Wang Jixing

china information center of daily chemical industry，China

Introduction

In recent years, the cosmetics market in China has been developing rapidly. According to the National Bureau of Statistics (NBS), the total retail sales of consumer goods reached RMB 3,323.16 billion, with an annual growth rate of 10.4% in China in 2016. Total retail sales of cosmetics in China reached RMB 222.2 billion with an increase of 8.3%, lower than overall consumer goods growth. China's gross domestic product in 2016 rose 6.7 % in real terms,down from 6.9% in the previous year. Nominal GDP increased to about RMB 74.4 trillion.

In 2016, many significant things happened in color make-up industry. Even though the country has been undergoing ups and downs in recent years, the Chinese color make-up market maintained a compound average annual growth rate of 11.44 % between 2011 and 2015,according to global market consultancy Euromonitor International.

Data from Euromonitor reveals that total retail sales of color make-up products in China reached RMB 25.1 billion in 2015. In the next five years, Chinese color make-up market will continue to rise at a rate of 10.85%(CAGR). Color make-up market in China will reach RMB 42.016 billion in 2020 (Figure 1).

Figure 1. Size and growth rate of color make-up products market

Color make-up is the second fastest growing product category, with demand rising by 13% in 2016. Hot products continue the focus on evening out skin tone,with color correcting creams and light weight foundations and tinted moisturizers growing in popularity. Color cosmetics comprise approximately 17% of US exports to China in 2015, with lip and eye make-up among the most popular. Manicures and pedicures are increasingly popular especially among Chinese women who prize decorative coatings and artificial nails. There is also increasing interest and growing market share for permanent make-up. The US is currently the fourth largest exporter of these products to China, preceded by France, South Korea and Japan.

Due to changing mindsets, more Chinese consumers have accepted wearing color cosmetics on a daily basis so as to achieve a better personal image. More importantly,the category’s consumer base grew steadily over the review period to also include male consumers, with this trend promoted by leading manufacturers, particularly from South Korea, as well as popular social media platforms.

Color make-up is still a developing category in China.The latest figures, published by Kantar Worldpanel,indicate that the make-up sector in China grew by 10%in the 52 weeks to June 2016. This is far higher than 3.1%growth reported for total FMCG. The cosmetic sector remains an important growth engine of the FMCG market in China. The double-digit growth was driven by strong performance of BB/CC cream as well as lip products.

China spends on color make-up is only about USD 18.26 per person annual, whereas South Korea, Janpan and the USA spend USD 37.27, 45.22 and 44.74 annually.

Chinese consumers are becoming more sophisticated in their beauty usage, opting to buy more premium products, which are fuelling the value growth of these sectors. This presents brand new opportunities to both international and domestic players.

In China, retail sales of color make-up accounted for only 7.95% of the total cosmetics market, whereas Japan,Korea and the USA accounted for 17.83%, 16.21% and 17.98% respectively.

Market developments include:

? Increase in woman’s awareness and understanding regarding using color make-up;

? Increasing foreign brands entering the Chinese color make-up market, mainly focused on high-end products ;

? Consumers opting for products with additional skin care effect, such as lipstick with nutritious effect,foundation cream with purifying and oil-control effect;

? Consumers are also increasingly attentive of health issue and prefer natural or less harmful products in China.

Types of color make-up

There is strong consensus across China that using make-up is a useful technique to boost confidence, and at the same time, show respect for others. The color makeup market in China can be segmented into four divisions:facial color make-up, lip color make-up, eye color makeup, and nail color make-up. These are categories for which specific color make-up are manufactured.

Changing age structures and changing lifestyles are the most important trends in the color make-up market in China. Facial make-up is the largest category by value in the market, followed by lip make-up and eye make-up.In China, facial make-up leads sales of color make-up. The retail sales of facial color make-up accouted for 48.61% of color make-up. The retail sales growth is also the fastest,at a compound annual growth rate of 14.08% from 2012 to 2015. Facial makeup covers foundation/ concealer,pressed powder/powder and blush. The facial make-up is used to mask dark circles, age spots, large pores, and other small blemishes visible on the skin. In this fast-paced world, Chinese consumers increasingly prefer to use convenient all-in-one facial make-up products, such as BB creams and CC cream. This kind of product has played a significant leading role in facial make-up sales.

