By Wang Jiping

Growth Potential for Cosmetics Producers

By Wang Jiping

In the past decade, China’s millennials have developed a love affair with foreign cosmetic products, particularly those from South Korea and Japan. Young Chinese travellers enthusiastically buying cosmetic products at duty free stores are often seen at airports around the world. This could be all about to change, however, as China’s domestic cosmetics producers have seen their customer base and revenues grow rapidly in the past year.

In 2015, the total revenue of Chinese cosmetics producers reached 91 billion yuan (US$13.7 billion), marking a growth rate of 12.8 percent compared to the previous year, according to Mintel, a global market research firm.

The vast market potential that exists within Chinese cosmetics has been outlined by industry experts in several interviews conducted by China Report ASEAN, who say that the industry is about to enter an era of even more explosive growth.

Utilizing experience gained from past efforts, Chinese cosmetics producers have improved their advertising techniques, which has resulted in enhanced brand awareness.

The Power of Advertising

Utilizing experience gained from past efforts, Chinese cosmetics producers have improved their advertising techniques, which has resulted in enhanced brand awareness. One such technique is to include exaggerated claims on packaging, a technique that has received mixed reviews from consumers.

Some companies have included phrases such as “no preservatives”, “all natural” and “quick-whitening” on their product packaging. Such claims are difficult to verify and are probably not a good idea for companies who hope to achieve sustainable development, according Li Jian’an, the CEO of the Beijing Union Medical College Biomedical Technology Development Company.

“Firstly, it is very hard to verify whether or not a product really is all natural, and secondly, preservatives are a necessary part of keeping products fresh and safe to use,” Li said.“Products labeled as ‘natural’ are popular among consumers because they usually have an attractive color or smell, not necessarily because they are actually made exclusively from plant products.”

When interviewing consumers in Beijing, this reporter found that shoppers tend to be more attracted to products labeled as “natural”, “gentle”or “green”, and are also partial to special packaging. However, consumers interviewed said they hope producers will stop exaggerating their claims in advertising and instead work on improving the quality of the products. Consumers voiced a particular dislike for companies who launch new packaging for the same product and then raise the price.

“A little exaggeration in claims or simply using words that are popular among young consumers could lead to greater sales volume for cosmetic products,” said Zheng Junqing, a member of the sales team at Synotanix, a Chinese cosmetics producer. “However, if a company wants to achieve sustainable development, this is not a long-term strategy. Advertising is important, but companies should not spend too much energy on it, because gaps remain when comparing Chinese cosmetics products with foreign ones.”

As China is the world’s leading emerging producer of cosmetics, most companies in the market today are medium- or small-sized. They should make pursuing high product quality a top priority for achieving sustainable development, Zheng said.

Making Competitive Products

How should Chinese cosmetics producers pursue sustainable devel-

opment?

“Chinese companies should build influence for their brands by first achieving competitive advantage compared to foreign brands,” Li said. “This will not only help Chinese brands gain more local and overseas consumers, but it will also prepare the companies for fierce market competition.”

Despite Chinese cosmetics producers’ increases in market share, Korean products still dominate the Asian market. In a survey conducted by Mintel, 33 percent of Chinese consumers between the ages of 20 and 30 prefer Korean products, 23 percent prefer Chinese products, 18 percent prefer Japanese products and 11 percent prefer French products.

Zheng urged Chinese producers to focus on products with Chinese characteristics, an area in which Chinese companies have a greater level of understanding than their Korean counterparts. However, such products should adhere to internationally accepted practices, Zheng said.

Products known as cosmeceuticals — cosmetics that contain an active ingredient that is purported to have medicinal benefits — enjoy huge market potential in China. Traditional Chinese Medicine, which relies on herbs for much of its medicinal benefit, is starting to appear in cosmeceutical products. Li said his company has begun using herbal vitamin E in its products, an ingredient which is now commonly seen in skin care products at supermarkets across China.

“The reason why this product is one of our bestsellers is that it is priced fairly,” Li said, adding that his sales staff tell consumers to use the product to moisten dry skin.

Due to the product’s low price, first-time buyers often take a cautious approach to using it. After a few weeks of use, however, they may notice a real difference and begin to trust the brand, Li said.

“Thanks to this flagship product, we can focus on other innovations now,” Li said. His company now has a full line of herbal products.

Similar ideas are being advocated across the industry. In 2015, more than 100 industry experts and cosmetics company managers worked together to establish a cosmetics production facility in Huzhou, a city in southern China’s Zhejiang Province, aiming to promote Chinese cosmetic products and increase sales abroad.

A customer tries on cosmetic products in a shopping mall in Nanjing, Jiangsu Province.