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Overview of the Five Major Beauty Categories: Skincare, Makeup, Facial Care, Face Masks, Professional Skincare

Date: 2024-04-28Views:

Which Beauty Product Categories Have More Market Potential?

Source:丨Harvest Capital

China's cosmetics can be divided into 11 major subcategories: skincare products, hair care products, oral care products, bath products, makeup, men's grooming products, baby and children's products, perfume, sunscreen products, deodorants, hair removal products, and more.

Among them, skincare, hair care, and makeup are the main categories: Skincare accounted for 50% of the total sales in 2019, consistently holding half of the total cosmetics sales. Hair care, makeup, and oral care accounted for 12%, 11%, and 10% of sales, respectively.

According to Euromonitor International, China's skincare market was worth approximately 270 billion yuan in 2020, with makeup accounting for 65 billion yuan. In the personal care category, hair care was valued at 60 billion yuan, oral care at 50 billion yuan, and other personal care products combined at around 80 billion yuan, making the total market size 530 billion yuan. The combined size of the skincare and makeup market was 335 billion yuan, with personal care totaling about 190 billion yuan. Under this definition, men's and baby care are counted separately.

Using a breakdown of product categories in the Taobao ecosystem, the beauty and personal care categories (the broader cosmetics industry) are divided into five subcategories: skincare, makeup and perfume, personal care and cleaning, personal care devices, and personal care tools. In terms of 2020 data, here are the various subcategories and their corresponding market shares:

- 01 -

Skincare Market

Online sales are significantly influenced by major shopping events like 618 and Double 11, with June and November showing the highest Gross Merchandise Value (GMV) on the platforms.

Looking at comparable periods from the second half of 2018 to the first half of 2021, the share of the sunscreen category grew rapidly, reaching 8% in the first half of 2021, up from just 3% in the second half of 2018. In terms of growth rate, the latter half of 2019 saw a 64% increase, while the first half of 2021 and the first half of 2020 saw 35% growth. Although lip care occupies a smaller share of the overall skincare market, its growth rate rebounded in the first half of 2021, reaching a 37% growth rate after a lower growth period in 2020 due to the pandemic.

Regarding market concentration, using data from the Tmall platform, the quarterly brand concentration for facial skincare products was the lowest between 2018 H2 and 2021 H1, with a CR5 (the top five brands) of 15% and a CR10 (the top ten brands) of 24%. Typically, the third quarter has the lowest concentration, while the fourth quarter has the highest due to the Double 11 effect, where consumers tend to buy high-end brands, and these brands offer more discounts in Q4, affecting the relative share in Q3.

Based on data from the Taobao ecosystem, from July 2020 to June 2021, the categories with GMV above 4 billion yuan in terms of 21H1/20H1 growth rate are as follows: makeup remover (81%), sunscreen (53%), showing growth rates above 50%. Sheet masks experienced a 7% decrease year-on-year, with a total market size of 11.4 billion yuan. Skincare sets had the largest market size, reaching 26.6 billion yuan, with a 40% growth rate.

In terms of concentration, skincare and sheet masks have a CR10 of 34%, indicating intense competition. The category with the highest concentration is eye creams (68%, 5.8 billion yuan GMV, with a 39% growth rate) and men's care (60%, 3.8 billion yuan GMV, with a 20% growth rate).

Looking at average spending per customer and the share of overseas brands, skincare and makeup categories exhibit certain characteristics: generally high average spending and a high proportion of overseas brands, indicating that overseas brands dominate the high-end market.

In terms of market share among skincare brands, the cumulative GMV from July 2020 to June 2021 shows that the top 20 brands had the following year-on-year growth rate, market share, and GMV for 21H1/20H1:

Domestic brands like Winona and Proya have made it into the top 20, with rapid growth rates. Proya and Winona's combined market share during the corresponding period was below 2%. The top three international brands, L'Oréal, Lancôme, and Estée Lauder, each hold less than 5%, demonstrating that international brands still have strong offline distribution channels, indicating their continued relevance in the market.

- 02 -

Makeup Market Overview

According to Euromonitor Consulting, China's makeup industry had a market size of approximately 59.6 billion yuan in 2020, with a year-over-year growth rate of just 1% due to the pandemic, compared to a compound annual growth rate of 18.7% from 2015 to 2020. This makes the makeup industry one of the higher-performing sub-industries in the cosmetics sector.

