Most of the cosmetics producer set their marketing strategies according to their target customers. For example, if their targets are young people, their products must be set in a lower price. And, for Women, as most of them have enough purchasing power to purchase. The price of cosmetics can be arranged to a higher level. The price of cosmetics can be arranged to a higher level. Therefore, the market of cosmetic industry is then divided into three types. That is, the high-priced market (For example, SK2 and Lancome), middle-priced market (For example, Fancl House and H2O+) and low-priced market (For example, Clean &Clear and Pounds). As different customers may have different demand in cosmetic, prices will be the main factors for them to choose the cosmetics product. That’s why some other competitors may have different line of production to suit different customers.
For the product trend of the cosmetics industry, the exploration of a new item mainly concentrates on improving the skin problems. As customers may have different kind of skin problems which will alter according to their age. For example, young people may need more natural type of cosmetic and oil control skin care products as they are in puberty. Women may need to have more hydrogenised and whitening masks for their skin. For children, more nutritious cream may be needed to protect their skin. Therefore, the product trend can be changing vastly, sensitive sense is a must for every cosmetics producers.
In order to gain a place in the cosmetics industry, a new entry needs a different character compared to the existed producer. Therefore, elderly who are most ignored in the market can be targeted by a new entry.
Cosmetic industry in Hong Kong
The cosmetic products sold in Hong Kong come from two sources—Manufacturing and Importing.
1. Manufacturing statistics:
source: www. /www.italtrade.com/
Hong Kong has a small cosmetic manufacturing sector, and the number is decreasing.Majority of cosmetics are imported from overseas like USA and France.
2. Importing statistics:
Trend for Importation of Cosmetic
source: Hong Kong Census & Statistics Department, processed by Italian Trade Commission
Importation of skin care is the highest among all the cosmetic products in the past six years. The amount of importation of all cosmetic varied a little only. In 1997, the amount is US820 millions and in 2002, he amount is US830. The importation of cosmetic is very stable. For each kind of cosmetic products, the variation of importation from 1997 to 2003 is small. In 1997, the amount of importation of Skincare, perfumery are US320 millions and US100 millions respectively. In 2002, the amount of importation of Skincare, perfumery are US330 millions and US90 millions respectively. We can see that the demands for each kind of cosmetic products are very stable.
The population pattern in Hong Kong
Female is the main market for cosmetic market. Age-group and sex distribution among the population must be taken in consideration.
fig.1
fig.2
Sources: Report of Task Force on Population Policy
Figure 1 and 2 shows the change of population from 2001 to 2031. The male and female population occupied a similar part of population in 2001. However, the female population had been increased in 2031, especially the age group of 45 years old to 79 years old. These figures show that the growing of female population will increase the demand of cosmetic product.
In 2001, the male and female population did not have a significant variation. Most of the population occupied in the age group of 30 years old to 54 years old. Children and elderly population only occupied 16% of the population. In 2001, as 80% of cosmetic demand came from women aged between 30 years old to 54 years old. So, cosmetic industry is most affected by women.
However, in 2031, the population pattern will vary a lot, the male and female population above 45 years old have a significant increase. There is 45% increase in the whole population of age group between 45 years old to 79 years old. The female population has 23.5% increase from 2001 and is larger than the male counterparts. All of these show that there is more women in Hong Kong and there will be a potential demand for them on cosmetic.
It is measured that the sale of cosmetic product will increase further and there will be a 28.56% increase in the total sale of cosmetic industry, especially and female market. So, the future population pattern will affect the demand of cosmetic industry directly as women population will increase by 4.67% a year.
Analysis of China market
SALES
The past and predicted sales of cosmetic are summarized as the following graph:
Cosmetic sales in China (billion$)
Source: Hong Kong Trade Department Council
The sales of cosmetic product kept on increasing since 1982. There was a greatly increase of cosmetic sales from last 10 years and it is expected that sales of cosmetic product will grow every year.
Figure ( ) shows that cosmetic sale in China are increasing from year 1982. The growth rate is increasing every 3 years. In 1990, the sales of cosmetic product were 40 billion dollars. In 2005, the sales have been increased to 500 billion dollars. The growth rate will keep on increasing in the future. From 2002 to 2010, it is expected that the sales of cosmetic product will able to reach 800 billion dollars. The year after this period, sales will reach 1000 billion dollars.
Analysis of the cosmetic markets of Beijing, Shanghai and GuangDong
We choose these 3 places because their local cosmetic sales are highest in China.. According to the Nation Bureau of Statistic of China, the average income per household in these three places is:
We can see that Chinese people are able to spend on cosmetic products in these 3 places. Therefore, we decide to introduce our products to these 3 markets first.
The future tariff rate
Import Tariff
Source :
After China's accession to the WTO, the tariff and non-tariff barriers of cosmetics product are continue to decrease. In 2003, the import tariff of cosmetics and toiletries are 22.3%. And the tariff will be reduced to 6.5% by 2008.Therefore, from 2003 to 2008, the tariff will decrease 15.8%.
The great reduction of import tariff of cosmetics creates a more favorable environment for foreign companies who want to export to China. It is because the selling price of the cosmetics product can be reduced due to the decrease in tariff. This can increase the potential of imported cosmetics goods to compete with low-priced domestic cosmetics. Also the reduction of import tariff decrease the cost of our products to entry China market and thus increase the profit.
