The Beauty Economy Booms

By Audrey Guo

W ith the rise of personal i n c o m e a n d t h e need for more social interactions， more and more women are willing to invest more in their looks， and consumers are increasingly receptive to medical beauty. The demands for medical beauty services keep rising， pushing up the whole medical beauty industry of China.

According to iresearch， Chinas medical beauty demands grew at a higher rate than the world average during 2015-2019. The market scale went up from RMB 64.8 billion in 2015 to RMB 176.9 billion in 2019， with CAGR （compound average growth rate） of 28.7%. Due to the impact from the Covid-19 pandemic， the whole market growth slowed down. However， based on internal reform and adjustment in the past 3-5 years， the market will pick up gradually. It is estimated that in 2023 Chinas medical beauty market will reach a value of RMB 311.5 billion.

Beijing and Shanghai lead the country in medical beauty consumption

According to Frost & Sullivan， the penetration rate of Chinas medical beauty industry rose from 0.1% in 2009 to 3.6% in 2019， but it is relatively low when compared to Japan， the U.S. and South Korea. An analyst from Dongwu Securities said that Chinas medical beauty consumption also varies largely between different cities. First-tier cities like Beijing and Shanghai， for example， have many top medical institutions and skillful doctors， and the local consumption of medical beauty is relatively high. The penetration rate of medical beauty services there nears developed regions like South Korea and the U.S. However， lower-tier cities feature low penetration rates， and the penetration rate of third-tier or lower cities is lower than the average. In the future， the penetration rate for Chinas medical beauty industry has a lot of potential for growth.

According to the China Medical Beauty Market Insight Report co-issued by Deloitte and Meituan， Beijing and Shanghai lead the country in medical beauty consumption. The consumption of South China is larger than that of North China. In 2019， the medical beauty consumption of a single consumer was RMB 5，067 for Shanghai， about 1.36 times that seen in Beijing. As super first-tier cities， Shanghai and Beijing leave other cities far behind in terms of single consumer consumption. Other firsttier and new first-tier cities like Shenzhen， Guangzhou， Chengdu， Hangzhou and Chongqing have slight differences in single consumer consumption.

Regarding order volume， Beijing， Shenzhen， Shanghai， Chengdu and Guangzhou far exceed other cities； Beijing sees an order volume that is 36% higher than Shenzhen. Chengdu surpassed Guangzhou to take the fourth position. Among all first-tier and second-tier cities， the total order volume for South China is 2.5 times that of North China， showing large regional differences in consumption. Considering consumption per single consumer， Beijing， Shenzhen， Chengdu and Guangzhou would focus on lowprice medical beauty programs when compared with Shanghai， Hangzhou and Chongqing.

Chinas medic al beaut y consumption is still in early stages， and the consumer group is relatively young. According to statistics by iResearch， in 2020 about 40% of consumers were under 30 years old and more than 70% of consumers were less than 35 years old. As medical beauty consumption may have long lasting effects throughout a womans life， young consumers normally choose lowprice procedures such as double eyelid surgery or facial contour adjustment by injection of hyaluronic acid. Consumers aged over 40 look to have anti-aging procedures when it comes to their medical beauty consumption. Dongwu Securities predicts that consumers born in 1990s will increase consumption gradually in the future. The increase of the consumer group will also inject new momentum into the medical beauty industry.

Light medical beauty procedures become popular among consumers

According to the report， skin， hair removal and botox are the most popular procedures amongst consumers. Skin procedures now rank first in terms of sales， and hair removal procedures rank second at 57% of skin procedures. The sales of botox procedures further slide to 27% of the skin procedures. The top three procedures far exceed other procedures in terms of sales volume. Most of the top 10 procedures mainly include injection or non-invasive treatments， and are relatively safe. That is why these light medical beauty procedures are more popular among consumers.

The key words of medical beauty seen in search engines of e-commerce platforms mainly include hair removal， minute bubble， thermage， face-lift needles and other light medical beauty procedures. Thermage and photo rejuvenation became popular search categories in 2019.

Light medical beauty has the dual attributes of medical treatment and beauty care. With the trend of consumption upgrading， light medical beauty procedures are preferred by consumers as they have low risk， a short recovery period and relatively low prices. Also， consumers tend to form consumption habits and are loyal to light medical beauty procedures.

There are significant differences in the selection of medical beauty procedures among different age groups. Consumers over 30 are keen on hot Maggie infrared procedures， while consumers under 30 prefer picosecond laser， photo rejuvenation and other entry-level medical beauty procedures. Consumers over 30 years old have more demands for anti-aging procedures and higher consumption capacity. The high-end anti-aging procedures like thermage have become quite popular among consumers， and the demand for hair transplant procedures has also increased among all age groups.

