In September, the total retail sales of cosmetics in China reached 32.57 billion yuan ($4.53 billion), a year-on-year increase of 1.6%.
In October, the total retail sales of cosmetics in China reached 31.74 billion yuan ($4.4 billion), a year-on-year increase of 1.1%.
In November, the total retail sales of cosmetics in China reached 54.85 billion yuan ($7.6 billion), a year-on-year decrease of 3.5%.
After experiencing three consecutive months of slight growth and decline, the total retail sales of cosmetics finally witnessed a nearly 10% year-on-year increase in December 2023, sweeping away the previous gloom. However, looking at the overall market performance for the year, the growth rate of total retail sales of cosmetics did not outpace the overall consumer goods market and the national GDP. So, where will the industry go this year?
In December, the total retail sales increased by 9.4%, but the overall sales level only returned to the level of three years ago.
Today (January 17th), the highly anticipated “report card” for the Chinese economy in 2023 was officially released. According to the latest data from the National Bureau of Statistics, China’s gross domestic product (GDP) for the whole year of 2023 was 126.0582 trillion yuan ($17.52 trillion), with a year-on-year growth of 5.2% at constant prices.
At the same time, the National Bureau of Statistics also released the data for the total retail sales of consumer goods for the period of January to December 2023, which amounted to 47.1495 trillion yuan ($6.55 trillion), representing a 7.2% increase compared to the previous year. Specifically for December 2023, the total retail sales of consumer goods reached 4.355 trillion yuan ($605.1 billion), showing a year-on-year increase of 7.4%.
Looking specifically at the cosmetics industry, the data shows that in December 2023, the total retail sales of cosmetics amounted to 32.3 billion yuan ($4.49 billion), with a year-on-year growth of 9.7%. However, compared to the previous month (54.85 billion yuan, or $7.62 billion), there was a decline of 41.1%. It is worth noting that November is known for its Chinese Double 11 Shopping Festival in the cosmetics industry, so a month-to-month decline in December is considered normal.
Reviewing the trend of total retail sales of cosmetics throughout the year, it can be observed that the highest year-on-year growth rates occurred in April and May, with 24.3% and 11.7% respectively. The retail sales for these two months were 27.62 billion yuan ($3.84 billion) and 32.98 billion yuan ($4.58 billion). On the other hand, July and November were the only months that recorded negative growth, with a year-on-year decline of 4.1% and 3.5% respectively. The remaining months maintained single-digit growth, with only March, August, and December exceeding 9% growth, while the growth rates of the other months did not exceed 5%. Overall, the industry exhibited a relatively volatile state.
It is worth mentioning that although the growth rate in December 2023 is considerable, it is also influenced by the lower value of total retail sales of cosmetics in December 2022. Upon examining the total retail sales of cosmetics in December over the past decade, it is noted that December 2022 was the only year to experience negative growth, with a significant decline of 19.3%. Therefore, the 9.5% growth achieved in December 2023, compared to the previous year, does not represent a significant sign of recovery.
Furthermore, in terms of the absolute value of total retail sales of cosmetics in December over the years, the total sales of 32.3 billion yuan ($4.49 billion) in December 2023 only returned to a similar level as December 2020 (32.42 billion yuan, or $4.5 billion), or even lower than December 2021 (34.14 billion yuan, or $4.74 billion). Hence, industry experts believe that “the seemingly high growth in December is merely an illusion.”
In 2023, the total sales reached 414.2 billion yuan ($57.56 billion), but the growth rate was “lagging behind.”
It is worth noting that although the monthly increase in total retail sales of cosmetics in December surpassed that of consumer goods (7.4%), the annual growth rate of total retail sales of cosmetics this year was “lagging behind.”
Specifically, from January to December 2023, the total retail sales of cosmetics nationwide amounted to 414.2 billion yuan ($57.56 billion), with a year-on-year growth of 5.1%. This figure is significantly lower than the overall growth rate of 7.2% for consumer goods retail during the same period and also falls short of the national GDP growth rate of 5.2%.
Senior industry experts have stated that this is almost the first time in nearly a decade that the year-on-year growth rate of total retail sales of cosmetics has lagged behind the growth rate of consumer goods retail. “It’s somewhat lamentable.”
However, looking at the overall development trend of the cosmetics industry itself, it is still on a positive trajectory. By examining the total retail sales of cosmetics over the past decade, except for a negative growth rate of 4.5% recorded in 2022, the other years have maintained steady growth. Moreover, the total retail sales of cosmetics in 2023 reached a 10-year high.
However, in terms of growth rate, among the nine years that achieved positive year-on-year growth, 2023 had the lowest growth rate of only 5.1%. The growth rates of the other eight years remained above 8%, and in the years 2014, 2015, 2019, and 2021, the growth rate even exceeded 10%. This suggests that the growth of total retail sales of cosmetics has begun to slow down.
“Staying steady is winning”
2023 was the first year of recovery after the pandemic, and the year-end “report card” of each industry also to some extent represents the resilience of that industry’s development. For the cosmetics industry, “difficulty” almost became the underlying theme for the entire industry last year.
Throughout the industry, bankruptcies and company closures were rampant. According to recent incomplete statistics from CHAILEEDO, a total of 43 cosmetics companies went bankrupt in 2023, including some well-established companies with a history of over 20 years. Additionally, based on the cancellation notices of cosmetic production licenses issued by regulatory authorities in several provinces, 150 companies canceled their licenses, with Guangdong Province having the highest number of cancellations at 88.
Furthermore, some industry experts also stated, “This year, the wave of bankruptcies and closures in the industry may continue for some time.” This indicates that the industry’s winter is not yet over. In this context, many industry insiders have expressed that “seeking progress while maintaining stability” is the keyword for companies this year, and some even say, “Staying steady is winning.”
However, the industry also has some top-performing players who are optimistic about this year’s development momentum. Recently, the head of a leading factory in Shanghai revealed to CHAILEEDO, “In the first quarter of this year, we will lay the foundation for our newly built headquarters and R&D building, and our performance is expected to grow by 30%.” Moreover, many factory managers in Guangzhou have stated that they will focus on a specific niche field and no longer pursue a “bigger is better” approach, instead focusing on “small and refined” business. Additionally, many brand owners are continuously investing in research and development.
It is worth mentioning that many legal professionals believe that the implementation of the complete version of safety assessments next year will also affect the overall development of the industry. If it is implemented according to the prescribed deadline, it is estimated that there will be another batch of companies that cannot sustain. According to CHAILEEDO’s understanding, some companies are actively preparing the materials for the complete version of safety assessments, with a raw material company in Guangzhou stating that “70% of our materials have undergone safety assessments.”
Some industry veterans believe that when the market conditions are generally unfavorable, it becomes especially important to cultivate the internal strength of the company/brand and build up reserves. Once the market conditions improve, they can make a strong comeback and have the hope of recovering what was lost.
