Page 302 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
In the past few years, the market for cosmetic products in better understanding of cosmetics consumption and
China has seen steady development. By the end of 2014, multiple sales channels, the momentum is expected to
the cosmetics market in China was highly concentrated. gather, according to Euromonitor, with the compound
In several subcategory markets, the top ten cosmetic average annual growth rate expected to reach 6.7
companies had a combined market share of 50 percent percent between 2016 and 2020. The value of the Chinese
and above. Multinational players continue to dominate cosmetics market can reach 435.2 billion yuan by 2020
the cosmetics market in China, with nine out of the top 10 (Song, Cosmetics). The demand for cosmetic packaging
players being foreign companies. The top three players, alone was valued at over $5.87 billion in 2016, is expected
Procter & Gamble, L’Oreal, and Shiseido together claimed to reach above $7.75 billion in 2022, and is anticipated
25.3 percent of the overall value sales on the Chinese to grow at a compounded annual growth rate of slightly
beauty and personal care market in 2014. The value of above 4.8 percent between 2017 and 2022 (Zion).
personal care and cosmetics products imported to China
from the U.S. in 2015 amounted to about $393 million More than 3,880 companies have been registered
in 2015 (Duncan). Euromonitor puts the total of retail for the cosmetic industry in China, more than 1,845 are
sales of skincare and make-up products in China at 160.8 located in Guangdong. However, taking into account the
billion yuan and 25.1 billion yuan in 2015, while the total cosmetics market, it is found that the national players
volume of retail sales of enterprises estimated at 245.3 represent only 20 percent of the market while foreign-
billion yuan in 2017 (Merso & Luo). funded enterprises and joint ventures possess the largest
share of 80 percent. The share of the national market
Major foreign cosmetic companies welcomed a 2017 brands grows gradually, resulting in competition with
move to cut red tape on imported beauty products their foreign counterparts. Some foreign brands like
in Shanghai. The decision to prune the customs Revlon, Garnier, and Episteme have announced that
procedure from three months to one week in the China they would withdraw from the market, due to a high
(Shanghai) Pilot Free Trade Zone (FTZ) has been hailed competition; however, these companies deserting the
as key breakthrough for overseas makeup and perfume market have little impact of the growing expansion on
businesses registered in the FTZ. New regulations started the domestic companies since multinational brands
in March 2017 and will run for a trial period until Dec 21, in the Chinese market have huge resources and strong
2018. If it proves successful, it will be extended. L’Oreal teams of research and development (Daxue, Cosmetic).
China was one of the first multinational cosmetics
companies to benefit from the policy change. “For In 2016, the growth rates of cosmetics sales through
cosmetic products, three months is a long time in terms department stores (skin care and make-ups) and
of fashion,” said Yu Xiao, Director of the Registration and supermarkets were minus 0.9 percent and minus 0.6
Claim Affairs at the Scientific and Regulatory Affairs percent respectively. However, the growth rate through
Department at L’Oreal China. “Companies will be more cosmetics chain stores has a clear increase of 9.2 percent,
competitive because of the new policy and consumers and for online platforms the increase was dramatic of 40
will be more in tune with international trends,” Yu said. percent. Online trading has incomparable geographical
Figures released showed that cosmetics brought into the advantages over traditional retail. Cross border
Shanghai FTZ make up 30.4 percent of the total volume e-commerce platforms that developed rapidly due to
of imported beauty products for the whole country. “The the low price barrier, have also contributed greatly to
new policy will benefit the color cosmetic products the the online trading market (CIRS). Online cosmetic sales
most as they are frequently updated with new editions,” amounted to around 124 billion yuan by 2015, with a
Yu said. “There are always special editions for Christmas growth rate of 25.2 percent compared to the previous
and New Year. With this policy, we can catch the right time year. An increasing number of both international and
to roll out our products here,” she added (Li, Beautiful). domestic players made significant efforts to set up their
online flagship stores during 2016. Sephora, Guerlain and
Furthermore, the Chinese Finance Ministry introduced Cle de Peau set up official online stores in Tmall.com in
a new policy in September 2016 that abolished the 2016, and Kosé Cosmeport also established a strategic
consumption tax for ordinary cosmetic products. The partnership with JD.com to open its flagship store in
tax for high-end cosmetics was reduced from 30 percent August 2016 (Euromonitor, Beauty). The middle class are
to 15 percent. With demographic changes, increased more likely than the average Chinese consumer to buy
consumer spending as a result of higher incomes, a their beauty through e-commerce, department stores
302
In the past few years, the market for cosmetic products in better understanding of cosmetics consumption and
China has seen steady development. By the end of 2014, multiple sales channels, the momentum is expected to
the cosmetics market in China was highly concentrated. gather, according to Euromonitor, with the compound
In several subcategory markets, the top ten cosmetic average annual growth rate expected to reach 6.7
companies had a combined market share of 50 percent percent between 2016 and 2020. The value of the Chinese
and above. Multinational players continue to dominate cosmetics market can reach 435.2 billion yuan by 2020
the cosmetics market in China, with nine out of the top 10 (Song, Cosmetics). The demand for cosmetic packaging
players being foreign companies. The top three players, alone was valued at over $5.87 billion in 2016, is expected
Procter & Gamble, L’Oreal, and Shiseido together claimed to reach above $7.75 billion in 2022, and is anticipated
25.3 percent of the overall value sales on the Chinese to grow at a compounded annual growth rate of slightly
beauty and personal care market in 2014. The value of above 4.8 percent between 2017 and 2022 (Zion).
