According to statistics from Euromonitor, the global cosmetics market was valued at US$488 billion in 2018, of which the China market accounted for 12.7%, making it the second largest cosmetics market in the world, just slightly behind the United States (18.3%).
In addition, China’s cosmetics industry reported the highest growth rate across the globe, with a compound annual growth rate of 9.9% from 2009 to 2018, 6.6% higher than America’s 3.3%. So, while the US currently still leads in terms of market size, China’s cosmetics industry is witnessing rapid growth, with huge potential for future development.
In China, many cosmetics brands — including top international ones — are striving to turn beauty advisers (BAs) into social influencers, better known as key opinion leaders (KOLs). These influencers are highly regarded and immensely popular throughout the entire beauty makeup market. On November 11, 2018, KOL Li Jiaqi sold 15,000 lipsticks within 5 minutes through live broadcasting, pushing KOL popularity to unprecedented heights. The cosmetics industry seems to be a red ocean market space, but a phenomenon cannot be ignored: The entire industry has become far more concerned with marketing methods, such as social influencer marketing, than it is with cosmetics R&D and product quality.
Generally, cosmetics enterprises can be placed in two broad categories: R&D and channel. Under the R&D type, there are only a few giants, such as L'Oréal, Estée Lauder, Procter & Gamble, Shiseido, who possess their own R&D centers and cover skin care, makeup cosmetics, and daily personal care. Other cosmetics enterprises, who fall under the channel category, mainly rely on OEMs to manufacture their products. The two modes actually complement each other — not only does it promote cooperation between companies from different segments of the industry (i.e. upstream with downstream), but it also provides products for different consumers to meet market demands. In 2013, China surpassed Japan to become the world’s second largest cosmetics consumer. This huge market attracted the attention of the global cosmetics industry. This, however, did not bring quick development but a dilemma. Back then, local cosmetics enterprises depended too much on channels and seldom made breakthroughs in R&D. The China market had developed supply chain systems and a huge number of cosmetics enterprises, but was lacking in the area of cosmetics R&D. Unlike international brands, most cosmetics enterprises in China attached too much importance to channels, and very few of them were willing to set up R&D centers to roll out distinctive, good products.
For a long time now, the world has held the perception that China lacks innovation, which is too much of a sweeping statement. The idea of ‘innovation’ is multi-faceted and it can actually be segregated into four sub-types: technology innovation, model innovation, disruptive innovation, and improvement innovation. Due to the huge demographic dividend, China’s innovation in terms of business models and marketing methods are never behind any other country or market. However, one major issue has been that cosmetics enterprises generally do not emphasize on basic R&D and technology innovation, or most of them merely put in a limited amount of effort. As a nation, does China really lack the capabilities in R&D innovation? The answer is a definite ‘no’. BOE Technology Group’s self-developed screen is expected to overtake Samsung and LG. To break monopoly on semiconductor chipsets, Huawei has developed their own chipsets. In the cosmetics industry, save for a few enterprises that focus on R&D, most local enterprises focus on developing their channels. They are more preoccupied with notions like popularity, social influencer marketing, and sales, instead of the pursuit of good products. Even in some of the larger enterprises, R&D investment has been quite limited.
If the popularity of a product and marketing strategies continue to be prioritized by companies without careful consideration, this is a worrying sign for China’s cosmetics industry. In the global scene, companies in Europe, United States, Japan, and South Korea attach great importance to R&D. After all, cosmetics products are born for beauty. Only products that can solve consumers’ skin problems or enhance consumers’ sense of beauty can hope to survive. Looking back, China’s cosmetics industry went through an evolution, moving from imitation to independent R&D. Over 40 years of development, companies like Jahwa, MARUBI, PROYA, and LAF have insisted on their originality, ramped up the company’s focus on meeting consumers’ demands, and have stressed on the importance of product R&D. LAF’s R&D expense accounted for 3.5% of their total costs from 2015 to 2017, which is higher than L'Oréal’s 3.4%, and puts the domestic company in first place. Behind the hustle and bustle of popularity, some enterprises are producing really good products and focusing on R&D. However, compared with the long-standing histories of some international brands, China’s cosmetics industry still has a long way to go.
For over a decade now, PCHi — China’s choice sourcing platform for the global personal care industry — has been committed to promoting technology and innovation. It is our desire that PCHi's commitment to technology will translate into a driving force for innovation and development within the cosmetics industry.
The next edition of PCHi will run from 26-28 February 2020 at the Shanghai World Expo Exhibition & Convention Center (SWEECC). Attendees can expect to view the latest ingredients and technologies presented by more than 600 companies from 30 countries and regions, as well as hear from some of the world’s most authoritative academics, industry experts, and formulators in the PCHi Annual Industry Conference 2020.
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