China in Development

As the rapid pace of urbanization continues in China, international beauty brands are looking to the country’s lesser-known cities to fuel future growth.

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Chongqing, China

Photo By justin guariglia/national geographic stock


Photo By Bruno Vandeville

Appeared In
Special Issue
Beauty Inc issue 06/17/2011

When it comes to beauty, Yu Xinxin knows exactly what she wants: light, non-fragrant creams with plenty of sun protection and an extra whitening agent, simple makeup in natural and pastel tones and hair care products that deliver glossy shine. Price is not her top concern as she browses through cosmetics and creams in a Beijing Sephora store one sunny Saturday afternoon. Yu earns 7,000 yuan (about $1,078) a month and often spends one-tenth of her salary on a variety of beauty products, including skin and hair care and cosmetics. She’s loyal to moisturizers by Biotherm, which cost on average $50 to $60, but is considering switching to a slightly more expensive brand like Estée Lauder.

“I feel very strongly that these products are worth the money,” she says.

“It’s important for me to protect my skin from the sun, keep it white and to have makeup that looks natural,” she says. “Lots of companies these days take looks into consideration at the office and I want to advance, so I’m cautious.”

It’s impossible to present a typical Chinese beauty consumer since the market is so massive and varied by geography, income and levels of economic development. But Yu’s tastes and demands are not unusual. She looks at beauty purchases as investments in her career.

Beauty products have become essential for young women in Beijing and Shanghai; and increasingly, customers like Yu are no longer found only in China’s most developed cities. Instead, more and more, smaller markets—cities of many millions that were virtually unknown to the West a decade ago—are emerging and offering new opportunities for international and domestic firms to grow in China. Along the way, companies are seeking to innovate and create specifically for the Chinese market, which they say has some of the most demanding customers in the world.

Cedric Prouvé, group president, international, for The Estée Lauder Cos. Inc., describes China’s consumers as “very aspirational.”

“They want the best possible products,” he says.

To that end, Estée Lauder and other major beauty companies have or are investing in research and development centers in China.

Lauder opened a new Shanghai R&D center in early June which is double the size of its original, and will be focused solely on creating products in China. “The new center will put a lot of relevance behind local products and consumer insights,” says Prouvé, “instead of developing research out of New York and spreading it to the consumer.”

Moreover, the products and lines developed in China could go global, with Chinese consumers driving new trends worldwide.

That’s not happening just yet, but many companies believe the day isn’t too far off. As Prouvé notes, research and development in China is important because creating products for some of the most demanding customers in the world will mean excellent products for customers globally.

“Asian women in general are true beauty seekers, quite phenomenally so,” says Joanne Crewes, vice president of Asia prestige & female beauty for Procter & Gamble International, who notes that customers here drive companies to continually work on new and better products. “They expect true quality and performance of their budget. Whether it be the Beijing or Shanghai consumer or in lesser developed areas, women’s expectations are getting higher and higher.”

Their expectations are so high because women in China see a direct link between success and looks. “You have to be willing to pay more for products to look good these days,” says Sheila Yan, a 26-year-old Beijing shopper. “If you don’t, others can pass you by quickly in life.”

L’Oréal China’s chief executive Paolo Gasparrini has witnessed China’s consumer beauty boom from its beginning, and has many unique insights into Chinese culture and how it shapes the beauty market across the country. A few examples: Chinese women consider advice and extensive input from their significant others and their families when making beauty purchases, in contrast with western women, who tend to make such decisions on their own or inspired by friends and trends.

Gasparrini says Chinese women also typically refrain from coloring their hair (apart from the older generation who rely on black hair color to cover greys). While tastes are changing, China’s beauty culture is unique. “The Chinese culture is very strong, very important,” he says. “It’s extremely highly linked to the market.”

A spokesperson for Sephora agrees, noting, “Although China has become more westernized in many aspects, most of the Chinese people are still introverted. They have the desire to express, but are often constrained by considering other people’s opinion and norms formed by the society.” The spokesperson went to on explain how that relates to beauty. “The rapid economic growth leads to a marketplace flooded with brands and merchandise, creating a phenomena where people express themselves through purchasing a certain product,” the spokesperson says. “They want to associate with that product to exhibit their social status and achievement in life.”

It is this mentality that has helped China move from a developing country to the world’s second-largest economy in the space of a generation. And now it is powering a consumer market that is soon expected to begin driving global tastes and trends, as Chinese incomes rise and tastes and expectations develop.

Euromonitor International pegs China’s beauty business at about $23.6 billion, making it the fourth largest in the world behind the United States, Japan and Brazil. According to China’s National Bureau of Statistics, China’s beauty sector has grown by an average of 16 percent annually for the past five years, with even higher growth rates in more developed cities like Beijing and Shanghai. And while the major markets are big, they’re not yet saturated. So room to grow at the top is massive.

Going forward, Euromonitor expects the market to grow 6 to 8 percent—slower than in the last decade, but still double the rate predicted for more developed markets. Much of that growth will come as retailers push deeper into China’s vast interior, smaller cities and less developed markets. And there are plenty of untouched spots remaining. The so-called “first tier” cities of Beijing, Shanghai, Guangzhou and Chengdu aren’t yet saturated and the rest of China remains eager for new products.

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