is familiar with the Chinese cosmetics market， and consequently makes changes timely and appropriately. Its efforts have saved Max Factor from a state of collapse. In Mr. Zhang’s opinion， Revlon could choose the same pattern when/if it returns to the Chinese market in the future.
Revlon has claimed that its drop in sales and increase in costs were the main factors behind this very sudden decision. But， Zhang Heng， board chairman of Guangzhou Thindo Consultancy， disagrees， claiming that Revlon’s failure was due to its commercial strategies. “The neither high-end nor low-end positioning” of its products and price meant it lacked a specific target market， resulting in its rejection by both highend shopping malls and ordinary supermarkets.
Many people are outraged at Revlon’s seemingly rash decision. In particular 1，100 employees Revlon has planned to fire in China， 940 of whom are beauty advisors employed through third-party companies. Compared with its spokesman’s statement about “leaving Chinese market being the best choice”， Mr. Zhang believes that China possesses a grand cosmetics market which could grow at 10%-12% annually. Thus， it is unwise to give up the market just yet.
The 1100 Layoffs
Naturally， when the global economy slows down， economic growth follows， meaning， companies are forced to cut jobs to save on costs. However， Revlon’s plan to lay off 1，100 workers is actually part of a restructuring plan aimed at reducing annual spending by US$11 million. In addition， Unilever， another major personal care product producer， has also announced their plan of cutting 2000 positions in the Chinese market.
But before the plan of reducing expenditure takes effect， Revlon is expected to pay additional US$22 million for the initial restructuring， from which US$10 million is to be used as compensation for those laid-off， while the rest is to be used for sales discount and reducing inventory. The company expected the restructuring plan to take effect as of 2014， expecting to save up to US$8 million.
So far， the restructuring has been a success， with many directors of Revlon department stores receiving the notice from the headquarters about clearing the shelves. The job was expected to be finished in February 2014. However the e-commerce platform is yet to be influenced， as the two online distributors of Revlon at Tmall， an online Chinese market board claims that as of yet， “no notice had been received”. The Impotent Business
So， was it a good idea to leave the Chinese market？ At least Revlon believes so. “We generally weighed the opportunities of expanding business in China and the cost of these activities. The conclusion we gained is that the wisest choice was to leave the Chinese market，” said Revlon spokesman on January 1.
Chang Yizhi， a researcher from China Investment Consultancy （CIC）， has supported this move stating that Revlon’s business in China only accounted for a small part of its global market.
What’s really behind the restructuring of Revlon is the slowdown of its business development in the world. The financial data of the company showed that Revlon’s total revenue amounted to US$1.021 billion in the first three quarters of 2013， down 1.3% from a year before. Apart from the U.S. mar-ket which had a slight 0.2% year-onyear growth， Revlon suffered negative growth in Asia， Europe， Middle East， Africa， Latin America and Canada.
The longer business history did not bring back the glory as the business development in the recent three years was quite uncompetitive. In 2010， Revlon saw a 2% growth in its total revenue which hit US$1.321 billion. The net profits amounted to US$327 million， up 571% dramatically. But in 2011， Revlon’s net profits dropped 84% to US$53 million even thought its total revenue had a 5% increase. The same thing happened in 2012 too. When its revenue went up 3.3% compared with a year before， the net profits dropped 4.3% to US$510 million.
Another notable point is that the net sales in Asia increased by 2.4% to US$239 million in 2010. Apart from the exchange rate factor， the sales increased by US$4.4 million. The Japanese and other regional markets contributed to 4.1 percent growth point while the Chinese market had a 2.1% decrease in the sales amount. This was quite different from the year of 2011. That means the recession in China started in 2012 and got worse in 2013.
Neither High- Nor Low-end Positioning
In spite of its 37-year existence in China， coverage of 50 Chinese cities，and a developed and deep distribution network， its brand awareness and business performance were not up to scratch.
According to an expert of cosmetics marketing， Revlon was quite conservative in the product and lacked innovative power， leading to old-fashioned products. In addition， it failed to appropriately market and advertise itself in competition with other leading cosmetic brands， such as Maybelline. This caused Revlon’s existential crisis in the Chinese market， leading to it being considered neither a high-end， nor low-end brand. “It has not become a brand for exclusive counters. Nor is it a brand for the ordinary consumers who can buy them in supermarkets. It failed to establish a profile as a professional skincare brand or cosmetics brand，” said Mr. Zhang.
Mr. Zhang has stated that Revlon could have a better place in shopping malls due to the cheaper prices offered compared to those of other more‘high-end’ products. However， these expensive retail outlets are refusing to supply Revlon products as they believe they will not generate the same income provided to them by other， more costly， more renowned products. But the price is not welcome in supermarkets either as Revlon products are typically more expensive than other products available.
This is the key influencing factor in Revlon’s drop out of the Chinese market： neither the high-end shopping malls nor the common supermarkets are will- ing to stock them.
Au Unwise Choice to Leave China
In spite of all these problems， Revlon is considered foolish to give up the Chinese market so easily. In Mr. Zhang’s opinion， the products of Revlon are of a very high quality. What’s to blame for its harsh situation is the companies flawed positioning and distribution strategies.
“It has met recession globally. The Chinese market just had a faster decrease. This is not a problem of the Chinese market， but its own defects.”Mr. Zhang said.
“You should know that the Chinese market is a big one， with the annual growth rate of 10%-12% every year，”Mr. Zhang added. “It is unwise to leave the Chinese market so easily.”
The fractures in distribution channels are not exclusive to Revlon in China. Many other cosmetics brands had to fight against them as well. Some of them have already won the fight.
The cosmetic brand， Max Factor had a similar problem to Revlon， according to Mr. Zhang. Previously， its distribution and marketing were run by its parent company Procter & Gamble（P&G）， which failed to bring it to the level of “first-class cosmetics brand”in China. These problems rested with P&G’s slow reaction to market changes， leading to a slow strategy adjustment.
Max Factor is now run by a Chinese local dealer appointed by Singaporebased UOB which bought it from P&G. This local dealer is familiar with the Chinese cosmetics market， and consequently makes changes timely and appropriately. Its efforts have saved Max Factor from a state of collapse. In Mr. Zhang’s opinion， Revlon could choose the same pattern when/if it returns to the Chinese market in the future.