personal care and cosmetics products imported to China
from the U.S. in 2015 amounted to about $393 million More than 3,880 companies have been registered
in 2015 (Duncan). Euromonitor puts the total of retail for the cosmetic industry in China, more than 1,845 are
sales of skincare and make-up products in China at 160.8 located in Guangdong. However, taking into account the
billion yuan and 25.1 billion yuan in 2015, while the total cosmetics market, it is found that the national players
volume of retail sales of enterprises estimated at 245.3 represent only 20 percent of the market while foreign-
billion yuan in 2017 (Merso & Luo). funded enterprises and joint ventures possess the largest
share of 80 percent. The share of the national market
Major foreign cosmetic companies welcomed a 2017 brands grows gradually, resulting in competition with
move to cut red tape on imported beauty products their foreign counterparts. Some foreign brands like
in Shanghai. The decision to prune the customs Revlon, Garnier, and Episteme have announced that
procedure from three months to one week in the China they would withdraw from the market, due to a high
(Shanghai) Pilot Free Trade Zone (FTZ) has been hailed competition; however, these companies deserting the
as key breakthrough for overseas makeup and perfume market have little impact of the growing expansion on
businesses registered in the FTZ. New regulations started the domestic companies since multinational brands
in March 2017 and will run for a trial period until Dec 21, in the Chinese market have huge resources and strong
2018. If it proves successful, it will be extended. L’Oreal teams of research and development (Daxue, Cosmetic).
China was one of the first multinational cosmetics
companies to benefit from the policy change. “For In 2016, the growth rates of cosmetics sales through
cosmetic products, three months is a long time in terms department stores (skin care and make-ups) and
of fashion,” said Yu Xiao, Director of the Registration and supermarkets were minus 0.9 percent and minus 0.6
Claim Affairs at the Scientific and Regulatory Affairs percent respectively. However, the growth rate through
Department at L’Oreal China. “Companies will be more cosmetics chain stores has a clear increase of 9.2 percent,
competitive because of the new policy and consumers and for online platforms the increase was dramatic of 40
will be more in tune with international trends,” Yu said. percent. Online trading has incomparable geographical
Figures released showed that cosmetics brought into the advantages over traditional retail. Cross border
Shanghai FTZ make up 30.4 percent of the total volume e-commerce platforms that developed rapidly due to
of imported beauty products for the whole country. “The the low price barrier, have also contributed greatly to
new policy will benefit the color cosmetic products the the online trading market (CIRS). Online cosmetic sales
most as they are frequently updated with new editions,” amounted to around 124 billion yuan by 2015, with a
Yu said. “There are always special editions for Christmas growth rate of 25.2 percent compared to the previous
and New Year. With this policy, we can catch the right time year. An increasing number of both international and
to roll out our products here,” she added (Li, Beautiful). domestic players made significant efforts to set up their
online flagship stores during 2016. Sephora, Guerlain and
Furthermore, the Chinese Finance Ministry introduced Cle de Peau set up official online stores in Tmall.com in
a new policy in September 2016 that abolished the 2016, and Kosé Cosmeport also established a strategic
consumption tax for ordinary cosmetic products. The partnership with JD.com to open its flagship store in
tax for high-end cosmetics was reduced from 30 percent August 2016 (Euromonitor, Beauty). The middle class are
to 15 percent. With demographic changes, increased more likely than the average Chinese consumer to buy
consumer spending as a result of higher incomes, a their beauty through e-commerce, department stores
302
