Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
June 2012.
osec.ch
Language.
English
Number of pages.
89 pages
Content.
Author.
Compiled by:
Swiss Business Hub China
In collaboration with:
CBC Business Consulting
Table of Content
Research Background....4~5
Macro Environment Analysis ........6~7
Luxury Market Overview
Luxury Cosmetics Market
8~14
15~25
Research Background
Located within the premises of the Swiss Embassy in Beijing, with area offices in
Shanghai and Guangzhou, the Swiss Business Hub (SBH) China is the network
partner of OSEC Business Network Switzerland. Osec & the SBH offer to small and
medium-sized Swiss and Liechtenstein enterprises individual advice on their
internationalization plans. Typical services include market analyses and evaluation,
contacts to business partners, and participation in major international fairs abroad as
part of the SWISS Pavilion.
Currently the Hub would like to do two different studies focusing on different
industries that are found to have a large potential but have however not necessarily
been in the media spotlight. The goal would be to give the potential target groups,
Swiss SMEs in the respective industries, an overview on the market, specific market
information, regulatory information, and some tips on how to enter the market.
The Hub would like to use its channels to publish this report in Switzerland under its
name (with CBC being prominently mentioned as the local research partner), making
the report available to companies interested.
CBC Business Consulting has been mandated by the Hub to conduct the market
survey of high end cosmetics in China. This report presents the main findings of this
study.
To provide the hub and target groups with an in-depth market, competitor,
distribution system, regulatory information of the luxury cosmetics market in
China and market entry suggestions for interested Swiss companies.
Research Scope:
Market Overview
Market Dynamics
Competitive Landscape
Distribution System
Regulatory Framework
6500
5200
8.3%
GDP
6079
14.2%
12.7%
3900
9.1%
10.0%
10.1% 10.4%
4758
2600
1661
1823
2423
'02
'03
'04
10.4%
4027
3277
2058
5165
9.6%
2876
9.2%
1300
0
'01
'05
GDP(USD billion)
'06
'07
'08
09
16%
14%
12%
10%
8%
6%
4%
2%
0%
10
Annual Growth
Note: the exchange rate of 1 USD = 6.4 RMB is adopted in this report.
Domestic investment and demand, especially in the real estate, automobile and
telecommunication industries, have remained quite strong and are still on the
rise.
However the central government has been taking various macro measures to curb a
trend of an over-heated economy by exerting various macro adjustment measures.
Tightened control of the real estate industry to rationalize the overall investment
and soaring retail price in many areas/cities, with similar actions taken for other
industries.
By the third quarter of 2011, Chinas GDP went up by 9.4% to reach USD 4,859
billion. Therefore the annual growth is estimated at 9% in 2011, and continues to
slow down to a relatively stable 8% per annum from 2012 and on.
Sold in a suitable environment, at a relative price level that is out of line with any
rational view of the products usefulness.
Class B
Class C
Very exclusive to
a few
Less exclusive
and becoming
daily necessities
for many & more
Still exclusive to
In the global picture, Japan remains the biggest market for luxury products by
occupying 1/3 of the worldwide consumption. China follows closely with a quarter
of the global share.
46%
54%
Domestic
Overseas
According to the World Luxury Association, the Chinese spent over USD 38
billion abroad in 2010, with a large portion going to the luxury goods. It is
estimated that Chinese luxury consumption will reach USD 46 billion in
2015.
In terms of domestic consumption, luxury cosmetics are taking a very important role
with about one quarter of the total market. Watches and fashion apparels/shoes
follow in close reach.
9
Jewelry
12%
14%
Handbags
Apparel/shoes
25%
20%
23%
Watch
Cosmetics
Others
China has the second largest population of global millionaires (in USD), only
following America. Meanwhile, China is the second largest luxury consumption
country after Japan. It is expected that China will overtake Japan to be the No. 1
consuming nation of luxury goods in 2012.
China has been leading in the wealth increment speed since 2002, with the
fastest compound growth rate of the number of millionaires from 2002 to 2010.
The rise of the new affluent class and consumers uplifting demand are the main
factors to drive the sales increase of luxury products in China.
With the appreciation of the Chinese currency and depreciation of EURO and
USD, it is much likely that Chinese will continue to spend more in luxury goods,
esp. in the European and American markets.
Tier-two and tier-three cities become rising battlefields for various top brands.
Enhance investment for brand image building and strengthen local elements.
More and more luxury goods are purchased and given as presents, with no
preference of certain category or brands.
The proportion of luxury goods consumed in China is 1/3 from China, 1/3 from
Hong Kong & Macao and 1/3 from Europe/America and other countries (58%
from Europe and 28% from America).
Most Chinese manufactures are striving to build their luxury brands. Chinas top ten
possible luxury brands will come out of industries like white wines, apparels, watches,
jewelry, cigarettes, tea, chinaware, perfumes, cosmetics and art & craft. They are
Maotai (liquor), Wuliangye (liquor), Yue-Sai (cosmetics & perfume), Zhonghua
11
The main consumer groups of luxury goods are getting younger on average, aged
25~30 years old in the next 3~5 years. The gender structure of those consumers is
man 75% and woman 25%.
