Studies have found that 47.8% of consumers will take cosmetics' technology into account when purchasing cosmetics, and this number will keep on growing with more consumers caring about what their product is made of, indicating tech-centric consumers are rising in China!

At the 2020 International Cosmetics Technology Conference organized by China Beauty Expo (CBE) and Supply World (SW) held on July 8, the organizers joined forces with YAT and beautydata.ai to release the 2020 China Meiyi Science and Technology White Paper with the support of JALA Corporation.

The White Paper promoted the concept of tech-centric consumers and discussed how to assist the advancement of technology in the beauty industry based on the insights from this consumer group.

<Eight Insights into Tech-centric Consumers in China>

1.  Consumers are gradually shifting to rationalization and pays more attention to the product itself

Research shows that in the past, most consumers focused mainly on price, followed by brand awareness, efficacy, feeling after usage, and recommendation by friends when purchasing cosmetics for the first time.  Now, efficacy has become the most important factor, followed by feeling after usage and price when buying cosmetics for the first time.

2. Driven by the wave of purchasing Chinese brands, the proportion of consumers choosing domestic brands is increasing

In terms of brand selection, most consumers (62.7%) have no excessive requirements when choosing domestic or foreign brands but focuses on the product itself. Data shows that although only 6.2% of consumers currently choose domestic brands, compared with the overall sales of domestic brands in recent years, this figure is  continuing to increase driven by the wave of purchasing Chinese brands.

3. Tech-centric consumers are increasing, focusing on product’s technology

The White Paper divided the consumers into four groups through a survey of 10,000 consumers aged 18 to 60 from Guangdong, Shanghai, Zhejiang, Beijing and Jiangsu based on their consumption beliefs: Simplicity, Trendy, Ingredient and Technology. Among them, the proportion of tech-centric consumers are increasing. They pay more attention to the cosmetics’ technology, is more rational, understands cosmetic technological innovation and patented technology of brands, and has an in-depth and professional understanding of the formula structure and the ingredient effectiveness through merchant marketing and ingredient breakdown.

4. Consumers' perception of beauty technology

First thing that comes to mind for most cosmetics consumers when they heard the word “technology” is “the latest and most effective ingredient” and “more advanced formula”.

They also believe that cosmetics "technology" should include the brand's unique formula, "state-of-the-art technology" ingredients and patented technology protection.

5. Consumers' attitude towards beauty technology claims

47.8% of consumers will take cosmetics' technology into account when purchasing cosmetics, and this proportion will keep on growing with more consumers caring what their product is made of.  According to research, there are four main cosmetic technology claims: sirtuin technology, autophagy, simulated skin and free radical.

6. Consumers' focus on beauty technology

Among the factors related to cosmetic technology, the top 3 that have received the most attention from consumers are clinical testing/efficacy testing, special formula technology and scientific ingredient.

From the perspective of technological ingredients, the top 3 that are in line with consumer expectations are Bosein, Bifida Ferment Lysate and Ergothione, followed by Pitera (the ingredient contained in SK-II Facial Treatment Essence) and retinol.

7. Problems beauty technology need to resolve for consumers
Consumers have a greater expectation for functional skincare products. "Blackhead/ large pores" and "dull skin tone" are skin problems that all age groups need to solve through technological cosmetics. With age, skin problems that appear in the corresponding age period become primary problems, while skin problems that existed before becomes secondary.

8. What China’s cosmetics tech-centric consumer values

• Consumption concepts gradually become more rational: Consumers are paying more attention to the cosmetics itself, such as ingredients and formulas, and this concept of consumption has become a trend.
• Consumers of different ages have different problems: Unique skin problems exists in each age period, technological cosmetics should have different solutions to meet the many diverse needs.
• Different consumer groups have different needs: The degree of understanding and needs for technological cosmetics has gradually increased from simplicity to technology orientated. The higher the degree of understanding, the higher the degree of need.
• Consumer groups are classified to guide marketing: The classification of consumer groups helps brands to have different ways and locations to conduct marketing.

<Development of the beauty industry through "Three Methods">

In recent years, domestic brands have been developing vigorously, led by Chando, Perfect Diary, Proya and Florasis, who have been listed in the top 10 for online sales, revealing technology of domestic brands being greatly improved. The China Meiyi Science and Technology White Paper provided an in-depth analysis on the three methods: R & D, product advancement and marketing through technology.

1. R & D

The R&D cost ratio for beauty companies in China is evenly distributed between 2.5% and 4.0%. It is particularly worth mentioning that JALA Corporation’s R&D cost was 4.4% in 2019. Its R&D includes 3D skin cell models, epigenetics, and research on outer space skincare.

2. Product Advancement

Product advancement in domestic brands is mainly manifest in product form innovation and product packaging upgrade, whereas overseas brand is mainly manifest in raw material innovation and formula technology upgrade.

3. Marketing through technology

In terms of marketing through technology, AI and VR technology enhances consumer purchasing experience, and user data is collected to assist corporate decision-making and accurate product development. The combination of beauty and digital technology is still in its infancy and its full potential is still yet to be explored. 

Through R&D, product advancement and marketing through technology, it can be seen that current development of beauty companies in China faces three major challenges: Firstly, the R&D cost ratio for domestic beauty companies is relatively high, however, due to the relatively small revenue, there is plenty of room for improvement; Secondly, it is difficult to innovate at the ingredient level, companies’ technical boundaries are narrow, and ingredient investment uneven; Finally, facing the management multiple channels and platforms, the companies’ internal management cannot keep up.

<How to develop in the beauty industry>

This edition of China Meiyi Science and Technology White Paper puts forward three major technological advancement paths for beauty companies in China:

• Path 1: Go international, consolidate basic R & D capability, and leverage capital
  

1. Combine forces with universities and laboratories on R&D

According to statistics on applications for beauty patents in the past three years, more and more basic research results come from universities while many laboratories abroad have accumulated richer results and have mature patent transformation methods. Thus, domestic companies should invest early in their laboratories and establish strategic partnerships to obtain the latest patent achievements.

2. Realize 1+1＞2 through strategic investments

The founders of foreign niche brands are often university professors or industry professionals with many years of experience. They have certain patented technologies but lack the marketing means. So, domestic companies should set up strategic departments to keep an eye on cutting-edge technologies and small businesses for the right time to merge and acquire in order to make up for their R&D shortfalls.

• Path 2: Establish an intelligent supply chain system, facilitate product development through cutting-edge technology, and empower company innovation with scale effect

For production, focus on building smart factories; consider transforming OEM/ODM to OBM to help domestic emerging brands; cross-field technology strategy for developing from ODM to CMO (pharmaceutical foundry); self-build production lines at brand end, master independent R &D and quality control strength; adopt multi-brand and group operation to enhance scale effect; and establish technology presence at the consumer end.

• Path 3: Embrace digital transformation, unlock all channels, and improve business decision-making efficiency

From raw material to production and to brand, technology empowers the entire beauty industry chain, establishes connection with internal decision makers, improves the operation efficiency of each position, and realizes its impact on the full chain. For example, at the raw material end, domestic companies should actively learn about current popular raw materials, analyze consumer demand trends, and determine future R & D directions; at the production end, companies should keep abreast of the layout of competing products in real time, match customer and product needs, and adjust production plans in time; at the brand end, companies should make a scientific prediction of market trends, adjust the pace of product development, and analyze the path to the best-sellers on the market.

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