It seems that this is particularly true of lip make-up as new Mintel research reveals that the category has received increased attention in recent years claiming 22%of the total market value in 2016, compared to 15% in 2014. Today, as lipstick usage is nearly universal in China,with 95% of urban Chinese female consumers having used lipstick/lip gloss in the past six months, it is also considered to be the most important color make-up product among urban Chinese women (63%) (when limited to applying up to three types of make-up).Following lipstick/lip gloss, female consumers prioritise BB/CC cream (49%), foundation (41%) and eyebrow definer (39%). The Figure 2 showed the sales value of color make-up by category in China.

Product innovation is essential to category development,and especially important for make-up brands to bring excitement and inspiration to consumers. Although the new category is more expensive, it also wins consumers’hearts with its different product values. For example,cushion compacts have transformed the BB concept.Instead of BB cream oozing from tubes, these compacts concentrate the BB formula in sponges that users dab with make-up pads to apply. Cushion products provide users the convenience and ease of applying and reapplying foundation during the day. The sales of BB/CC cream have been stagnant, but cushion compacts’sales rose 282%. As cushion blush, cushion eyeliner and lip cushion have also started to appear in the market,“cushion” seems like a panacea for make-up brands.Facial cushion products have reached 8.6% penetration and taken 29% of value share in South Korea in 2014,growing by 26%. Influenced by Korean trends, Chinese consumers have embraced the product easily. Thanks to the promotion by the popular Korean TV drama “My Love from The Star”, Amore-Pacific’s IOPE is the brand benefiting the most from this fashion trend, rocketing to 9th biggest make-up brand in 2015Q1. Increasingly,brands try to capitalize on the wave by adding cushion products to their product portfolio, including western brands like L’Oréal Paris and Lanc?me. Manufacturers should bear in mind that product innovation should always be user-centric and able to create satisfying user experience.

Distribution channels

Market channels for color cosmetics are changing rapidly, reflecting consumer distrust of mass market channels; the upgrading of Chinese consumer preferences;and the growing middle class in Tier 2 and Tier 3 cities.

Make-up has become one of the fastest growing categories, and more and more brands entering the China color make-up market. In China, growth is often linked to the increase of the number of sales terminals, department store, specialty stores, online sale or the number of distributors.

Department stores, specialty stores, professional beauty salons and some commercial websites typically buy and/or sell color make-up in China.

Supermarkets and department stores make up the largest make-up retail channel, contributing 24% of the market, but the importance is falling. Specialty retail stores such as Sephora and Ulta are becoming more popular with consumers of color make-up products.

However, the market share of grocery retailers and department stores has been decreasing; while health and beauty retailers and Internet retailing has witnessed significant increase in market share.

Traditional channels such as department stores are still the main channels. The department stores are still the number one destination for affluent shoppers (those with an annual income of $100,000+). Specialty store is possible the main color make-up sales channel, the sales in 2015 accounted for about 55%. Specialty stores offer a large variety of color make-up products, from lower to high-end. Though, they answer to the customers’ needs.Specialty stores are perfect for promoting a brand image,because they permit a quality service and practice standardized prices. But the specialty store is losing market share, whereas online sales is rising year by year with market share increasing from 1% in 2009 to 21% in 2015.

Department stores

Department stores offer a wide range of merchandises and provide one-stop shopping experiences to consumers.Department stores play an important role in brand building. Competition for counter spaces is fierce, many lesser-known brands are forced to phase out. Department stores may gradually lose appeal to Chinese consumers due to poor differentiation.

Department stores are known in China for retailing high-quality products. As such, most of the prominent international cosmetics companies sell their products through high-end department stores in China’s metropolitan areas. Department stores must, however,closely monitor the quality of the products that they retail, as some international cosmetics products are counterfeits or smuggled into China without proper official registration to guarantee their safety and quality.

Specialty stores

Specialty stores are becoming more popular with consumers. These stores retail the products of famous international cosmetics companies and a variety of small to medium-size domestic companies. Many specialty stores are now contacting manufacturers directly for their cosmetics supplies, thus by passing the wholesalers. Hong Kong based Watson’s and Sasa, and Sephore of France are major players. Department stores, along with specialty stores, are the top sales channels to consumers.

Specialty stores and online shopping are two important distribution channels for the color make-up market.However, there are two levels of differentiation in different channels.