After nearly 20 years of development, the luxury goods markets in tier-one cities like
Beijing, Shanghai, Guangzhou, etc. have been very well established and
sophisticated. Consumers from these regions are sensitive with product quality and
producers responsibilities. And manufacturers are cautious with customers demand
and pay closer attention to their brand images. The top three cities are Beijing,
Shanghai and Guangzhou.
New markets for luxury goods in China concentrate on tier-two and tier-three cities.
Competition amongst different top brands will be rather fierce. The top five cities are
Hangzhou, Wenzhou, Qingdao, Shenyang and Chengdu.
As Chinas political, economic and cultural center, luxury goods sell best in Beijing.
Shanghai takes the second place, but gathering more headquarters of various luxury
brands. The maturity of luxury market is the highest and competition is fierce.
Guangzhou is close to Hong Kong and Macao where Guangzhou local residents can
easily visit and buy duty-free luxury products. Therefore it lags far behind Beijing and
Shanghai in sales volume.
Hangzhou, Wenzhou, Chengdu, Shenyang and Qingdao turn out to be crucial
battlefields for luxury brands. However market promotion and sales resources are
restricting them in their overall expansion. Therefore luxury e-commerce is getting
more important. Many well-known virtual shops have emerged on the internet, such
as VIPStore, XIU, ShouKe, etc. These manufacturers are trying to make customers
have offline real experiences in their boutiques, and do their best to possess
advantages with accessibilities, quality and after-sales services.
13
16%
14%
12%
8%
10%
6%
5%
4%
1%
0%
In the past two years, luxury brands have been speeding up in expanding their
presence in China. By the August of 2010, fifteen luxury brands, such as Dunhill,
Burberry, Ferragamo, Gucci, Louis Vuitton, etc. have opened 80 new boutique stores
across China, with the total number approaching 550 stores by 2010.
Major demographics
Gender split: the % of each age groups in total population and the % in each age
group:
Age
% in total population
Male
Female
Male
Female
9-
5.8
4.8
55.1
44.9
10-19
7.2
6.3
53.5
46.5
20-29
7.0
7.0
50.1
49.9
30-39
7.8
8.0
49.4
50.6
40-49
8.7
8.9
49.6
50.4
50-59
7.0
7.0
50.2
49.8
60+
7.2
7.3
49.4
50.6
Total
50.8
49.2
50.8
49.2
As a result of the sustained growth in the national economy and individual wealth, the
cosmetics industry has witnessed a stable and sound growth in recent years.
The total sales of the cosmetic industry in China are calculated at USD 22.3 billion in
2010, up by 9% from 2009. This figure includes the imported cosmetics but excludes
the exports to foreign markets.
This current growth pattern of about 10% annually is expected to continue for the
next several years.
Market Size
40
15%
9%
30
20
18.9
8%
20.4
9%
22.3
10%
24.5
10%
27
29.8
10%
32.7
10%
35.8
10%
9%
5%
10
0
0%
2008
2009
2010
2011
Market size
2012
2013
2014
2015
50
YOY growth
15
According to the Customs, the total imported cosmetics is valued at about USD 1
billion, or over 47,000 tons in 2010 while the export value achieves $ 1.62 billion.
The detailed product information, including HS code, product name, import values
and YOY growth from 2009 is as follows:
HS CODE
33030000
33041000
33042000
33049100
33049900
33051000
33052000
33053000
33059000
33072000
Product Name
Perfumes & Toilet Waters
Lip Treatment
Eye Treatment
Incense Powder (no matter
whether pressed)
Others (including skin care
product, Sunscreen, etc. )
Shampoo
Perm Agent
Hairspray
Others
Body Deodorant and
Antiperspirant
Million USD
68.7
26.4
47.6
Growth Rate %
2009/2010
20.33
7.07
21.33
36.2
25.71
689.1
36.28
25.3
2.7
7.2
32.6
32.32
89.57
44.83
29.25
5.5
38.52
Skin care products (face/body lotion, cream, etc.): the most important sector and
fiercest market competition among various brands
Makeup products (lip sticks, perfume, face powder, etc.): fastest growing
Hair care products (shampoo, hair gel, etc.): getting mature but remaining stable
Others including baby care products, those for anti-aging, sports purposes, etc.:
small in total share but demanding constant attention
8.7
24%
26%
25%
6
4
2
2.1
2.6
3.3
24%
4.1
7.3
22%
5
40%
30%
6.1
20%
22%
20%
19%
2014
2015
10%
0%
2008
2009
2010
2011
Market size
2012
2013
10
YOY growth
In the meantime the luxury and/or upper end cosmetics mainly depend on imports.
Since the Chinese consumption of luxury cosmetics is in a rapidly rising stage and is
in a high price-to-earnings scenario, the multinational cosmetics companies are
generally rather speedy in introducing their luxury & upper end brands/products to
China. For instance, Estee Lauder has continuously opened four special cosmetics
counters for its new brand Origins in Shanghai and Beijing.
In terms of breakdown of product types, it has much in common with the overall
cosmetic industry:
Skin care products are the fastest growing and most developed sector.
Hair care cosmetics are getting saturated, thus with its growth slowing down.
17
Demand for makeup products increases by 30% per year and the market is far
from being saturated.
60% of Chinas high-end lip stick and perfume sales volume is dominated by
worldwide well-known brands, who account for over 90% of Chinas perfume
sales value.
