Feel-good spending

China cosmetic sales grew by only 5% in 2023, a fraction of the 15% average growth per annum observed from 2019 to 2021 (2022 was impacted by lockdowns). The Chinese economy faces multiple headwinds as a result of a property crisis, record high youth unemployment, and rising geopolitical tensions. However, CLSA’s latest proprietary Skin Gold survey reported an increase in respondents willing to spend over RMB 6,000 (EUR 766) on skincare in 2024, while the share of respondents planning to spend less than RMB 2,999 (EUR 383) halved since 2022, suggesting continued premiumization in beauty care. Chinese consumers’ readiness to spend more on skincare despite economic pressure also supports the lipstick effect theory, which characterizes how during recessionary periods consumers spend more on affordable luxury products providing a feel-good factor. Despite popular belief, the idea was not pioneered by Leonard Lauder but by Professor Juliet Schor in her 1998 book The Overspent American.

Source: CLSA, Skin Gold China Survey, December 2023.