(Last updated: 6 Jan 2012)

Trends and opportunities

The market

In 2010, Hong Kong’s total imports of cosmetics and skincare products was valued at US$1.86 billion.

Hong Kong is often considered as an excellent testing ground for international products entering Asian markets, and is therefore a burgeoning and competitive market for cosmetic and personal care products.

Over the years, 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, toiletries, and wellbeing products, particularly in the natural and organic skincare categories.

Australia has a diverse native flora which is unique. Its botanical ingredients and extracts containing antioxidants, vitamins and minerals from native fruits and plants such as kakadu plum, grass lily, quandong, tea tree, etc are increasingly well known.
Consumers are becoming more aware of the impact of chemical ingredients and are increasingly looking for natural or organic ranges with the same benefits and functionality.

Mainland Chinese tourists have emerged as one of the major consumer groups in Hong Kong. Attracted by the zero retail tax rate, advantageous exchange rate and lower retail prices, mainland Chinese consumers also have stronger confidence in the perceived authenticity and quality of products in Hong Kong. In 2010, Hong Kong received 36 million visitors from around the world with 22.7 million mainland Chinese visitors representing 63 per cent of total visitors. A Nielsen report estimated that mainland tourists spend an average of HK$12,000 per stay. According to the Hong Kong Tourism Board, approximately 80 per cent of the mainland Chinese tourists who visited Hong Kong went shopping with cosmetic and skincare products amongst their top three shopping purchases. As such, Hong Kong plays an important role in showcasing cosmetics and skincare products to such a large visitor/consumer base.

Hong Kong is an ideal trial market to springboard into mainland China and other Asian markets, due to:

• Its high consumption power and willingness to try new products 
• Similar weather conditions and consumer preferences with other Asian markets 
• Low entry barriers 
• Zero tariff 
• No mandatory local labelling, but highly recommended 
• English is widely used in business 
• Manageable market size 
• Flat distribution structure 
• Huge visitor numbers: 36 million in 2010 – the average visitor spending per capita is HK$6,728 (overnight stay) 
• Hong Kong being a gateway to the potential market offered by the Greater China market

The cosmetics and skincare market in Hong Kong is still dominated by international and premium brands from France, Japan and the USA. However, in recent times newer brands from Japan and Korea and niche brands built on the basis of ‘natural’ or plant-based ingredients are becoming more popular. On the lower end, imports from China dominate.

There is strong competition in the cosmetics and skincare market in terms of:

• Brand awareness
• Quality (in terms of ingredients, design and functionality) 
• Packaging 
• Price competitiveness

Australian skincare products are perceived to be of premium quality, however in comparison to similar products or major brand names from other countries, pricing and packaging are often considered weak points.

Opportunities

Products that are in strong demand in Hong Kong include:

• Certified organic functional skincare and personal care products
• 100 per cent natural and functional skincare products with strong/unique selling points, for example, use of Australian native plants, plant-based ingredients
• Certified organic or 100 per cent natural baby skincare and toiletry products
• Complete lines of skin whitening and sun protection products (summer products occupy shelves for approximately nine months)
• Anti-ageing/nourishing products
• Natural colour cosmetics (mineral make up)
• Dermatologist-developed skincare ranges
• Complete line of professional skin treatments and salon products
• Spa – relaxation and self-pampering products

Competitive environment

Ranked as the world’s freest economy, Hong Kong is a duty free port with few barriers to trade in goods and services. The market is therefore extremely competitive, which means fierce competition in terms of quality, innovation, functionality and price.

With virtually no local manufacturing, almost all of Hong Kong’s beauty product needs are met by imports, principally from France, USA, Japan, and Switzerland for the higher end market, and China for lower end products.

Tariffs, regulations and customs

There are no tariffs in Hong Kong on imported cosmetics and toiletries.

Registration and local labelling are not required on general cosmetic or cosmeceutical products, unless there are medical or therapeutic claims on the products.

Labelling can be in English, or English-Chinese (bilingual). In many cases, it is acceptable to leave the original English label unchanged. Expiry date, although not mandatory, is highly recommended to be printed on the products and/or outer box.

Marketing your products and services

Market entry

The image of Australia’s ‘clean and green’ production environment helps the promotion of Australian cosmetics and toiletries 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, but most importantly to the brand building activities and sustainable development of the brand in the market.

In some cases, retailers, such as Sa Sa, 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.

Brand building and PR

Hong Kong is a highly media influenced market. Cosmetics and skincare product reviews often occupy many pages in various newspaper and magazines. In addition, celebrity endorsements are effective means to drive growth.

