Review of 2022 high-end beauty market trends: How to capture both new demographics and new categories? (Part 1)

During the Double 11 shopping festival this year, beauty and personal care products have achieved impressive results. Now more and more young people are paying attention to their image and are willing to spend time and money on their faces, which also gives us great opportunities in the beauty market. The author also used data to review the trends in the beauty market for us. Let's take a look.

As the economy goes into a downturn, “lipstick effect” is one of the most frequently mentioned keywords.

The lipstick effect is indeed still taking effect in China. According to BCG&TMI data, the domestic high-end beauty market has maintained a high growth rate of 20% in the past few years. Although there has been a slight correction of 2% this year, it can be said to be harmless compared with other consumer sectors that have been hit hard.

During the just-concluded Double Eleven period, Star Map data showed that the GMV of beauty and personal care products reached 82.2 billion, accounting for 8% of all categories in the promotion, which is consistent with the ranking in 2021/2020.

In the high-end beauty market, the position of international brands may be difficult to shake for a long time. Looking at the top ten brands in terms of sales volume in the beauty category on Tmall’s Double Eleven this year, only Proya and Winona made it to the fifth and sixth place on the list. Euromonitor data shows that since 2019, the top three positions in the high-end cosmetics market share have been firmly held by L’Oreal, Estee Lauder, and LVMH. In 2021, the market shares of the above brands reached 18.4%, 14.4%, and 8.8%, respectively.

However, a change worth noting is that during this year's Double Eleven period, the GMV growth rates of most international beauty brands turned negative, while domestic beauty brands are still maintaining strong growth.

Magic Mirror data shows that during the Double Eleven period in 2022, the GMV of domestic beauty brands reached 5.678 billion. Although it is only 1/3-1/4 of foreign brands (20.961 billion), the GMV of the TOP50 domestic and foreign brands increased by 49% and -2% year-on-year respectively, continuing the 618 trend.

As domestic brands continue to launch attacks on the high-end market, the consumer group/category structure of the beauty market is also changing rapidly: people born after 2000 are beginning to enter the workplace, they have low incomes and are better able to screen information; after years of market education, the demand for essences, creams, sunscreens, primers/lotions and other sub-categories has been stable, and new potential categories such as body lotions and high-end perfumes are eager to compete for consumers' attention.

How can brands capture the above trends and reach new beauty consumers with more innovative means? Recently, Tencent Marketing Insights (TMI) and Boston Consulting Group (BCG) jointly released the "China High-end Beauty Market Digital Trend Insight Report" . The Community Marketing Institute has extracted some key points to share with readers.

1. What is the current status of the high-end beauty market?

What is the high-end beauty market? How expensive does a product have to be to be considered high-end?

The report provides a division and reference standard, which is to divide the beauty market into high-end skin care, high-end makeup, and high-end perfume:

• High-end perfume must be over 500 yuan;
• In the high-end skin care sector, (products with significant repair effects) essence/cream/eye cream are priced at more than 500-750 yuan, (daily care products) lotion/makeup remover/facial cleanser/mask/sunscreen/body lotion are priced at more than 200-300 yuan;
• In the high-end cosmetics sector, (full face makeup) foundation/primer/primer/loose powder costs more than 350 yuan, (partial makeup) concealer/highlighter or blush/eye shadow eyeliner mascara/eyebrow pencil costs more than 200-250 yuan, (lip makeup) lipstick/lip balm costs more than 250 yuan.

After statistics on the above categories, it was found that China's high-end beauty market fell slightly by 2% in 2022, mainly due to a decrease in volume, but there was no significant fluctuation in product purchase levels and prices. Among them, the user penetration rates of high-end skin care, high-end cosmetics, and high-end perfumes reached 90%, 50%, and 20% respectively. The number of high-end cosmetics consumers fell slightly, and high-end perfumes showed a trend of decreasing volume and increasing prices.

The reason for the above trend is that the epidemic has weakened the purchasing power of a very small number of consumers under the age of 25, whose consumption in 2022 accounted for 17%, a decrease of 4 percentage points from last year; secondly, light-consuming customers are restraining their consumption, which specifically refers to customers who spend less than 3,000 yuan on skin care products/less than 1,500 yuan on cosmetics/less than 1,500 yuan on perfume a year, and their spending on high-end beauty products has fallen by 9%-11%; but heavy consumers of high-end beauty products (who spend more than 6,000 yuan a year on perfume) also prefer to buy high-end perfumes.

So, who is making up the new growth in the high-end beauty market? Male, young, and sinking market are three key words that can be extracted. In the comparison of the old and new markets in the past year, the proportion of males increased from 16% to 20%, the customer group under 25 years old increased from 20% to 26%, and the third-tier and lower cities increased rapidly from 27% to 39%.

Maybe they are becoming more aware of image management, or they are inspired by KOLs/family and friends, or they have received perfume as gifts... The entry trajectory of these new customer groups can be summarized as follows: they initially start by understanding high-end skin care products such as facial cleansers, essences, and toners, and gradually move into high-end beauty products such as lipstick and primer. At the same time, they also have a strong interest in emerging categories such as body lotion, sunscreen, and perfume, and are more willing to learn/share/try new products based on social platforms.

For the future high-end beauty market, the post-00s and male customer groups will gradually grow into a market force that cannot be underestimated. The rise of new groups will also bring opportunities for segmented categories. Although there has been no obvious change in purchasing channels in the past year, online consumer touchpoints also require to be more three-dimensional and further matched with offline experiences.

2. In the competition for the high-end market, how can different product segments establish new touchpoints with consumers?

First of all, consumers have relatively different functional and emotional demands for different categories.

