After more than two months of confinement during the coronavirus outbreak, the people of China are now largely free to resume life as they knew it. Work has started up again in most of the country, although social distancing and mask-wearing remain de rigueur. Even in Wuhan, COVID-19’s epicenter, the lockdown should be lifted on April 8.
As things slowly get back to normal, industry analysts are assessing how the beauty and personal-care market is rebounding. Pre-health crisis, the sector boomed, generating almost CNY 470 billion, or $66.06 billion, in retail sales in 2019 with a compound annual growth rate of approximately 9 percent over the past five years, according to Ifop Asia.
In 2019, skin-care sales rose 11 percent and makeup revenues gained 12 percent on-year in the country, Kantar Worldpanel data shows.
But from January, physical stores began shutting, greatly impacting the business, especially for prestige beauty in downtown and travel-retail locations. The confinement ate into important sales stemming from the key Chinese New Year, International Women’s Day and Valentine’s Day holidays.
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“Beauty suffered a bit less than other sectors, especially in luxury,” said Felicia Schwartz, founder and director of China Insight, a London- and Beijing-based consultancy. “One of the reasons is that beauty in China is already massively online.”
Digital commerce can easily generate 20 percent of a beauty company’s sales in China, and for some companies, that figure is as high as 30 percent to 40 percent, said Jason Yu, managing director of Greater China at Kantar Worldpanel.
No one knows for sure how quickly trading might revert to the pre-crisis level, but some analysts are looking at early summer as a realistic target. “Retailers expect that business should be 100 percent back to normal by mid-July, and if the infection rates continue to be suppressed, production should be back to normal by June,” said Michael Nolte, creative director at BeautyStreams, relating input culled from the group’s team in Asia.
“However, as China is highly dependent on export, we expect the economy to continue to suffer from the current global health crisis,” he added. “We also expect that international imports will be reduced until at least end-2020, adding complications to the already disrupted beauty business worldwide.”
While makeup, especially lipstick, was a key driver of beauty growth before the crisis, that is expected to change — at least for now. “Although it’s hard to predict when it can come back to pre-COVID-19 levels, we do see some categories will suffer an impact in the short term,” said Amy Tan, team director, head of qualitative at Ifop Asia, who said different categories will recover at different paces.
“The recovery of color cosmetics will be relatively slow, as the protection on faces will last for some time,” she said. “Similarly, for fragrance, due to less socializing scenarios, combined with the increased usage of disinfectant fluid and spray, the number of fragrance-usage occasions reduced significantly.”
Kantar’s Yu expects the Chinese beauty business will come back gradually, but that the second quarter will remain challenging as the COVID-19 pandemic intensifies in other parts of the world. That impacts companies sourcing raw materials from abroad, causing supply chain disruption, for instance.
Many analysts posit that one potential winner could be domestic beauty brands. Already, domestic beauty players such as Herborist, Chando and Inoherb — which had performed strongly pre-crisis — launched into the sanitizing products category, riding the swelling trend centered on hygiene.
“The feeling toward the Made in China tag is also swinging in a new direction,” said Tan. “Some Chinese netizens are focusing on purchasing from Chinese brands [whenever] possible, expressing desire to support compatriots who have made great contributions combating the virus.”
Further, post-crisis Chinese consumers, especially those from Generation Z, are paying more attention to product quality than to brand name. “The high price-to-quality ratio of C-beauty will be on their radar,” said Tan.
Online buzz causes Schwartz to believe “there is going to be an increasing focus on a healthy and balanced life, well-being — including exercise, yoga and meditation. The advantage is how easy it is for beauty, and especially skin care, to position in line with [such a] lifestyle.”
BeautyStreams also expects an increased demand for immunity-boosting ingredients, accelerating the use of traditional Chinese medicine ingredients and TMC-inspired rituals in beauty products.
“We see potential that there will be a shift [where] consumers prioritize how they feel over how they look, creating even greater potential for self-care and well-being claims in all beauty categories,” said Nolte. “Safety and provenance will become bigger topics, resulting in higher demands for transparency in sourcing and supply chains.”
Tan predicts a rising focus on skin health and green beauty. “As the outbreak of COVID-19 is somewhat considered as [nature’s revenge], more consumers, especially in the young generation, are attentive to green consumption and the sustainability issue, which means that products with environmentally friendly elements will gain more preference and likely inspire the beauty industry to integrate sustainability into brand strategy and focus more on products with ‘nature’ and ‘healthy’ concepts,” she said.
“Sanitizers, which are mostly focusing on functionality, will eventually grow into a complete category, including more offers of premium ingredients, packaging and claims,” said Nolte. “Trends that were already [growing], like the rising pride in local storytelling, ingredients and production will continue their momentum, and sustainability and ethical production will [be] huge opportunities for brands targeting Chinese consumers in the future.”
Mask-wearing as the new normal will also present opportunities. “On the Internet there’s a lot of discussion about how you [can] stay beautiful while you are wearing a mask,” said Yu, noting that dryness and irritation are common side effects.
For mask-wearers, Tan foresees opportunities for innovation, including soothing and cooling products for summertime, and long-lasting yet breathable makeup. Tan said that eye cream and makeup are already surging, citing as examples Estée Lauder’s Advanced Night Repair Eye Supercharged Complex and a Perfect Diary eye palette fronted by mega-influencer Li Jiaqi.
With constant hand-washing to combat viral infection, Chinese consumers have been focusing on hand creams, as well.
Industry experts see that consumers are seeking happiness, indulgence and relaxation from beauty, noting that the time at home caused many to spend more time and effort on skin care, with a corresponding increase in online tutorials.
“Many consumers find a sense of well-being and happiness from it,” said Tan, “and will tend to continue the habits even after the crisis.”