Chinese selective spending habits part I: What the economy means for beauty

Economic performance​

Despite China’s economy moving ahead at a moderate pace, work and personal finance strains have led to selective spending in today’s Chinese beauty and personal care markets.

“Besides the slowing economy, increasing work and financial pressure such as price increases, slower income growth and having to financially support more children and senior people in the future are also contributing to consumers’ prudent approach to spending,”​ Laurel Gu, Research Director at Mintel outlined.

Mintel confirms that through exploring the habits of 3,000 internet users in tier 1-3 cities aged 20-49 via a survey conducted in January 2017, it has found that urban Chinese consumers are more conservative when it comes to giving their spending a lift than they were in 2016. Of the 3,000 surveyed, 36% of those asked report spending more in 2017 compared to 43% of those who answered in 2016.

In addition, shoppers are more likely to exercise control when it comes to their spending patterns in 2017, as 49% reported that they are spending “about the same”​ as in 2016.

Spending habits ​

“Economic slowdown is part of the reason that’s driving this change. However, consumers are generally still increasing their spending to achieve a higher quality of life. They have become selective in terms of where to spend their money and are adopting new ways that can help them save,”​ Gu observed.

With this said, Mintel still anticipates an 8.4% year-on-year consumer expenditure lift through 2021, with the beauty and personal care areas still experiencing a rise in consumer spending.

On the whole, the various beauty and personal care categories “are not heavily affected by the financial pressure or seeing a slowdown in spending habits”​, Jessica Jin, Associate Beauty Director at Mintel stated.

Beauty buyers’ priorities​

Consumers are “proactively seeking better solutions for their daily lives—more efficient skin care products, innovative products to apply make up better —and they are putting in more effort into taking better care of their appearance,”​ Jin shared.

However, Jin did emphasise how “manufacturers are cultivating consumers by introducing advanced ingredients or formats to justify the increasing prices, like the silicon-free shampoo and electric toothbrushes, for instance”​.

This then results in “both the active and passive factors pushing consumers to spend more than last year, although volume consumption has only changed marginally,”​ Jin noted.

Industry reaction ​

Although this growth is forecasted, Laurel Gu, Research Director at Mintel, points out that consumer demands are changing, and as a result, brands must develop their products and services accordingly: “Demand for upgraded consumption for new options, better quality, and greater convenience will be the major driving factor in 2017.” ​

Beauty and personal care sector spending sat at approximately RMB 566 bn (€72 mn) as of the end of 2016, which rose by 8.1% from 2015. As Mintel tips this for further growth, it expects local brand launches, premiumisation and imported items will develop this.

Consumers today are also increasingly demanding safety goods, athbeauty products, and areas that focus on a specific occasion or activity that successfully reduce the time it takes to complete beauty routines.  

By 2021, the leisure and entertainment sector will reach RMB 2,823 bn (€360.4 bn) in value, Mintel reports. This is largely the result of consumers opting for a balanced lifestyle that seeks entertainment, relaxation and health and fitness services.

The second part of this interview on Chinese spending, which examines lifestyle preferences as a key industry driver, will be published on Wednesday 27th September 2017.