Relative to the structure of mature cosmetics markets overseas, China's makeup sector is still in a "low-proportion" stage.

According to Euromonitor Consulting, the makeup-to-skincare ratio in 2020 was 69% in the United States, 35% in Japan, and 32% in South Korea, while China was only at 22%, indicating significant potential for category growth.

New domestic makeup brands are emerging, bringing fresh competition. According to Euromonitor Consulting, in 2020, the top 20 makeup brands held a combined market share of 67.1%, an increase of 10.4% from 2015, reflecting an improved competitive landscape. Among these top 20 brands, new domestic brands have emerged in recent years, differentiating themselves through product innovation and modern marketing strategies, contributing to the increase in local market share.

In 2020, domestic brands like Perfect Diary, Florasis, Carslan, ZEESEA, ZEESEA, and Colorkey made it into the top 20, holding 6 spots (marked in red in the chart below), with a combined market share of 19.0%, indicating a strong presence in the mass makeup market.

Makeup Subcategories

Using data from the Tmall platform, from 2018 H2 to 2021 H1, facial makeup accounted for 40% of the market. Excluding the pandemic period, the growth from 2019 H2 to 2018 H2 was 67%, and from 2021 H1 to 2020 H1, there was a 33% increase.

In terms of industry concentration, the concentration level for beauty tool brands is the lowest, with CR5 (top 5 brands) at 10% and CR10 at 17% between 2018 H2 and 2021 H1. The facial makeup sector has the second-lowest concentration, indicating intense competition. The highest concentration is in men's makeup, but with new supply, the industry's concentration has shifted, with a turning point in 2020 Q2, dropping initially then rising. Perfume and fragrance have relatively stable concentration, with CR5 at 27% and CR10 at 43%. Lip makeup has also seen an increase in concentration.

According to data from the Taobao ecosystem from July 2020 to June 2021, categories with over 1 billion yuan in GMV include pressed powder (77% growth), makeup sets (65% growth), and lipstick (10% growth). The largest category is lipsticks with a 60 billion yuan market size, growing by 10%. Liquid foundation is second, with a market size of 51 billion yuan, growing by 48%.

In terms of concentration, beauty tool brands have the most competition with a CR10 of 17%, followed by perfume with CR10 at 45%, while most other categories have a concentration over 50%. The highest concentration is in pressed powder (72% CR10, with a 77% growth), men's makeup (76%, with a 41% growth), loose powder (73%, with a 30% growth), and lip gloss (73%, with a 33% growth).

For the top 20 makeup brands from 2020 H2 to 2021 H1 in the Taobao ecosystem, the data shows that the domestic brands Perfect Diary and Florasis are the leading brands with 3.2 billion yuan and 2.75 billion yuan in GMV, respectively. However, Perfect Diary's growth rate seems to have plateaued with only a 5% increase from 21H1 to 20H1, while Florasis grew by 64%. Notable international brands like Yves Saint Laurent, 3CE, Estée Lauder, and Giorgio Armani have GMV above 1 billion yuan, but their growth rates are below 30%. Brands like Lancôme and Christian Dior have GMV close to 1 billion yuan with growth rates of 79% and 63%, respectively. Makeup giant M.A.C has over 1 billion yuan in GMV but experienced a -6% growth. Colorkey achieved a 200% growth with a GMV of 1.25 billion yuan.

Although domestic brands dominate the top two positions in the makeup industry, there's still room for new brands and high growth. Even in mature categories, there's potential for further evolution. By following the sequence of makeup application steps, new opportunities can be found. Below is a chart outlining the 18 makeup steps, ranging from a simple 4-step process to a more advanced 10-step approach, indicating room for further specialization and growth.

2.1Fragrance and Foundation Markets

Between Q3 2018 and Q2 2021, the growth in fragrance GMV has been high, driven by Chanel's entry into Tmall (showing rapid growth in 2020 Q1), along with category expansion that has fueled brand growth.

Looking at foundation, high-end price ranges have shown rapid growth, driven by category expansion, which has led to growth across brands. The data shows that as consumer expectations for their facial makeup increase, they tend to opt for more expensive products, indicating a trend of upgrading in this category.

2.2Liquid Foundation: High-Growth Category, Core Focus on Coverage and Oil Control, Leading Brands, High Price Points

From 2018 Q3 to 2021 Q2, the GMV for liquid foundation in the Taobao ecosystem showed rapid growth, especially in the price bracket above 410 yuan, driven by the category's benefits that led to brand growth.

