The post-90s generation drives the growing luxury cosmetics market in China
China’s economy is showing signs of recovery after being battered by the coronavirus pandemic. Also back in good shape is the country’s luxury cosmetics market as it returns to pre-corona levels, and the driving force behind this is the “post-90s” generations.
Consumption by post-80s and -90s makes up 80% of the market
According to McKinsey & Company, the global luxury market in 2018 was worth 2.4 trillion dollars, and 32% of that (770 billion dollars) was the Chinese market. It’s expected that by 2025, the global market will have grown to 3.1 trillion dollars and China’s share will have expanded to cover 40% (1.2 trillion dollars).
The consumer force driving the luxury market in China is the so-called “post-80s” and “post-90s” generations — or those born on or after 1980 and 1990 respectively. The post-80s overall are spending 415 billion yuan (US$62 billion) a year on luxury goods, which includes fashion and beauty products, while the post-90s are spending 170 billion yuan (US$25 billion). Their proportion of all generations is 56% and 23% respectively; making for a combined proportion of around 80%. The average post-90 individual spends up to 25,000 yuan (US$3,700) on luxury goods per year, and this is on par with their parents — the post-65s and -70s.
According to Dongguan Securities, the size of China’s cosmetics market in 2019 was 477.7 billion yuan (US$71.5 billion) — a 13.8% increase from the previous year — and the luxury market made up a 31.8% share at 151.8 billion yuan (US$22.7 billion). This share is also increasing every year, with a 17% average yearly growth rate between 2014 and 2019.
The companies with the top 10 largest shares of the beauty luxury market are led by L’Oréal with 17.3%, followed by Estée Lauder with 13.1%, LVMH Moët Hennessy Louis Vuitton with 8.7%, Shiseido with 6.9%, and in fifth place is Chinese haircare and body care brand Adolph. Together with supplement and facial massager brand Infinitus, which took eighth place, there were only two Chinese companies on this top 10 list. The mid-price range market has seen Chinese domestic brands rise remarkably in recent years; however, the luxury cosmetics market is still dominated by overseas brands.
In terms of sales channels, e-commerce is growing steadily and in 2019 made up over 30% of all channels. The majority of e-commerce users are also post-90s. According to the “2020 Luxury Cosmetics Trends Report”, around 60% of online cosmetics purchasers are post-90s, and for luxury brand purchasers, this was 57%.
The luxury market was impacted during the peak of the country’s COVID-19 infections, but now recovery is speeding along thanks to brands’ active usage of digital technologies. The online June sales of 11 brands that the above report mentions as examples saw an average increase of 244% up from January (those brands were Sisley, De La Mer, Guerlain, Pola, SK-II, Helena Rubinstein, Clé de Peau Beauté, Shiseido, Clarins, La Prairie, and Tom Ford). The highest growth rate was achieved by Helena Rubinstein, and next was Sisley followed by Shiseido’s Clé de Peau Beauté.
For these 11 brands, 30% of purchasers were post-95s, and for other brands as well, including Yves Saint Laurent, Chanel, Givenchy, and Dior, post-95s made up over 40% of purchasers.
30% of post-90 women earn money on the side
According to Chinese research company Quest Mobile, the incomes of post-90s tend to be much more polarized compared to the income differences of other generations. For post-90s’ incomes in July 2020, 25.9% were below 4,000 yuan (US$600), however, 25.8% were over 10,000 yuan (US$1,500). In terms of job position, 42.2% were indicated as regular company employees, 9.5% were self-employed or freelancers, and 9.3% were in managerial positions.
Also, 30% of post-90 singles are moonlighting on the side, according to a white book on post-90 singles — this was a joint survey conducted by matching platform Zhenai and IT news site 36Kr. In China, having a second job is quite common. For women, in particular, the top three second jobs are product selling on WeChat, product selling on Taobao, and teaching courses in relation to one’s own hobby. About 38% of them earn 10,000 to 20,000 yuan (US$1,500 to $3,000) per month from these second jobs. This trend is also bringing about an increase in high-income earners in China.
The need to tailor marketing techniques to the post-00s
Growth is expected to continue for China’s luxury market, however, there’s no guarantee that famous foreign-affiliated luxury brands will be able to stay at the top as they have done so far.
The above-mentioned “China Luxury Report 2019” says that when post-65s and -70s purchase luxury goods, 94% lay importance on brand power (or brand recognition), however, this percentage decreases the younger the consumer gets. For post-80s it drops to 72%, and for post-90s to 68%. Of the latter, the remaining 32% lay importance on other points such as design and style, fabrics and materials, manufacturing processes, and pricing.
While consumer values diversify and Chinese brands, as well as little-known but capable brands grow their market share gradually, the market is in a state of flux. It’s likely that brands will need to make use of a variety of publicity platforms, including short-form videos, social media, and live commerce, while also continuing to offer interesting designs, materials, and manufacturing processes.
As we talked about in a previous article (“Makeup Marketing Needs Facelift to Target China’s post-00 Crowd”), in order to pull in the post-90s and the even younger post-95s and post-00s, these brands will need to convey their distinguishing qualities well and conduct more precise marketing.
Text: Ching Li Tor
Original text (Japanese): Team Roboteer
