F REIGN TRADE - 中国国际贸易促进委员会

consumption structure. These new consumption patterns and
consumer concepts will also propel the development of the
cosmetics industry.
With China’s economy moving into the fast lane, the
cosmetics industry, as a sunrise industry, is developing much
faster than the average growth rate of GDP. The increase
in consumption has boosted overall economic prosperity
and made China the largest emerging market in the world.
Predicatably, in the future China will become the largest
consumer market globally, and the cosmetics industry as a
whole has changed course to follow the development trend.
One sign of improved consumption is the acceleration
of luxury good consumption. According to China Marketing,
by the end of last year, LV already had 29 locations in China’s
first-tier and coastal cities, while most of the interior provinces’
capitals have no LV outlets yet. Huangqiang, manager of
Hangzhou Xinziyang Daily Chemicals Co., Ltd., predicted
that with the continuously rising levels of consumption and the
acceleration of urbanization, top international brands will soon
move to second and third-tier cities. If there was one LV store
in each city at the prefectural level, then there would be 400.
Similarly, the high-end cosmetics market in China’s
first-tier cities is booming. At present, the cosmetics market
in major Chinese department stores is dominated by international
brands. Looking at Lancome in China as a example,
the Lancome counter at Hangzhou Tower had sales volume
of RMB 55 million, the highest among all global sales counters,
while the Xinjiekou counter at Jinying Shopping Center
in Nanjing was No.3 with RMB 48 million in sales, and the
Wulin counter at Intime Department Store in Hangzhou
was No. 5 with RMB 43 million.
Another example, the sales volume of Estee Lauder
rose 43% year-on-year, making it one of the fastest-growing
brands in China’s high-end cosmetics market. The brand’s
Wangfujing counter in Chengdu, had the highest sales volume
in China with RMB 40 million, while Intime saw 60%
growth, putting it at the forefront across the country.
Meantime, the rapid increase in consumption level has
also contributed to the recent prosperity of the high-end cosmetics
market. Currently, second and third-tier cities are seeing
a rapid upgrade in their consumption level. Mainstream
consumption has moved away from joint venture brands like
OLAY, L’OREAL and Aupres with average prices around
RMB 200 in the past, to brands like Shiseido, Elizabeth
Arden, Beauté de Kosé, Laneige, and others with average
prices from RMB 300-400, and gradually moving closer
to RMB 500-600 for mainstream consumer goods in firsttier
cities.
Expanding channels for foreign brands
As mentioned earlier, increased urbanization is the key
engine behind the prosperity of the cosmetics industry. Take
Hangzhou as an example, the city’s central business district
(CBD) is expanding rapidly. In the past, there was only one
business district, while in the future, there will be 5 or 6.
In the meantime, large chain department stores, an
important channel for cosmetics, are also expanding. Intime
already has 5 stores in Hangzhou and will have another 5 in
the near future compared with only one just a few years ago.
Department stores in second and third-tier cities will
also follow the trend and upgrade themselves, while wellknown
chain department stores are marching into these cities
as well. Meanwhile, in order to satisfy the higher demands of
consumers, promote their own image and enhance competitiveness
in the market, stores will be eager to introduce more
high-end foreign brands. In the future, these cities will likely
bring in more foreign brands to keep up with first-tier cities.
Department stores in county-level cities will also be
rising soon. Currently, across China there are about 2,000
counties with a few large department stores. These counties
are transitioning to medium-sized cities with populations of
over 100 thousand or even hundreds of thousands.
Cosmetics stores are another strategic channel for
Chinese cosmetics and are taking new approaches such as
expanding their networks, upgrading their store level, etc.
Throughout China there are hundreds of thousands of cosmetics
stores, which are undoubtedly an important channel
for cosmetics sales, with networks covering all of the large
and medium-sized cities and key towns. In Zhejiang Province
alone there are more than 6,000 cosmetics stores.
Presently, cosmetics stores are the main sales venue for
foreign cosmetics brands and will likely be the most promising
sales channel in the future. Some secondary stores, specializing
in domestic brands, should introduce more foreign
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