Specialty store is an accelerated growth channel in offline channels, and the accelerated growth of online shopping and overseas purchasing has affected the market competition. Brands are no longer restricted by geography and space, which means market competition is further intensified. The Figure 3 showed the distribution channnel for color make-up product sales.

Figure 3. Distribution channel for color make-up product sales in China

Online shopping

Shopping on-line has grown rapidly in China in recent years. Selling color make-up online has proved to be a viable medium of distribution. Consumers have several online platforms to purchase color make-up.There are three major online retailing platforms for color make-up products in China, which are: Self-operating online platforms; Online stores on integrated online retail platforms such as Tmall, JD.com and Amazon;Third-parties color make-up online platforms which provide a wide range of cosmetic brands. Customer to Customer (C2C) platforms such as Taobao.com (the biggest online C2C outlet in China) provide lower cost cosmetics; however, the authenticity of these products cannot be verified. Therefore, consumers should proceed with caution or purchase color make-up online from more reputable sources. Taobao.com, itself, does not sell color make-up, rather only offers an online platform for individuals to buy and sell products.

More trustworthy online options are facilitated by Business to Customer (B2C) platforms, such as Tmall.com, which offers cosmetics directly from online shops.Tmall.com is a spin off from Taobao and was established in 2008. By 2011, Tmall was separated into its own entity to specifically serve the B2C platform. Tmall.com presently offers more than 70,000 major multinational and Chinese brands from more than 50,000 merchants.Numerous prominent cosmetics companies (L’ Oréal,Adidas, P & G, Unilever, Estée Lauder, Dior, Lanc?me,Shiseido, Mary Kay, etc.) and brands have opened online stores on Tmall. Furthermore, consumers can purchase color make-up online from retail websites that specialize in color make-up such as Lefeng.com and Jumei.com.

Nevertheless, selling and buying color make-up on the Internet is a growing trend and the reality in China that every player must face and deal with. The penetration of online retailing in China has opened new growth prospects for color make-up vendors. Online retail stores are gaining popularity as they offer the convenience of shopping without time or location constraints. They also enhance interactivity between buyers and sellers. Sellers are able to communicate considerable information about their products through this channel, while simultaneously achieving costefficiency and ease of distribution. There are various mediums such as online agents or retail portals,company owned websites, and B2C platforms through which color make-up are available to consumers.

The rapid expansion of the Internet in China, which now has more than 400 million users, has created online distribution channels. Record turnover on Taobao and Tmall got out those times. For this moment it’s mainly brands with a weak added value, which fight for the prices. Consumers are looking for the best products with the more attractive prices.

Overseas purchase

Aside from the booming e-commerce channel,accounting for 12% of value share compared to about 3% of total FMCG, overseas purchase has become increasingly popular, given the substantial price differences for imported brands.

As more and more Chinese consumers shop online and travel overseas, many are interested in buying foreign products online. Mintel’s new report Haitao Retailing reveals that almost three in five (58%) consumers bought foreign products online from domestic shopping website in a six month period ending November 2015, with quality of products (63%) and pricing (38%) as the prime concerns when shopping for imported products online.

In fact, cross-border online retail is already a significant part of total online retail sales. Mintel research indicates that the cross-border online shopping market value grew at a CAGR of 63.3% in 2015, faster than the 48.8% CAGR growth in the total online retail market during the same period. Also, Mintel forecasts the market will achieve 18%CAGR from 2015 up to 2020, compared with total retail sales growing at a rate of about 6.3% CAGR over the same period.

Comparing Chinese domestic and overseas online shopping websites, Mintel research reveals that foreign sites are perceived by shoppers to do better in terms of product quality (57% foreign vs 21% domestic) and providing language options (40% vs 35%), while domestic websites do better in most other areas, such as good value for money spent (47% domestic vs 34% foreign), and fast delivery (65% vs 16%).

Many Chinese consumers choose to purchase abroad instead of in China. Convenient traveling conditions,the appreciation of the yuan and attractive foreign retail and tourist markets pushed Chinese to buy more foreign products in both physical stores and online shops.

Mintel research indicates that Chinese consumers tend to buy certain products from certain countries.South Korea (47%), Japan (29%) and France (27%) are the top three countries for sales of beauty and personal care products, while Japan (29%) and the US (25%) are the prefered countries when people shop for imported personal electronic appliances.

