Beauty and Personal Care in China

Published:2011-09-29    Source:Huaran Consulting

Strong growth fuelled by rising disposable income levels
Beauty and personal care saw strong growth in China throughout the review period, with this largely due to an increasingly affluent consumer base. Strong economic growth during the review period led to rising disposable income levels encouraging higher spending on non-essentials. Rising urbanisation was meanwhile coupled by a growing association between a well-groomed and youthful appearance and social and career success. Consequently, consumers became increasingly willing to invest in their appearance, particularly in urban areas.

Competition widens beyond first tier cities
The leading players and retailers in beauty and personal care focused on expanding their distribution networks into smaller cities towards the end of the review period. Competition in first tier cities such as Beijing and Shanghai is intense, while second and third tier cities offer a relatively untapped consumer base. As a result of this widening distribution, consumers in rural areas and lower tier cities gained access to a growing range of beauty and personal care. These consumers tend to be more traditional in their attitudes and are often highly price-sensitive, with players consequently encouraging purchases by offering price promotions and focusing on affordable brands such as Shiseido’s skin care and sun care brand Pure & Mild.

Strong multinationals push for growth
Beauty and personal care is led by a number of strong multinationals, with Procter & Gamble, L'Oréal, Shiseido, Unilever and Amway being the top five players in 2010. These players competed aggressively for share, with L'Oréal and Shiseido proving particularly successful in 2010. Both companies focused on expanding distribution towards the end of the review period, while benefiting from strong marketing and new product development. They also benefit from a strong portfolio of well-differentiated brands such as Shiseido’s Aupres and L'Oréal’s Maybelline New York, alongside their eponymous flagship brands. These companies’ brands cover a wide range of prices and have a strong reputation for quality, thus attracting many consumers trading up in search of more effective and indulgent products.

Beauty specialist retailers and internet retailing continue to emerge
Sales of beauty and personal care continued to be dominated by two well-established distribution channels in 2010. Supermarkets/hypermarkets continued to have the leading share, offering a wide range of mass products and attractive prices. Meanwhile, department stores ranked second, often being the only outlet for premium beauty and personal care in many smaller cities and towns and also benefiting from offering expert advice and a wide choice of premium products. However, both channels continued to rapidly lose value share in 2010 over the previous year as beauty specialist retailers and internet retailing continued to emerge. Beauty specialist retailers continued to expand into lower tier cities and towns towards the end of the review period, with this expansion led by chains such as Sephora. Internet retailing meanwhile benefited from ongoing rapid growth in internet users and from the popularity of sites such as Taobao. Internet retailing also attracted consumers due to the wide range of beauty and personal care bargains that can be found online.

Further economic growth to fuel stronger sales
Beauty and personal care is expected to continue to see dramatic sales growth during the forecast period. Constant value growth rates are expected to slow down in comparison to those seen during the review period due to a higher sales base but absolute growth rates will be stronger. Growth will be fuelled by China’s ongoing economic growth and consumers’ rising disposable income levels. Mid- and high-income consumers in first tier cities are expected to become increasingly affluent, consequently seeking out premium brands and value-added products. Low-income consumers and those outside of the largest cities will meanwhile remain price-sensitive but will begin to buy a widening range of beauty and personal care as their income levels rise. Men are expected to be a major driver of growth, with a growing number of men buying their own products as they seek to look well-groomed and youthful.