The beauty and cosmetics industry is one of the fastest-growing and most promising sectors currently in China. The Chinese personal care market registered more than US$59 billion in 2022 and it is estimated to reach US$78 billion by 2025. This places China's beauty market second in value only to that of the United States, which will be worth an estimated US$91 billion in 2023.
The cosmetics industry covers a wide range of products serving the purpose of cleaning, grooming, and beautifying the human face and body. Products sold in China include skincare, color cosmetics, haircare, and toiletries.
According to the market research firm Euromonitor International, China will account for almost 70% of the growth in the regional beauty and personal care market through 2025.
In 2021, China accounted for about half of the Asia-Pacific cosmetics market and more than a fifth of the world cosmetics market. As a result of urbanization, growing disposable income, and social media influence, the beauty and personal care market is facing a burgeoning demand for higher quality, premium brand products.
According to a Statista consumer survey in 2022, approximately 28 percent of Chinese consumers preferred to buy luxury or premium cosmetics products, well ahead of their peers in South Korea and Australia.
The Chinese beauty market is largely driven by female Gen-Z and millennial consumers. In 2020, women under the age of 40 spent more than RMB 1,000 ($156) per capita on cosmetics, accounting for nearly 70% of the total market. This demographic has become highly knowledgeable about skincare and beauty products, which has led to increasing demand for product variety, innovation, and specialization.
In terms of product types, skincare products still dominate the cosmetics market in China. While colored cosmetics account for the largest proportion of cosmetics sales globally, makeup is still an upcoming beauty category in China. Colored or decorative cosmetics, which largely include face makeup, started to gain popularity among younger consumers.
Skincare products are the largest and fastest-growing segment in the cosmetics market. These carry primarily functions such as preventing moisture loss, anti-ageing, whitening, soothing sensitive skin, treating inflammation and acne, managing oily skin, etc. The most common skincare products are facial cream, facial toner, and essence.
E-commerce has been the dominating sales force in China, with more than half of cosmetics sold online in 2021. Among China's online beauty consumers, Tmall, jd.com, and Taobao were three major e-commerce platforms they used for buying products.
The popularity of online channels reflects both limited access to retail stores and a lack of brand diversity in China’s tier 2 and 3 cities. This surge in online sales is driven by the significant advantages of selling through cross-border channels, where products are shipped directly from foreign manufacturers and distributors straight to consumers through bonded warehouses or a pre-approved customs channel, as opposed to traditional brick-and-mortar storefronts.
In 2021, the direct online cosmetics transaction from South Korea to China was approximately US$ 2.5 billion dollars.
China’s e-commerce platforms are increasingly influential in impacting consumer purchases by providing a platform for the beauty community to share shopping and product experiences.
According to the International Trade Administration, U.S. Department of Commerce, the social media and e-commerce platform Xiaohongshu (Little Red Book) has attracted over 200 million users. These users, predominantly female and under 26, fit into the target demographic for imported cosmetic product sales.
Among online channels, live streaming has rapidly grown into a major sales platform for cosmetics, often marketed to smartphone-savvy consumers. Livestreaming, which doubled its market share from 2019 to 2020 and now makes up roughly 10% of Chinese e-commerce, is a key element in any successful multi-channel sales strategy.
Cosmetics with Chinese characteristics are getting more attention, even though most Chinese consumers enjoy beauty products with an international flavor. Since 2015, domestic cosmetics products have quickly closed the retail sales gap. It is anticipated that the retail sales of local cosmetics brands will surpass international ones by 2024.
Domestic companies have successfully targeted the cosmetics market with such items as Chinese‑style vanity gift boxes, limited festival editions, and lip glaze. Domestic brands are actively applying traditional Chinese medicine concepts and natural extraction methods in their development of skincare products, such as the Tai Ji and Yu Wu Xing series from Herborist.
Three of the most successful ten cosmetics companies in China in 2021 were homegrown. Chinese color cosmetics company Perfect Diary surpassed Dior in 2020 to take the second-largest position in the makeup market.
One of the major driving factors for the use of cosmetics in China is an increased consciousness about external beauty along with an individual’s intellect. Currently, along with women, there is a rise in the use of cosmetics among men in their daily routine, complementing the market demand.
Male consumers are increasingly receptive to skincare and make‑up products designed especially for men. Data from the Credit Suisse Emerging Markets Consumer Survey 2021 indicates that the ratio of men and women buying cosmetics has narrowed in recent years.
