1. Definition and Classification of Cosmetics

According to the National Economic Industry Classification (GB/T 4754-2017), cosmetics refer to daily-use chemical industrial products applied by smearing, spraying, or similar methods to any part of the human body (skin, hair, nails, lips, etc.) for cleansing, odor elimination, skincare, beautification, or adornment purposes.  

The cosmetics industry is divided into 11 sub-sectors:  

Skincare, Haircare, Color Cosmetics, Oral Care, Bath & Shower Products, Baby & Child-Specific Products, Men’s Grooming, Sun Care, Fragrances, Deodorants, and Depilatories.

The company primarily focuses on the skincare segment within the cosmetics industry.  

2. Global Cosmetics Industry Development

(1) Global Market Size

Rising global incomes, diversified lifestyles, and growing acceptance of "self-rewarding consumption" have transformed cosmetics from mere beauty tools into vehicles for self-expression, health, and confidence. Urbanization and demographic optimization in emerging markets further drive demand.  

Per Euromonitor, the global cosmetics market has grown steadily since 2016. Despite economic fluctuations, it demonstrated strong resilience, reaching $592.335 billion USD in 2024.  

(2) Regional Distribution

United States remains the largest single market (20.97% global share in 2024), characterized by maturity, high brand concentration, and sophisticated segmentation.  

China has emerged as the second-largest market (12.58% share), fueled by rising disposable incomes, e-commerce penetration, and local brand growth. Its consumption is shifting from function-oriented to experience-driven, with leading growth potential across categories.  

3. China Cosmetics Industry Development

(1) Historical Evolution

Early Stage (Ancient–19th Century): Cosmetic culture dates back millennia, documented in classics like Shijing and Chuci, with materials like floral extracts and lead powder used in Han/Tang dynasties.  

Slow Development (Early 20th Century–1970s): Limited by wars and weak industrialization. Domestic brands (e.g., Pehcholin, Friendship) emerged but demand remained low.  

Rapid Growth (1980s–2000s): Economic reforms spurred demand. International brands entered via JVs, upgrading standards and marketing. Cosmetics transitioned from luxury to daily essentials.  

Regulated Development (2010s–Present): Shift from "high-speed" to "high-quality" growth. Regulations like the Cosmetics Supervision and Administration Regulation established rigorous frameworks for safety, efficacy claims, and child product management.  

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(2) Size of the Chinese Cosmetics Market

According to Euromonitor data, China's cosmetics market size doubled from RMB 205.4 billion in 2010 to RMB 537.2 billion in 2024. Between 2010 and 2021, rising household incomes and consumption upgrades drove increased cosmetics penetration. The development of e-commerce and social platforms expanded sales channels, while accelerated entry of domestic and international brands enriched product categories and structures. During this period, the market maintained an average compound annual growth rate (CAGR) of 9.7%.  

From 2022 to 2024, amid macroeconomic slowdown and intensified competition, the market stabilized at around RMB 530–540 billion. The industry shifted from earlier extensive "volume expansion" to a phase of "quality enhancement" focused on premium products and stronger brands.  

(3) Segmented Categories in the Chinese Cosmetics Market

In recent years, as health awareness and self-care consciousness grew among consumers, China's cosmetics market gradually shifted from aesthetics-driven to function-oriented demand. Skincare, serving both beauty and skin health purposes, evolved from basic cleansing and moisturizing to multi-dimensional applications like repair, anti-aging, whitening, sensitivity relief, and oil control. It has increasingly become a "daily necessity" in consumers' lives.  

Compared to other segments, skincare maintains dominance due to its broader user base, higher repurchase rate, and stronger brand loyalty. Euromonitor data shows that China's skincare market reached RMB 271.2 billion in 2024, accounting for 50.49% of the total cosmetics market—ranking first among all categories and demonstrating robust, stable market support.  