The trend of real GDP
GDP of Mainland China remains increasing and the details of real GDP are as follow:
source: World Bank, World Development Indicators, Cabinet Office, Japan
This figure shows the relationship between year and the real GDP. The real GDP is constantly increased from 1978 to 2002. From 1978 to 1991, the rate of increase is slower than those from 1991 to 2002. The rate of increase in real GDP from 1991 to 2002 is much faster. The trend predicts that there will be a much higher real GDP in 2003.
The population of Mainland China is over 13 millions people. China Cosmetic Industry Association reports further 5 millions of Chinese have a gross annual income of US$1000. The growth rate of real GDP in China is never negative. It shows that real GDP of China will continue to increase. The real GDP growth rate is 7.3%, and in 2003, the growth rate is expected to be 7.4%. According to World Bank, China’s real GDP will remain increase year after year. This shows that people in China are able to spend money on cosmetic products. China will become an important market for cosmetic industry. So, it is expected that China demand for cosmetic product will increase the revenue of cosmetic market by 8.4%.
POPULATION
The population of Mainland China is over 13 million people. China Cosmetics Industry Association reports further 270 million Chinese have a gross annual income of US$ 1000. The statistic also shows that people in China are able to spend money on cosmetic products.
CATEGORY
The category of cosmetic sales
-Skin care product 35%
-Hair-care product 28%
-Make-up product 24%
-Perfume 8%
-other 4%
source: Hong Kong Trade Department Council
Skin care product is the dominant product in the domestic market (35%). The first runner-up are Hair-care (28%) and make-up product (24%).
Recommendations
Goals:
We plan to put 40% of the resources in HK's market while 60% in China's market since it is found that there is a larger potential to develop the cosmetics market in the mainland China as people there become richer and have a much higher living standard than before.
Our products will firstly be marketed in HK from June 2003 to Jan 2004
(6 months) and start developing in the 3 major cities- Shanghai, Beijing and GuangDong in Mainland China. The goals are to earn an estimated profit for the first year of $2 million, also establish a brand-name image in China market and explore the cosmetic market for the eldery in HK and china
Products:
Our products will mainly be focused on make-up cosmetics and perfumery that are special on their huge number of colors and flavors. Also their ingredients are only less than 1% chemicals. For example, the oil makes lipsticks from goats while color of rose is extracted to make powder blush. Hence the products are healthier and are less harmful to skin, which are also our selling points.
Besides, we also provide other basic skin care products like bath gel, cleansing gel, toner and body spray with different flavors. Our products are packed with cool and attractive packages to create our brand's special image-- Trendy, elegant and healthy. Moreover, to support environmental protection, we also provide refilling packages with cheaper price.
Price:
We will set different prices in two different markets due to the difference of their CPI. In HK, prices are ranged from $55to $580 according to different products, while in mainland China, products are set in lower price due to the lower CPI there, prices will be ranged from $40 to $460.
Promotion:
A series of big promotion will be carried out to make our products become popular within the first 6 months in HK and mainly in China. Besides sponsoring a number of big fashion shows in the coming year, holding cosmetic workshops and skin consultations regularly, our products will also be advertised on different kinds of mass media including newspapers, magazines, TV, radio and Internet. We will invite a number of superstars to be our products’ representatives and our first proposed target is Miss Maggie Cheung Man Yuk. On the other hand, there are also some pricing strategies to encourage larger amount of consumption.
Place:
Our production plants will be shifted to GuangDong with technologies and skills transferred from USA so as to lower the production cost. On the other hand, products should be sold in large shopping malls like Sogo and Time square in HK, as well as in our retailing shops nearby our fashion department stores and our special counters in some beauty salons and beauty schools.
I suggest our company to establish a large consultation center in China. It is because the cost of establish a large center in China is lower than HK. The large consultation center will provide value-added services, such as make up demonstration and professional advice on skin care.
Market:
Our market will focus on the middle to high income group with monthly income of $25000 or above in HK and $5000 or above in mainland China who are more trendy, higher educated, more aware of appearance and willing to spend on cosmetics. Our target group will be aged around 25 to 60.
Budgeting:
Our planned total budget for this new product line is $10 millions and the following is the allocation of our budget:
- Rent (10%)
- Production (20%)
- Promotion (20%)
- Licensing (5%)
- Tax (5%)
Bibliography
The Bank of Asia limited
Available: http://www.hkbea.com/whp_welcome/whp_c_welmain.html
Census and Statistics Department, HKSAR Government
Available: http://www.info.gov.hk/censtatd/chinese/news/01c/01c_index.html
The Cosmetic and Perfumery Association of HK LTD
Available: http://www.cosmetic-perfume.com/statistics.htm
Hong Kong Census & Statistics Department, processed by Italian Trade Commission
Available: www.italtrade.com/
Hong Kong Trade Department Council
Available: http://www.business.gov.hk/chinese/f0204.htm
Pro Re Nata, Inc
Available: http://www.prorenata.com/china_drugstores/beauty_hs.htm
Report of Task Force on Population Policy
Available: www.info.gov.hk/info/population/eng/annex2_e.pdf
The UK Times Online
Available: http://www.thetimes.co.uk/article/
World Bank, World Development Indicators, Cabinet Office, Japan
Available: http://econ.worldbank.org/