The size of the male skincare market in 2021 was RMB9.9 billion (US$ 1.4 billion), an increase of 23.8% year‑on‑year, according to a study by iiMedia Research. The figure is expected to top RMB16 billion (US$ 2.4 billion) in 2023.
A study on male skincare products released by Xiaohongshu notes that 68% of users are the young, post‑90s generation, which is also the group reporting the highest per‑capita spending each year on such products.
In addition, increasing consumer demand for plant-inspired and premium botanical ingredients coupled with multi-functional properties in natural cosmetics, such as anti-aging, anti-wrinkle, or scars removing claims, is another key factor driving the organic men’s grooming products market in China.
The natural and clean-label cosmetic products category has grown in popularity due to consumer awareness of the side effects related to animal-derived ingredients. A larger demand from mainstream consumers across the country for vegan-certified products is expected to push the revenue generation in the China market.
The natural cosmetics market includes all types of vegan, clean-label, organic, 100% plant-derived, non-GMO, and minimally processed beauty products. In addition, the country witnessed a significant increase in household expenditure and an inclination toward spending more on appearance.
The adoption of sustainable packaging of natural cosmetic products by larger players further bolstered the market growth. For example, Procter & Gamble recently announced a significant shift to plant-derived packaging for some of its leading China cosmetic brands and is using sugarcane-derived plastic from Brazil’s Braskem.
L’Oréal recently helped reduce the environmental impact of its packaging by introducing two new assessment tools, namely Sustainable Packaging Scorecard (SPS) and Packaging Impact Quick Evaluation Tool (PIQET), to its package design process.
Foreign players strongly dominate the Chinese cosmetic products market. The major companies are L’Oreal Group, Avon Products Inc., the Estée Lauder Companies Inc., Shiseido Co. Ltd, Dior, Yves Rocher International, and Oriflame Holding AG, among others.
Manufacturers are changing their product branding and advertising strategies to accelerate sales in China. Innovative strategies such as new product launches with natural ingredients and appealing packaging have been adopted by companies to increase sales.
Also, Advanced and diversified distribution networks give larger companies an upper edge to expand their range of products across the country.
In 2021, Valentino Beauty, the luxury cosmetics brand licensed by L’Oreal Group, launched the Chinese mainland’s first offline store in Shanghai’s Xintiandi. The flagship store showcases cosmetic products, including the 50 colors of Valentino V lipsticks, foundation, eye makeup, perfume, and other accessories, with a beauty expert in each sector.
In 2020, L’Oréal Paris Professionnel unveiled its first hair salon in China, in Shanghai. The new hair salon is the first flagship salon operated by a professional hairdressing brand, with a full range of hair colors, different textures, and styles. It also includes an augmented reality facility to try new hair colors and a haircare steam pod styler.
In 2019, Christian Louboutin Beauty launched a flagship store on Tmall – marking the Parisian house’s first official sales channel in China. The cosmetic brand said offers a full-line assortment of lipsticks packaged in ornate gold and black cases inspired by ancient Babylonian aesthetics, as well as nail lacquer, eye shadow, and fragrance collections.
Many consumers who love sports and fitness are keen to look good as well. They use sports cosmetics that help prevent moisture loss and are anti-odor, anti-sweat, and anti-bacterial, packaged in compact, portable sizes.
Another growing segment are cosmeceuticals, which are products that combine cosmetics and pharmaceutical features, such as spot lightening cream, acne treatment lotion and acne ointment. Cosmeceuticals can be roughly classified into three types: pharmaceutical cosmetics from pharmaceutical companies, medical skincare products that provide supplementary therapeutic functions, and functional cosmetics that deal with specific skin problems.
China’s demand for make‑up products is maturing and diversifying. Mainland consumers used to buy mostly basic products, but now demand has expanded to include items such as liquid foundation, eye make‑up and lipstick.
People’s skincare needs also changed due to the COVID-19 pandemic. Because of having to wear face masks regularly, the demand for skincare products surged, with allergies and acne becoming consumers’ main skin concerns. On the other hand, the demand for items such as make-up removal and sunscreen fell significantly.
In recent years, the Chinese market has been moving towards high‑end products, especially from foreign brands. Euromonitor estimates that high‑end products will make up 53% of the cosmetics market in 2025.
According to the China Cosmetics Industry Development and User Insight Research Report from 2022 to 2023 compiled by iiMedia Research (“Cosmetics Industry Report”), compared with the previous year, consumers give more importance to the ingredients and efficacy of products than prices and brands, exhibiting more rational purchase decisions.