Cosmetics for men grew robustly in recent years, and have about 12.7 % of the
total market share. Oil-control creams and facial-cleansers are rather popular.
HR cost; 6%
Stores; 3%
Ad & PR; 5%
Govt.
taxation;
20%
Raw
materials; 5%
Manuf. Cost;
6%
Brand value;
55%
Import tariff is about 6.5%, with little difference for different origins.
In addition, 30% consumption tax for eleven kinds of cosmetics including lip
make-up preparation and eye make-up preparation.
The accumulated import linkage taxation for perfume and makeup can reach up to 60%
of the import prices. For example, the retail price of LANCOME blanc expert ultimate
whitening hydrating (50ml) is about USD 109 in mainland but it is USD 57 in Hong
Kong, which is nearly 50% cheaper. This tremendously stimulates overseas
purchasing.
It is noteworthy to point out that these cosmetics or goods are mainly commodity
products or goods that are intended for resale or distribution. Cosmetics for
individual self-use are still tax free.
19
Market Segmentation
In terms of origins, luxury cosmetics are mainly from Europe, esp. France, Italy and
UK, where the local markets are relatively mature. Approximately 70% of the luxury
goods are exported to the biggest luxury consumption countries, including China.
There are other few luxury cosmetics brands from America and Japan.
According to Customs figures, 52.4% of the luxury cosmetics sold in China are from
Europe, 24% from the Americas. Japan is the most important exporting nation in Asia
to China.
Segmentation by Origin
5%
Europe
Americas
19%
24%
52%
Asia
Others
Switzerland also has a few luxury brands in comparison with the numerous European
brands, such as Swiss Perfection & BELLEFONTAINE from Switzerland.
Top luxury skin care & nourishing creams are made in Switzerland, but the price
is very expensive (a small bottle of 30ml face cream costing about USD 1200),
very often higher than those famous European brands. For example, La prairie
cream is over seven times more expensive than La Collines.
Thus, it is not so often to find Swiss cosmetics on the Chinese market. The
consumers who are interested in and can afford to buy Swiss cosmetics often go
to Switzerland to buy luxury cosmetics or to enjoy body care/health therapy
there.
Price references
Due to varieties of cosmetics, some representative ones are chosen to show the
retail price situation of different luxury cosmetics that are sold in China, such as
creams, eye treatment, serum / concentrate treatment and makeup in USD.
Cream/50ml
Eye Treatment
/15ml
Serum/Concentrate
Treatment
Markup/
30ml
La prairie
560~1515
439/20ml
864
273/32g
Shiseido
361
118
129/30ml
68
LA MER
356
303
606/50ml
273
LANCOME
94~598
133~265
118/30ml
94
Swissweda
174~1212/30ml
98/(5.5ml*5)
Cosme Secorte
1060/45g
121/40ml
242
Bellefontaine
376~482
361
436/30ml
VALMONT
220~706
288
173/30ml
180
65~194
118
70/32g
Estee Lauder
112~818
273
98~379/30ml
61
Dior
118~485
120
636/15ml~220/50ml
85
Chanel
104~483
114~200
514/30ml
83
HR
197~573
273
451/40ml
179
83~220/30ml
120
280/30ml
Origins
71~88
65
133/50ml
Lancaster
76~135
56
130/350ml
Loccitane
65~148
50
88/30ml
Jurlique
63~70/40ml
63
215/100ml
Kiehls
44~74
44~62
98/50ml
76
Brand
Elizabeth Arden
La Colline
21
Product Categories
All of the luxury cosmetics manufacturers have their own comprehensive production
lines of cream, eye treatment and concentrate treatment, which generally have much
added value. But approximate 50% of these manufacturers dont have a sufficient
portfolio of markup cosmetics and perfumes.
Standard package is 15~50ml.
China is in strong demand for luxury cosmetics, which is shown by the robust annual
growth of the overall industry. And it is also demonstrated by the annual increase for
various products in the List of imported cosmetics in 2010 (with half of listed 10 items
growing by over 30% from 2009).
Skin care product dominates with 73.2% of the import cosmetics.
Though the import value of perm agent is only USD 2.7million, the year-on-year
growth rate is as high as 89.57%.
Market Dynamics
China has entered into a rapidly rising stage in luxury cosmetics consumption. There
are big market potentials to be tapped in the next decade.
The mainstream consumers of luxury cosmetics are below 40 years old (18~39)
and the average age of consumption group is getting younger and younger. Their
demands for luxury cosmetics contribute 70% of nationwide sales value.
The gender ratio to luxury cosmetics consumption is male 27%: female 73%.
Demands for luxury cosmetics, especially skin care products for male ascend up
step by step. It is estimated the percentage will rise by 10% till the end of 2012.
Income increase results in more and more people who have the opportunities to
go abroad. Moreover the price advantage of purchasing luxury cosmetics abroad
is extremely evident. Therefore, overseas purchase via different means has
become a trend for many consumers.
Heavy consumption areas are eastern & southern coastal areas and the Bohai
Rim, otherwise known as Beijing-Tianjin Corridor.
More and more luxury cosmetics brands begin to penetrate into tourism
destinations such as Qingdao, Sanya, etc. and wealthy cities such as Wenzhou
where a large number of small & medium-sized enterprises exist.
