China Cosmetics Consumption Behaviour

Consumption in New Digital Age More Online Shopping, Consuming Level & Behaviour Diversifying

Spending frequency/amount: Spending tends to average Different spending levels in different parts of China High/mid/low-end cosmetics all have large number of consumers Frequencies of spending depend on seasonality

Difference in areas: West China has the highest frequency of spending

Preferred shopping channel: Online has become the main shopping channel for cosmetics, comprehensive e-marketplace preferred

Difference in cities: Advanced cities accepting to Haitao, individual overseas shopping Mega cities prefer European/US brands 2nd tier cities more accepting to Chinese/Korean/Japanese brands

Preferred countries of origin: European/US products preferred Chinese skincare brands on the rise Japanese/Korea makeup becoming popular

Level of products preferred: High-end makeup brands on the rise

Buy more online Buy equally online/offline Buy more offline Buy only offline Buy only online

Comprehensive e-marketplace Vertical e-marketplace Brand’s own site Haitao Individual overseas shopping Other

Preferred Channel For Cosmetics Shopping Online Shopping Channel For Cosmetics

Large, Comprehensive E-marketplace Is Preferred Channel For Online Shipping Online Is the Main Shopping Channel For Cosmetics

•  Online penetration increases with the development of e-commerce, online has become a preferred shopping channel •  Consumers are more concerned with product safety and authenticity, comprehensive e-marketplace has become preferred shopping channel

Frequency of skincare consumption/year Frequency of makeup consumption/year

Shopping Frequency Dependant on Seasonality Shopping frequency for skincare dependent on seasonality, 1-2 times per season, shopping of makeup less frequent

•  As basic cosmetic/skincare product, skincare products are more frequently used and bought •  Skincare usage and purchase are highly dependent on seasonality, bought 1-2 times per season •  Cosmetic products are bought for replenishment, less than 5 times per year

1-3 times 3-5 times 5-10 times More than 10 times

1-3 times 3-5 times 5-10 times More than 10 times

<1,000 1,000 - 3,000 3,001 – 5,000 5,001 – 10,000 >10,000

<1,000 1,000 - 3,000 3,001 – 5,000 5,001 – 10,000 >10,000

Skincare spending/year (CNY) Makeup spending/year (CNY)

Spending Averaging, Full-Coverage Strategy More Suitable for China Spending level for skincare tend to average, spending level for makeup is mostly below 3,000 Yuan

•  Spending on skincare tends to average, Chinese skincare consumers are evenly distributed, large consumer groups exist for high/mid/low-level cosmetics products •  Over 50% consumers spend 3,000 Yuan on makeup; over 13.5% spend over 10,000 Yuan, there is a market for high-end makeup

Frequency of purchase Frequency of purchase

High-end Mid-end Low-end High-end Mid-end Low-end

High-end Makeup Products On The Rise

Most spending on skincare is mid-end and on makeup low-end/mid-end; however spending frequency for high-end makeup products is the highest. The reasons: high-end consumers seldom buy low/ mid-end products, on the other hand low/mid-end consumers are attracted to high-end products and prefer to buy at least one classic high-end makeup product for trial

Top Positions

Frequency of Purchase Frequency of Purchase

Preferred Countries of Origin for Brands European/US brands are still top choice; Chinese skincare brands on the rise; Japanese/Korea makeup brands becoming popular •  European/US skincare and makeup brans are still on the lead •  Chinese skincare brands make more efforts on R&D, promotion and distribution channel, their usage exceeding those of Japanese/Korean brands •  Japanese/Korean makeup brands are on the rise

>8,000 1,000-3,000

3,000-8,000 <10,000

>8,000 1,000-3,000

3,000-8,000 <10,000

China West China

China West East South North Northeast Central China West East South North Northeast Central

Spending Skincare/Year - Areas (Yuan) Frequency Skincare/Year Spending Makeup/Year – Areas (Yuan)

Frequency High-end Skincare/Year

Higher Percentage of High-end Consumers In West China High-end shoppers in West China shop more frequently •  In skincare, more than 30% of consumers in West China spend over 8,000 Yuan per year, buying frequency for high-end skincare is less than the average of China, but 55.8% consumers purchase more than 5 times per year •  In makeup, more than 30% consumers in West China spend over 8,000 Yuan, the percentage is about 10% in central China

5 times + /year

High-end

Haitao – City tier

Comprehensive e-marketplace

Vertical e-marketplace

Brand’s own site

Haitao Individual overseas shopping

Individual overseas shopping – City tier

Mega 1st tier 2nd tier 3rd tier & below

Mega 1st tier 2nd tier 3rd tier & below

Advance Cities More Accepting to Haitao & Individual Overseas Shopping The more advanced the city, the more likely accepted Haitao, individual overseas shopping more trustworthy in mega cities

•  Comprehensive and vertical e-marketplace are the main shopping channels for makeup consumers in cities of all tiers •  Mega cities are more accepting to Haitao and individual overseas shopping, 1st tier cities consumers most accepting to individual overseas shopping

Choice of Online Shopping Channels

China Mega 1st tier 2nd tier 3rd tier & blow China Mega 1st tier 2nd tier 3rd tier & blow

>5,000 3,001-5,000 1,000-3,000 <1,000 >5,000 3,001-5,000 1,000-3,000 <1,000

Spending Skincare/Year – City Tier Spending Makeup/Year – City Tier

Average Spending on Makeup Varies For Cities of Different Tier The more advanced the city, the more spending per year, the trend is more prominent in makeup

Average spending of over 5,000 Yuan dominates in mega cities (35.9%), average spending in 3rd tier cities is below 1,000 Yuan

China Mega 1st tier 2nd tier 3rd tier & below

China Mega 1st tier 2nd tier 3rd tier & below

% Skincare Purchasing – Country of Origin % Makeup Purchasing – Country of Origin

Japan Korea China Europe

US Japan Korea China Europe

US

The More Advanced The City, The More Preferred European/US Brands Mega cities prefer European/US brands, 2nd tier cities Chinese/Japanese/Korean

•  In skincare, mega cities have high penetration rate for Chinese/Japanese/Korean skincare products •  In makeup, the higher the city tier, the more preferred are European/US brands, nearly 90% of mega city consumers have used them •  2nd tier cities have the highest penetration rate for Chinese/Japanese/Korean makeup

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