China set to become world's largest professional skin care market

By Simon Pitman

- Last updated on GMT

Related tags: Professional skin care, Economy of the people's republic of china

Fueled by massive economic growth and the shear size of the
population, the market for professional skin care in China looks
set to topple worldwide competition if current growth rates can be
sustained.

Growth in the market during 2006 came in at 15 per cent, which according to a new study entitled Professional Skin Care 2006: China, published by Kline & Company, easily outpaced other US and European markets – and is expected to be sustained during the course of the next five years. "The sheer size of this market alone makes it attractive," says Carrie Mellage, industry manager for the Consumer Products practice of Kline's research division. "Factor in the growth potential and it's easy to see why China is becoming such a critical element in sales and marketing strategies for the global consumer products industry, especially for high-margin sectors like professional skin care." So what's driving this phenomenal growth? Primarily it is because China's economy is currently firing on all cylinders, with growth in disposable income surging by an average of 11.3 per cent over the last five years. This new-found wealth is now being spent on products and services that many ordinary Chinese have not, until now, had the means to experience. Much of this new-found wealth is being spent on personal care products and services, with most segments within the industry reporting growth well into double figures – a figure that Kline claims has averaged 13.4 per cent in the course of the past five years. Consequently, in recent years many Chinese nationals have visited spas and professional beauty establishments for the first time. And they like it. Kline currently values the market for professional skin care at $720 million at the manufacturer level, a figure that is seeing it quickly catch up with the world's leading market, the US, where the market is currently valued at $870 million. Indeed the market for facial treatments is estimated to be the third largest in the world, putting it ahead of any country in Europe. However, there's room for further growth in China, as the market is still in its infancy and remains relatively fragmented, especially compared to more developed markets in the West. According to Kline more than a thousand local brands currently compete with approximately 100 import brands, leading it to estimate that further growth in the segment should continue at around 15 per cent until at least 2011, pushing it beyond the projected size of the US market, to give it a value of $1.4bn. However, in parallel witht the growth, the market has developed its own unique charactistics, one of these being that it is relatively fragmented compared to international standards. This fragmentation manifests itself through the polarization of the foreign and domestic brands, which has, in turn, led to expensive foreign brands, cheaper domestic brands and a lot of room in the mid- to upper-end of the market – a situation that could spell opportunities. "There are essentially two brand tiers: the foreign brands and the local brands," Mellage says. "Imports are higher-end and tend to be more expensive, appealing to upscale spas and beauty institutes. The local brands, which account for a large majority of products on the market, are low- to mid-priced and are generally positioned for beauty institutes where there is less emphasis on luxury and pampering." Although beauty institutes in China are currently said to command a 70 per cent share of the professional skin care market, it is the spa market that is set to surge, which should prove particularly beneficial to foreign brands. "We're expecting sales through spas in China to grow by more than 17 per cent a year over the next five years," said Mellage. "The emerging middle class is beginning to discover the day spa, which offers some of the same amenities of the full spa experience but at a much more affordable price." Although the market in China is still relatively young, Mellage sums up by stating her expectations that many of the developments already experienced in the West should be mirrored there. But likewise, she also believes that many of the growing spa institutes are likely to incorporate Chinese herbal and medicinal treatments into their skin care treatments, which could help to give the market a distinct character of its own.

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