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12 Predictions for the China Beauty Market in 2023

Published January 17, 2023
Published January 17, 2023

As China transitions from a zero-COVID policy, there may be light at the end of the tunnel to finally move past the pandemic-induced market uncertainty. Financial markets have mainly predicted a tough quarter or two for China, citing the experience of overseas reopenings.

The Office of the Central Financial and Economic Affairs Commission (CFEAC) said of the transition from China's strict zero-COVID policy, "This will unleash huge vigor and ensure that economic activities continue to circulate and reach their full growth potential. We must have good management for the transitional period. The finish line is now in sight."

Navigating the market will require foreign brands to have the agility to navigate political, business, and cultural shifts as China reopens. BeautyMatter reached out to four of our China beauty experts for their predictions. Their responses represent the complexity and nuance of what will drive the beauty sector in 2023.

Franklin Chu, Managing Director – US at Azoya International

The rebound of global duty-free business: Chinese consumers have been the key factor in driving the growth of the duty-free industry in recent years. International duty-free retailers will continue to suffer from the inability of Chinese consumers to spend abroad. However, we noticed that Global Blue released a monthly update that travel retail in Europe is nearly back to 2019 levels. If China actually relaxes outbound travel restrictions in 2023, we expect global duty-free sales to return to 2019 levels or even exceed them in 2023.

Digital technologies transform omnichannel and immersive shopping: The uncertainty of offline traffic accelerated the pace of digitalization, as companies from different industries are forced to embrace online sales channels. During the post-COVID era, many consumers may continue to remain active in online shopping as one of their daily habits. Brick-and-mortar is witnessing foot traffic rebound back to pre-pandemic levels, even as online shopping continues as an essential alternative for consumers. Moreover, digital consumers will engage in new technologies when they browse products or consume entertaining content. For example, AR/VR, virtual try-on, AI, livestreaming, and other innovative technologies are transforming the customer experience.

Supply chain and inventory management remains a challenge: Due to a sharp drop in sales in 2022, global retailers are leveraging methods to reduce inventory levels. In the short term, the market is facing a huge amount of unsold stock, which could impact the profitability of retailers and brands.

Brandon Pemberton, President of Market Defense

Purchase decisions are becoming more intentional: We are seeing a major shift in how Chinese consumers are making purchase decisions, increasingly paying greater attention to product ingredients and benefits. Consumers are now researching purchases and are keenly aware of authoritative testimonials. Historically, beauty buying decisions in China were more driven by emotion and impacted by non-expert influencers. In 2023, beauty brands will shift marketing efforts to promote objective product benefits. This will not only impact marketing content, but also the platforms used for promotion and sales with a strong shift to platforms that support detailed product education.

Arbitrage across channels: China's most savvy consumers look across a broad array of buying platforms to find the lowest price on offer once they have decided to buy a product. As this arbitrage trend continues through 2023, brands and retail platforms will work for greater price parity and more consistency in discounting, shifting platform preferences away from price and towards consumer experience.

Demand for health-enhancing benefits: Chinese consumers have been severely impacted by zero-COVID policies and hold a widespread belief that COVID is here to stay and will spread. They are actively looking for immune system–reinforcing food supplements and for ingredients in beauty and wellness products that could provide additional virus resistance. In 2023, products with ingredients and benefits that may directly or indirectly boost immune systems or reduce the perceived threat of virus spread will be in high demand with the Chinese consumer.

William Lau, CEO Bonnie&Clyde, SVP USHOPAL

The ethos of customer service will drive brand and retailer innovation: As consumer attention becomes increasingly fragmented and the quest for self-expression plays out online and in the physical realm, retailers and brands alike will get a lot more creative about customizing connective content online and in-store. Delivering highly personalized and curated brand and retail experiences—such as free in-store facials from your favorite skincare brand or access to special events with brand founders, favorite makeup artists, or content creators, not to mention sneak peeks and product previews—2023 will be the year to dial up connectivity.

Health and wellness is the new luxury: The pandemic has reordered consumer priorities and expanded the traditional definition of health, wellness, and prevention. Greater consciousness around mental health, life/work balance, and a return to simplicity mean consumers will increasingly prioritize those brands whose ethos mirrors their values and will demand products and solutions that promote health and wellness, and deliver on anti-aging prevention across skin, hair, and body.

Efficacy-focused innovation: As seeing is believing, consumers expect efficacy and results. As clean beauty has become table stakes, efficacy has become the new luxury across beauty categories. Consumers will prioritize those science-led brands with compelling ingredient-driven formulations and proven benefits that effectively harness biology and chemistry in the service of creating high-performance–driven solutions.

Jack Porteous, Client Services Director at Samarkand Global Limited

Austin Li to make a debut Douyin livestream: After years of platforms being protective over their traffic, customers, and livestreaming talent, regulators have started to take aim at anti-competitive practices in 2022. Some platforms removed exclusivity clauses for their stars, and some of Douyin's biggest names like Luo Yonghao livestreamed on both Alibaba's platform and Douyin during this year's Double Eleven festival. We've not seen major movement the other way yet, but could 2023 be the year for Austin to embrace an additional sales platform? If he does, it could be the shopping event of the year.

Color cosmetics to bounce back (eventually): It's been a torrid time for color cosmetics this year in China. Sales at Double Eleven were reportedly down 25% vs 2021 figures, as people were spending more and more time at home. The first half of 2023 doesn't look too rosy either— big waves of COVID infection will keep people in relative confinement—but by the summer months consumers will want to look and feel good after a tough winter. This should all build up to big growth numbers at key selling periods in late 2023 as old habits are re-established and lives adjust to a new normal.

Social commerce booms: 2023 could be an unstable year in terms of both pandemic control and economic performance, which will weigh heavily on consumers' minds. Many labels will struggle to adapt quickly to consumer moods—it'll be ever harder to seem authentic and human in official brand communications. How can brands navigate that and maintain momentum? Work with the decentralized, professional network of boutique social commerce vendors who are closer to their customers and can be nimbler in their approach. With total social commerce sales forecast to hit half a trillion dollars in 2023, it's a segment too big to ignore.


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