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Revlon Exits China

January 7, 2014

Once thriving market is now a tough slog.

Revlon's announcement last week that it was exiting China is just the latest proof that this once-dynamic market is either going through some growing pains or showing the first signs of old age.

Revlon's announcement comes after Avon Products reported that its revenue plunged 67% in China in the third quarter; that's a significant acceleration from the first six months of the year, when revenue fell just 28%. Similarly, Procter & Gamble said it's losing market share in China. In contrast, Estée Lauder insists it has gained market share in China and L'Oréal continues to  build a presence in this most-important of emerging markets.

Analysts say that marketers are being hit from both sides—slowing demand and rising costs. China's services sector fell for the fourth straight month in December, as did manufacturing. The economy is expected to grow just 7.6% for 2013, the slowest expansion since 1999. Meanwhile, manufacturers are leaving China because it is no longer the best place to find low-wage labor—that title belongs to Bangladesh. Despite all of China's potential, reaching the consumer hasn't been easy for many. Best Buy closed all of its stores in China in 2011 due to poor sales, instead focusing on a local chain it acquired, and Home Depot closed all of its stores there in 2012. Last year, U.K. supermarket giant Tesco also abandoned the go-it-alone approach, opting to partner with a Chinese hypermarket operator.

Do these moves represent a blip or a trend? As we move through 2014, it will be interesting to see how companies commit their capital to China.

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