By Jason Yu, General Manager of Kantar Worldpanel China; edited by SpaChina
On May 30, the Chinese government decided to reduce the import tariffs on consumer goods from July 1, 2018 to better meet the diversified needs of consumers. The average import tax rate on personal cleansing products, on cosmetics including skincare and hairdressing products, and some medical and health products has been reduced from 8.4% to 2.9%. This 65% reduction is fairly attractive and it is undoubtedly good news for the foreign skincare and beauty brands operating in China.
According to the data from recent years, there has been strong growth momentum in imported cosmetics, reaching a growth rate of 40% in 2017. It can be estimated that the tariff reduction will further benefit imported cosmetics, especially high-end products, in the years to come. They will maintain a growth rate of 30-40% for some more years. Typical premium imported brands include Lancôme, Estée Lauder, SKII, Dior, Yves Saint Laurent, Shiseido and many more.
Both the brands whose products are manufactured and packaged in the country of origin and brands which have their products manufactured in China should be aware that China’s consumers have distinctive expectations with regard to brands from different countries.
For example, European and American brands are expanding because increasingly savvy consumers in China have begun to take notice of niche product categories that were previously embraced by only a few, such as eye cream and serum. Europe and America are experts in such categories and have developed unique formulas. Therefore, with the added support of KOLs, Europe and the United States have become first choices of Chinese consumers when considering these products.
Last year, Japanese skincare and beauty products saw rapid growth in China because they meet Chinese consumers’ requirements on price and health-orientation. These additive-free and function oriented products are very popular in China’s market.
Korean products have not seen such positive growth mainly because of a disordered pricing system resulting from the large number of agents involved, all seek instant benefits. Nevertheless, they have made inroads into second- and third-tier cities as well as online channels. Sensitive to market needs, they focus on launching “star” products and invite the internet stars to promote them. In this way, they are successful in keeping a certain market share in China.
The general trend in China’s cosmetics market has contributed to the growth of imported beauty brands. Recently, consumer demand for high-end products has been a main driver for the revival of China’s Fast Moving Consumer Goods (FMCG) market, among which personal care has seen a high-speed growth, giving huge opportunities to skincare and make-up products.
According to Kantar Worldpanel concerning personal make-up products, females aged 20+ years old are the biggest consumer drivers for market growth. They are keen on giving sharp comments in different kinds of online forums on the products they have used and they also closely watch the comments of others. Their shopping habits are “less quantity and higher frequency”, totally different from females over 40 years old who love to stock up plenty of goods once for a cheaper total price.
With the emergence of vertical e-commerce, some of the overseas niche brands have enjoyed a sudden rise. For example, make-up brands from Thailand were among the best sellers in the skincare and beauty field in China last year. The reason is that since Thailand features a humid climate, their products are remarkably effective against water and sweat so as to keep make-up in place, which caters to the demands of Chinese consumers as well.
With regard to city types, the less-developed cities are seeing a more rapid growth in the beauty market. In 2007, female consumers from second, third, fourth and fifth-tier cities were double (and more) their peers in first-tier cities in the average expenditure growth of make-up products.
Below are three major trends from Chinese consumers concerning skincare and make-up products:
Chinese consumers have turned from anti-wrinkle, whitening and acne removal to healthy skin management. Today, anti-aging means repairing skin barrier; and oil-control is replaced by improving the water-oil balance, while whitening is more a matter of keeping the skin bright and radiant.
More Professional Products
With a deeper understanding of make-up products, Chinese consumers tend to pick more professional ones for themselves. Kantar Worldpanel indicates that the once-popular BB cream and CC cream known for their convenient and simple application have seen a decline of market penetration while professional foundation products such as cushion compact are clearly seeing a rise.
More and more Chinese female consumers are falling in love with fragrances and bold colors to express themselves. Traditional pink, orange and red lipsticks have given way to crimson, purple and brown since the spring-summer of 2015. Concerning eye shadow, the previous brown, grey and black which were used to make eyes appear bigger have been outrun by more active orange, pink, red and purple.
To sum up, tariff reduction makes imported make-up brands more competitive in China’s market in the aspect of price, but we believe that the more important thing is, based on reliable data, to understand the actual needs of Chinese consumers, catch up with the market changes and lead the trends.