In terms of market share by brand, the data for cumulative GMV from 2020 H2 to 2021 H1 in the Taobao ecosystem shows the following year-over-year growth rates, market share percentages, and GMV data:

- 03 -

Facial Skincare Market

According to data from the Auto International Consulting firm, the total retail revenue for facial skincare products across the internet in 2021 (from January 2021 to December 2021) was 245.1 billion yuan, a year-over-year increase of 9.4%. The total retail volume reached 2.021 billion units, with an average transaction price of 121.3 yuan. B2C e-commerce and C2C e-commerce accounted for 76.4% and 23.6% of the total retail revenue, respectively.

Throughout 2021, the top 20 facial skincare brands had a minimum threshold of 1.961 billion yuan, with the top 20 brands accounting for 35.6% of the total retail revenue, indicating high brand concentration and increased competition. There was a shift in the top 3 positions among the top 20 facial skincare brands. Estée Lauder took first place with 10.052 billion yuan in retail revenue, accounting for 4.1% of the total, surpassing Lancôme and L'Oréal Paris, which ranked second and third with 3.8% and 3.6% market share, respectively.

The data also indicates a clear trend toward high-end skincare, with international brands occupying a significant portion of the market. Among the top 20 brands, high-end cosmetic brands such as Shiseido, La Mer, Sulwhasoo, Clarins, Helena Rubinstein, and Guerlain demonstrated strong performance, with growth rates exceeding 30%. Notably, Helena Rubinstein, a premium brand under the L'Oréal Group, experienced an 88% year-over-year increase in retail revenue. However, Olay was the only brand among the top 20 to experience a decline, with a 9.6% decrease in retail revenue.

Among domestic brands, Proya, Winona, and Pechoin made it into the top 20. Proya surpassed Winona to enter the top 10. However, the data shows that Proya and Winona each had a 1.4% market share (with retail revenue of 3.432 billion yuan), with similar retail volume percentages, indicating a very close competition.

In recent years, Proya, which originated from traditional channels, has achieved rapid growth by targeting younger customers and focusing on online sales, while Winona, known for its focus on sensitive skin and medical skincare, has established a solid foundation and emerged as a leading domestic brand. During the "2021 Tmall Double 11" event, Winona and Proya were the top two domestic beauty brands, with Winona being the only domestic brand in the "20 Billion Yuan Club."

3.1Skincare Sets: Largest Segment, Cost-Effective Livestreams, Higher Average Spending, and Benefit from Sales Promotions

Between 2018 Q3 and 2021 Q2, GMV for skincare sets in the Taobao ecosystem showed a significant peak in Q4, driven by the promotional seasons when major brands offered special deals on their flagship products.

In terms of market share by brand, the cumulative GMV from 2020 H2 to 2021 H1 in the Taobao ecosystem shows the following year-over-year growth rates, market share percentages, and GMV data. Notably, Korean and Japanese brands like The History of Whoo and Sulwhasoo have growth rates of 94% and 148%, respectively, with a strong focus on package deals. SK-II is known for its "Miracle Water," achieving consistent sales throughout 12 months with a 12 billion yuan market, although the growth rate from 21H1 to 20H1 was just 9%.

Among domestic brands, Chando, Winona, Proya, and Pechoin had market shares of 2.33%, 2.23%, 1.69%, and 1.73%, respectively. Winona showed a growth rate of 38%, while other brands had slower growth. In contrast, international brands had growth rates over 50%, with significant increases from The History of Whoo (94%), L'Oréal (53%), Sulwhasoo (148%), La Mer (125%), Shiseido (125%), and Lancôme (151%).

3.2 Facial Serums: High Growth, Skincare Upgrade with Higher Spending, Core Profit Items for Brands, Best-Selling Products

Between Q3 2018 and Q2 2021, GMV for facial serums in the Taobao ecosystem saw rapid growth in the high-end price range, indicating a clear trend toward higher spending and quality upgrades. Consumers are increasingly investing in premium facial care products, pointing to a preference for more expensive products in this category.

21H1/20H1 GMV Growth Rates for Five Brands in the Negative

Five brands experienced negative GMV growth rates from the first half of 2021 to the first half of 2020. The specific brands and their corresponding decreases are as follows:

- Olay: -8%
- L'Oréal: -25%
- SK-II: -10%
- Helena Rubinstein (HR): -36%
- HomeFacialPro (HFP): -71%

Given the emphasis that international brands typically place on the major Double 11 sales event in the fourth quarter, it's likely that L'Oréal's complete annual data might differ from the half-yearly trend. The decline in Olay's growth could be due to product aging issues, while HFP (HomeFacialPro) saw the most significant drop in the first half of 2021.

