Weak cosmetic sales as cautious customers tone down spending

Taiwan's cosmetic market is facing declining sales, what is contributing to this trend?

According to the latest Beauty trend released by Kantar Worldpanel Taiwan, 2013H1 Taiwan’s cosmetic market* value had declined marginally by 3% compared to the same period last year, due to dipping non-seasonal sales, which even a strong Mother’s Day performance could not salvage. The unbalanced sales fluctuation in seasonal vs. non-seasonal trend was no news, but according to KWP Taiwan’s data, this trend seemed to become even more apparent since last year; with the biggest seasonal event, Annual Department Anniversary sales, soon to kick off, whether it will provide the cosmetic market with the boost it needed to make up for the loss sustained remains a major hurdle for brand managers to cross.

On the bright side, despite flat value sales, the market demand remained intact, with shopper numbers hit a record half year high, and level of consumption maintained on a steady note compared to previous year; an indication that Taiwan ladies are still more than willing to invest in the beauty business, and the reason behind the market’s slow performance, was mainly due to a drop in purchase price, where on average each person is spending TWD 215 less than 2012H1, an equivalent of 870 million in market value.

With consumers clearly spending more cautiously, which sectors were impacted most by this change in behaviour? Traditionally, the spring/summer season of cosmetic market focuses on the spring makeup edition and whitening skincare. However according to KWP Taiwan’s findings, for 2013H1 these usual highlights failed to stimulate traffic and consumption, but instead it was hydration and acne/oil pore, primal functions that look after the basic needs of healthy skincare, that won the heart of Taiwanese ladies, reflected in its continuous growth in penetration for the past three years; This demonstrates that during times of uncertainty, Taiwanese ladies will prioritize basic need over advanced desires; and rather than high end counter brands, greater preference is placed on cheaper Mass brand and professional Derma brands. Leading Derma brands** in particular, according to KWP Taiwan’s data, had been fast gaining popularity among the Taiwanese ladies in recent years; its promise of equally high-end result but at a much more affordable price compare to counter brands is believed to be the key reason of attraction, especially for ladies age 36-45. As for the most lucrative sector: anti-aging, although data has shown a slight dip in the level of penetration, this sector’s growth continued to be supported by ladies age 36-55, whose strong purchasing power help stimulate the high end TWD 5000+ product tier, hence sustaining the overall growth for anti-aging.

Another important note to the change in cosmetic purchase behaviour, is the reflection of a changing channel structure. KWP Taiwan noticed that Department Store, the long term market leader’s performance is mainly supported by high end products, but the truth is that its buyer base and loyalty are both on a decline trend; and other than its loss in buyer base, it was also observed that counter brand buyers are upping their investment in the cheaper OTC brands. A slow economy may be partly to blame, but product advancement in affordable skincare, continual store expansion of Mass channels including Watsons, Cosmed, Poya, Hyper & PX Mart enriching their product offerings; all of the above reasons contributed to the prospering of Mass skincare market, as while offering consumers great choice of selection, it also provided them with greater convenience in shopping.

On the other hand, online shopping, a rising star who had demonstrated growth for the past three years, sales had been relatively slow for 2013H1; skincare performance maintained, whilst the makeup sector was not up to par. For cosmetic products, personal trial is a key factor to purchase decision, and Taiwan’s highly concentrated physical provides both instant trialing and shopping convenience in which online shopping cannot compare. Hence for cosmetic brands whose looking to play in the virtual field, it is important to clearly communicate product and safety function, as well as integrate and fully utilise the best of both physical and retail channels to ensure further future growth.

Overall, Taiwanese Ladies’ cosmetic knowledge, usage and purchase behaviour has now reached a mature phase. Not only do they understand their needs, but they are also smart enough to identify the best timing to purchase. With consumers cautious in spending amid a slow economy, naturally many should be already planning on getting the best buy for the upcoming seasonal sales. Therefore other than ensuring an attractive price offering, how to accurately identify the must-buys in these ladies beauty repertoire, will be something important to consider for the cosmetic brand managers.

*The definition of beauty industry covers categories including facial skincare, makeup and nail polish, it does not include non-makeup suncare or body care.

**Leading Derma brands includes Avene、Dr.Wu、Bioderma、Vichy 、For Beloved、La Roche Posay、Neostrata、Uriage

To quote data from this article for any purpose, please specify the source is from Kantar Worldpanel Taiwan