Yuliang Liu, Qiwen Xu, Jing Deng

Jala Group Co.,China

In recent years, China cosmetics market has been booming and become the world’s second largest cosmetics market. China cosmetics market is expected to remain fast growth during the “Thirteenth Five-Year Plan” period, in particular in small and medium-sized cities. It is estimated that the average growth rate of the overall market will reach about 10%, and the market scale will be close to 500 billion yuan by 2020.

Objective of the industrial upgrading

The total volume of cosmetics industry of China ranks second in the world, but its industrial structure is irrational.Foreign-funded cosmetics enterprises still play a dominant role and captured a larger market share while domestic cosmetics enterprises are relatively scattered with more than 3,000 enterprises registered. Support should be given to encourage the rapid development of domestic cosmetics enterprises, especially the enterprises with total assets of above 100 million yuan to improve product quality,of cosmetics.

Objective of cosmetics technology

More investments should be increased in relevant basic subjects including biomedical sciences, genetics, genetic engineering, skin bioengineering, emulsification technique,ergonomics and aesthetics. Importance should be attached to scientific research on raw materials, and investments should be increased in biological, plant, special and rare raw materials at all stages from the raw materials source,extraction to application. Firstly, the usage of China raw materials used by domestic enterprises should be improved so as to expand the China raw materials exports. Diversified formulation systems should be created for China’s cosmetics. More investments should be increased in research of cosmetics packaging design, color, aesthetics,enhance the ability of innovation and cultivate core competency, as well as to support local brands with competency to seize more market shares.

Globally, China cosmetics enterprises are still at the regional market development phase. Enterprises should participate in China’s “the Belt and Road Initiative” and actively explore markets in countries along “the Belt and Road”, and on this basis, become strong competitors in the globe market.

Optimizing channel. Department store channel:maintain its leadership position; supermarket channel:increase market share of cosmetics and increase the power in the negotiation on entering supermarkt; specialty store channel: the dominance of cosmetics in small and medium-sized cities should be reinforced to improve the status of specialty store channel; and e-commerce channel:share of intermet channel in the cosmetics market should be increased in order to invigorate e-commerce channel material to provide consumers international cosmetics,with convenience and better visual effects. Efforts will be made to increase investments in research on production technology, equipment, etc. Enhance the manufacturing capacity of complete sets of cosmetics production equipment, and improve the automation and intelligence degree of China’s cosmetics production.

Globally, cosmetics industry makes prominent contributions to social and economic development.Hence, many countries attach great importance to the development of domestic cosmetics industry and give a lot of support policies. So, it is calling on the government to introduce some encouragement and support policies for development of the industry. And it would encourage the cosmetics industry to make greater contributions to social and economic development.

With the improvement of people’s living standards,cosmetics have become less of luxury and more of daily necessities; however, the country still imposes a consumption tax of 30% on makeup and perfume,which has greatly hindered healthy development of the China cosmetics industry. Therefore, the government should adjust the tax policy for cosmetics to promote the consumption of cosmetics.

Accelerating industrial agglomeration

In recent years, the local governments of Shanghai,Sichuan, Chongqing, Zhejiang, Yunnan, have introduced some policies and measures to increase support for the cosmetics industry and invested in several regional bases of the cosmetics industry. However, the decentralized industry bases just play limited roles in promoting the competitiveness of China’s cosmetics industry. The cosmetics industry cluster should be built, and all regions resources should be fruitfully exploited and the coordination should be strengthen to enhance overall competitiveness of China’s cosmetics industry rapidly. From the point of view of industry value chain, industry clusters in the following fields should be supported.

Shanghai will be planed into a innovation center of cosmetics. Shanghai is accelerating to build a science and technology innovation center and implement the development strategy with priority to talents. Shanghai has certain advantages in fashion industry, industrial design industry and other different creative industries.The cosmetics industry is one of the key industries in Shanghai. Shanghai Creative Industries Demonstration and Service Platform is a public servise platform by related social agencies under the guidance of Shanghai Municipal Economic and Informatization commission.

