In 2010, the New York based agency Pao Principle has recruited a proprietary panel of China beauty buyers for the purpose of understanding their attitudes and usage about beauty products. The findings from this report are helping beauty companies better understand what is needed to succeed in this market. 1,014 panelists completed the survey incentivized by prizes donated by Oscar de la Renta, the study sponsor.

Here are some key findings:

• Prestige consumers are concentrated in Shanghai, are older and tend to either own their own business or work in middle management positions for an SOE or multi-national corporation.
• Mass consumers tend to live either in Beijing or Guangzhou and are primarily students
• Education and training are key to gaining market share as beauty is still relatively new in China
• While skincare usage is high and begins at a relatively early age, color cosmetics and fragrance usage begins in university
• Chinese beauty buyers rely on word of mouth from their friends and family as their primary source of information
• Brand loyalty is relatively low although skincare brands from Avon and Olay have successfully instilled loyalty among their respective consumers
• While mainland Chinese beauty consumers overall did not appear to exhibit price sensitivity, some brands such as Maybelline, pricing can potentially impact their consumption

Given the complexity of doing business in China, there have been many success stories and missteps along the way. This study explains some of the 2010 failures and brand missteps:

• MAC
  • They have had difficultly in communicating their message.
  • As a result, Chinese beauty consumers are confused as they don’t understand MAC’s message
• Clinique Happy
  • Chinese love the fragrance of this luxury brand. However, after mass advertising, has gradually has lost its image as a premium brand.
• Elizabeth Taylor White Diamonds
  • Indian rose ingredient is not very attractive to the Chinese.
  • Average packaging,
  • Insufficient advertising.
• Lancome Trésor
  • Lancome is not perceived as a professional in fragrances
  • Insufficient advertising (fixed since with a campaign started late 2010)

For further information you can get the whole study summary at the study dedicated website, made by Pao Principle.

Seventy-seven percent of Hong Kong consumers are spending the same on necessities while 54% continue to spend on luxury items despite the economic downturn, according to a global survey by leading market research firm Synovate. Interestingly, when asked whether they are worried about the economy, 58% of consumers say they are, but they just can’t stop spending.

Synovate surveyed more than 17,300 people across 26 markets and found that people are regaining their positive outlook on the economy, becoming more optimistic for themselves and their country’s economy.

Spending as usual

This latest survey shows that, while not many people are spending more in the downturn, the majority is maintaining their usual habits. Hong Kong consumers are spending the same on categories such as staple food items (86%), hot beverages like coffee and tea (68%), dairy products (66%), cosmetics (58%), and healthcare products (53%).

Brendan Shair, Managing Director of Synovate in Hong Kong comments: “The economic climate is surely not as good as last year. However, on any regular day when you go to the markets and some of the shops, it is still buzzing with people. This reflects in the high percentage of people saying they have maintained the same spending levels when it comes to necessities (77%) and luxuries (54%). This is good news for many companies.”

Hong Kong consumers’ overall monetary habits have not changed much either.

Shair continues: “After SARS and the previous Asian financial crisis, people in Hong Kong understand the importance of saving for a rainy day. It is not a surprise to see that across the 26 markets surveyed, people in Hong Kong are one of the highest groups (60%) to indicate their saving patterns did not change.

“And likely because of their habits of saving and still having money in their pockets, consumers also admit they are checking prices of food items less often. Over half of those surveyed said they are behaving in the same way as they were six months ago.”

It’s not as bad as we think

What is the impact of the economic downturn to Hong Kong consumers? Findings show it is not as bad as we think. Hong Kong fared better compared to its closer neighbours in the region.

Sixty-eight percent of people in Hong Kong say they are earning the same amount as six months ago, with 24% indicating they are earning less. Earning levels in Korea (54% earn the same, 30% earn less), Japan (44% earn the same, 44% earn less), and Taiwan (40% earn the same, 43% earn less) seem to be more affected by the downturn.

When asked about impulse buying, 55% of Hong Kong consumers say they are shopping as usual.

Furthermore, 61% say they have not changed a major life decision, such as getting married, having a child, or changing jobs, due to the current economic situation.

View on Hong Kong’s economy

Many projections have been made on whether Hong Kong’s economy is starting to improve or will continue to go down. We asked respondents their view on this, and 48% believe the economy is going downhill and will get worse before it gets better, with more females (49%) agreeing to this than males (45%). Thirty-three percent believe the economy is in a bad patch but will quickly get better.

In November 2008, 25% of people across the globe said that they find the economy boring and don’t pay much attention. In May 2009, it was up to 29%. The highest agreement came from Hong Kong.

“Fifty-four percent of people in Hong Kong find the economy boring and don’t pay much attention. This really shows that people in the city are bombarded with news on the economy, and negative ones, every day and they are getting tired of it. Over time, people would wonder whether the economy is really as bad as it is projected. From the low of the Hang Seng Index at 10,676 points, to its peak at 23,369, we currently stand at around 20,000 points. Are we still in a financial crisis which echoes in the news everyday?” says Shair.

Recommendations for companies in the downturn

This survey finds Hong Kong consumers are very brand loyal. In addition to spending money as usual, consumers have not switched brands to get more for the same amount of money in the current economic situation.

A high majority indicate they will continue to use the same brand for staple food items (85%), hot beverages (82%), laundry and cleaning products (82%), dairy products (81%), soft drinks (79%), canned goods (78%), bottled water (75%), cosmetics (73%), healthcare products (72%), and alcoholic beverages (68%).

Shair concludes: “These numbers reinforce the idea that companies should continue to invest in building and maintaining their brands despite the downturn. A brand is one of the most important aspects that connect to consumers. By continuing with customer experience improvement and understanding which brand attributes appeal most to consumers, sales will keep rolling in.”