3.3、Lotions and Creams: Dominated by Traditional International Brands, but Winona Breaks Through with Sensitive Skin Products

Between Q3 2018 and Q2 2021, data from the Taobao ecosystem showed a rapid increase in GMV in the high-price range for lotions and creams, driven by strong performance from major brands during the Double 11 promotion, which boosted overall brand growth.

Winona, a domestic brand known for its focus on sensitive skin, made a notable breakthrough in this traditionally international brand-dominated category, showcasing its ability to compete with more established players. The high growth in this segment is largely attributed to the efforts of major brands to leverage the Double 11 sales season to their advantage.

21H1/20H1 GMV Growth: Decline for One Brand, Surge for Others

Only one brand showed negative GMV growth from the first half of 2021 to the first half of 2020, namely Olay, with a decline of 23%. This may reflect issues with product aging and brand fatigue. Among domestic brands, Yuze recorded a 17% increase, achieving a cumulative GMV of 360 million yuan over 12 months. Winona recorded a 40% growth, with a cumulative GMV of 532 million yuan. Proya saw a staggering 141% increase, with a GMV of 123 million yuan. Both Yuze and Winona specialize in products for sensitive skin, which have become a burgeoning segment over the past two years.

While leading international brands L'Oréal and Lancôme hold slightly higher absolute GMV compared to Winona, their growth rates are high, reaching 70% and 108%, respectively. Other international brands such as Kiehl's, with 161% growth, and Helena Rubinstein, with 169% growth, are also performing well, with Skinceuticals showing a 148% increase and Estée Lauder a 105% increase. These growth rates demonstrate that international brands still hold considerable market power.

3.4 Toner: Lancôme Leads by a Wide Margin, Domestic Brands Struggle, HFP Shows Strong Growth

From Q3 2018 to Q2 2021, the GMV for toners in different price ranges within the Taobao ecosystem demonstrated steady growth.

Looking at market share by brand, the cumulative GMV from 2020 H2 to 2021 H1 in the Taobao ecosystem shows that Winona had a negative growth rate of -12%, with a GMV of 197 million yuan, ranking fourth in this category. HFP recorded a 107% growth, achieving a GMV of 136 million yuan, while Pechoin had a 4% growth, with a GMV of 71 million yuan.

In this category, Lancôme holds an overwhelming lead with a market share of 16.70% and a growth rate of 57% from 21H1 to 20H1, indicating a significant leading brand effect.

3.5 Facial Cleansers: Freeplus Leads, Domestic Brands Offer Localized Services, Consumer Spending Trends Upward

From Q3 2018 to Q2 2021, the GMV for facial cleansers in different price ranges within the Taobao ecosystem showed significant growth, with middle and lower price ranges maintaining the lead. However, there's an upward trend in higher price ranges, indicating a shift toward more premium products.

Looking at market share by brand, the cumulative GMV from 2020 H2 to 2021 H1 shows various domestic and international brands making significant strides. Some notable domestic brands are AOEO, which grew 90-fold, achieving a cumulative GMV of 255 million yuan over 12 months, and Uniskin, which grew 19-fold, reaching 156 million yuan. Dr.alva (瑷尔博士) grew 124-fold, with a GMV of 64 million yuan. Other domestic brands like Helius and Xue Ling Fei are also among the top 20. Meanwhile, Little Dream Garden dropped 13%, with a GMV of 127 million yuan, and Winona saw a 25% decline, with a GMV of 95 million yuan.

Overall, domestic brands seem to have a natural advantage by claiming to understand the skin types of East Asians better. This is why Japanese and Korean brands like Curel (Kao) and Innisfree have also entered the top 20. Among international brands, Freeplus holds a market share of 14.2% and an impressive 82% growth, indicating a strong trend toward higher consumer spending.

3.6 Eye Cream: Premium Product with High Brand Loyalty, International Brands Dominate

From Q3 2018 to Q2 2021, the GMV for eye creams in the Taobao ecosystem demonstrated rapid growth in the mid-to-high price ranges, driven by consumer preference for premium international brands. This category is also known for its high-price products.

