China Beauty Expo had a chance to catch up with Euromonitor International’s Shanghai-based Research Manager, Hui Wan, earlier this month. Ms. Wan provided some keen insights on what beauty industry watchers can expect from China in 2017.
CBE: How is China’s beauty industry performing as we move into 2017, and what factors do you see driving or constraining growth this year?
Wan: Amid the uncertain global economy and domestic economic downturn, the beauty and personal care market maintained its strong value growth pace in 2016, driven by the steady market demand for such highly-penetrated hair care and oral care as well as the upgraded consumer need in color cosmetics and skin care. This is in line with the growing awareness of personal hygiene and the rising disposable income among Chinese consumers. Mass beauty and personal care registered slower value growth than premium products in 2016, underpinned by broader premiumization trends.
CBE: What’s the outlook for beauty retail, and how are department stores and specialty fragrance retailers doing?
Wan: Department stores and perfumeries are losing market share in beauty retailing due to intensifying competition from e-commerce and the impact of increasing popularity of traveling abroad among Chinese consumers. However, in 2016 some premium skin care brands like SK-II, Sulwhasoo and Woo still sold mainly through department store channels and performed well. So, department stores are still seeing some areas of growth. Compared to online store, department stores still provide a richer buyer experience and give more free samples.
CBE: How big of a role is e-commerce playing in China’s beauty sector, and how are brands responding to these changes?
Wan: To stay on top of the increasingly competitive China market, manufacturers are increasingly focused on online distribution channels. We see more multinationals setting up their online flagship stores in such leading B2C platforms as Tmall.com and JD.com. Meanwhile, a number of cross-border e-commerce platforms like RED.com and Kaola.com also boost the volume of online purchases by providing a variety of imported products with comparatively fair price.
CBE: Are local beauty brands gaining a larger share of the market? What strategies do you see working here?
Wan: Taking advantage of their established brand reputation, consistent product quality and effective marketing, multinational players continued to lead the market in 2016. Many were very active with new product launches which should give them a strong start in 2017. Domestic brands, however, are catching up. They are taking up more value share among the top ten players throughout the review period. Domestic brands' stronger foothold in second- and third-tier cities, aggressive marketing by sponsoring popular local reality TV shows and high performance to price ratio are also among the keys to their success.
CBE: How is the growing popularity of Korean brands effecting other international players?
Wan: Korean brands led by Amore Pacific and LG still gained market share in 2016 by rapid expansion of both offline beauty specialist retail outlets and e-commerce channels. The popularity of Korean brands impacted international players especially in premium skin care and mass color cosmetic segments. The skin care brands like Sulwhasoo and Woo are well-received by female consumers due to Han prescription and hefty marketing campaigns.
E-commerce is another platform where Amore Pacific and LG have invested heavily. Their investment has given them insight into customers’ cosmetic spending by utilizing data from user profiles, purchase frequency, product preferences, and household income estimated by cross-referencing the shipping address with property market data.
CBE: Hui Wan, thank you very much for your insights on the rapidly evolving China beauty landscape in 2017.
Euromonitor International, provides independent strategic market analysis to 29 fast moving consumer goods industries and players on a global scale. We research over 300 different consumer sectors in 80 countries worldwide.
China Beauty Expo’s China Industry Insights taps its network of industry experts to provide timely, China-based analysis of China’s fast evolving beauty market and supply chain. China Beauty Expo brings together an unmatched group of senior-level industry insiders at its Beauty Supply Chain Summit, International Cosmetics Retail Summit, Beyond Beauty Trends, Business Meetings Asia, and Beauty Ingredients and Formulation Shanghai conferences – all part of the 2017 China Beauty Expo.