The Chinese health and beauty market has been growing at a fast pace with the rapid development of the Chinese economy in recent years as consumer demographics shift towards a younger and more affluent segment with more demand for luxury goods such as beauty and care products.

Data from Euromonitor reveals that total retail sales of skin care products and make-up products in China reached Rmb131.4 billion (US$21 billion) and Rmb18.8 billion (US$3bn) respectively in 2013, achieving slower year-on-year growth of 9.1% and 7.3% respectively compared to 2012.

Dedicated online retailer transactions were reported to be 25% of sales in cosmetics.

The Asian natural cosmetics market is expanding by about 15% per year, while growing consumer awareness of health and wellness issues is boosting demand for organic and natural products. Few Chinese companies however are producing natural and organic cosmetics because of formulation and ingredient issues, according to Organic Monitor.

“The market growth rate is declining mainly because of animal-testing methods for cosmetic & personal care products,” Organic Monitor said in October 2014.

A Hong Kong trade Development Council report in 2014 said that China’s cosmetic imports in 2013 were led by skin care and sunscreen products, the largest and fastest growing sector in the cosmetics market; followed by perfumes & toilet waters; eye make up; cosmetic powders; lip make up; other cosmetics; and shampoos.

People are increasingly aware of the safety issues of cosmetic products. Consumers, manufacturers and regulatory authorities have been alarmed by a series of problems arising from unsafe products, while the authenticity of cosmetic products, particularly those purchased from online sources, is also an issue of wide concern.

Domestic players account for less than 20% of the market while foreign-invested enterprises and joint ventures take the largest share (80%).

According to Euromonitor and the HKTDC, hypermarkets/supermarkets, department stores and health and beauty retailers were the most popular sales channels for beauty and personal care products in 2012. However, the market share of grocery retailers and department stores has been dwindling, while Internet retailing and health and beauty stores gained an upsurge in market share against 2011.

AS Watson (Group) led the highly fragmented channel of health and beauty specialist retailers in 2014, and saw a negligible increase in share compared with 2013. The company continued its robust expansion in terms of outlet numbers in 2014, with the opening of 275 new stores nationwide, in an attempt to open 3,000 outlets by 2016.

Targeting young women aged 18 to 35, Watson’s Your Personal Store focuses more on beauty and personal care products, catering to the growing demand for a better personal image and wellbeing.

Health and beauty specialist retailers are expected to see a slight deceleration in the value CAGR at constant 2014 prices in the forecast period compared with the review period, mainly due to the saturation in chemists/pharmacies, the main channel in health and beauty specialist retailers. However, the overall growth momentum is projected to be mainly driven by beauty specialist retailers.