China lipstick market is one of the growing markets directly taking advantage of the growth of Chinese middle class power income and the rise of beauty and personal care.
PEST analysis China
China Political context
The thorough law and multipartite superintendents from government will make sure the stable developing of the lipstick market in China. Now Segmentation of all the products in the market will also help the superintendents from the related departments. Otherwise the Brand protection by the government law and the Stable policy on international trade will be more in advantage of the foreign Luxurious cosmetic brands. The Tax free store open in the bonded port or some cities will make the price lower in the market. But the Chinese government supporting the local industries will impact the market share in China.
The growth rate of the GDP in the First half year of 2014 is lower than the previous year on the corresponding period. And the forecast of the economic growth in this year is not optimism. If the inflation will be higher in the next half year the “lipstick effect” will be more obvious.
Chinese consumers’ profile
The large population of China is always in benefit of the size of the market. And when we look the Hofstede model we can find the Chinese people will like to show off their status and also their treasure, also they will be impact by the group, society and other people very easily. It can explain why the luxury branding products have such a good performance in China. And when the people who born after 1980’s begin to have job and buying power, their buying behavior will be more effected by the idol, especially from the South Korea. [more about Chinese consumers]
Technology in China
New distributive channels will give the customers and Companies more impact. This part will be a two-edged sword; higher sales volume but also higher competitiveness from the others ; lower cost in the operating but lower quality guarantee.
China industry analysis
Potential entrants on lipstick market in China
There are more foreign brands of lipstick entering in the Chinese market. Most of them are not luxury brands and they will have the lower price in the cosmetic market in China. The representatives are from South Korea and Japan. Other sidethere are more and more local branding come back into the people’s attention, not only because the technology of the companies became better, also because of the first lady of China Peng liyuan propagandize the classical brands of China.
The top luxury brands in cosmetics industries are very strict with its suppliers. Also the producer will develop new technology to maintain the growing performance of the products. But there is no Chinese factory to produce these kinds of products, and it makes the distributors or the stores unable to reduce the cost of the supply chain.
Foreign cosmetic brands have famous branding effect on the customer choice and they provide a large range of lipsticks in order to extend the offer on a regular basis. These factors help the customers to increase its willingness to pay a high price. But in the other hand, the customers have different income level and education level in China, so even the cardinal number of potential buyers is higher but they will be less likely have the loyalty to one brand.
Substitutes to lipstick in China
Even the product of the lipstick can have various kinds; it can be solid, liquor and cream. Beside these categories, it is very difficult to find the substitutes.
It has very limited market in China. So in this way the most threats from the substitutes are from the products themselves, like the overseas purchasing on the internet and the imitative commodities will be have the price advantage in the market.
The brand as Lancôme in China already entered in the Chinese market more than 20 years ago, and it had been founded more than 70 years ago. The lipstick is not like the skin make up products, for different race and skin color will have different technology to produce specialized products. It already had the stable products and price planning in the whole market.
Traditional stores are not the only way to gain market share in China. We know there lots of official website in EU, USA and some other counties. But in China this part is empty. Even if there is the VIP.COM which is in the standard trench to sale the products, it also needs the more standard platforms to expend the market. Wechat stores can be also a way to extend the market
Beginning of 2014 saw a Korean drama promoting the consumption of Chinese cosmetics. Then the similar lipstick color than the one used by the heroin had been sold out in the whole world market. This is a new way to promote the lipstick market in China (example here or here)
In the same time, the young ladies of China will have more and more buying power in the market. Choosing the right idol will surely make the market share increase fleetly. Finally, using some popular Chinese Weibo users to promote a product will insure a regular and efficient visibility over Chinese Internet.