By our reckoning, China’s cosmetics market is significantly larger than is currently perceived, given that a large portion of items are purchased overseas. Thus, while Euromonitor puts it at US$33bn in 2017, in our view US$44bn is more realistic. The largest consumer of beauty products, the country’s incremental growth continues to drive the global market, especially at the premium end, which we expect to grow at twice the rate of the mass segment.
Dividing along geographic lines
Our analysis of geographic appeal confirms that Japanese names lead in terms of quality perception, and Western players have the highest brand awareness. However, the variance within geographies is wide; there is ample room for Chinese firms to find a strong niche, and for Korean lines to execute well. Indeed, 2018 saw solid results for Chinese brands in the purchase cycle, even though consumer perception took a small step back.
The leading brand in the beauty and personal care segment, L’Oreal Paris, has only 3.6% market share. Younger people are making more cosmetics purchases amid rising – and fragmenting – brand awareness. They are most aware of Western players (48%), followed by Chinese (46%), Korean (44%) and Japanese companies (37%). Shiseido is the most well-known name on a standalone basis, with 72% of all respondents saying they have heard of it. As ecommerce increases the availability of products, the value of brand awareness is a crucial commodity; its creation will cost newcomers significant marketing spend, and how well incumbents can maintain their loyal customers will remain essential for their margins.
Analysing brand success
A majority of brands, regardless of their country of origin, experienced an increase in brand awareness in 2018. However, overall brand quality dropped. While we are interested in the comparisons between different geographies, consumers see a much more vibrant and chaotic mosaic. On average, our respondents know more than 22 brands. Chinese consumers are increasingly well informed, so each player’s success now depends on management execution. Japanese skincare brands dominate quality rankings. LG H&H’s Whoo line is gaining awareness and loyal users. Amorepacific’s Sulwhasoo and Innisfree brands are performing well. At the top, Shiseido edges out Estée Lauder.