But this week, we are looking at cosmetics in China. Coming in the top 100 are the four familiar cosmetic and skin-care brands, OLAY, Maybelline, L’Oreal, and Amway.

Of these four brands, OLAY, L’Oreal, and Maybelline are globally recognized in the make-up and skincare areas. But Amway’s non-traditional direct sales model and high quality perception has allowed it to increase sales dramatically in China. China is currently Amway’s largest market with gross sales of over 2.5billion USD in 2008.

But why are these brands seeing success and other are not? Well, according to CLSA’s Head of Consumer Research, Robert Bruce, the answer lies in a shift in values from price to quality:

“Consumer emphasis is already shifting from price to quality, which will allow companies who deliver on their brand promise to increase price, in turn increasing profits, and thus providing the ability to innovate and propagate through R&D and distribution.”

Quality is surely becoming more important for older and wealthier Chinese consumers who are attracted to luxury brands, but what about Chinese youth consumers who do not always have high incomes or strong purchasing power?

For our hypothesis that we will testing this week through our primary and secondary research methods, we believe in three key factors that cosmetic brands must keep in mind to attract Chinese youth consumers. These are:

• Cosmetic brands attention to customer service.
• An open forum to discuss cosmetics, whether it is through online BBS’, SNS’, etc, with friends, or with customer representatives.
  
• Cheaper and convenient online shopping methods.

Pay attention to our final analysis report at the end of the week to see if these hold true!

Citing an “insider” Senior Beijing Ad Executive who made this claim after the tainted milk scandals also tainted the careers of many Chinese celebrities involved, French continues to cite that “Chinese consumers are almost universally rejecting celebrity endorsements.”

Let me say this: celebrity endorsements in China will never go away. I’m sorry Mr. French, but here’s why:

1. Regional celebrities in Tier 2 and 3 cities are beginning to have more of a local impact.

Monstrous national celebrities like Jackie Chan, Yao Ming, Liu Xiang, Jay Chou, Ziyi Zhang all have conquered China. They are known in ever tiered city throughout China. However, their ubiquity has also diluted their influence to sell products. In order to regain influence, regional and local celebrities can be tapped to sell products on a local level. Makes sense right? One needs to only head over to an online poll taking place in Hunan Province that is measuring the popularity of forty-eight (forty-eight!) local Hunanese celebrities. With around 10,000 online votes, 4 out of the top 5 Hunanese celebrities are TV Hosts. The other one? A reality TV show winner.

A recent survey conducted by GroupM states that, “young people dislike ads on TV unless they are endorsed by celebrities or contain relevant music soundtracks.” Brands would be wise to tap into these local celebrities as they have more relevancy and a better connection with key youth demographics.

2. The definition of  a ‘celebrity’ in China is beginning to shift.

A celebrity in China has typically been defined as an actor, actress, singer, or athlete. These four areas dominate the cultural landscape of Chinese media and entertainment. However, celebrities with unique talents and broader interests are beginning to have more of an impact on younger generations of Chinese youth. Celebrities in today’s Chinese society must be involved in a wide range of areas to maintain relevance. One of the most popular bloggers in the world Han Han (韩寒), has crossed over into celebrity status through his controversial blogs and race car driving antics. He has been hailed as the “voice of his generation”.

A celebrity in China also does not have to be an established mega-superstar to qualify as a celebrity. Chinese youth today are just as attracted to reality TV stars such as Zeng Yike (of HappyGirl Fame) and Fantasy RPG celebrities such as Ling Er (灵儿) from Xianjian Legend as they are ‘traditional’ celebrities. It’s through unique endorsement strategies that brands can reach new and untapped markets.

We’re only beginning to see this tactic employed through online marketing campaigns such as Microsoft China’s Bing viral video featuring Internet celebrities Xiao Pang and Furong Jiejie. The video has been watched over 2 million times with thousands of comments. Though Bing (or in Chinese, 必应) currently has a 6% market share in China, further growth is anticipated.

3. Chinese business models are often slow to react to changing attitudes.

Celebrity endorsements in China will not be dying out anytime soon. Business models in China sometimes move at a microscopic pace, and Chinese business managers often minimize risk by using what has worked in the past. Large companies with large budges continue to advertise with huge Chinese celebrities. As recently as Monday, global companies Nike and Amway ran full page ads featuring Chinese track star Liu Xiang, capitalizing on his recent success. Scandals can often dislodge celebrities from their high status, but as our recent street interviews show, Edison Chen is still fresh on the tongues of China’s 90′s and ’80′s generations.