Overall, international brands continue to have a strong presence in this premium segment, with consumers showing a marked preference for established high-end brands in eye creams. This aligns with the trend of consumers seeking more refined and high-quality products in the skincare and cosmetics market.

In this category, the cumulative GMV over 12 months for the three major international brands, Lancôme, Estee Lauder, and L'Oréal, are 1.1 billion yuan, 1.2 billion yuan, and 700 million yuan, respectively. Their market share percentages are 18.86%, 20.68%, and 12.07%, respectively, totaling over 50% of the market share. In terms of year-over-year growth from 21H1 to 20H1, Lancôme recorded an 82% increase, while Estee Lauder saw a 101% increase.

Among other brands, Uniskin had a growth rate of 247%, while Proya surged by 332%, reaching a scale of 1.1 billion yuan, with a corrected growth rate of 101-fold.

3.7 Makeup Removal: Domestic Brand Zhuben Shines with Aromatherapy-Based Skincare, Innovation, and Quality Upgrades

From Q3 2018 to Q2 2021, the Gross Merchandise Value (GMV) for makeup removal products in the Taobao ecosystem showed significant growth across different price ranges, except for the low-end segment. This indicates that consumers are moving toward higher-quality makeup removal products, and domestic brands are gaining strength with their innovative concepts and improved product quality.

Looking at the market share by brand, the data for cumulative GMV from 2020 H2 to 2021 H1 in the Taobao ecosystem, along with year-over-year growth rates for the top 20 brands in 21H1/20H1, shows the following:

From 2020 H2 to 2021 H1, the cumulative GMV and year-over-year growth rates indicate that a local brand leads with a GMV of 420 million yuan, accounting for 9.31% of the market share. However, Perfect Diary and Florasis experienced declines in growth rates, with -30% and -28%, with GMV of about 210 million yuan and 100 million yuan, respectively.

For other personal care brands, there was a notable growth rate of 35-fold, with a GMV of 86 million yuan, but it wasn't reflected in the chart.

3.8 Sunscreen: Seasonal Product, Professional Brands Lead, Winona Excels with Focus on Sensitive Skin

From Q3 2018 to Q2 2021, the GMV for sunscreen in the Taobao ecosystem showed rapid growth across various price ranges. Sunscreen products have a seasonal usage pattern, with significantly higher volumes in Q2 compared to Q4 due to summer demand.

Market Share by Brand: 2020 H2 to 2021 H1 MAT Cumulative GMV, Year-over-Year Growth, and Market Share in 21H1/20H1

The data below reflects the cumulative GMV from 2020 H2 to 2021 H1, along with year-over-year growth rates and market share for the top 20 brands in the Taobao ecosystem:

Among the brands not shown in the chart, the domestic heritage brand Cogi experienced a 3567% year-over-year growth rate from 21H1 to 20H1, with a cumulative GMV of 45 million yuan from 2020 H2 to 2021 H1.

In the professional sunscreen sector, Anessa, a leading brand, saw a growth rate of 104%, with a GMV of 583 million yuan. L'Oréal recorded a 106% increase, reaching a GMV of 384 million yuan. Isdin, however, experienced a 15% decline, yet still maintained a considerable GMV of 316 million yuan, accounting for 6.36% of the market share.

A noteworthy brand to watch is Winona, with a growth rate of 136%, achieving a GMV of 228 million yuan. Its products, based on dermocosmetic ingredients, have gained recognition among consumers with sensitive skin, contributing to its substantial growth in this segment.

- 04 -

Face Mask Market Overview

According to Auto International Consulting, the total retail revenue for face mask products across the internet reached 33.27 billion yuan in the past year (January to December 2021), representing a year-over-year decline of 6.9%. The total retail volume reached 409 million units, with an average transaction price of 81.4 yuan. B2C e-commerce accounted for 75.8% of the retail revenue, while C2C e-commerce accounted for 24.2%.

In 2021, the threshold for the top 20 face mask brands by retail revenue was 260 million yuan, with the top 10 brands accounting for just 22.3% of the market, indicating intense brand competition.

Among the top 20 face mask brands, Dr. Jart+ led with over 998 million yuan in retail revenue, accounting for 3% of the total. L'Oréal Paris came in second with over 965 million yuan in sales. The Korean brand JM Solution followed closely, with the domestic brand Chando making its way into the top five.