Euromonitor predicts that retail sales in China’s perfume market will rise by an average of 7.1% a year to RMB30 billion (US$ 4.5 billion) in 2025. Based on observations on the speedy growth of sales of niche and high‑end perfume on Tmall, these two markets will continue to expand, especially as consumers demand more personalized fragrances.
A study of iiMedia Research on domestic perfume brands that carry mainly Chinese‑style fragrances, found that the most popular fragrance is olive (44.7%), followed by rose (36.7%), jasmine (35.4%), lavender (34.3%) and tea (33.9%). As perfume appeals to the sense of smell, most customers prefer making purchases at physical stores where they can test the products.
Children’s cosmetics include products for kids under 12 years old, with functions such as cleansing, moisturizing, reducing sweatiness and sun‑screening. Lately, most consumers are being more careful and conservative towards children’s cosmetics, however such an attitude will hopefully change upon the introduction of regulations governing them.
Cosmeceuticals, especially traditional Chinese herbal medicine cosmetics, are relatively new in the market. Forward Industry Research Institute points out that China’s cosmeceuticals market was valued at more than RMB80 billion (US$ 12 billion) in 2021 and is continuing to expand.
At the moment, sales of cosmeceuticals represent just 24% of China’s cosmetics market, so there is potential for growth. Under current laws, no medical jargon or claims of medical efficacy should be used in these items’ packaging or instructions to avoid misleading consumers.
After the introduction of new regulations related to cosmetics in 2021, consumer confidence in cosmeceuticals increased. According to the Regulations on Cosmetics Hygiene Supervision, which came into effect January 1, 2021, different types of cosmetics and cosmetics ingredients are managed based on their level of risk.
Cosmetics are classified into special‑use and general‑use cosmetics. Five types of cosmetic products related to hair growth, hair removal, breast beauty, body beauty and deodorization are classified as special‑use cosmetics subject to registration, whereas general‑use cosmetics are subject to filing administration.
Sustainability is another element that Chinese consumers have been paying more attention to in the beauty care industry. Popular brands are incorporating green elements in their operations: Lancôme has recovered more than 3 million empty bottles as of March 2021; Shiseido plans to fully use recyclable packaging before 2025; and L’Oréal is using renewable energy and achieved carbon neutrality in 14 of its factories by the end of 2019.
In 2021, 5,728 enterprises were qualified to produce cosmetics in China, according to statistics from the National Medical Products Administration (NMPA), which is now under the State Administration for Market Regulation (SAMR).
Domestic brands are mostly concentrated in the mid‑ to low‑end market segments, while joint ventures and enterprises with foreign investment dominate the high‑end segment. According to 2020 data from Forward Industry Research Institute, international brands took up the first three places in the market (accounting for 41.6%), and just two domestic companies were among the top 10 high‑end brands, comprising just 3% and 2.3% of the market, respectively.
On the other hand, more domestic brands made it to the top 10 in the mass market, yet it will be some time before they can challenge the status of their international counterparts.
The high‑end cosmetics market has traditionally been the exclusive territory of international brands, but with world‑renowned fashion powerhouses such as Hermès and LV now entering the market, competition is growing.
With Chinese people enjoying a higher quality of life and income, the prospects for the high‑end cosmetics market look promising. Since the NMPA tightened regulations on the cosmetics industry, small enterprises failing to meet the relevant standards will be gradually phased out.
Products with consistent quality and enterprises with a branding advantage are set to snatch a greater share of the market.
Pharmaceutical companies, which are under NMPA control, have started to expand into the cosmeceuticals market. Biotech and pharmaceutical firms are used to meeting rigorous quality standards with advanced manufacturing technology.
Their raw materials also tend to meet higher standards than those used by a typical cosmetics company, giving them a better competitive edge in the cosmetics industry. In April 2021, NanHua Bio-Medicine Co Ltd, which aims to become a world‑leading biotech company, was granted a patent by the China National Intellectual Property Administration to apply its technology in cosmetics production.
Some domestic brands, including Tongrentang and Herborist, have also ventured into the cosmeceuticals market and are achieving increasing recognition from consumers. In a mainland report on brand competition and investment opportunities in China’s cosmeceutical industry, it is projected that the size of China’s cosmeceutical market will reach RMB125 billion (US$ 18.7 billion) by 2025, as more overseas players enter the market and domestic brands become more prominent.
The main sales channels for cosmetics on the mainland include integrated e‑commerce platforms, wholesale markets, supermarkets and department stores, dedicated counters, specialty chain stores, drugstores, beauty parlors and direct selling.
