China's beauty and skincare market, boasting an annual growth rate of 5 percent and a staggering market value of $67.18 billion (480 billion RMB) in 2023, stands as a beacon of unprecedented potential.
In November this year, social commerce technology company Yaso released a comprehensive report, “China Next: A Changing Beauty Space,” which explores the dynamic shifts propelling China to the forefront of global beauty and skincare innovation.
From changing economic landscapes, shifting social norms and tightened regulation of the channel ecosystem, to increasing cultural confidence and the rise of Gen Z consumers, the white paper unpacks the trends shaping this ever-evolving market.
With an annual growth rate of 5 percent, China's beauty and personal care market is projected to reach $85.07 billion (607 billion RMB) by 2028, constituting nearly one-sixth of global beauty sales.
Despite the effects of the Covid-19 pandemic, China's beauty market demonstrated resilience, growing by 20 percent in 2020. As the market diversifies, opportunities will likely arise in sub-categories, challenging the dominance of established players and allowing niche brands to flourish.
Traditionally, foreign beauty brands focused on tier-one cities like Beijing and Shanghai, but a shift is occurring. Beyond megacities, tier-three and lower cities present untapped potential, with over 70 percent of China's population residing in these areas. Brands adapting their strategies to cater to emerging demographics will likely find exciting opportunities to reach new consumer segments.
With approximately 40 percent of total spending in China now occurring online, versus the US’ 16 percent, the dynamics of online shopping in China have transformed.
While Alibaba's platforms once dominated, increased regulatory pressures and shifting consumer preferences have led to a decline in market share. The rise of social commerce, exemplified by Douyin (the Chinese version of TikTok), is a game-changer, offering innovative, content-driven, and community-amplified shopping experiences. In 2022, the platform recorded a five times increase in content related to anti-aging topics, overtaking all other channels.
Livestreaming has become a significant driver of sales, with around two-thirds of Chinese consumers making purchases through livestreams in the past year, when live shopping generated $512 billion (3.7 trillion RMB) in sales.
Influencers and other tastemakers, particularly on platforms like Douyin and Xiaohongshu, play a crucial role in the customer journey.
Gen Z, born between 1995 and 2010, will be responsible for close to half of all spending in China by 2025, and is reshaping the beauty landscape. This demographic, which has grown up in relative prosperity and comfort and is marked by cultural confidence and a penchant for individuality, is on the hunt for new and exciting products.
Over 30 percent of Gen Z consumers spend more than 2,000 RMB ($274) online per month. Their purchase decision-marking balances quality and functionality with emotional resonance.
These consumers’ reliance on user- and KOL-generated recommendations has led to the emergence of "skintellectuals" as key influencers. These hyper-focused expert voices provide detailed and honest reviews and insights, influencing purchasing decisions in a highly competitive market.
Clean beauty: With a growing preference for natural and organic formulations, “clean beauty” is gaining traction, addressing sensitive skin concerns and promoting sustainability. Over half of Gen Z consumers reported that they highly value plant-based skincare and ingredients. The industry has also initiated conversations on sustainability through reducing packaging costs, recycling, and zero waste.
Derma skincare: Dermatologically-tested products cater to consumer demands for efficacy, focusing on addressing various skin conditions. The market is expected to grow substantially, with an emphasis on clinical evidence supporting brand claims. Globally, the market was valued at $52.12 billion (372 billion RMB) in 2021, with China expected to make up almost half that figure by the end of this decade.
Mass fragrance: China's fragrance sector, once dominated by a few French houses, is diversifying into a masstige category. Gen Z's daily use of scents is driving demand for niche fragrance brands, with collaborations and home fragrances witnessing significant growth. To research perfumes, 60.8 percent of consumers use Xiaohongshu as their main source of information.
Premium hair care: The "skinification" of hair care is leading to a premiumization trend, with consumers considering hair care as important as skincare. As hair loss concerns rise, products like hair growth serums and scalp care oils are gaining popularity. In 2022, the sales share of shampoo and care sets saw a YoY increase of 119 percent. The nourishing lotions and repairing essential oils categories grew 384 percent YoY.
Mother and baby: China's baby and child skincare industry, valued at over $600 million (4.3 billion RMB) in 2020, is driven by consumer demand for quality and safety. A string of product safety scandals in the 2000s and 2010s still loom large in consumers’ minds. As such, demand for products with high standards of quality and testing, often from overseas, remains strong.
Microbiome-based skincare: Meeting the demand for both “clean beauty” and effective derma skincare, products catering to the skin's microbiome are rising in prominence. The microbiome is a collective term used to describe the bacteria, viruses, and fungi that live on our skin. They are unique to each individual. The trend aligns with broader preferences for personalization and bespoke beauty solutions.
China's beauty landscape is a dynamic tapestry of trends and transformations. As the market continues to evolve, brands must adapt to shifting consumer behaviors, embrace digital innovations, and leverage emerging opportunities in niche categories to secure their foothold.