Of the top 20 brands, more than half experienced a decline in retail revenue over the past year, with the most significant drop seen by New Zealand's Mãn Manufacture, which fell by 54.9% year-over-year. Another notable decline was by My Beauty Diary, which saw a 53% decrease in retail revenue.

Despite the overall downward trend, some brands managed to achieve steady growth in the past year. Winona, OSM, Dr. Alva, and RHEA achieved triple-digit growth rates of 331.4%, 175.2%, 336.3%, and 169.8%, respectively, showing that some brands can still thrive even in a challenging market.

In 2021, Sephora's official store emerged as the top-selling store for face masks with a sales revenue of 586 million yuan. Among the top ten stores, L'Oréal's flagship store was the only international brand, while five domestic brand flagship stores secured their spots, showcasing a clear advantage for local brands, particularly those like Chando and Winona.

An analysis of the best-selling face masks on Tmall and reveals that the leading consumer demands are still focused on whitening and hydration. Among Tmall's top 27 best-selling products, 19 face masks specifically promote "moisturizing," "whitening," or "hydration." Similarly, on's top 30 best-selling list, 24 products fall into the whitening and hydration categories.

4.1Sheet Masks: Low Customer Loyalty and Declining Growth

From Q3 2018 to Q2 2021, the growth rate for sheet masks in various price ranges in the Taobao ecosystem showed a noticeable decline. The low-price segment exhibited a downward trend, the second-highest price segment showed no growth, and only the high-end price segment recorded some growth. The low price point and declining trends suggest that sheet masks have become a lower-loyalty, loss-leading category.

Market Share by Brand: 2020 H2 to 2021 H1 MAT Cumulative GMV, Year-Over-Year Growth, and Market Share in 21H1/20H1

The cumulative GMV from 2020 H2 to 2021 H1 in the Taobao ecosystem, along with year-over-year growth rates for the top 20 brands in 21H1/20H1, is detailed as follows:

Among the brands not shown in the chart, Holika recorded a 439% year-over-year growth rate from 21H1 to 20H1, with a cumulative GMV of 158 million yuan from 2020 H2 to 2021 H1.

Other leading brands in the sector include L'Oréal, which grew by 126% with a GMV of 848 million yuan, representing a 7.45% market share. Dr. Jart+ saw a decline of 37%, with a GMV of 579 million yuan. Among domestic brands, Mefasto Family 1908 experienced a 52% decrease, though it still maintained a GMV of 265 million yuan. Unifon had a 35% decline, and OneLeaf saw a 34% drop. Pechoin's decline was 29%. In contrast, Winona grew by 59%, reaching a GMV of 131 million yuan.

4.2 Cream Masks: Product Innovation Drives High Growth, Adding Fun to Usage, Proya's Explosive Growth

Between Q3 2018 and Q2 2021, the GMV for cream masks in various price ranges in the Taobao ecosystem showed rapid growth. Cream mask products tend to have a seasonal usage pattern, with a significant increase in volume in Q2 compared to Q4.

This segment has seen significant innovation in product features, enhancing user experience, and driving interest among consumers. Among domestic brands, Proya has experienced explosive growth, with substantial increases in GMV, indicating a positive outlook for this product category.

The data below represents the cumulative GMV from 2020 H2 to 2021 H1 in the Taobao ecosystem, with year-over-year growth rates for the top 20 brands in 21H1/20H1, showing how these brands fared in terms of market share:

Among the brands not shown in the chart, Xiao Mihu experienced a year-over-year growth rate of 1033% in 21H1/20H1, with a cumulative GMV of 48 million yuan from 2020 H2 to 2021 H1. Proya recorded a growth rate of 14.6 times, reaching a GMV of 178 million yuan. HomeFacialPro had a growth rate of 516%, with a GMV of 37 million yuan. Peterson's Lab grew by 40 times, reaching a GMV of 40 million yuan.

Among other domestic brands, Yuze, a new addition this year, achieved 162 million yuan in GMV. Unifon saw a decline of 8%, with a GMV of 378 million yuan.

Additionally, sensitive skin care has become a significant area for face mask brands. According to a joint study by L'Oréal and the Chinese Dermatologist Association, the incidence rate of sensitive skin among Chinese women is between 30% and 50%, meaning that on average, 1 in 3 women has sensitive skin. This trend has spurred rapid growth in the functional skincare market, which grew by a compound annual rate of 23% from 2015 to 2019, reaching 13.6 billion yuan—significantly outpacing the 12% growth rate of the overall skincare market.

