Kantar Worldpanel - www.kantarworldpanel.com

Decoding beauty market for China today

04/05/2017

The total FMCG spending sees a slowdown in nearly everywhere across the globe in 2016. However, what lies beneath the downturn is a vigorously evolving landscape, with quite a few categories rising against all odds with unstoppable force – Beauty segment for example.

Next burst: “situational” care for micro moments

Influenced by “Korean wave”, Chinese consumers are becoming more in favor of the Korean cosmetics and skin-care product. At present, one of the most dominant trends in Korea is the “situational” care for micro moments, another dominant trend in Korea is that consumers are pursuing convenience and customization, which would definitely trend-set Chinese cosmetic market as well.

Kantar Worldpanel found that: nearly 31% of consumers claim to have reduced their skincare products while the volume has grown more than 20% in recent years. On the surface, the consumers seem to be reducing their steps and contracting their consumption in beauty products especially in skin cares. Actually, such development is led by the popularity of multi-function or hybrid categories.

Considering what is happening in both China and in Korea, we believe that “situational” care leads the way to the future of beauty market, meaning that consumers will change their beauty routine according to the needs and emotions at the moment.

The breakthrough of offline sales

Kantar Worldpanel discovered that: Cosmetics channel landscape is undergoing a considerable shift in China, with domestic offline trade starts to decline in penetration from end of 2015 and the loss expanded to 1.2% up to 2016 Q2. This is the first time that domestic offline starts to lose shoppers in addition to frequency. At the same time, online shopping and overseas purchase continue to gain momentum – online volume grows by a vigorous 4.2%, overseas by 0.9% in 2016 Q2 vs one year ago.

Analysis above means more than 100 million people have traveled abroad and shopped in beauty sectors in a single year. Looking deeper, there has been particularly strong growth in tier-2 and tier-3 cities. Spending through this channel is significantly high, RMB675 a year by Q2 ’16 for instance, constituting 42% of these consumers’ annual spending on cosmetics, thus actually squeezing the basket in other channels.

The increase in online shopping of cosmetic penetration due to Chinese relying on mobile devices greatly, even no other market relies on mobile devices like China. 55% of Chinese consumers regard smart phones the most influential media on their buying decisions, compared to one-third in the US and the UK. Currently, Mobile might not have yet reached much of total population, but it offers far greater return on investment. Taking haircare for example, mobile platform is about 1.6 times as efficient as PC in driving sales per one-thousand households reached.

For offline cosmetics stores to capture value, it takes transformation given that organic growth of this channel is hardly pressed. This is proven successful among some single-brand or multi-brand chain stores that have succeeded in attracting more buyers by engaging them well. Friendly shelf designs, trendy portfolio promotions, sensory experience enhancements and lifestyle claims have all helped in building up value.

The wind gap of cosmetic market

Kantar Worldpanel’s investigation showed that: girls in their 20s play key role for personal care sales. 14.3% of total population, they contribute 38% of makeup sales value. And the potential of its growth can be explosive – makeup adoption penetration among Chinese female in their 20’s is 53 percentage points behind their counterparts in Korea, one of the most advanced beauty markets in Asia. The gap also reflect the great potential in this consumer group.

What characterizes them, the most influential beauty products buyers in China? A clear profile emerges from Kantar Worldpanel beauty index, showing that: they have an urge to be trendy and pretty by investing regularly on beauty products, and use a variety of niche categories, with more cosmetics steps, are sophisticated users of advanced cosmetics ,are keen to try new products, are good at mix-and-match brands, are big fans of Korean cosmetics, they embrace natural concepts and are inclined to purchase premium sectors, are omni-channel users and embrace e-commerce.

Through analyzing the developing status and trends of the 20s, we find the keys to stay in winning position, our suggestions include:

-Drive consumer-needs-based category development and product innovation to overcome demographic structure change

-Accelerate young consumer recruitment in niche category; improve market segmentation and upgrade consumers in high-penetration category

-Differentiate and specialize brand/product/function strategy tailored to each age group to lead and create needs.

In this day and age, we see what had happened in advanced markets is happening in China, in a much faster manner. Beauty companies still have plenty of opportunities to thrive in a fast evolving China by tapping into consumers’ knowledge.

The current status of Chinese cosmetic market, channels and the interaction of the mobile platform

The current status of Chinese cosmetic market, channels and the interaction of the mobile platform

Get in touch

Eliane Liu
Associate Account Director, China

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