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China eCommerceCosmeticseMarketing

4 Key Facts to Shine in the Chinese Cosmetic Market

by TLG Commerce March 25, 2019
written by TLG Commerce March 25, 2019
4 Key Facts to Shine in the Chinese Cosmetic Market

Global cosmetic giants have been competing for a piece of the Chinese market for decades. As a result, they gradually shaped and dominated this market, with subsidiary brands under L’Oréal and Estee Lauder Group taking up most of the market shares.

However, this volatile market keeps facing radical changes by threats from China’s complicated interior environment, the wide presence of South Korean and Japanese beauty brands, the rising domestic brands trying to catching up…etc. However, plenty of opportunities are generated during this continuous reshaping process. Catch the following 4 trends/facts to keep your business up-to-date.

The Prosperous Chinese Cosmetic Market

China is predicted to overtake America as the world’s largest cosmetic market. As showed in the following chart, its share of global sales already rose from 10.6% to 13.1% between 2010 and 2016, and it’s expected to reach a global market share of 14.3% in 2021 and approach the U.S. that will decrease to 17.1%.

China’s beauty market is set for further growth, on the back of the rising disposable income of its considerable middle class and the growing sophistication of its consumers. Thus, China’s beauty market will keep growing at a robust growth rate, far exceeding the global average one. In particular, one of the factors that most contribute to this growth is the surge in consumption power. Chinese consumers’ average expenditure on cosmetics per year increased from RMB 169.4 to RMB 261.5 between 2011 and 2017, which is still a small portion of their western counterparts (less than 1/6th of the U.S. and UK). Therefore, there’s a significant room for expansion the near future. 

Smart Brands GO Digital

In China brands who don’t establish an online presence are basically doomed. Online cosmetic sales accounted for 67.28% of the whole industry’s retail sales in 2017, reaching almost RMB 170 billion in total. E-commerce enables cosmetics brands to reach remote areas without opening physical stores while setting up their base in big cities. Considering that in China consumption power is spreading from first tiers cities to lower ones, more and more cash from smaller cities is flowing online, since physical stores are out of range. E-commerce basically helps brands to save the costs of maintaining physical stores at remote locations.

In China, innovative brands have done their best to reach as many customers as possible, not only by building brand-owned websites and WeChat stores but also by conquering third-party e-commerce platforms including Tmall, JD, Tiktok…etc.

Going digital also means having a social media strategy. Top consulting company BCG (Boston Consulting Group) announced that KOLs have a significant effect on Chinese customers, since they’re used to check products’ comments online before purchasing. Top-ranked KOLs are able to help unknown brands to shortly gather nation-wide a substantial customers base from zero. 

China has nearly 30 different online social platforms while the U.S. has about five. Beauty bloggers in social media websites such as Weibo, Wechat, Little Red Book…etc. offering makeup and grooming tips have helped boost sales among millennials.

Skincare Dominates the Sector, Color Makeup increases the fastest

Chinese consumers value skincare more than anything else. Euromonitor detected that in China the skincare sector took up to more than 50% of the beauty market shares in 2017. Basic facial care products including toner, lotion, serum, and moisturizer accounted for 73% of sales in this sector. 

Color Cosmetics remains the best performing category, growing at an 11.5% CAGR between 2011 and 2016. In contrast, Hair Care was the slowest segment, growing at a 5.7% CAGR over the same period. Color Cosmetics’ growth is expected to stay high, followed by skincare and fragrances.

Male cosmetics is going to be a vital driver of the beauty market. Since 2014 China has replaced Korea as the world’s largest market in this segment and it’s still growing at a remarkable annual rate. In China sales of male grooming products, including toiletries and fragrances, grew stably at an average annual rate of 7.9% between 2013 and 2016, from RMB 23 billion to RMB 31 billion.

Related Reading: Chinese Man’s Beauty Revolution

Rising High-end brands and China’s Domestic Beauty brands

As predicted by Euromonitor, the premium market has been consistently growing at a higher rate than the mass market and will keep eating market shares. L’Oréal Group announced that their revenues from the Chinese market grew by 7.1% in 2018, reaching 26.94 billion Euros in revenue. The high-end department contributed vigorously displaying a 10.6% growth rate. In fact, customers tend to move up to premium products as their disposable income increases.

At the meantime, also China’s domestic beauty brands strived to snatch a piece of market shares from the fierce competition of western brands and are starting to reap the benefits now. Among the top ten cosmetics brands winning the market, Chinese domestic brands have gradually increased their market shares from 0.7% in 2008 to 7.1% in 2017.

4 Key Facts to Shine in the Chinese Cosmetic Market

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