23
Consumption Considerations
In terms of brand selection and considerations, over one third of the luxury cosmetics
consumers think highly of brand history and culture. They pay close attention to
launches of new products and the overall trend of consumption. About half of them
hope to get relevant information from the brand manufacturers or their agents, which
will influence their purchasing decisions substantially.
When it comes to the reasons behind purchasing luxury cosmetics, a recent study
reveals that nearly 86% of the buyers think their purpose is to show a high quality of
life. Approximate 60% of them consider luxury cosmetics to be able to reflect their
individual characteristics & taste.
86%
60%
43%
Improve self-attraction
32%
20%
16%
0%
50%
100%
As far as brands are concerned, the French, Japanese and American luxury
cosmetics brands are more preferred than others because of their constant market
advertising and promotion, nice quality and appropriate pricing. They are rather
popular among up to 40% of the Chinese top cosmetics consumers.
In comparison with its key competitors, again Swiss brands are preferred by some
consumers but they are far less known to many Chinese consumers.
Brand Preference
Channel
40%
LANCOME
38%
Dior
35%
Estee Lauder
31%
Shiseido
30%
Elizabeth Arden
28%
HR
19%
Jurlique
15%
Lancaster
12%
Origins
10%
Kiehl's
8%
L'occitane
7%
La Colline
6%
Swissweda
3%
VALMONT
3%
Cosme Secorte 2%
LA MER 2%
Bellefontaine 2%
La prairie 1%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
25
Competitive Landscape
Overview of the competitive market
Newcomers to the Chinese cosmetic market will face fierce competition. Multinational
giants who have been present much earlier have achieved an overwhelming market
coverage and influence.
Beijing and Shanghai are definitely the top two destinations for almost all luxury
brands, including new incoming cosmetic brands. Then they generally expand to
Hangzhou, Guangzhou, Qingdao, Tianjin and other cities including Ningbo, Chengdu,
Tianjin, Zhengzhou, etc.
Large and continued investment in marketing and advertisement is mandatory to
achieve excellent performance in China.
Large cosmetic giants like ESTEE LAUDER and LOreal invest heavily in
marketing and advertising via various channels, such as TV, magazine,
promotional events, brand representatives, sponsorship of influential events, etc.
Other new entrants mainly focus on one or two media for advertisement like
magazine, which is relatively cheaper but still effective in precise marketing to
their target consumers.
Cosmetics brands labeled Swiss usually have good reputation among Chinese
consumers, which is a natural advantage. However most Swiss brands are not
doing very well in raising their brand awareness in China due to insufficient
investments in advertising. Some of them even do not have a Chinese official
website, making it inconvenient to understand their products and to purchase
them.
At the early market entry stage, the business model of distribution via agents is often
used. And most companies choose to setup their own legal entity in China after sales
revenue is stabilized, usually after 3-5 years.
In terms of retail, traditional channels, namely beauty counters at department stores
or shopping malls are still most preferred. However online shopping is getting more
and more popular, both among the consumers but also among the retailers.
Cosmetics companies either choose to convert their official websites into online
shopping center, or cooperate with other third party online shopping portals.
Large cosmetic groups like LOreal have also adopted the online shopping
system for the majority of its affiliated brands.
Performance of Swiss brands varies dramatically. Most of them are sold mainly in
beauty salons instead of traditional but predominant retail outlets in department
stores.
La Colline and Valmont are cooperating with local distributors, mainly selling to
consumers in beauty salons or SPAs.
Swiss Perfection, who was in cooperation with a local partner, tried to expand in
department stores and shopping malls but finally failed due to the high
investment in advertisement and rent in top ranking stores.
There are other brands not shortlisted or studied in this survey. They work with
influential cosmetics chain stores such as Hong Kong SASA China Co., Ltd.
27
la prairie SWITZERLAND
China Market Development
First launched in SCITECH Plaza Beijing in 2005 and then expanded to high-end
department stores or shopping malls in 13 cities; on Aug. 25th 2011, the 19th
beauty counter was opened in Beijing
Now considering cooperation with premier SPA brand, also to distribute in beauty
salons in the future
The China market is developing much faster than any other markets in the world
for LP.
Cooperated with top level fashion magazine (i.e. ELLE) for advertisement and
products promotion
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited, like the China entry news release conference, 5th
anniversary event, etc.
29
Distribution Channels
Address: Room 4101, Tower2, Plazza66, 1366 West Nanjing Rd., Shanghai,
1366 2 4101
Cream
3,700 RMB
5,200 RMB
10,000 RMB
Eye Treatment
2900 RMB
Serum/Concentrate Treatment:
5700 RMB
Makeup Cosmetics
1800 RMB
31
SHISEIDO
China Market Development
Technological assistance and joint venture program with Beijing Liyuan Daily
Chemicals Factory to launch a locally developed brand, HUAZI, in 1983
Joint venture Shisedo Liyuan Cosmetic Co., Ltd. was founded and factory
established in 1991-1993
Joint venture Shanghai Zhuoduozi Citic Cosmetic Co,. Ltd was founded for the
East China Area in 1998
Shisedo Life Quality Beauty Center was established in Shanghai to offer free
beauty advice for customers.
