The retail market of skincare and cosmetics products in Hong Kong has long been supported by tourists, especially those from the PRC. In terms of retail value, Hong Kong’s skincare and cosmetics market increased from approximately HK$25.9 billion in 2012 to approximately HK$33.1 billion in 2016. The retail value refers to the amount of money paid by end consumers to purchase the products. However, the retail value of the skincare and cosmetics market in Hong Kong dropped by approximately 3.6% and 4.9% in 2015 and 2016, respectively, which was primarily due to a general slowdown of mainland Chinese tourist arrivals caused by, among other, continuous strengthening of US dollar against RMB and changes in Hong Kong Government policies on visa for Shenzhen citizens. In the following years, it is expected that the market is likely to recover gradually due to increasing purchase by local residents, and introduction of popular new products. Since the Hong Kong Government has initiated a series of projects to attract visitors and enhance the attractiveness of Hong Kong as a tourism destination, it is expected that the retail value of skincare and cosmetics market in Hong Kong is likely to increase accordingly and is expected to grow from approximately HK$33.1 billion in 2016 to approximately HK$42.2 billion in 2021, representing a five-year CAGR of approximately 5.0% from 2016 to 2021. In terms of retail value, the skincare and cosmetics market has outperformed the overall retail market in Hong Kong in 2016. According to the statistics announced by the Hong Kong Government (“the Report on Monthly Survey of Retail Sales”), the retail sales value of the category of “medicines and cosmetics” (including retail outlets selling cosmetics, skincare and personal care products, medicines and health supplements) for 2016 decreased slightly by approximately 0.1% as compared with the previous year, while the total retail sales value decreased by approximately 8.1% compared with the previous year. Visitors’ purchase took approximately 77.6% of Hong Kong’s skincare and cosmetics market in 2016. Although the retail value generated from visitors increased at a CAGR of approximately 6.5% from 2012 to 2016, such growth rate is expected to slow down to a CAGR of approximately 4.8% from 2016 to 2021 due to the slower growth of the tourism industry. On the contrary, the retail value generated from local residents grew from approximately HK$5.9 billion in 2012 to approximately HK$7.4 billion in 2016, representing a CAGR of approximately 5.9% and is expected to grow at a CAGR of approximately 5.4%, increasing from approximately HK$7.4 billion in 2016 to approximately HK$9.6 billion in 2021.
Retail Value Breakdown by Price of Skincare and Cosmetics Market
In terms of the retail price of skincare and cosmetics products, the market in Hong Kong can be segmented into premium (retail price over HK$800 per set/piece), mid to high-end (retail price between HK$200 to HK$800 per set/piece), and mass market (retail price under HK$200 per set/piece). The premium and mid to high-end skincare and cosmetic markets in Hong Kong are dominated by foreign brands while leading local brands generally compete in mass market. Among Hong Kong’s overall skincare and cosmetics market in 2016, premium, mid to high-end, and mass market contributed approximately 22.0%, 35.1%, and 42.9%, respectively. The mass and mid to high-end markets are expected to increase from approximately HK$14.2 billion to approximately HK$18.8 billion and approximately HK$11.6 billion to approximately HK$15.0 billion at a CAGR of approximately 5.7% and 5.2% from 2016 to 2021 respectively. Consumer demand has rapidly shifted towards mass products or mid to high end products, which drives the increasing proportion of mass market in the overall market. The premium, mid to high-end, and mass market is likely to contribute approximately 20.0%, approximately 35.5%, and approximately 44.5% in 2021 to the retail value of the skincare and cosmetics market, respectively.