- 05 -

Professional Skin Care (Sensitive Skin Care)

Doctor-Endorsed, Supply-Driven, Domestic Brands Overtake

From a product category perspective, functional skincare products targeting sensitive skin, acne-prone skin, and skin whitening are gaining significant market attention. Alongside these trends, new players and growth opportunities have emerged in segments like oil-based skincare, clean beauty, and personal care fragrances. Functional skincare, which has seen rapid growth in the professional skincare sector, has prompted many domestic brands to launch corresponding professional line products such as Yuze and Proyou.

Professional skin care generally falls into three categories: dermatology-grade skincare (dermocosmetics), functional skincare, and medical aesthetic devices.

Dermatology-Grade Skincare (Dermocosmetics)

Also known as "medicinal cosmetics," these products often contain natural active substances and are formulated with gentle and scientific ingredients. They are designed to repair skin barriers, relieve irritation, reduce redness, inflammation, acne, and other skin issues, emphasizing safety and expertise. These products are suitable for skin care, especially for sensitive skin. Representative domestic brands include Winona and Yuze, while international brands include La Roche-Posay, Vichy, and Avène.

Functional Skincare

These are products that have clinically proven efficacy while ensuring safety, targeting specific skin problems such as hydration, anti-oxidation, anti-wrinkle, and soothing. Representative domestic brands include RHEA, Quadi, and HomeFacialPro, while international brands include The Ordinary and Skinceuticals.

Medical Aesthetic Devices ("Medical-Grade" Products)

These products are low-risk medical devices regulated by the government to ensure safety and effectiveness. Representative brands for medical-grade dressings include Chuangfukang, Fulejia, and Cofume.

5.1.Historical Growth Rates

The professional skin care market reached a scale of 26.5 billion yuan, with a compound annual growth rate of 30.3% from 2016 to 2020, making it a high-growth sub-industry in the skincare sector. According to Frost & Sullivan, the skin care market is divided into basic skin care and professional skin care, with professional skin care further segmented into functional skincare (dermatology-grade skincare and highly functional skincare) and medical device-based dressings. By 2020, the professional skin care market reached a scale of 26.5 billion yuan, accounting for approximately 10% of the total skincare market. The compound annual growth rate from 2016 to 2020 was around 30.3%, significantly outpacing the basic skin care market. The functional skincare market reached a scale of 22.3 billion yuan with a compound annual growth rate of 25.6% from 2016 to 2020, while the medical device-based dressing market grew to 4.2 billion yuan with an astounding compound annual growth rate of 105.7%.

5.2 China's Market Offers Significant Growth Potential

The penetration rate in the Chinese market is only 17%, indicating ample room for growth. As the cosmetics industry sees a continual increase in consumer penetration, the demand for products has shifted from basic usage to more sophisticated care. This shift aligns with the trend toward upgrading beauty and skincare consumption, with consumers opting for specialized skincare brands based on specific skin issues. This trend reflects a higher expectation for product performance and efficacy.

According to Huajing Industry Research and Qianzhan Industry Research, the penetration rate of functional skincare products in developed Western markets exceeded 60% in 2017, while China's penetration rate was just 17%. This indicates a significant opportunity for future growth in China's functional skincare market as consumer preferences evolve and demand for specialized skincare products increases.

5.3  Local Brands Hold Greater Advantages

Globally, local brands have a stronger understanding of regional skin issues and mechanisms, and they tend to have more established professional channels. In the dermatology-grade skincare market, the top five brands hold significant market share in their respective regions: Japan (97.3%), South Korea (70.3%), the United States (69.8%), and France (61.1%), demonstrating a more favorable competitive landscape compared to the broader skincare market. Furthermore, local brands are predominant among the top five brands in these regions, with local brands accounting for 72.1% in Japan, 39.1% in South Korea, 20.7% in the United States, and 61.1% in France.

As the capability for raw material research and development advances and marketing strategies become more agile, local brands are expected to continue to maintain their advantage in these markets. The combination of deep regional understanding and enhanced marketing flexibility creates a strong position for local brands to lead in the future.

According to data on brand retail revenue from Euromonitor, HFP (measured by retail revenue) and Winona (measured by receipts) each held a 10% market share in 2020. Brands under Huaxi Bio and Fulejia achieved a market share exceeding 5% (measured by receipts). This significant market presence underscores the distinctive competitive advantage of domestic brands in the professional skin care sector, positioning them as leaders in the industry.

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