Shiseido China widely used varieties of advertisement channels for its brands,
like TV advertisement for AUPRES and chose actress SUN Li to be the brand
representative
Shiseido paid attention to charity activities and has built 5 Hope Primary Schools
in Inner Mongolia, Tibet, Shanxi, Hebei and Beijing so as to set up good image of
social responsibilities
Hosted and sponsored various contests for young people, such as modeling,
attracted attention and transmitted the brand image to the younger generation
Distribution Channels
Shiseido cooperated with local provincial companies for distribution and its
products have widely reached tier1, tier 2 and tier 3 cities all over China through
department stores, shopping malls, special beauty shops and supermarkets
Distributor:
Address: 10th Building, No. 1558 Longdong Road, Pudong District, Shanghai
1558 10
Cream
Benefiance Nutriperfect
2,380 RMB
780 RMB
Serum/Concentrate Treatment:
860 RMB
Eye Treatment
950 RMB
Makeup Cosmetics
450 RMB
33
LA MER
China Market Development
First launched in SCITECH Plaza Beijing in 2004 and then expanded to 20 beauty counters in
high-end department store or shopping malls in 14 cities all over mainland China
La Mer managed to setup an image of ocean environment protector in China. It cooperated with
National Geographic to host the Looking for the China Blue Ocean Event as well as sponsored
Shanghai Jiaotong University for research on the HAB (Harmful Alga Bloom) in China.
Cooperated with top level fashion magazine (i.e. ELLE) for advertisement and products
promotion
Hosted luxurious banquet event for new products launch and anniversaries with top national film
stars invited
Distribution Channels
China Distributor:
Address: Rm 301, 302 & 306, No. 3688 Jindu Rd, Minhang District, Shanghai,
3688 301302306
20 direct sales beauty counters in high-end department stores or shopping malls in 14 cities
Cream
1,600 RMB
2,350 RMB
50ml
2,000 RMB
Serum/Concentrate Treatment:
1,600 RMB
Eye Treatment
4,000 RMB
Makeup Cosmetics
35
LOCCITANE EN PROVENCE
China Market Development
First launched in 2005 and then expanded to 86 beauty counters in middle and
upper level department stores or shopping malls in 34 cities all over China
Cooperated with top level fashion magazine (i.e. ELLE) for advertisement and
products promotion
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited
Distribution Channels
China Distributor:
Cream
980 RMB
800 RMB
Eye Treatment
330 RMB
Serum/Concentrate Treatment
580 RMB
Makeup Cosmetics
NONE
37
Jurlique
China Market Development
Cooperated with many magazines and in order to enforce the brand image,
Jurlique currently make advertisement on 3-4 magazines on a monthly basis,
namely Psychologies, Self, Ruili, Style, Cosmopolitan, Vogue, ELLE, Mina, Oggi,
CeCi, LOFFICIEL, Marie Claire, etc.
Distribution Channels
China Distributor:
Cream
420RMB
420 RMB
460 RMB
800 RMB
Eye Treatment
420 RMB
Serum/Concentrate Treatment:
1420 RMB
Makeup Cosmetics
NONE
39
First launched in Shanghai Parkson in 2010 and then expanded to 20 direct sales
beauty counters in high-end department stores or shopping malls in 9 cities
Cooperated with fashion magazine (i.e. ELLE) for advertisement and products
promotion
Hosted event for new products launch and anniversaries with top national film
stars invited
Distribution Channels
China Distributor
Address: Rm 301, 302 & 306, No. 3688 Jindu Rd, Minhang District, Shanghai,
3688 301302306
Cream
Eye Treatment
580 RMB
430 RMB
Serum/Concentrate Treatment:
Dr. Andrew Weil for Origins Mega-Mushroom Skin Relief 50 ml 880 RMB
41
CHANEL
China Market Development
Cooperated with top level fashion magazine for advertisement and products
promotion
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited
Distribution Channels
China Distributor:
Cream
3190 RMB
1305 RMB
690 RMB
Eye Treatment
Serum/Concentrate Treatment:
1315 RMB
3390 RMB
Makeup Cosmetics
550 RMB
43
HR
China Market Development
Cooperated with top level fashion magazine (i.e. ELLE) for advertisement and
products promotion
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited
Distribution Channels
China Distributor:
Cream
1,300 RMB
2,380 RMB
3,780 RMB
Eye Treatment
1,800 RMB
Serum/Concentrate Treatment:
2,980 RMB
Makeup Cosmetics
11,80 RMB
45
LANCME
China Market Development
Till now, there are 104 direct sales beauty counters in high-end department
stores or shopping malls in 38 tier 1 and tier 2 cities
