Why Do Business in China?
According to Euromonitor, the total retail sales of skin and makeup products in China has reached $27.2 billion and $5 billion respectively, and China’s share of the beauty marketed is expected to be the world’s largest by the end of 2019. Asian people are renowned for their love of beauty and the multi-step regimen of skincare. Due to this cultural influence, the economic boom, and the sheer number of the population of 1.3 billion, China has become a gold mine for the beauty business.
Chinese consumers have a strong appetite for foreign luxury beauty. Being able to use a luxury brand is a symbol of social status. Moreover, based on a local study, 63% of men now use cleansing milk or facial cream; this increase in Chinese men using beauty products is heavily influenced by Korean pop culture.
The types of skincare products Chinese consumers are seeking are natural, green, & organic, which is very on trend with current global cosmetic themes. The reason why foreign brands enjoy a high market share in China is primarily due to product quality, and the ability of Chinese consumers to afford luxury brands. According to the China Food & Drug Administration (CFDA), domestic cosmetic brands are concentrated in low to mid beauty segments, while foreign-invested enterprises or joint ventures dominate the high-end segment—foreign brands are especially desired because of the perception that “the grass is greener on the other side.”
Chinese consumers love to shop, and it has been reported by China News that 36% of the consumer budget is on imported beauty. While traditionally luxury brands are the go-to brands, the market does allow for “best product for value” among millennial consumers. The best thing about the beauty business in China is that, similar to Korea and Japan, Chinese women are willing to use at least 6 products in their skin regimen. This behavior boosts sales potential.
Beauty purchase intent in China is highly influenced by a brand’s online presence. Leading e-commerce are Taobao, T-Mall, JD, and VIP.com. Chinese consumers are also avid users of social media. Instead of Facebook or Instagram like their American counterparts, Chinese consumers use Weibo to build a community of key opinion leaders and use Baidu for researching beauty brands. Instead of SnapChat, WeChat is a popular platform people use to influence friends and followers. Additionally, apps like Little Red Book are used to search trends and for purchasing foreign beauty brands. Despite the different social media platforms that are available in China, the consumer purchasing behavior is quite similar to that of the United States.
How to Enter the Chinese Beauty Market
Where does one start to capture the fastest-growing beauty market?
Historically, in China, the registration process for brands has been extremely long. China recently revised its registration process for brands that show that ingredients used in their product formulation are China-compliant (listed on the 2015 existing inventory list). This speeds up the export process tremendously. Additionally, one of the biggest concerns when marketing in China is animal-testing requirements. However, there are ways to avoid these requirements. One is by using China-compliant ingredients and a joint venture with a local manufacturer for final formulation or packaging; the other is by selling via cross-border e-commerce and retail stores in Hong Kong. Neither of these is complicated and easily accomplished with the right type of partner.
There are several ways to work with Chinese distributors; however, the best way is by being your own distributor so you can manage your own physical store and staff training, since most distributors in China do not treat suppliers as partners unless they have a special relationship. Having physical stores is a great way to increase awareness, as shopping is treated as a favorite pastime for most Chinese consumers. Another popular channel to market in China, as well as the most profitable, is through e-commerce. One can do this through popular platforms like T-Mall, your own brand website, or the Little Red Book shopping app.
When it comes to the Chinese beauty market, Shanghai and Beijing are the two most prominent metropolitan cities Americans think of. However, there is a hidden gem that is predicted to be the city with the most potential as the entry point—Chengdu. Chengdu has opened more than 30 new shopping malls in the past two years, and has ushered in a number of high-quality commercial real estate projects like Tikooli, Yintai Center, and New Century Global Center, which is known as world’s largest mall, complete with an indoor beach. Additionally, Chengdu is into beauty big time, as they have hosted beauty expos twice a year for the past 40 years targeting skincare beauty professionals.
Given the potential of the beauty business in China, and consumer desire for foreign brands, the time is ripe to consider expanding your beauty business to China.
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