How Lower Tier Cities Are Changing the Luxury Beauty Market

on February 12 2014 | in Beauty Trends | by | with No Comments

Lancome

As affluence increases in China’s lower-tier cities, international beauty brands are finding new sales outlets for their products.

Rising incomes have created a new demand for high-end cosmetics and other beauty products outside of the country’s first- and second-tier cities like Beijing and Shanghai, where the market is already saturated with international brands.

Data from research and consulting firm Nielsen clearly indicates the shifting tastes of consumers, with the market share of low-end cosmetics and beauty products dropping from 47 percent to 28 percent in lower-tier Chinese cities in the past two years. But while the overall market share for high-end beauty products is 16 percent in first-tier cities, it is less than 10 percent in lower-tier cities.

According to Cindy Yang, senior director at Nielsen, third-tier cities (after first-tier cities and provincial capitals) are now “the fastest growing markets for high-end cosmetics.”

“As disposable incomes continue to increase, third- and fourth-tier cities, where 70 percent of Chinese people live, will see rapid growth, faster than first- and second-tier cities, for high-end cosmetics,” Yang said in an interview with China Daily.

Yang also warned that “the current distribution channels in lower-tier cities cannot satisfy the consumers’ desire for beauty.” While consumers in first- and second-tier cities have numerous sales channels from which to purchase their luxury cosmetics (including shopping mall counters, brand boutiques, beauty chain stores, and airport outlets), a greater brand presence is required for any international company to attain success in lower-tier cities.

Online sales among young people were “booming,” particularly in third-tier cities. Despite the importance of online markets, though, brand presence and face-to-face interactions are also important to luxury consumers.

Yang Yi, a 34-year-old owner of an advertising company in Zhenjiang, Jiangsu province, has been a faithful consumer of L’Oreal’s Lancome cosmetics line since 2009. Although Lancome’s serum costs 300 yuan less in airport duty-free shops, Yang prefers to buy from the local Yaohan shopping mall.

“Face-to-face purchases with professional beauty advisors help me to choose the most suitable products. Furthermore, I can try other products and get gift samples,” she added.

Lancome’s presence in the Yaohan shopping mall demonstrates the immense market potential of lower-tier cities: the store sold 1.3 million yuan worth of products on opening day alone.

Stephane Rinderknech, vice president of L’Oreal China, noted the importance of this market presence. “Our ambition with our beauty brands is to capture the growing Chinese middle class,” said Rinderknech. “First-tier cities are important, however, more potential comes from lower-tier cities.”



image credit: song zhen

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