Cooperated with top level fashion magazine (i.e. ELLE) for advertisement and
products promotion
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited, i.e. 75th anniversary of Lancome was celebrated in
the World Exhibition Park in Shanghai in 2010
Distribution Channels
China Distributor:
Online
shopping
at
www.lancome.com.cn,
http://static.msn.yobrand.com/promote/luxurious/luxurious.html
47
Cream
Renergie Lift Volumetry Advanced Lifting and Shaping Cream 50ml 895
RMB
3,950 RMB
Eye Treatment
1750 RMB
Serum/Concentrate Treatment
620 RMB
Genefique 30ml
780 RMB
Makeup Cosmetics
620 RMB
Kiehls
China Market Development
Till now, Kiehls has already set up 20 beauty counters in more than 13 cities
Cooperated monthly with around 20 top level fashion magazine (i.e. ELLE) for
advertisement and products promotion and invited famous stars and models to
share experiences with the brand
49
Distribution Channels
China Distributor:
Online
shopping at
www.luxurybeauty.com
its
official
website
www.kiehls.com.cn
Cream
490 RMB
290 RMB
580 RMB
Eye Treatment
290 RMB
Serum/Concentrate Treatment:
650 RMB
500 RMB
Makeup Cosmetics
NONE
410 RMB
and
ESTEE LAUDER
China Market Development
In the past 18 years, Estee Lauder has opened 91 direct sales beauty counters in
high-end department stores or shopping malls in 36 tier 1 and tier 2 cities
In 2005, the company has setup its own R & D Center in Shanghai
Cooperated with top level fashion magazine (i.e. ELLE) for advertisement and
products promotion
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited
51
Distribution Channels
China Distributor
Address: Rm 301, 302 & 306, No. 3688 Jindu Rd, Minhang District, Shanghai,
3688 301302306
Cream
Time Zone Line and Wrinkle Reducing Moisturizers 50ml 740 RMB
Eye Treatment
Serum/Concentrate Treatment:
Makeup Cosmetics
Dior
China Market Development
China market entry in 1979 as the first foreign brand to cooperate with Friendship
Department Store in Shanghai, Beijing and Guangzhou
Cooperated with top level fashion magazine for advertisement and products
promotion
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited
Invited top model or film star to be the brand representative, i.e. Sara Stone
came to Shanghai for the International Film Festival and participated in event of
Dior
53
Distribution Channels
China Distributor:
Address: 2nd Floor, 32# Factory, No. 190 Hedan Rd, Waigaoqiao Bonded
Area, Shanghai 190 32 B
Through beauty counters in tier one and tier two cities all over China
Cream
780 RMB
895 RMB
1080 RMB
3200 RMB
Eye Treatment
790 RMB
Serum/Concentrate Treatment:
1450 RMB
4200 RMB
Makeup Cosmetics
560 RMB
Elizabeth Arden
China Market Development
Till now, there are all together more than 200 beauty counters in up to 101 tier 1,
tier 2 and tier 3 cities
Website: www.china.elizabetharden.com/
Forum: www.ea-beauty.com
Cooperated with top level fashion magazine for advertisement and products
promotion
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited, etc.
Sponsored influential event like the International Beauty Contest for Tourism.
Distribution Channels
China Distributor
Address: Rm 322, The Bank Building, No. 24, Jiafeng Road, Waigaoqiao
Free-duty Zone, Shanghai
200+ beauty counters in middle to top level department stores in 100+ cities
Cream
350 RMB
710 RMB
1,190 RMB
Eye Treatment
430 RMB
1,280 RMB
Serum/Concentrate Treatment
780 RMB
Makeup Cosmetics
460 RMB
COSME SECORTE
China Market Development
First launched in Shin Kong Place in Beijing in 2009 and then expanded to
Hangzhou Tower in Hangzhou, Zhejiang Province in 2010
Opening ceremony of
Beijing Beauty Counter
in 2009
Cooperated with top level fashion magazine for advertisement and products
promotion
Distribution Channels
57
China Distributor:
Only 2 direct retail beauty counters in high-end department stores and shopping
malls in 2 cities (Beijing and Hangzhou)
Cream
7,000 RMB
1,200 RMB
Serum/Concentrate Treatment:
800 RMB
Makeup Cosmetics
1,600 RMB
LANCASTER
China Market Development
Website: www.lancaster-beauty.com.cn
59
Distribution Channels
China Distributor:
Cream
Suractif Non-stop Lifting Advanced Rich Day Cream 50ml 890 RMB
Eye Treatment
Revolcanic Eyes deep moisturizing anti-fatigue eye care 15ml 370 RMB
Serum/Concentrate Treatment:
VALMONT
China Market Development
Two distribution agents: Beijing CLV Cosmetic Co., Ltd. in the North and Joy
Century in Shenzhen in the South. Beijing agent is mainly in charge of the
distribution, import issues, etc.
