Cosmetics to Hong Kong
Trends and opportunities
Australia has earned a deserved reputation as a quality supplier to the beauty and health sectors in Asia and is recognised as a good source for cosmetics, skin care and health products, particularly in the natural and organic skincare categories. Australia’s botanical ingredients and extracts containing antioxidants, vitamins and minerals from native fruits and plants such as kakadu plum, grass lily, quandong and tea tree are becoming increasingly well known.
With virtually no local manufacturing, Hong Kong’s beauty product needs are overwhelmingly met by imports. The regions discerning consumers are becoming more aware of the impact of chemical ingredients and there is demand for natural, organic and safe-to-use skin care products amongst local customers and overseas visitors.
According to the Australian Bureau of Statistics on Global Trade Atlas, Australian cosmetics exports to Hong Kong grew by 14 per cent to about A$70 million (approximately HK$420million) in 2015. It has more than doubled in the last six years from A$26 million since 2010.
While Australian skincare products are perceived as premium quality, the market is extremely competitive. In comparison to similar products or major brand names from other countries, pricing and packaging of Australian brands are often considered weak points.
The beauty market in Hong Kong is very strong. There is untapped demand in the natural and organic products segment and great potential in the following areas:
- baby and child-specific products
- anti-ageing products
- skin-whitening products
- sun-protection products
- natural colour cosmetics and mineral make up
- natural or organic functional hair care products
- men’s grooming products.
Hong Kong is an ideal trial market to springboard into mainland China and other Asian markets, due to:
- high consumption power and willingness to try new products
- similar weather conditions and consumer preferences with other Asian markets
- low entry barriers
- zero tariffs
- no mandatory local labelling, although dual-language labelling is highly recommended
- manageable market size
- flat distribution structure
- English is widely used in business.
Hong Kong acts as an important showcase for the greater China market and is a favourite shopping destination for tourists from mainland China due to its lower retail prices and authentic products. In 2013, some 40 million mainland Chinese were among the 54 million visitors flocking to Hong Kong. (Source: Tourism Commission, Tourism Performance 2013, 29 August 2016)
Cosmetics and skin care products are high on the shopping list for Chinese and other tourists visiting Hong Kong, contributing to total sales in the beauty and personal care sector of nearly HK$17 billion in 2015.
Recently the sales of premium international brands have been impacted by a reduction in mainland visitors to Hong Kong. This decline in premium consumption has been offset by increases in local demand for more mass market products. As a result a perceivable transition is underway with local retailers moving to increase development and sourcing of quality but mass oriented products that cater to the domestic market. (Source: Euromonitor, Beauty and Personal Care in Hong Kong, 2 Oct 2014)
Hong Kong remains a glamorous shop window for showcasing international brands. The city offers an ideal platform for many Australian cosmetics companies to establish a reputation amongst enthusiastic mainland buyers, building brand equity before tackling the mainland’s complex and costly regulations.
Competition is fierce as the Hong Kong market is highly fragmented and saturated with products from a wide array of supplier countries. The cosmetics and skincare market in Hong Kong is still dominated by international and premium brands from France, Japan, Switzerland and the United States.
In recent years, new brands from Japan and Korea and niche brands built on ‘natural’ or plant-based ingredients are becoming more popular. The pop culture wave of Korean cosmetics has recently intensified the competition. At the lower end, imports from China dominate.
Tariffs, regulations and customs
There are no tariffs in Hong Kong on imported cosmetics, skin care and health products.
Registration and local labelling are not required on general beauty, cosmetic or cosmeceutical products, unless there are medical or therapeutic claims on the products.
Not all health supplement products need to be registered. Only pharmaceutical products are required to be registered with the Department of Health in accordance with the Pharmacy and Poisons Ordinance Cap 138.
In deciding whether or not a product is a ‘pharmaceutical product’, the Department of Health takes into account the composition of the product and nature of the claims made in the labels, leaflets, brochures, wrappers, advertisements and other promotional materials of the product.
In general, products carrying ‘medicinal’ claims fall within the meaning of pharmaceutical products and need to be registered. For more information about registration, visit the Hong Kong Department of Health.
Labelling can be in English or English-Chinese (bilingual). Traditional Chinese is used in Hong Kong while simplified Chinese is the norm in mainland China. Traditional Chinese is always recommended in the Hong Kong market. In many cases, it is acceptable to leave the original English label unchanged. An expiry date, although not mandatory, is highly recommended to be printed on the products and/or outer box.