51% of urban Chinese consumers agree that reviews and/or recommendations are important to them when choosing where to shop for imported products online,while two in five (40%) agreed that sharing new overseas purchases brings them a sense of achievement. Meanwhile,almost three out of five (58%) Chinese consumers agree that it is important to buy from online shopping websites that are recommended by those around them.

Consumer groups

Color make-up is an emerging category in China compared with most countries—less than 40% of households made purchases in the category last year. Six in ten (62%) urban Chinese women claim they wear makeup almost every day, up from 38% of surveyed women who said the same in 2016. Despite this increase in daily make-up usage, Mintel research reveals that minimising the number of steps in the make-up regime is the desire of 67% of respondents, compared to 30% who want one product for each step of their make-up routine. According to Mintel Global New Products Database (GNPD), only 4.3% of multi-use color make-up launches took place in China in 2016, compared to 7.8% in South Korea, 8.7% in Japan, 10.5% in the UK and 11.2% in the US.

The Chinese consumers have become more mature and, as a result, have changed their attitudes towards these brands, often viewing them as lower in quality and design than its neighboring countries or global heavyweights’product ranges. When it comes to influencing the purchase decision, on average, urban Chinese female consumers are impacted by 3.6 influencers when they are buying color make-up, higher than the 3.1 for facial skin care products. Beauty “blogebrities” (41%), celebrities(37%) and online celebrities (25%) are playing important roles in influencing consumers’ purchase decisions in the color make-up sector, ranking after family members/friends (64%) and cosmetics store staff/beauty assistants(41%).

In general, Chinese women use color make-up for special occasions, not on a daily basis as women do in developed Asian countries or regions. They spend $5 per capita annually on color make-up— significantly less than women in Korea, who spend $104 per capita. But as Chinese women begin to buy color make-up more frequently, they also start to exhibit repertoire behavior.

When women purchase them more than three times a year, they buy on average 2.86 brands. When they purchase them more than five times over two years, the average number of brands they purchase increases to 4.1 brands.

Chinese consumers are smarter and their decision making is more sophisticated; at each purchase occasion,consumers can choose brands at different price levels.

Women in China have gradually formed the habit of putting on make-up. This is particularly true for younger women (aged 20～30). Their proportion of putting on make-up (88%) is higher than that of more mature (aged 31～45) women (83%).

Among them, the main composition of consumers include staff, students, managers and professionals, account for 30%, 21%, 18% and 15% respectively (Figure 4).

Figure 4. Composition of color make-up consumers in 2016

Girls aged 20 to 29 are targeted by make-up companies

According to the Kantar Worldpanel, the rapid development of the color make-up market has a lot to do with young girls aged 20 to 29. 14.4% of total population, they contribute 45% of make-up sales value.Most of them also will pay high price for color make-up.

What characterizes them, the most influential beauty products buyers in China? A clear profile emerges from Kantar Worldpanel beauty index, showing that: they have an urge to be trendy and pretty by investing regularly on beauty products, and use a variety of niche categories,with more cosmetics steps, are sophisticated users of advanced cosmetics, are keen to try new products, are good at mix-and-match brands, are big fans of Korean cosmetics, they embrace natural concepts and are inclined to purchase premium sectors, are omni-channel users and embrace e-commerce.

In 2016, one in three girls in their 20s has bought color make-up, the penetration is highest of any age group.They also want to spend more on make-up and buy more expensive brands. They spent the most on make-up and spent 29 % of their budget on high-end make-up. This figure is significantly higher than the overall market.51% of the Korean brands’ consumers are the girls aged 20～29. The most popular major categories are: BB/CC air cushion, eyebrow make-up, and liquid lipstick. And the make-up which can make the face look more dimensional and brighter are also favored.

Emerging middle class will drive growth in China

Growing demand in the color make-up market is the rapidly expanding middle class in China. The fastexpanding middle class consumers in China has been highlighted as having a significant impact on spending patterns in color make-up, particularly in the premium segment.

China’s middle class population, which now number well over 100 million families, are playing a key role in the growth of the beauty market, according to Kantar Worldpanel.

In its latest research, Kantar Worldpanel reveals that middle class consumers are typically more confident about their future prospects and, as a result, tend to buy more and have more confidence in big brands. They love to use the internet to acquire more information about the products they purchase and are willing to pay a premium for quality. In general, China’s middle classes are more inclined to try new products and follow emerging trends.

