Could Chinese president Xi Jinping’s vow last month to crack down on super-rich consumers to address wealth disparity in the country spell opportunity for prestige cosmetics brands? Indeed, the emergence of a larger and increasingly affluent middle class could be a boon for more affordable luxury items.
As reported in China’s state media, president Xi Jinping said in August that China would “regulate excessively high incomes and encourage high-income groups and enterprises to return more to society.” Luxury stocks fell as a result of the announcement, which is intended to address wealth disparity in the country.
For now, it is unclear how exactly the market will be impacted. As their purchasing power is affected, perhaps coupled with a desire to be less conspicuous, the way in which high-net worth consumers display their wealth may change. A bigger, more affluent middle-class could spell opportunity for brands however, particularly for affordable items like cosmetics.
Prestige beauty is already seeing good growth in China, particularly online. According to new data from The NDP Group, online prestige beauty sales in the country grew 47% to $5.4bn in the first half of 2021.
By category, online sales of prestige fragrances grew 48% between January and June of this year, while make-up sales rose 34% as a result of increased demand following the easing of mask mandates. Skincare sales were up 50%, while haircare witnessed the biggest growth, with an 84% uptick.
“One of the key takeaways from the prestige beauty industry’s experience with COVID-19 lockdowns has been that manufacturers and retailers must have an up-to-date and actionable digital strategy,” Stanley Kee, managing director, APAC, The NPD Group, said in a statement. “Not only are more people buying beauty products online, but new selling formats such as livestreaming or short-form videos are continuing to rise in popularity, providing endless marketing opportunities for beauty brands.”
Time will tell what lies in-store when it comes to China luxury, and cosmetics in particular.