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Middle class pivotal to China’s beauty market

25/01/2017

China’s middle class population of well over 100 million families are playing a key role behind the growth of the beauty market, according to Kantar Worldpanel. In its latest research, Kantar Worldpanel suggested that middle class consumers are typically more confident about their future prospects and as a result they tend to buy more and have more confidence in big brands. They love to acquire more information about the products they purchase through internet and are willing to pay premium for quality. In general, they are more inclined to try new products and follow closely the latest trend. This important market segment contributed more than half of incremental sales of many categories in the beauty market.


Kantar Worldpanel Beauty discovered startling contributions made by the middle class to the consumption of perfume, body wash and hand sanitizer categories, reaching as high as 466%, 324% and 163%, respectively.

On closer examination, three main drivers can be found behind it: pursuit of health, product quality and personal enjoyment. In beauty market, high-end niche categories, such as antiperspirant, serum and perfume have gradually gained popularity, as middle class consumers in China are developing more advanced needs on fragrance and health.

Beauty consumption behavior of Middle Class Consumers
With strong financial stability and growing purchasing power, middle class consumers increasingly value their personal image. They are happy to stay at the forefront of fashion and try emerging brands. They are also willing to spend both money and time on skin care. 

Data from Kantar Worldpanel Beauty suggested that the middle class consumers currently contribute over 1/3 of the consumption of all high-end product categories in the market. For high-end skin care products with a unit price of over RMB300, high-end makeup products with a unit price of over RMB300, and high-end personal wash and hair care products with a price of over RMB60 per bottle (600ml), middle class consumer made up approximately 38%, 35% and 32% of all buyers of each sector respectively.

Take facial cream as an example, middle class consumers spent on average RMB647 on luxury price tier (>RMB300/bottle) per annum, higher than the average consumption among all consumers. For premium tier (RMB120-300/bottle) and medium price tier (RMB50-120/bottle) product, they spent approximately RMB391 and RMB305 respectively per annum, both higher than the average purchase level among all consumers. Mass facial cream (

Middle class consumers also developed deep affection towards more sophisticated products. Data suggests that they buy more makeup removers, serum and eye cream, as well as more pre-make up products, blush and lip gloss.

Middle class consumers are showing preference for the mainsteam brands shown in the fact they make up more than their fair share of importance to the top 30 beauty brands in the market with 47% and 55% importance to female facial care and make up respectively. They are important consumers of luxury brands and are therefore driving premiumisation in the market.

Kantar Worldpanel also discovered that middle class consumers in China are lovers of ‘natural concept’ products. Products with natural ingredient and production process are easier to catch their attention. In addition, middle class consumers are also fond of trendy and innovative packaging. Brands need to consider innovations in formula, function and packaging in order to win the patronage of those consumers.

The middle class are more likely to buy their beauty through e-commerce, department stores and overseas channels. Today their purchases through cosmetic stores are relatively low. There is some exception for SASA, GIALEN, GOLDONE high end cosmetic stores with their interactive and engaging shopper experiences.

Shaping the future of beauty market
Premium sector in China beauty panel is yet to catch up with Korea according to Kantar Worldpanel. Reports shows that premium brands only commanded a market share of 13% in China, which was far lower than 44% in Korea. Based on the current pace of development, it will take at least 8 years for premium sector to catch up with Korea.

Looking at a booming high-end market, local brands need to consider a “dual strategy”: maintaining the growth of mass brands while investing in the building of Premium brands

Tier 2 cities are catching up the trends very fast. In 2014, skin care sales in tier 2 cities were lagging well behind tier 1 cities while in 2016 they are reaching a comparable level.

The purchase behavior of middle class consumers will gradually converge across city tiers and this will have profound impactions to brands. To capture middle class consumers, brands will have to adapt to local market condition and ride on the wave of change. It is also increasingly difficult to dominate the market with one mega brand in China, and brands shall consider establish multiple brand/platform matrixes to fully capitalize the opportunities in the market.

 

 

 

Notes:
1. The middle class: Those with an annual family income of more than RMB100,000.
2. Sources: Kantar Worldpanel, urban family purchase sample group (40,000), Tiers 1-5 cities in China; Worldpanel Beauty sample group (40,000), Tiers 1-5 cities in China; and personal use sample group (6,000), key and provincial capital cities across China.

Middle class pivotal to China’s beauty market

Middle class pivotal to China’s beauty market

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Jason Yu
General Manager in China

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