Established network with top grade beauty salons and 5 star hotels for products
distribution
http://www.evalmont.com/flashCn/main_cn.htm#/products
Cooperated with top level fashion magazine for advertisement and products
promotion
Distribution Channels
Address: Room 1511, COSCO Happiness (Beijing) Tower, 3 Dong San Huan
Bei Lu, Chaoyang District, Beijing 3
A 1511
61
Address: Unit D, 7th Floor, Intelligent Tower, 12 Foo Man Road, Shenzhen
7D
Cream
2,140 RMB
1,900 RMB
Serum/Concentrate Treatment:
1,450 RMB
Eye Treatment
4,660 RMB
Makeup Cosmetics
None
1,145 RMB
La Colline
China Market Development
First launched in Jinyuan Shopping mall in 2004 and then expanded to high-end
department store or shopping malls in Shanghai and other tier 1 or tier 2 cities
Besides opening beauty counters, La Colline also cooperated with top spa and
beauty salons
Hosted news release conference for important events, especially for launch of
new product line
Cooperated with top level fashion magazine (i.e. Rui Li, Spa China, City Sap) for
advertisement and products promotion
Distribution Channels
63
China Distributor:
Cooperated with many beauty salons and SPA centers for distributing
Cream
546 RMB
1,450 RMB
1,125 RMB
Eye Treatment
788 RMB
Serum/Concentrate Treatment
Makeup Cosmetics
None
1,850 RMB
Bellefontaine Switzerland
China Market Development
China market entry in 2009 in Beijing: first launched in Beijing and then in the
same year, expanded to Shanghai and Suzhou
Cooperated with premier and luxurious SPA brand all over China
www.swissbellefontaine.ch/
Highlighted the image as Swiss made and used by the Royal family
Hosted luxurious banquet event for new products launch and anniversaries with
top national film stars invited. In the opening ceremony for Shanghai and Beijing
beauty counters, tens of top film stars were invited to attend; In promotional
events, many TV or film stars were also invited to share their skin care tips and
experience with the brand
65
Distribution Channels
China Distributor:
Cooperated and also distributed with top grade SPA or beauty Salon
Cream
3,180 RMB
2,480 RMB
Eye Treatment
2,380 RMB
Serum/Concentrate Treatment
Makeup Cosmetics
None
2,880 RMB
swissweda
China Market Development
In 2010, Swissweda launched its premier product line in World Exhibition Park in
Shanghai
Website: www.swissweda.cn
Hosted news release conference for important events, especially held the
Shanghai entry ceremony in the Swiss Pavilion in the World Exhibition
Invited VIP customers for products launch event and experience new product,
sent direct mail with samples for potential clients
Distributed promotional set of products in the name of some great events, like the
World Exhibition Set
Distribution Channels
China Distributor:
67
Cream
1,150 RMB
8,000 RMB
Eye Treatment
Makeup Cosmetics
NONE
650 RMB
SWISS PERFECTION
China Market Development
First launched in Beijing and Shanghai with beauty counters in 2007. It has tried
to setup its beauty counter in Bund the 18th but failed.
After 2-3 years of retail business in China, they withdrew from those shopping
malls and department stores and currently no retail outlet in mainland China.
Hosted news release conference for important event, i.e. new product launch at
Bund the 18th in 2007
Cooperated with top level fashion magazine for advertisement and products
promotion
Invited top model or film star to be the brand representative (etc. Meng
Guangmei)
Distribution Channels
China Distributor
Address: 11F, New Huangpu Financial Building, No. 61 East Nanjing Road,
Shanghai, 61 11
69
Besides Swiss Perfection, this company has also distributed other Swiss
brands such as La Danza.
Swiss Perfection used to setup beauty counters in high-end shopping malls and
department stores. However, the Swiss side decided to withdraw the investment
due to too high marketing costs and poor performance in the market
Distribution System
Traditional retail channels, particularly beauty counters in well-known and high end
shopping malls or department stores are still predominant in the distribution and retail
of luxury cosmetics.
The great majority of luxury cosmetic brands have been actively fighting for the
best spot at various landmark dept. stores.
Some major department stores or shopping malls in tier one and tier two cities,
which are always the first option for cosmetic companies to consider:
With the fast-growing trend of online shopping in China, especially with the boom
of Taobao which is the most well-known online shopping portal in China, various
cosmetic brands have also launched online shopping system, especially those
71
giant cosmetic groups. They usually combine online shopping together with
direct sales at traditional outlets.
Besides their official websites, cosmetic brands also refer to public shopping
websites, like MSN shopping channels, Taobao or Sephora for online distribution,
depending on the differentiation in their general budget or target groups.
Brands or groups who have adopted this online channel and their respective
shopping website include:
www.loccitane.cn
www.origins.com.cn
www.esteelauder.com.cn
LOreal Group:
-
www.lancome.com.cn
www.sephora.cn
Kose Group
-
However, Cosme Decorte has been excluded from the group online
shopping website, due to its brand positioning.
Some relatively minority brands, like Valmont and Bellefontaine, mainly distribute
their products in cooperated or authorized SPAs or beauty salons. Valmont has
also set up beauty counters in shopping malls and department stores, but their
retail price is much higher compared to those distributed in salons. It is commonly
accepted that their beauty boutiques are mainly for the purpose of display and
advertisement instead of retailing.
Bellefontaine has cooperated and also distributed with top grade SPA or
beauty salons.
73
Regulatory Framework
Governing Bodies and Regulations
Quality and safety have always been carefully attended by the governing bodies in
China, esp. after the much reported and disputed safety scandal of SK-II (a luxury
brand manufactured by P&G Japan. Its exports to China were found to contain
prohibited elements such as Chromium and Neodymium in 2006 and had to be
removed from the shelf.)
With the change in name and responsibilities, State Food & Drug Administration is
currently the most important governing authority for cosmetics in China.
Currently the major governmental departments in charge of cosmetics monitoring are:
Food & Drug Administration Department, Public Health Bureau, Quality Supervision
Bureau, Industrial & Commercial Bureau, and Commodity Inspection & Testing
Bureau. These departments are generally independent with their own managing
responsibilities.
Health Bureau: record and examination & approval, sanitary condition, issue of
sanitation license
Major regulations
75
The registration system and the filing system are generally the same, with
the only difference that the registration system for special-function cosmetics
requires an extra Technical Review or Examination of submitted materials.
Testing of sample products goes ahead of the overall filing system or registration.
The company can register or file the products at SFDA ONLY AFTER the test
meets the local requirement.
One filing is for one product name only. The possibly various products under one
brand or series of one product should be registered individually.
