Economy
Skincare items popular despite cost
By Yu Tianyu (China Daily)
Updated: 2010-09-06 10:33
 |
Large Medium Small |
Andrew Fan, Greater China president of Nu Skin Enterprises Inc, a skincare and nutrition product developer, said in an interview with China Business Weekly that since the company entered China in 2003, the company has abandoned juicy commercials and created Nu Skin Experience Centers across the country in an effort to demonstrate the company's scientific research, innovation and skincare knowledge to their customers.
"Customers are able to have various skin tests done in these centers and better know the condition of their skin," he said. "We also welcome them to return and redo tests again to verify the effectiveness of our products." Now, Nu Skin has about 50 such centers across China.
Having used his company's products for almost 19 years, Fan, in his 50s, boasts of his healthy complexion.
Skincare firms eyeing the China market should have a long-term plan, Fan said. "With a long-term development strategy, we never expect sales or revenue to jump through hyped-up advertisements or costly promotions by celebrities," he said.
"Market research by Nu Skin showed that many female consumers, with a monthly net income of 5,000 yuan or less, spend about 60 percent of their salary on cosmetic, beauty and healthcare products," he said.
Susie Zhang has over 20 years of experience in skincare and improving her appearance, but is often confused by the countless products and brands available in department stores.
"Having tried a great number of products, I have no idea whether I should maintain loyalty to one product or brand, or regularly experiment with some new ones," she said.
Fan explained that based on research by his company, if consumers choose products suited to their skin type and conditions, they do not need to worry about so-called "resistance" which refer to misunderstanding that the efficiency of products would gradually decline when consumers keep using them over the long term, so that they could regularly change brands.
Dermatological health takes time and effort and therefore hoping for immediate results is scientifically unrealistic, he said.
Battle for youth
Japanese economist Kenichi Ohmae recently said in Beijing that China currently has an aging population of 143 million and that figure will double by 2015.
At the same time, sales of anti-aging products globally have soared to $100 billion in 2009 and are expected to be over $176 billion by 2015. This craze will happen in China as well, said Ohmae.
Andrew Fan of Nu Skin said that they previously targeted consumers over 35 years of age, but now consumption by the post-80s generation has been growing as well.
With more and more young consumers hoping to preserve their youthful looks before the onset of aging, consumption has shifted from middle-aged and older consumers to younger consumers between the ages of 26 and 38.
From creams to pills to cosmetic surgery, different product makers often promise the gift of youth to consumers. Nu Skin has discovered that a person's genes directly affect the aging process, according to Joseph Chang, Nu Skin chief scientific officer.
The company's exclusive ageLOC science, an anti-aging formulation developed to target those aging-related specific genes and restore them to younger state.
Fan said that the ageLOC anti-aging products have helped Nu Skin scatter the dark clouds of the financial crisis as its global revenue hit $1.33 billion in 2009 and also maintains strong growth momentum in 2010.
The company's revenue in the Greater China region grew by 22 percent year on year in the first quarter of 2010 and it reached 53 percent in the second quarter as the revenue growth in the China mainland was 94 percent during the same period.
Fan said the company expects global sales of its new ageLOC anti-aging products would exceed $150 million within a year of its global launch last October.
Private players
Dermatologist Chen Hongduo said the cosmetics and skincare industry in China is not a friendly area for speculative investment because it requires massive investments in innovation and research.
He has witnessed the efforts of private Chinese cosmetics enterprises, but he stressed that these companies need to be integrated and their product categories do not always match market demand.
Ma Ya, president of the Chamber of Beauty Culture and Cosmetics of the All-China Federation of Industry and Commerce, said private cosmetics makers should be given more government policy support since the industry faces soaring marketing costs - easy for international players, but not affordable for fledging Chinese enterprises.
She also advocated that the government should create some special funds to support innovation and development of emerging Chinese brands.
Hou Juncheng, chairman of Hangzhou PROYA Holding Co Ltd in Zhejiang province, said his company has started to expand in the Chinese competitive cosmetics market from second or third tier cities as well as the rural areas, and currently has around 20,000 outlets and shopping mall counters nationwide.
"But it is extremely hard for us to enter first-tier cities since we need to pay a huge entrance fee to shopping mall operators which has led to a difficult set of circumstances for us to gain popularity, which is key to the development of cosmetics companies," he added.
Hou said many smaller manufacturers are jealous of international brands because shopping mall operators provide them with free counter space in the best locations.
"The dilemma for Chinese private cosmetic companies is that most of them are purchased by international players when they develop to a certain level, leaving others struggling for survival," Hou said.
RNCOS's report showed that there are nearly 3,500 domestic cosmetics makers in China, but the majority of them operate on a small scale. When domestic players are compared with their foreign counterparts, they are far less competitive.
"We anticipate that the big foreign and domestic cosmetics makers will adopt the merger and acquisition route to attain inorganic growth in the market. This will translate into a moderate level of industry consolidation and the consumer will benefit via improved product quality at a reasonable price," the research firm said in their report.
In 2003, French beauty brand L'Oreal acquired Chinese local brand Little Nurse, and then acquired another local cosmetic brand YUE-SAI in 2004.
In 2008, US healthcare and cosmetics giant Johnson & Johnson purchased Beijing Dabao Cosmetics Co Ltd for $337 million.
However, Ma and Hou claim that as a huge cosmetic consuming country, China also has great manufacturing strengths and needs a brand of its own.
Other trends
Meanwhile, the world's health- and beauty-care industry is also experiencing a revival of Chinese traditional herbal products, which are favored by Chinese consumers and also many in other countries.
For example, ganoderma, one of the most popular ingredients in Chinese traditional herbal medicine, has been used in many skincare products like YUE-SAI.
|
|||||||
Shanghai Jahwa's medium-priced brand, Herborist, which was launched in 1995, enjoyed more than 60 percent growth last year and the company plans to open 250 new Herborist stores in the country this year.
Beijing Tongrentang, a 100-year-old Chinese brand also launched skincare products for dark rings, acne and many other common skin problems.
Daniel Chen, research and development director of Henkel Cosmetics, said: "The application of Chinese traditional herbs does not actually involve (digesting) individual herbs but taking advantage of their whole prescriptions or formulas combined with modern technology."