Newspapers:

• South China Morning Post – the largest English newspaper in Hong Kong
• Apple Daily
• Ming Pao
• AM730 (free morning newspaper)
• Metro (free newspaper distributed through all MTR stations every morning)

Weekly and monthly magazines for cosmetics and skincare:

• Oriental Sunday More
• Sudden Weekly (me magazine)
• East Weekly
• Next Magazine
• Elle
• Marie Claire
• Cosmopolitan
• Harper’s Bazaar
• Vogue
• Milk

Internet forums

According to Euromonitor International (Beauty and Personal Care – Hong Kong, June 2010) media tools including blogs, beauty forums and Facebook, continue to rank highly in terms of influencing consumers’ purchasing decisions. These forums are increasingly used by companies as platforms for marketing campaigns.

In Hong Kong, popular beauty websites include Beauty Exchange, Elle and She Critiques. These sites feature reviews for beauty products and the latest trends within the industry, a forum for consumers to share product reviews, blogs by skincare experts, make-up artists and/or celebrities to share their beauty experience and tips, and a means for referral of brands. Australian natural and organic skincare products are often discussed in these forums.

Pricing structure

The pricing structure for exports to the Hong Kong market is different from the wholesale pricing structure in Australia due to high overhead costs and margins required at each level (importer, distributor and retailer).

To cover overheads and retail margins for skincare products, the retail price would usually be four to six times the FOB price.

A typical distribution channel to consumers would involve importers, distributors and finally retailers. However, given the limited size of Hong Kong in terms of both population and geography, importers in Hong Kong 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 in Hong Kong may be doubled the Australian retail price, and in most cases the price would therefore become uncompetitive in this market.

We suggest suppliers take the above structure into consideration when shaping the pricing strategy for the Hong Kong export market.

Distribution channels

The major retail distribution channels for cosmetics and toiletries products in Hong Kong include:

• Department stores normally stocks high-end and branded products.
• Beauty specialty shops – for all price ranges. These stores 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) – over 400 stores mainly for middle and mass market products. However, these chains typically demand high listing fees and 35~50 per cent retail margin.
• Supermarket chains – low-end/mass products, tendency towards private labels.
• Brand and concept shops offering experiential aspects to consumer, eg. L'Occitane, L’Oreal, Aesop, Jurlique.

Trade event

Cosmoprof Asia is recognised as the premier tradeshow for the cosmetics and toiletries sectors in Asia. A true trendsetting event for the industry and a must-see exhibition in all Asian buyers’ calendar, Cosmoprof Asia represents an ideal platform for Australian beauty suppliers who are targeting Asian markets to meet key buyers from many countries in a very intensive three-day exhibition.

Austrade has coordinated the Australian presence at Cosmoprof Asia for over 10 years with approximately 30 Australian exhibitors participating in 2011 in the Australian National Pavilion. Cosmoprof Asia’s 2011 exhibition was its largest ever with 68,000sqm of exhibition space (up 18 per cent on the 2010 edition), hosting 1,780 exhibitors (up 9 per cent on 2010) from 42 countries and regions. The total number of visits for the three days was over 48,500 (up 8 per cent on 2010) with a record in international attendance: mainly from Australia, Brazil, Mainland China, France, Germany, Italy, Japan, Korea, Middle East, Russia, Turkey and USA.

Cosmoprof Asia 2012 will be held in Hong Kong from 14-16 November 2012.
For more information, please contact cosmoprofasia@austrade.gov.au at Austrade Hong Kong.

Links and industry contacts

Cosmetics and toiletry-related resources

Cosmoprof Asia – www.cosmoprof-asia.com

Government, business and trade resources for Hong Kong

The Australian Chamber of Commerce in Hong Kong – www.austcham.com.hk
Bilingual Laws Information Service – www.legislation.gov.hk
Census and Statistics Department – www.censtatd.gov.hk/home/index.jsp
The Cosmetic & Perfumery Association of Hong Kong – www.cosmetic.org.hk
Hong Kong Customs – www.customs.gov.hk
Hong Kong SAR Government – www.gov.hk
Hong Kong Trade Development Council – www.hktdc.com
Intellectual Property Department – www.ipd.gov.hk
Invest Hong Kong – www.investhk.gov.hk

Major retailers

A.S. Watsons – www.aswatson.com
Bonjour Cosmetics – www.bonjourhk.com
Lane Crawford – www.lanecrawford.com
Mannings – www.mannings.com.hk
Sa Sa International – www.sasa.com

Contact details

The Australian Trade Commission – Austrade – is the Australian Government’s trade and investment development agency.

Through Austrade’s network of offices in over 50 countries, we assist Australian companies to succeed in international business, attract productive foreign direct investment into Australia and promote Australia's education sector internationally.

For more information on how Austrade can assist you, contact us on:

Australia ph: 13 28 78 | Email: info@austrade.gov.au

A list of Austrade offices (in alphabetical order of country) is also available.