China cosmetics market set to out-grow US

The market is estimated to have grown by 17 per cent in 2005, to reach $2.2bn by the end of 2006, growth that is predicted to be sustained over the next two years, according to a new report from TNS. The market research company estimates that, if economic growth is sustained, the market for cosmetics should witness growth of between 15 - 20 per cent from this year until 2009. Furthermore, if the market experiences the top-end growth predictions, this kind should see it eclipse the US as the world's largest market for cosmetic and toiletry products. Top end growth would mean that by 2008 the market would be valued at $3.8bn, eclipsing the relatively stagnant US market, which was valued at $3.6bn at the end of 2006. TNS's latest report on the China market indicates that a number of reasons are responsible for the strong growth, including an increasing fixation on anti-aging products, last year's relaxation of direct sales laws - allowing big US names like Avon and Mary Kay to expand, and consumers' trading up to more expensive products. In testimony to consumers plumping for more expensive products, the research company's data shows that the average price increase for makeup in 2006 was 15.7 per cent compared to 2005. Likewise, TNS estimates that the spend on makeup brought from direct sales channels rose by 92 per cent in 2006, whereas sales of skin care products rose by 82 per cent in the same period. Likewise, prices for facial cleanser and skin moisturizer rose by 9.7 per cent and 8.4 per cent respectively. "We don't know for sure when China's cosmetics market will eclipse the US, but it will happen sooner than we think - the year 2009 is likely,"​ said Jason Yu, account director for TNS Worldpanel, based in Shanghai. "Growth in 2006 over 2005 in the US cosmetics market was flat. If that continues in the next three years, China is likely to overtake the US. Even if we see growth of 2 per cent in the US for the next three years, China will still be vying with the US​ market in 2009 and would probably take the lead the year after."​ What has been feeding the spending rush has been a sustained GDP well into double figures over the past three years, providing jobs and incomes that many Chinese nationals could only have dreamed of just a few years ago. As the population discovers its spending power, consumers are introducing themselves to vanities and luxuries that until now have been both impossible to get hold of, not to mention being far too expensive. "This is an exciting market for cosmetics brands from the US and Europe​ with the promise of growth followed by yet more growth in the next few years,"​ Yu added. "China clearly stands out from its neighbors in this respect, with average spend per household at the end of 2006 in urban areas of just $26, far lower than the $191 level seen in Korea and $176 in Taiwan​. ​ The average spend on cosmetics per trip in China - at just US$7 - compared to US$31 in Korea and US$26 in Taiwan further underlines the opportunity for overseas brands to sell more products." ​Whichever piece of data we look at, we see the same promise of room to grow in China's cosmetics sector." ​