Demand for cosmetics is racing ahead, thanks in part to the 2006 liberalisation of direct sales Data from TNS Worldpanel China (National Urban Panel) shows that China’s cosmetics sector (skin-care and make-up products) grew from US$2.4 billion at the end of 2006 to US$3.1 billion by the end of 2007. This was a 29% rise. TNS is predicting growth of between 15% and 20% in the US$ value of China’s cosmetics market during the next three years.
If China achieves the 20% level of growth in 2008, its cosmetics market will be worth some US$3.7 billion, eclipsing the US cosmetics market (skin-care and make-up), which was worth an estimated US$3.6 billion at the end of 2007.
It’s not possible to say for sure when China’s cosmetics market will eclipse the US, but it will happen sooner than we think – the year 2008 is likely. Growth in 2007 over 2006 in the US cosmetics market was flat. If that continues in the next three years, China is likely to overtake the US. Even if we see growth of 2% in the US in 2008, China would probably take the lead over the US market.
What’s driving this?
Rising prices, consumers trading up to more expensive products, growing demand for anti-aging products, and the official relaxation in 2006 of an earlier ban on direct sales. On prices, for example, TNS Worldpanel China data shows the average price increase in China of make-up for 2007 vs 2006 was 5.2%, while prices of facial cleanser and skin moisturizer increased by 8.1% and 8.4% respectively.
China’s liberalisation of direct sales (meaning home sales) is having a major impact on the country’s cosmetics sector. China put a moratorium on direct sales in cosmetics in 1998. But the government issued a new law in 2006 that allowed direct sales on the back of tighter regulation. Major foreign brands now have fresh opportunities. TNS data shows the share of spend from the direct sales channel in China has shot up, rising 21% in 2007 over the previous year for skin-care products, and 23%
The first direct sales player granted a license to sell at national level in China was Avon, with brands targeting a range of affordability levels. Mary Kay is also permitted to undertake direct sales and was one of the fastest growing brands in 2006. Amway is another direct sales player, with its prestige Artistry brand. This is an exciting market for cosmetics brands from the US and Europe with the promise of growth in the next few years.