In contrast, haircare ranked second with an 11.80% market share in 2024, significantly lower than skincare. Other categories like color cosmetics, oral care, and baby/child products, though smaller in share, showed high growth elasticity due to Gen Z consumer emergence and youthful brand marketing, becoming key forces driving industry restructuring.  

(4) Sales Channels for Cosmetics in China  

From 2010 to 2024, China's cosmetics sales channels underwent significant transformation. Per Euromonitor, e-commerce surged from 3% to 47% of total sales, becoming a major growth driver. E-commerce platforms boosted product reach and sales conversion through wide coverage, flexible marketing, and shorter decision paths, especially crucial for emerging brands.  

However, despite e-commerce expansion, physical retail still held >50% market share. Stores remain indispensable for brand image building and customer relationship management, offering advantages in skincare consultation, professional services, and high-repurchase scenarios through trust-based engagement.  

E-commerce’s growth also intensified reliance on traffic resources. Rising marketing costs (platform ads, livestreaming, SEO) made brand loyalty and profitability harder to achieve online. Physical stores, meanwhile, facilitate regional market barriers and customer retention, creating long-term "moat effects." Future channel strategies will hinge on online-offline integration to synergize brand value and commercial benefits.  

(5) Competitive Landscape of the Chinese Cosmetics Market  

At the corporate level, China's cosmetics market was highly concentrated in 2024. L'Oréal Group, Procter & Gamble, and Estée Lauder led with 14.4%, 7.9%, and 5.1% market share respectively, leveraging advantages in brand portfolios, channel control, and R&D. Three Chinese companies—Proya, Chando Group, and Pechoin—ranked among the top 10, jointly holding 6.3% share. Though still limited, local players strengthened market influence through improved product quality, e-commerce expansion, and targeted marketing, gradually forming a co-existing landscape with global giants.  

The market comprises two main player types:  

1. Global conglomerates (e.g., L'Oréal, P&G, Estée Lauder): Leading market share via brand portfolios, channel power, and R&D.  

2. Local enterprises (e.g., Proya, Chando, Pechoin, Marubi, Yatsen, Botanee, DR PLANT): Gaining traction through product upgrades and omnichannel strategies.  

At the brand level, competition is more fragmented. In 2024, the top three brands—L'Oréal Paris, Lancôme, and Estée Lauder—held just 4.5%, 3.8%, and 2.3% share respectively. The top 10 brands combined accounted for only 22.0%. This stems from:  

- Conglomerates’ multi-brand strategies covering diverse segments/price tiers.  

- Rising consumer focus on ingredients, efficacy, and experience, enabling agile new brands to emerge via social media, content commerce, and precision operations.  

(6) Market Tiers in Chinese Cosmetics  

Based on consumer perception, brand recognition, pricing, and channels, China's cosmetics market divides into mass and premium tiers. Mass cosmetics cater to daily care and basic beauty needs with wide accessibility, high frequency, and dominant market share. Euromonitor data shows the mass segment reached RMB 284.05 billion (52.88%) in 2024, while premium cosmetics hit RMB 200.07 billion (37.24%).  

(7) Per Capita Cosmetics Spending in China  

China’s per capita cosmetics spending remains low globally. In 2024, it was $53.0—far below the U.S. ($365.9), Japan ($226.9), and South Korea ($256.3).  

This gap reflects room for growth in penetration, usage frequency, price points, and consumption structure. As incomes rise, consumption matures, and beauty habits proliferate, per capita spending is projected to increase, expanding total market capacity.  

Urbanization and new-generation consumers will further unlock demand for personalized, efficacy-driven, and refined products, accelerating the industry’s transition from "basic adoption" to "quality elevation." Compared to saturated mature markets, China retains stronger structural growth momentum.

Future Industry Development Trends

(1) Accelerated Rise of Local Brands, Increasingly Multipolar Competitive Landscape

For a long time, China's cosmetics market was dominated by foreign brands, especially in the mid-to-high-end price segments, where international companies held sway with their strong R&D, branding, and channel advantages. However, driven by rising national pride in domestic brands, growing consumer confidence, and the proliferation of digital marketing tools, a cohort of local brands has rapidly broken through in multiple market segments by leveraging their agility, precise market positioning, and efficient channel deployment.  

