Consumer products to China (personal care, fashion)
(Last updated: 16 Oct 2012)
Trends and opportunities
The market
The growth of 18.7% per annum has been reported in 2011, which demonstrated stronger increase and growth of China’s cosmetics market, which is more than that in 2010 (16.6% YOY). (Source: China Cosmetics Market 2011- Li & Fung)
Skin care leads China's beauty and personal care market, accounting for 40% of value in 2010, and shown strong double digit growth in that year. The sale of skincare has reached RMB73 billion in 2011 and per capita spending on skin care was US$7.10 in 2010. Retail value sales growth of 15% for women clothing has been recorded in 2011 comparing with those of 13% by men’s. Children wear also registered double-digit retail value sales growth in 2011. (Source: Euromonitor)
Given China’s continued improvement in living standards, consumers are becoming more willing to spend money on skincare, cosmetics and other fashion products. Chinese women nowadays are becoming more independent financially and during daily life. The demand for personal care and fashion products therefore is much greater than ever before. They are paying more attention to their appearance, to help boost their confidence at work. Chinese consumers are very keen to follow the global trends on premium and luxurious personal care and fashion items.
While first tier and coastal cities contribute most of the sales/revenue to the consumer products industry, there have been considerable increase from the second tier and north west cities. Consumers in those cities are the most emerging power who experience and enjoy increasingly higher income and living standard, which enable them to afford luxurious goods and products.
Opportunities
- Australia is recognised by local consumers as having a clean and green environment with good quality products and brands. Some Australian exporters have already taken advantage of this competitive edge and established their positions as suppliers of products such as skincare, baby care and hair care products.
- Chinese consumers are highly brand oriented for premium products. Branded and imported products are always regarded as high quality in the eye of consumers.
- Food and skincare product safety has been a major concern amongst Chinese consumers in recent years. Australian baby and children products have consequently attracting greater attention among parents given their clean and green reputation. Due to the “one child policy”, parents are very willing to buy expensive baby care products given the strong association of price with quality.
- The Ministry of Finance announced that from 1 January 2012 onwards, tariffs on “730 categories of commodities” (in which these products are categorised) will be lowered to an average of 4.4%. Tariffs on imported skin care products have been reduced by 1.5% to 5% from the current 6.5%. (Source: China’s Cosmetics Market 2011- Li & Fung)
As a result of the above factors, there is growing demand for premium products categories as noted below:
- Skincare products with multi functions of moisturising, whitening, anti-aging etc.
- Maternity and baby care products
- Men’s care
- Colour cosmetics
- Hair care
- Apparels and foot ware
- Jewellery with special and modern design (Diamond, Pentium gold, pearl, etc)
Key challenges for Australian business in China include:
- Growing number of scams or unqualified leads to Australian companies
- Due diligence and still non-payment issues –letter of credit etc.
- Market access – product registration issues
- Strong competition from other countries
- Growing tightening of regulations and non-tariff barriers
- Intellectual property and trade mark issues
- Strong Australian dollars
- Cultural and language barriers
- Increasing cost of doing business in China including HR, property and other operational costs including marketing and promotion.
Tariffs, regulations and customs
As quoted, tariffs on 730 categories of commodities have been lowered to an average of 4.4% from 1 January, 2012 and the tariff of personal care products stand at an average of 5%. According the Ministry of Finance, the move is largely aimed to boost imports and reduce China’s high inflation rate.
China has significantly reformed its trade policies, reduced tariff barriers and has been conforming to international practices after China’s accession to the World Trade Organisation (WTO).
However, there are non-tariff barriers that impede import of consumer products. All the imported personal care and cosmetics products have to apply for Registration Credence of Imported Cosmetics of Non-special purpose or the Document for Hygiene Permit for Imported Cosmetics for Special purpose from the State Food and Drug Administration (SFDA) of P.R.C. Please refer to the basic process for the application, more information is available on the SFDA’s official website. Prior to exporting to China, labels must be prepared in Chinese. The local Customs Inspection Quarantine will examine the labels for consistency with the local labelling regulations.
Indicative tariff on personal care, cosmetics and apparel items:
- Skin care (toner, moisturiser etc)
Duty tax: 5%, Value added tax (VAT): 17%
- Hair care (shampoo, conditioner etc)
Duty tax: 6.5%, Value added tax (VAT): 17%
- Colour cosmetic (lip sticks, rouge, foundation etc)
Duty tax: 10%, Value added tax (VAT): 17%, Consumption tax: 30%
- Perfume
Duty tax: 10%, Value added tax (VAT): 17%, Consumption tax: 30%
- Essential oil
Duty tax: 20%, Value added tax (VAT): 17%
- Apparel
Duty tax: 14 to 25%, Value added tax (VAT): 17%
(Note: the information provided above are indicative figures and are subject to change by government authorities. Some information is readily available on the internet and we do not guarantee the content’s accuracy and whether they are the most up to date)
Marketing your products and services
Market entry
There are a number of actions that will help you succeed as a supplier:
- Get to know the market – Visit the market, establish a price range for your products, understand the sales and distribution channels, and know your customers’ preferences.
- Proper due diligence – due to an increased incidence of scams in China, Australian companies are urged to investigate enquiries from China and consult with Austrade for assistance and referrals to professionals specialising in China due diligence checks and investigations.
- Find a local partner or agent – Choose carefully and cautiously; look for a partner with a proven record, and ensure that the partner is able to handle import formalities.
- Test the market – Be aware that everything is different in China, even between different cities and provinces.
- Adapt your product to the local market – Adapt your product to local tastes, and make small adjustments to the product if necessary.
- Invest wisely in market promotion – Participate in industry specific trade shows, and make frequent visits to China.
Distribution channels
Department stores
Department stores are a good platform for brand building and can attract high end customers who are willing to pay for luxurious products. However, the investment in counters from suppliers is quite expensive.
Professional stores
Shopping at professional stores has become more trendy among young Chinese ladies. Stores like Sephora, Sasa, Gialen, Watons provide a one-stop-shop concept to the consumers. These stores tend to display products of different tiers of quality and price, which can satisfy different customers and their needs.
Internet retailing
Recently Business To Consumer (B2C) online retail markets have achieved great success given the change of customer’s purchase behaviour.
Many cosmetics brands are making use of online platforms to reach customers. According to iResearch, the transaction value of China’s online retailing market was up by 75.3% YOY to reach 461.0 billion yuan in 2010, accounting for 2.98% of the country’s total retail sales. Cosmetics and personal care products ranked 4th among the most popular categories consumer (Source: China’s Cosmetics Market 2011- Li & Fung)
Supermarkets/hypermarkets
Supermarkets traditionally are a very good platform for low to middle range personal care products. However, more high-end cosmetics products have tried to tap into this channel as the supermarkets tend to upgrade their profile to meet the increasing and changing demand of their customers.
Links and industry contacts
State Food and Drug Administration – www.sfda.gov.cn
Tel: +86 10 6831 3144
email: webmaster@sfda.gov.cn
General Administration of Quality Supervision, Inspection, and Quarantine – www.aqsiq.gov.cn
Tel: +86 10 82260552
Fax: +86 10 82260552
China Ministry of Commerce – www.English.mofcom.gov.cn
No.2 Dong Chang’an Avenue, Beijing
Tel: +86 10 6528 4671
Fax: +86 10 6559 9340
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes 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.