China will soon become the world’s largest economy. It is a much poorer country than the US, which it will overtake, but its aggregate purchasing power (a population of 1.3 bn) means that it has now surpassed US levels. As such it will become the new reference point in beauty.

China is a huge trading power, it exports more than the US but imports much less. However, beauty imports are significant because Chinese consumers prefer foreign brands. Domestic beauty brands have suffered badly – either directly or indirectly – from serious quality and safety concerns.

Lack of confidence is a defining feature of this mega beauty market. The Chinese hair and skincare industry experts – we have been interviewing for more than decade – report a widespread lack of trust in branding.

A very definite pecking order of brands has been established by buyers. It is the actual country of manufacture which determines confidence and is the key factor which consumers use to rank brands.

The “made in China” label does not inspire confidence with Chinese buyers. Beauty retailers from all across the country tell us that suspicion is now so entrenched that multinational brands manufactured outside of China are more trusted than the exact same brands made in the country.

Brands from certain countries are very highly sought after because Chinese buyers attribute what are regarded as national characteristics to brands. France, for example, continues to benefit from the historical status of Paris as the global arbiter of culture (especially fashion and beauty).

It is precisely these consumer attitudes which have contributed to making China one of the largest world markets for imported luxury skincare. What might seem like an obsession with prestige brands is, in fact, quite rational behavior. The Chinese beauty buyer is willing to pay a premium for quality which – for them – means safety. All the retailers we talk to report that price has become a proxy for quality for consumers.

What can marketeers do?

Chinese beauty retailers and manufacturers which guarantee product quality and a counterfeit-free supply chain reap the rewards. For example, the largest Chinese salon and spa chains use exclusive brands and this strategy pays dividends. These companies are huge players in beauty and are widely acknowledged as reference points for the industry.

We estimate that the largest chains could, combined, account for more than a third of the professional beauty market in the megacities of Beijing, Shanghai and Guangzhou.

Diagonal Reports’ new report, Chinese Beauty (Hair and Skincare) Consumer and Market 2014-2020, is now being published.
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