Currently, domestic brands are no longer confined to the mid-to-low-end market but are gradually penetrating the mid-to-high-end price segments. They are enhancing brand value and premium pricing power through ingredient innovation, product packaging, and cultural storytelling. Simultaneously, leading local companies are further strengthening R&D capabilities, tightening control over supply chains, and covering broader consumer groups via multi-brand strategies. In the future, domestic brands are expected to form a multipolar competitive landscape alongside international players, each with distinct characteristics.  

(2) Sustained High Growth in Functional Skincare, Accelerated Layering of Specialized Segments

As consumers become increasingly rational about skincare, product demand is shifting from "beautification" to "efficacy," making functional skincare products a key market focus. Specialized needs like barrier repair, anti-oxidation/anti-aging, acne-prone skin care, and post-procedure recovery continue to emerge, driving product structures toward "high efficacy coupled with safety." Functional skincare emphasizes active ingredients, scientific validation, and balanced user experience, demanding higher formulation design and efficacy delivery capabilities, thus prompting companies to increase R&D investment.  

Furthermore, consumer focus on "ingredient science" and "skin type suitability" compels brands to continuously optimize claim substantiation, testing transparency, and consumer education. In the future, functional skincare will become a key battlefield for segment competition and a core direction for companies to build professional reputations and brand moats.  

(3) Deepening Omni-Channel Integration, Revalorization of Offline Channels

In recent years, with the rapid rise of e-commerce penetration, online sales have become a crucial growth engine for the cosmetics market. However, amid trends of consumption upgrading and heightened demand for experiences, the irreplaceable value of offline channels is being re-recognized and revitalized. Offline stores offer advantages like product experience, professional consultation, and immediate feedback, serving as key touchpoints for brands to build image and consumer trust. Particularly for categories like skincare, fragrances, and beauty tools, offline service experiences significantly influence purchasing decisions. Moving forward, Chinese cosmetics companies will accelerate omni-channel integration, creating closed-loop systems through self-operated stores, multi-brand shops, pop-up stores, and O2O services to achieve traffic synergy, brand linkage, and user retention.  

(4) Accelerated "Brand Globalization" Trend, Faster International Market Expansion  

Against a backdrop of intensifying competition and slowing growth in the domestic market, an increasing number of local brands are setting their sights on overseas markets. Benefiting from China's mature supply chain system, strong digital marketing capabilities, and frequent supportive cross-border e-commerce policies, domestic brands are gradually entering emerging and mature markets like Southeast Asia, the Middle East, Europe, and the US. Chinese cosmetics brands primarily employ localized product development, overseas social media operations, and local team building to create market strategies highly aligned with local cultures, rapidly accumulating user bases and brand awareness abroad. In the future, domestic brands possessing "product strength + brand power + supply chain flexibility" are poised to overtake international competitors in global markets, with "Chinese brands" becoming key participants in the new wave of globalization.  

(5) Continuous Tightening of Industry Regulations, Compliance as Long-term Competitiveness

With the implementation of the "Regulations on the Supervision and Administration of Cosmetics" and multiple supporting regulations, compliance standards across all industry stages – from raw materials and production to labeling, efficacy claims, and advertising – have been significantly elevated. The industry has entered a development phase characterized by "regulation-led governance, transparent supervision, and strict risk control," making comprehensive compliance capabilities a hard requirement. Efficacy claims must be substantiated, advertising must avoid false claims, labeling must strictly follow prescribed formats, and registration/filing requirements demand systematic and meticulous processes, posing all-chain compliance challenges for companies.  

In the future, companies with mature quality systems, robust compliance management, and prudent operational philosophies will demonstrate greater stability and development certainty within this regulatory environment.