Generally speaking, China has been taking active measures to simplify the
procedures and requirements for imported cosmetics, esp. for non-special
function cosmetics.
Authorities involved:
Approval authorities
Evaluation committee
77
Inspection:
-
In addition to the normal filing system, an extra Licensing is required for 9 types
of special cosmetics: including hair growing, hair dye, hair perming, depilating,
breast beauty, slimming, deodorant, spot-removing and UV prevention cosmetics
Prepare and provide the official Inspection and Quarantine Certificate by the
relevant overseas agencies/authorities
Generally one Inspection Certificate and one Risk Evaluation report for one
product
Documents required:
-
Product formula
Other documents related and helpful for the inspection, plus three
samples with complete and good package
All the documents should in Chinese and have 1 original copy as well
as 3 photo copies
Submit the forms and other documents to the Health Administration of the
State Council who will arrange the examination and approval process
Obtain the Health Permit for Import Cosmetics, which is valid for 4 years and
should be renewed 4-6 months prior to the expiry.
Overall requirement of the draft Chinese label: the distributor, importer, agent
in China, and/or contact in China should be legally registered names and
address
Documents required:
-
Formulation
Approval granted
Customs Declaring
81
Import Taxation
Overall import taxation for cosmetics
MFN Consumption
VAT %
Rate %
Tariff %
General
Tariff %
HS CODE
Product Name
33030000
10
30 ad valorem
17
150
33041000
Lip Treatment
10
30 ad valorem
17
150
33042000
Eye Treatment
10
30 ad valorem
17
150
33043000
Nails cosmetics
10
30 ad valorem
17
150
33049100
10
30 ad valorem
17
150
33049900
30 ad valorem
17
150
33049900
91
Beauty or make-up
preparationscontaining
composition of plants in imminent
dangers
6.5
30 ad valorem
17
150
33051000
Other shampoo
6.5
17
150
33051000
10
Shampoos containing
composition of plants in imminent
dangers
6.5
17
150
33052000
Perm Agent
10
17
150
33053000
Hairspray
10
17
150
33072000
10
17
150
33059000
Others
10
17
150
From Jan. 1st 2012, China has reduced import tariff for over 730 commodities,
including skin care cosmetics of which the import duty has decreased from previous
6.5% to 5% for most favorable nations (MFN).
83
Domestic Taxation
Local taxations for imported cosmetics include the following two parts. One is paid
based composite assessable price, the other is paid based on incomes.
Composite assessable price=landed price/CIF price + customs duty) / (1product tax rate)
Still very strong and stable GDP growth averaged at 7-8% in the next several
years
Consequently constant rise in individual income and purchase power, esp. the
high net worth of affluent households (millionaires) who retain the largest target
groups for various luxury products, including cosmetics
Strong demand of luxury/upper end cosmetics valued at USD 3.3 billion in the
domestic market, not to mention the vast amount spending in overseas market
which is very likely to see a downturn as the domestic supply is getting better in
product variety, availability, price and service.
And vigorous annual growth of around 20% till 2015 in the domestic luxury
cosmetics market
HOW TO ENTER?
Suggestions on the entry strategy
Company establishment & registration
No legal entity in China (first three years)
Sole reliance on local partners (distributors/agents) to nurture and
gradually expand the Chinese market
Office-in-Office (OIO) solutions to enhance the management of local
agent (s) and better understand the Chinese market with its own staff
Local partnership
Better to have one single agent nationwide for better control and dealer
management efficiency
The fastest and most cost efficient way of entering the Chinese market: just
be here in China without being legally registered
CBC: offering a furnished office space, recruiting and employing the staff,
providing various administrative and secretarial support, coordination and
marketing assistance and supervising
Client: having its staff on the site to coach and manage local partners and
getting itself ready for a more active market entry
Rep. Office
Good to the brand image, no need for registered capital and less requirement
for team setup
Cannot invoice clients directly, cannot employ staff by itself, still need to pay
corporate income tax based on office expenditures, therefore not very much
suggested in general
Location
Most convenient and thus suggested to rely on the local partner for the various
and time consuming import and custom clearing process
Marketing strategies
Branding
Brand history, uniqueness of the products, special success stories and long
built brand image are the aspects to consider.
The Swiss image is rather well perceived and accepted among many
Chinese, which is something to take advantage of.
TV advertisement is the most direct and effective way when the company
has sufficient marketing budget. If not, magazine or internet also works.
Fashion magazines like Elle, Ruili are very good choices to consider when
aiming targeting the white collar females aged 22-45.
Retail channels
Traditional channels such as dept. stores should never be ignored. But they
are seldom cost-friendly to the company. Top ranking department stores
means top ranking lease.
SPA and beauty salons are pursued by some brands, but generally not so
hot. Besides the SPA and beauty salon sector is not so well organized and
less transparent with the products they claim to use and those they actually
use. This may have some less desirable impact on the brand. And it can be a
big challenge to find well-developed top ranking salons nationwide.
Pricing
For late comers, it is much suggested that they price their products a bit
lower than that of their key competitors who have been well established here
in China.
A unified pricing system should be applied for the same product in all retail
channels across China.
Enhancing staff training and management so that they can deliver the same
service as expected by customers, esp. in Tier 2 and Tier 3 cities.
89