The middle class has been particularly strong in contribution to the color make-up market. They contribute more than half of incremental sales in the beauty market.

On closer examination, three main drivers can be found: the pursuit of health, product quality and personal enjoyment. In the beauty market, high-end niche categories, such as antiperspirant, serum and perfume,have gradually gained popularity as China’s middle class consumers develop more advanced needs in fragrance and health.

With strong financial stability and growing purchasing power, middle class consumers increasingly value their personal image. They want to stay at the forefront of fashion and try emerging brands. As a result, they are willing to spend both time and money on color make-up.

The latest data from Kantar Worldpanel shows that middle class consumers comprise more than a third of the consumption of all high-end product categories. For premium make-up products (with a unit price of over RMB 300), middle class consumers make up 35%.

Middle class consumers contribute more sales to brands across all price segments. Brands in every price segment have an opportunity to win middle class consumers by providing high quality products.

Middle class consumers have also developed a deep affection for more sophisticated products. Data reveals that they buy more make-up removers, serum and eye cream, as well as more pre-make-up products, blusher and lip gloss. The middle class enjoy the experience of superior care for themselves and fashionable image through the usage of those products.

Middle class consumers’ preference for mainstream brands is reflected by in their share of the top 30 beauty brands. Such brands hold 55% of make-up. The middle classes are important consumers of luxury brands and are driving premiumisation in the market.

International brands in China

Foreign companies dominated the Chinese color make-up market up until 2013. According to Ubifrance,they owned 60% of a 14-billion-euro market. France was especially well represented with brands such as L’Oréal Paris, Lanc?me, Clarins, and Dior. In total, they owned 32.77% of shares, ahead of Japan and the United States. At the end of 2012, L’Oréal was marketing 20 brands in China,among which are Maybelline and L’ Oréal Paris, whose growth was around 12.4 % per year. Generally speaking,three years ago, foreign companies and joint-ventures were marketing high-end brands while their local competitors remained focused on the low and middle end.

L’Oréal China led color make-up in China in 2016,with a value share of 30%. The company benefits from its well-established brand image and reputation,nationwide distribution and, most importantly, the stellar performance of its premium color make-up brands, such as Lanc?me, Yves Saint Laurent and Giorgio Armani. Even though its premium color make-up product lines made a strong contribution to strengthening its leadership, the company was dragged down by its mass color make-up brands, and lost share in China from 2012.

Thanks to its close relationship with consumers,L’Oréal China is taking full advantage of the boom in the make-up market, particularly in the lipstick category with the success of Rouge Pur Couture by Yves Saint Laurent.In foundations, L’Oréal China is surfing on the cushion trend, an all-in-one liquid foundation delivered through a cushion applicator, a Korean technology. In this hot new segment, the group is innovating with products like Gwang Cushion by L’Oréal Paris and Miracle Cushion by Lanc?me.

China has become the second largest contributor to the group’s total revenue in 2015, only next to the US. Figures provided by global market research firm Euromonitor International shows that L’Oréal’s two leading color make-up brands Maybelline and L’Oreal Paris have grabbed the top two positions in China since 2010.

China is one of the giants of global e-commerce,with highly influential social networks, such as WeChat,and very powerful online sales websites. The L’Oréal brands have moved quickly to take up positions on the platforms that really count. L’Oréal Paris was the first great international beauty brand to open a store on Tmall in 2010. In 2015, L’Oréal Paris was the first e-commerce beauty brand, while Maybelline New York was No.1 in mass-market make-up, MAGIC was No.1 in skincare masks and Men’s Expert was No.1 in men cosmetics.

Maybelline ranks the first in the Chinese color make-up industry. Maybelline entered China market at a relatively earlier stage, compared with other brands. Its formal entering took place in year 1995, when it received universal welcome due to its high quality and easy to accept prices. Now, it has thousands of outlets in over 100 cities in China.

Domestic brands have huge development potential

Chinese consumers are showing more love to Chinese beauty brands. Mintel research reveals that Chinese brands are the most often used color make-up, selected by over 25% of make-up wearers across sub-categories.Chinese brands are only slightly more popular than South Korean brands for female facial make-up consumers, but the gaps increase for eye make-up, lip make-up and nail make-up. Change and innovation are the key words of the domestic cosmetics brands.