Marketing your products and services
The image of Australia’s ‘clean and green’ production environment helps the promotion of Australian beauty and health product exports to Hong Kong.
The most effective way to enter the market is to work with local distributors or agents, who normally contribute not only to the sales and marketing, but most importantly to brand building activities and sustainable development of the brand in the market.
In some cases, retailers, such as Sa Sa, Bonjour, Nest Beauty and Meka may also play the role as importers to import products directly from suppliers, bypassing the need for intermediaries.
Importers and retailers in Hong Kong will often seek exclusivity to secure brand/product uniqueness and avoid price competition, given the relatively small market size.
Austrade has launched a video insight to provide you with first-hand perspectives from experts in the market. This video provides advice on the latest market trends and tactics to be used in Hong Kong and China.
Brand building and PR
Hong Kong is a highly media-influenced market. Traditional television or print advertising are key marketing tools as are online channels. Beauty and health product reviews often occupy many pages in various newspaper and magazines.
Social media is increasingly popular. Blogs, beauty forums and Facebook have significant influence over consumers’ purchasing decisions. Beauty Exchange, Elle and She Critiques are popular beauty websites. In Hong Kong, digital marketing, such as creating a Facebook page and using interactive online games, has become an effective interactive way for brands to communicate with potential consumers. Weibo is China’s most popular social network, where Facebook is generally not accessible.
In addition, celebrity endorsements and engaging bloggers are an effective means to drive growth. Brands invite bloggers to new product launches and send them product samples to try. These bloggers review products online and encourage their followers to try out the latest offerings.
The pricing structure for exports to the Hong Kong market is different from the wholesale pricing structure in Australia due to the high overhead costs and margins required at each level (importer, distributor and retailer).
Hong Kong commercial real estate is amongst the most expensive in the world. To cover high rental cost and retail margins for beauty and skincare products, the retail price is normally four to six times the free on board (FOB) price.
A typical distribution channel to consumers involves importers, distributors and finally retailers. However, given the limited size of Hong Kong in terms of both population and geography, importers may also play the role of wholesaler/distributor. Retailers may also import products directly from suppliers, bypassing the need for intermediaries.
In cases where importers pay the equivalent of the Australian ‘wholesale’ price for the goods, the retail price may be double the Australian retail price, which is not generally competitive in this market.
Australian suppliers should take the above structure into consideration when shaping their price strategy for the competitive Hong Kong market. They should remain flexible and negotiable on the pricing structure in order to increase their price competitiveness.
The major retail distribution channels for beauty and health products include:
- Department stores normally stock international, high-end and branded products
- Beauty specialist retailers (for all price ranges) are still selling parallel-imported brand name products, but are progressively seeking new product lines to reduce their parallel imports
- Personal care chain stores (combined with pharmacies) are mainly for middle and mass-market products. There are over 400 of these stores and they typically demand high listing fees and a 35 to 50 per cent retail margin
- Multi-brand stores are for middle to high-end ranges. They may also play the role of importers and distributors to import products directly from suppliers.
- Supermarket chains stock low-end/mass products and have a, - tendency towards private labels.
- Concept shops are standalone brand stores offering experiential aspects to consumer e.g. Australian skincare brands Aesop, Jurlique, Anumi and Perfect Portion.
- B2C e-commerce platforms and the development of O2O and cross border e-commerce platforms for imported goods.
Beauty and personal care products are usually distributed through health and beauty specialty retailers.
To help more Australian companies understand the distribution channels in the cosmetic sector, Austrade has produced a list of Hong Kong health and beauty retail stores.
Cosmoprof Asia – the largest and most definitive beauty trade event in Asia Pacific.
Sisters BeautyPro Expo - the largest beauty trade fair in Hong Kong.
Links and industry contacts
Government, business and trade
Bilingual Laws Information Service
Census and Statistics Department
Hong Kong Customs
Hong Kong Department of Health
Hong Kong SAR Government
Hong Kong Trade Development Council
Intellectual Property Department
Invest Hong Kong
The Australian Chamber of Commerce in Hong Kong
The Cosmetic & Perfumery Association of Hong Kong
Oriental Sunday (More magazine)
Sudden Weekly (Me magazine)
Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.
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