Integrated e‑commerce platforms, department stores and specialty stores are now the top three sales channels. Data from Euromonitor show that the share of e‑commerce platforms as a sales channel has risen from 2.6% in 2010 to 38.7% in 2021 to become the leading sales avenue.
Offline, supermarkets, department stores and specialty channels accounted for 17.4%, 17% and 17.7% of all sales channels, respectively. Supermarkets recorded a drop of 17.6%, the sharpest decline in 10 years.
According to the Cosmetics Industry Report, 72.6% of all consumers buy cosmetics products on integrated e‑commerce platforms. Although Tmall and Taobao remain the key players, the emergence of platforms such as Xiaohongshu, TikTok and Kuaishou is challenging the dominance by these companies.
To boost online and offline sales, several international brands have developed WeChat mini programs to provide e‑discount coupons and enhance interactions with customers. The Administrative Measures on Live Streaming Marketing came into force in May 2021 to regulate the online market and protect consumers’ rights.
Besides online channels, “dedicated counters” and cosmetics retailers are major traditional sales channels for cosmetics. Data from Daxue Consulting shows that more than 50% of all consumers still make purchases through these channels.
Regarding physical stores, although only international brands set them up in the past, domestic brands such as Perfect Diary and Judydoll have increased investment into opening more physical stores in recent years to add value to consumers’ experience.
Some brands seek to expand their business by opening specialty stores, either directly operated or as franchises. Many multinational cosmetics giants prefer directly operated stores where they can control the brand image, maintain quality of service, and ensure unified, stable pricing.
Franchise chain stores, however, are generally regarded as being the most effective format, requiring minimum input and achieving the highest success rates.
When assessing the cosmetics market, foreign companies should evaluate the relevant standards adopted by Chinese authorities. Industry players should refer to the Standardization Administration of China (SAC) website to look up the standards relevant to them.
In accordance with the Administrative Measures on the Inspection, Quarantine and Supervision of Import and Export of Cosmetics, for imported cosmetics, samples of a Chinese label, a foreign‑language label and its Chinese version need to be submitted.
For finished cosmetics products without sales packaging, information such as the name, quantity or weight, specification and origin should also be provided. The General Administration of Customs also revised related import and export regulations in 2020 so that during customs declarations, importers need only state that they have obtained the hygiene license for imported cosmetics from relevant competent authorities instead of submitting the license certificate.
For cosmetics where the state has not specified hygiene permits or record‑filing requirements, importers are no longer required to submit safety assessment information from relevant qualification agencies for substances that may pose safety risks but are required to provide a product safety pledge. In addition, the regulatory requirement for record‑filing by manufacturers of cosmetics for export has been revoked.
In compliance with the State Council’s intention to expand the list of retail imports in cross‑border e‑commerce to promote the development of such business, the List of Retail Imports in Cross-Border E-Commerce came into effect in 2020. Cosmetics and skincare products meeting the regulatory requirements can be treated as imports for personal use, but the importers are still required to apply for first‑time import permits and carry out registration or record‑filing in accordance with the law.
In 2021, the Regulations on Supervision and Administration of Cosmetics came into effect. Compared with the 1989 version, it has 37 more articles, and aims to optimize the business environment, step up corporate legal responsibility, set up an effective administration system, and increase penalties for violation.
Specifically, e‑commerce platforms must undertake the administrative responsibility of operators while a registrant and filer system has been added to further improve business standards. Furthermore, newly added penalties stipulate that, in addition to being fined, the person(s) in charge of an entity that has been found in serious violation of laws will be prohibited from engaging in cosmetics production and business activities for a defined period or for life.
The Measures for the Supervision and Administration of Cosmetics Production and Operation released by the SAMR clearly stipulates the licensing of production, production administration, operation administration, supervision administration and legal responsibilities for cosmetics.
To regulate the production of children’s cosmetics and step-up supervision and administration of these products, the NMPA has required producers to strictly comply with the Regulations on Supervision and Administration of Children’s Cosmetics. Children’s cosmetics produced or imported after May 1, 2023, must have the “little golden shield” logo.
In view of the current wasteful over‑packaging of cosmetics, the SAMR issued the national standard Requirements of Restricting Excessive Package – Foods and Cosmetics. The new standard, which will come into force on September 1, 2023, specifies the requirements for packaging porosity, packaging layers and packaging cost, as well as the corresponding calculation, inspection, and determination methods. Packaging requirements for 16 categories of cosmetics are standardized.
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