In recent years, we have seen the growth of Chinese brands, not only in the color make-up category, but across beauty and personal care categories. What Chinese brands are selling is not patriotism, but rather increasing product quality and inherited brand equity and technology. Brands should leverage quick innovations with affordable prices and provide as many kinds of make-up options as they can in order to attract younger consumers in their 20s who are still in the early stages of finding the most suitable make-up look.

In 2016, the domestic color cosmetics brands have a bigger market share than the foreign brands for the first time,contributed 52% market sales, with the growth rate of 21%.Chinese brands stand out in this intensified competition,contributing 72% of the market growth. Leveraging their advantage in lower tier cities, more than 3 quarters of Chinese brands’ growth came from tier 3 to 5 cities.

Domestic brands focus on facial make-up, BB/CC cream (which also includes the common BB/CC and air cushion products) contributes almost half (48%) of the sales of domestic brands. Eye make-up and lip make-up are relatively weak categories.

In general, 4 characteristics of domestic brands help them succeed in the market.

1) Over the past year, 78% of consumers chose domestic color make-up brands over global brands, which means that domestic brands have a large customer base.

In particular, in the past three years, the proportion of people who didn’t buy any foreign brands but local brands increased 4% from 2014 to 2016. It indicated that, in the color make-up market, consumers still very recognized domestic brands.

2) The speed of domestic brands upgrade is fast.Domestic brands currently offer 62 yuan per piece, and the average market price is 82.5 yuan per piece. But the unit price growth of domestic brands is up to 17% and the upgrade rate is the fastest.

3) What is often forgotten about the Chinese color makeup market is that 70% of the Chinese are still living in lower tier cities in rural areas. In China’s FMCG retail market, lower tier cities offer more opportunities for color make-up brands. Cosmetics retail sales in lower-tier cities are fast growing. The domestic color make-up brands focused on the lower tier cities to build their success. In fact, the domestic brands are gaining ground in lower tier cities and most of them also aim to market high quality and high end products as well. The domestic players now understand the importance of brand-building. This has greatly helped their sales in China. Chinese brands stand out in this intensified competition, contributing 72% of the market growth. Leveraging their advantage in lower tier cities, more than 3 quarters of Chinese brands’ growth came from tier 3 to 5 cities .

4) As the lower tier cities accelerate, and the channel patterns of online, offline and overseas purchasing change,the brand restrictions by space, region and the channel will be reduced. The domestic and foreign brands competition will transfer from the channel, and distribution to brand image, product quality, the experience of using.

Carslan —the China’s first color make-up brand

Carslan is the largest China-origin cosmetics company.It is a first tier brand in China’s color make-up market and is competing with big brands like Maybelline. And its products have the same functions as those of Maybelline,but are priced much lower, and gained fame more rapidly.Carslan ranks third, behind Maybelline and L’Oreal Paris,with a 6.5% market share in 2015 (Figure 5).

Figure 5. Market share of color make-up, 2012-2015

As a leading market player in the color make-up market in China, Carslan together with another Chinese brand, Kafellon, has 50% market share. In 2016, Carslan had many firsts, its ranked No.1 in online color make-up sales and distribution agents. It grew 40% annually for the past five years.

In April 2016, Carslan opened the first store in Guangzhou. Now, there are 4 flagship stores in Guangzhou. The sales of these stores accounted for 2% of total sales.

The sales director of Carslan said it will continue to open nearly 10 new stores in Guangzhou. And in the future, Carslan will also work with agents to open franchised outlet.

In addition, Carslan also attaches importance to the department stores and held the first meeting of department store retailers in April, 2016. The number of counters with average annual sales of over 2 million yuan accounts for one-five of the department store counters.This year, Carslan plans to add 600 store counters.

As one of the first domestic cosmetics brands to enter the special store channel, Carslan is also a major player in making color make-up of special store more professional.Fifteen years ago, the Chinese color make-up market was still small, and dominated by international brands such as Maybelline. Choosing the special store is the first breakthrough of Carslan.

In 2016, the company celebrated its 15thanniversary and presented a new goal to build a world-class cosmetics group.

