Polarization in foundation market

I. Rapid pie expansion

  • Base makeup (foundation) is one of the fastest growing categories in China. Base makeup sales in May 2019 amounted to 1.3 bn yuan(+257.9% yoy vs. average growth rate of all categories was +151.3% yoy)
  • Currently the cosmetics market, especially base makeup category, is witnessing price polarization. Luxury brands sell their products at higher prices each year, while smaller, niche brands appeal to consumers with lower and approachable prices.
  • While the foundation market is rapidly expanding, new brands are particularly outperforming in mass segment.
  • Most of the new brand names that appear on the table below(which shows the change in rankings in base makeup category from May 2018 to May 2019) are positioned in mass segment.

Table1. Brand ranking in base makeup category on May 2019 vs. May 2018

Source: MeasureCommerce | MeasureChina

II. Clear distinction between premium and mass segment

  • Average price of the top 10 brands in base makeup shows a rising trend. The average sales price of the foundation category in total rose by more than 20%, yoy, from 120 yuan in May 2018 to 146 yuan in May this year.
  • 200 yuan seems to be the threshold between mass segment and premium segment. Most brands positioned in mass segment are local.
  • Premium brands are selling their products at about 10% higher the price than they were a year ago. Mass brands’ price increases are even higher. However, since the base is low for mass brands, the raised prices still remain below 200 yuan.

Figure1. Price comparison of foundation brands on May 2018 and May 2019

Source: MeasureCommerce | MeasureChina

Table2. Price comparison of foundation brands on May 2018 and May 2019

Source: MeasureCommerce | MeasureChina

III. Higher competition in mass market

  • Mass segment is a much more difficult playground for brands due to its low entry barrier
  • If we divide the Top 200 base makeup brands of May 2018 and May 2019 into premium and mass brands, premium now accounts for 19%(down from 25% last year) and mass brands account for over 80% of the market. This implies fiercer competition in the mass market.

Figure2. Composition of Top 200 base makeup brands by price range

Source: MeasureCommerce | MeasureChina
  • Products from premium brands tend to sell well thanks to their name value and credibility. Therefore, their life cycle is longer, and the price does not fluctuate over time. Meanwhile, mass brands seem to constantly adjust their selling price in order to win over their peers in price competition.

Table3. Change in price of Top 10 base makeup products

Source: MeasureCommerce | MeasureChina
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