Yunnan, Sichuan and other places will be built into centers for planting and developing raw material of cosmetics. Places like Yunnan, Sichuan, Tibet are rich in natural resources and homes to large variety of plants and have extremely significant advantages in special and rare raw materials. The government should give strong backing to the cultivation and research of raw materials in these regions. It will increase China’s market share of cosmetics raw materials in the global market.

Guangdong will be created as a modern processing and manufacturing center of the cosmetics industry.Guangdong has traditional advantages in the cosmetics manufacturing as well as rich experience in the technology and modern manufacturing. The government should increase the support for the cosmetics manufacturing in Guangdong and build it into a cosmetics processing and manufacturing center with global competitiveness.

Strengthening ties with the capital market

Opportunities should be seized to promote the development prospects of the cosmetics industry for the purpose of attracting more capitals into the industry.Expert team should be actively organized to help enterprises with certain conditions in listing. Enterprises should be encouraged to combine their operations through mergers, and acquisitions.

Optimizing the market structure

The cosmetics industry still has a great potential.Cosmetics enterprises can exploit the consumption potential through continuing to enrich and develop the products categories, as well as new marketing. China is in the stage of the upgrading consumption, local cosmetics enterprises should timely launch mid-high end brands and expand the market share. The cosmetics enterprise can strengthen investment in less developed areas, and make the consumers in these areas can enjoy benefits from the development of China’s cosmetics industry.In addition, the “the Belt and Road Initiative” brings huge opportunities to China’s enterprises, the cosmetics enterprises should seize the opportutities to expand overseas markets.

Optimizing channel structure

Deportment store. Efforts should be made to update image, improve service quality and customer experience to maintain the advantages of department stores.

Supermarket. Through adjusting the category structure and developing new products suitable for display on supermarket shelves, the cosmetics sales will be increased. More rights in the negotiation will be obtained by joint efforts of the industry association and enterprises.

Specialty store. Efforts should be made to update the image, improve management level and reinforce the dominance in small and medium-sized cities with good services. It should encourage employees of specialty stores to enhance their brand awareness, form regional advantages by means of regional chain operation and franchise operation to strengthen the status of franchise store channel in China’s cosmetics market.

E-commerce. It should also actively respond to the“Internet+” strategy of the country, and encourage cosmetics enterprises to increase sales and expand share of the e-commerce channel via rapidly growing e-commerce channel. Employees interested in the e-commerce should also be encouraged to dive into e-commerce of cosmetics,to promote the diversified development of the e-commerce channel of cosmetics.

Product development

Priority should be given to the following products.Protection products: products with functions of clean and UV protection, shielding technology and defense system against pollution, enhancement of skin resistance and moisture barrier. Repair products:products with functions such as moisturizing, antioxidation and anti-aging. Multi-functional products themed lifestyle: products with concepts of urban life,anti-stress and detoxification. Seasonal products: more and more consumers recognize that seasonal changes can have drastic effects on skin. “Seasonal products”not only mean to change products as seasons change,but also include seasonal natural ingredients in the product formulation. Chinese herbal medicine cosmetic:traditional Chinese medicine has a wide influence in the world. China’s cosmetics industry should strengthen the research and development of Chinese herbal medicine cosmetic based on the theory of traditional Chinese medicine. Beauty drinks: the products is expected to exhibit remarkable growth and will become an important mature market segment like Europe, Japan and Hong Kong. Beauty drinks is still in its infancy in China, but it is expected to growth rapidly in the future.

Conclusion

The China cosmetics industry experienced remarkable development over the past few decades and industry scale ranks second in the world, enjoys great potential of development. The Current problems that China cosmetics enterprises face are maintain a sustained, healthy and stable development, and catch up with the advanced world levels in the future.