Other color make-up giants

In the next 15 years, in addition to develop its three big make-up brands rapidly, Suhu group will cooperate with international companies on raw material supply,fashion research and manufacturing & production, and comprehensively promote the brand transformation and upgrading.

Another color make-up giant Lansur also said on the 10thanniversary celebration, in the future, it will make three major changes: from traditional management style to scientific management style, from objective orientation to market orientation, from the channel brand for consumers brand.

Designed for 18-to-35-year-old females, QDSUH chose pink for its brand image. QDSUH is more like the“girl next door”.

Skincare manufacturers are keen to tap into color make-up

The color make-up market is so hot, and skincare brands want a share. For example, in January 2016, the collection of “l(fā)ight makeup” was released by Shanghai Jahwa. This is an important attempt of the Shanghai Jahwa’s own brand in the color make-up category.

Chando, which is owned by JALA—one of China’s largest cosmetics groups, plans to launch 100 new SKU products, including facial make-up, lips make-up and eyes make-up.

Some brands choose to acquire existing brands. In 2016, Shanghai Shangmei Company announced that it has completed its full acquisition of Hiface. In the future, color make-up will become the core business of Shangmei.

The skin care brands are perhaps better than the professional make-up brands. Personalization is a matter of concern.

Trends

Consumption upgrade is driving the market

Chinese women are very interested in improve their appearances and color make-up have become an important part of their daily life of Chinese consumers.

Color make-up is still a developing category in China.According to Kantar Worldpanel China, in the past year,only 32 out of 100 Chinese urban families purchased color make-up, a 2.7% increase compared to 2 years ago. Lowertier cities posted stronger color make-up sales growth than key cities. First-tier cities have a low penetration rate (24.5%) of color make-up products, and the sales growth is also slower than the overall market. Considering customers in first-tier cities are more mature in skin care,personal care, and other categories, and are also more likely to receive the latest fashion information, color make-up in the first-tier cities market have great potential to grow.

The high-speed growth of make-up market was mainly driven by upgraded purchasing, meaning that increasingly consumers are willing to pay higher prices for more premium products or buying a wider range of products. During the two years, the average price of a color cosmetics product has risen from RMB 75 to 82.5,and the price will continue to rise.

There are many reasons for the price increase:

1) Consumers are willing to spend more money on higher-end brands.

2) Pay for the value of emerging categories.

On the one hand, sales growth of high-end, luxury brands are higher than that of the whole color make-up market, permeability is improved significantly, brand upgrade to high-end, luxury brands. Chinese consumers are becoming more sophisticated, and are opting to buy more premium products which are fueling the value growth of these sectors. Sales of mid-end and mass-market brands have stagnated, but the average price of product has risen by 7%～ 8%. In the color make-up market, an enlarged buyer base and premiumisation are two key drivers to the market growth. Data shows that only 32 urban families out of every 100 have purchased color make-up products in 2016, demonstrating a huge market potential for make-up manufacturers in China. Furthermore, the trend of “nude look” has successfully attracted consumers’ attention,pushing up the growth of BB cream, lipstick, eyeliner,eyebrow and cushion products.

It is worth mentioning that although the high prices,emerging categories have won consumers hearts with their different product values. BB/CC is a typical example:the unit price of the average BB/CC cream is 91.3 yuan per piece, although it was once popular, but in the past year, its sales growth has been sluggish and sales have stagnated. However, although the unit price of BB/CC Cushion was higher (156.7 yuan/piece), but it won 282%growth in sales.

Classification and new concepts will promote market development

As the market trends towards high-end, new concepts,new products and new trends continue to spring up.Korean wave has contributed to the popularity of certain color make-up products. The color make-up growth was driven by strong performance of BB/CC cream as well as lip products.

For example, BB/CC products imported from South Korean, along with the Korean dramas, and then performed in China. The ordinary BB/CC product is the largest category, and air cushion BB/CC is the fastest growing category in 2016.

Influenced by Korean trends, eyebrow make-up also kept growth rate of 45%. Lip make-up products contributed 15% of market shares and grew by 22%.

The popularity of the lip color subcategory is largely based on items including lip sticks and lip satins that do not require any specific tools.

Summary

There is still significant potential to drive trials of color make-up, and cushion is becoming the point of market entry. Consumers are embracing natural and safe product concepts. Successful brands differentiate themselves by advocating new concepts, benefits and usage occasions as well as pure and natural ingredients.