China cosmetic sales growth powers ahead, but rate slows

By Simon Pitman

- Last updated on GMT

Related tags Economic growth Economics

Retail cosmetic sales grew at 16.9 per cent in China during the course of 2009, a figure that defies the global market trend but indicates slower underlying growth.

Retail sales of cosmetics for the period from January to December grew to CNY74.0bn ($10.8bn), underlining the continued desire Chinese consumers have to purchase skin care and hair care products that are increasingly prestige and luxury products.

The figures for the last three months in the year also illustrate a slight downward trend in the growth rate, as in the nine months to September 2009 sales had grown at 17.9 percent to reach CNY 52.8bn.

Underlying trend is down, despite breakneck growth

This downward trend was even more emphatic for the month of December, which showed that cosmetic retail sales grew by 13.4 per cent to CNY 7.3bn.

However, cosmetics sales compared well with other retail categories, beating growth in the food and drink, household appliances and jewelery categories, but failing to come near the 25 percent-plus growth rates in the top three categories : furniture, automobiles and building and decoration materials.

Growth in the retail sector has been fueled by incomes rising in excess of 9 percent throughout 2009, although there is still a big rural-urban poverty gap and an estimated 150 million people in the country are thought to live below the poverty line.

Cosmetic growth almost double GDP growth

The figures for the cosmetics industry also compared well with the GDP growth rate, which hit 8.7 percent in 2009, a figure that is so strong economists believe China is set to overtake Japan to become the world’s second largest economy, behind the US.

China currently has by far the highest GDP growth rates of any of the major economies in the world, an achievement made particularly notable by the fact that its neighbor Japan is expected to see its GDP contract by around 6 per cent in 2009.

Put in the context of the shrinking economic growth that has been registered in many of the other leading global economies in 2009, the situation in China underlines the fact that there are still key growth opportunities.

Still opportunities to tap into China cosmetics growth

Market researchers have repeatedly stressed that opportunities still exist in the ever-growing skin and hair care products market, particularly for more niche functional products, whereas the prestige and natural and organic categories are also likely to provide future growth for both established and new players.

Currently annual market revenues represent approximately 38 per cent from skin care and around 20 per cent from hair care.

Indeed, with strong growth in key areas such as skin care and hair care, the market research company RNCOS believe that the total revenues for the cosmetics market could exceed $25bn by 2012.

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