• For high-end skin care products, the functional factors that consumers care about most are natural, safe, and non-allergenic ingredients. When considering emotional factors, in addition to the brand being trustworthy, having a good experience, and being pleasing to the consumer, consumers also value the product's cost-effectiveness.
• For high-end cosmetics, consumers are most concerned about ingredients, brand trust, and cost-effectiveness. However, "how long-lasting it is", "whether it conforms to popular makeup trends", and "whether it can express personality" are also unique reference indicators for this category.
• When it comes to high-end perfumes, consumers pay attention to how long the scent lasts, and also consider the balance between popular trends and expressing one's personality, but self-pleasing is a relatively unique indicator. "First of all, you have to feel that the scent smells good and is comfortable."

Such category characteristics also form different market strategies. High-end skin care products emphasize professionalism and cost-effectiveness; the audience loyalty of high-end cosmetics is low, and it is more necessary to grasp the market sentiment to create trends and hot-selling products, as well as cost-effectiveness; high-end perfumes emphasize the identification with the brand spirit and emotional connection, so that consumers can please themselves.

If we look at specific subcategories, there are also more differentiated retention levers.

In the high-end skin care market, the three categories with the fastest growth in spending over the past year are:

1. The first category is the first choice for beginners to get started with high-end skin care products, including lotions, facial essences, creams/lotions, and eye essences. This is because these categories are also core categories for segmenting brand assets, with steady demand. The factors that consumers agree with most are that the ingredients are natural, safe, and non-allergenic (68%), texture and skin feel (51%), and good brand reputation (41%).
2. The second category is a new potential category that has emerged with the growth of skin care knowledge, namely sunscreen products. This category is also driven by brand and influencer education, and the market demand is constantly strong. The market penetration rate (mainly willingness to pay) and product strength still have room for improvement. Consumers also agree that the ingredients are natural, safe and non-allergenic (40%) and have good sunscreen effects (30%).
3. The third category is body lotion, a new potential category that has emerged with the refinement of makeup and the focus on head-to-toe at home. Since this category is mainly driven by self-pleasure and new lifestyles, it requires a good reputation for the product (29%).

In general, due to the outstanding functional attributes of high-end skin care products, their premium ability is significantly higher than that of high-end cosmetics. They have many core categories with stable demand, and they need to narrow the distance with consumers in all aspects through discounts/sample trials/brand services (such as spa appointments, product usage instruction, online skin diagnosis, etc.).

In the high-end cosmetics market, the categories with the fastest sales growth in the past year include:

1. The first category is new categories driven by new makeup styles (mask makeup/eye makeup), including eye shadow/eyeliner and eyebrow products. Consumers in this category are most likely to agree that the product is in line with fashion trends (32%), new products (23%) and limited edition products (22%).
2. The second category is the category driven by the advancement of makeup knowledge, including primer/primer, loose powder, and concealer. In addition to caring about the ingredients of this category (34%), consumers will also pay special attention to whether it is professional (29%) and whether it is new (15%).
3. In addition, lipstick and foundation are still the mainstay categories of cosmetics (over 60%), and consumers are most concerned about ingredients (35%), no smudging/sticking/floating (21%), and good durability (18%).

In general, since consumers have stronger emotional appeals to high-end cosmetics, they make decisions faster. Whether brands can use a series of marketing combinations, such as celebrity advertising, product stories, product trials, discounts, exquisite packaging, etc., to shorten the consumer consumption chain from planting grass to placing orders is the key to efficient conversion, among which celebrity advertising has the most significant driving effect.

In the high-end perfume market, more consumers have used perfume for private parties/dates (73%) and business/office (57%) in the past year. Fruity and floral, fougere, woody, green leaf and aquatic scents are the most mainstream scents, but fragrance preferences vary in different scenarios.

For example, fougere and floral and fruity scents that can express special emotions are more popular in private gatherings; in business scenarios, more moderate woody scents are very popular; when outdoors or at home, except for floral and fruity scents, other scents are almost on par.

Perfume itself is an emotional product, and the market cultivation of high-end perfume is in its early stages. The success of a high-end perfume depends more on whether the brand can make consumers yearn for love and even more beautiful stories after displaying a number of product value points such as niche and unique fragrance, exquisite and durable packaging, and a profound brand story.

3. Summary: How to capture both new groups and new categories?

In the past year, the categories with strong growth in the high-end beauty market showed the following characteristics:

• Consumers have more advanced knowledge of skin care and makeup, and have stronger demands for products such as sunscreen, primer, and foundation. Consumers are pursuing more segmented body management, with more refined skin care and makeup, and have clearer aesthetic demands for eyes, eyebrows, and whole body skin.
• With the advancement of existing customer groups, the post-00s, men, and lower-tier markets have also formed a new army of high-end beauty consumers. They either switch from high-end skin care to high-end makeup, or are attracted by new products when giving gifts to others.

Expensive does not mean high-end, and the same is true for the high-end beauty market. In order to fill the inner qualities of their products and make consumers feel that they are getting good value for money, high-end skin care products, high-end cosmetics, and high-end perfumes also have very different strategies.

High-end skin care products have outstanding functional attributes, and they need to be professional (such as ingredients, technology, patents) and cost-effective so that consumers can experience and try out the products at a low cost. As a category with stronger emotionality, high-end cosmetics need to explore hot-selling products with stable new products, and high-end perfumes need to tell a three-dimensional and moving product and brand story...

What experiences can be learned from establishing touchpoints for different categories? What are the decision-making characteristics of new customer groups? How to optimize the reach for new customer groups? How to consider the synergy of online and offline touchpoints? The Community Marketing Institute will present the above questions in the next article.

Author: Editorial Department

WeChat Official Account: Community Marketing Research Institute