Channels, products and consumer trends were the hottest topics at the recent China Top 50 Cosmetics Store Summit that was jointly organized by China Beauty Expo and L’Oreal. Ni Yi, Vice President of Nielsen China’s Retailer Research division share the firm’s latest findings and insights.
Consumption Outlook: Slower But Stable Economic Growth
As 2018 came to a close, China’s economy maintained slow, but stable growth. The new “six-stability” policy focuses on balancing employment, finance, investment, foreign capital, foreign trade and expectations. Urban unemployment remained at 3.8% in the third quarter of 2018. Chinese businesses enjoyed a RMB 45 billion tax break, and China absorbed more than $70.2 billion in foreign direct investment. Even as Chinese companies refocused on domestic demand, foreign trade still grew by 13.8% year-on-year in the third quarter of 2018.
Rise in Household Expenditures
Product and Channel Growth
Among 34 FMCG categories covered in Nielsen research, online and offline spending grew by 14% year-on-year. China’s FMCG category far outpaced the global average of 3%.
Cosmetic stores continue to outpace other traditional retail channels like hypermarkets, supermarkets, and convenience stores. Within the cosmetics segment, new store opening has slowed during the past year; single store sales have become the major growth driver.
Meanwhile, online cosmetic stores activate purchasing desire by creating great shopping experiences. Online channels leverage O2O, vending machines, and cross-border supply to enable trial and product exploration.
Professional service remains the main differentiator for offline cosmetics stores. Offline stores are working to reduce the role of beauty assistants and add professional skin care experts and make-up artists.
While all personal care product channels have grown, facial care segments are clear category leaders. Broader trends in consumption upgrading are leading consumers to purchase high-end products in place of lower and mid-range products. Sales of new personal care products are also concentrated at higher price points.
Top selling products in the facial category include facial mask, cream/lotion, toner, essence, and eye gel/essence with facial essence emerging as the fastest growing product. Other top sellers include hair color, personal cleansing products, mouthwash, hair styling products, electric toothbrushes, and teeth whitening products.
Imported Product Growth
Cross-border e-commerce has been an engine for growth among imported personal care brands. These e-commerce channels allow Chinese consumers access to products that are genuine and unavailable in the local market.
Korean brands are still the most popular imported products in cosmetic store channels. Among Western brands, French products are frequent top sellers. Cosmetics are the leading cross-border purchasing category, and Spain, Iceland, and Hungary became notable new sources for products in 2018. Industry analysts still see growth opportunities for imported brands in offline channels.
One example of a China’s shift in beauty product demand has been the recent lipstick craze that brought bright red and orange colors into the market. Popular films and TV have influenced buying choices. The percentage of rouge color lipstick sales exceeded 2017’s hot cameo brown. Rouge remained the most popular color, showing the greatest growth across all age categories. Lipsticks were the hottest topic in online cosmetic media in early 2018. Names like orange, dirty orange, pumpkin, and maple became popular keywords. The prior year, metallic color lipstick was popular, and hip hop shows lured Chinese consumers from traditional Japanese and Korean styles to more personalized European and American products.