According to the report， with the awakening of consumer awareness and the growth of consumer demand， medical beauty institutions stepped up to increase light medical beauty business and consider such business as their major income growth point. On top of that， medical beauty institutions focus on surgery procedures to consolidate technological advantages， so that their products have a better price and profit margin. As the regulation policies gradually improve and Internet channels are reshaping， medical beauty institutions will be more reasonable and careful when selecting and investing in sales channels.

Strict regulation on the medical beauty industry

As the medical beauty market keeps growing， the government has been issuing policies to regulate industry development， with stricter regulations accelerating the industry reshuffle. As the peak of financing passed， capital investors will further promote the integration of the industry.

According to Dongwu Securities， the raw materials， consumer materials and medical facilities in the upper chain of the medical beauty industry have the highest market threshold and strongest ability to earn profits. Some pharmaceutical makers gross profit rates may reach 70%-90%. Medical beauty institutions in the middle range of the industry chain vary largely in terms of regulation and profitability， and top players have evident advantages. Medical beauty APPs in the lower chain of the industry have been developing fast in recent years， as they may reduce costs of medical beauty institutions to attract customers， but the sector is currently facing fierce competition from other integrated APPs.

Medical beauty institutions have been increasing their promotions on the APPs and e-commerce platforms. Since 2016， the online sales model of medical beauty institutions mainly adopts price competition， and the platforms have extended from Baidu to other vertical mobile internet platforms. Medical beauty APPs and various social media platforms are major platforms to reach customers by medical beauty institutions.

As the medical beauty market develops and consumer needs grow， the service e-commerce platform Meituan medical beauty and comprehensive e-commerce Alibaba Health have engaged in the medical beauty sector. These newcomers have been developing strongly thanks to their massive user data. As the medical beauty market has been expanding， market chaos frequently occurs， including disordered product prices， lack of safety guarantees， the proliferation of false information and operation without license.

In this regard， the government has been issuing multiple policies to standardize the medical beauty industry， and has carried out special actions on illegal medical beauty procedures. The regulatory environment of the medical beauty industry has become stricter， and a diversified long-term regulatory mechanism is being explored. The National Health Commission and other government institutions have issued documents to regulate the behaviors of doctors and medical beauty services， to promote healthy development of the industry.

The pandemic stimulated online operations of medical beauty industry

Due to the impact from the Covid-19 pandemic in Q1， 2020， many offline medical beauty institutions were forced to close down and the whole industry was receiving less attention. However， as the pandemic became less of an issue， the consumption of the medical beauty industry started to rapidly recover. On top of that， the pandemic forced the industry to speed up online operations， which will reshape the whole industrial chain.

As institutional investors of the leading companies of the industry will seek capital exit opportunities， the medical beauty industry will focus on M&A opportunities. From 2016 to 2018， the medical beauty industry witnessed peak financing and investment， as many capital investors engaged in the industry to accelerate industrial integration. Statistics show that there were about 19 financing events in 2018， with a total financing amount of RMB 2.2 billion. The investments were mainly concentrated in the middle and lower reaches of the industrial chain. The offline medical beauty institutions and the online medical beauty platforms became hot spots for investment. As regulations strengthened and capital investments cooled down， in 2019 the total financing amount came to RMB 250 million， down by 89% from previous year. There were 13 financing events， down by 32%.

In addition， the start-up programs in the middle and lower reaches of the medical beauty industry chain have become more segmented. Many new programs， including data services， SaaS service platform， consumption financing platforms and start-ups with content have emerged. During the past several years of rapid growth， the middle and lower sections of the medical beauty industrial chain， especially the lower section， have seen the booming of entrepreneurial startups and increasing competition. As market space was limited， top players would accumulate clear advantages. From 2019 to 2020， many star enterprises in the upper， middle and lower reaches of the industry chain have been listed in the stock market.

In 2020， the supply and demand of the medical beauty industry recovered steadily. The report points out that the Chinese medical beauty market is expected to enter a mature period of development in 2021. In the future the Chinese medical beauty industry will display the following trends： the industry reform and business reshuffle will reshape the pattern of the industry. As a series of new policies came out， the industry regulation will become stricter. The regulatory authorities will step up to ban illegal operations and move towards a long-term and effective regulatory model. Most medical beauty institutions will further grow up by adopting a more standardized and easily replicated store operation model. The application of innovative digital tools will help bring better industry transparency and information quality for consumers.