Opportunities in the USD300b beauty salon and spa sector in Hong Kong

Everyone wants to look great and feel great, men & women. Beauty salon and spa services became an integral part of the middle class lifestyle in the Mainland since Q1/2009, after 30+ years of successful economic reform, and the government’s encouragement to spend money and boost up domestic consumption.

Here is a huge opportunity for professionals and investors from Hong Kong.

There are more than 2,000,000 beauty salons and spa centers, employing about 30 million people. I estimate that the turnover of this sector exceeds RMB 2,000 billion or USD 300 billion in 2012.

This is equivalent to the GDP of the City of Shanghai or approx 4% of the country’s GDP. It is growing by double digits each year. The growth rate would probably accelerate as the government has decided to transform the country into a fairly well-off society“Xiao Kang”(小康社會) by 2020.

The demand is enormous. Unfortunately, there are serious problems in the supply side. Bad stories caused by substandard products and treatments are happening everyday.

There are two major problems in this sector: safety and sincerity (兩大問題：安全、誠信). I believe that many of them would probably be closed down by the authorities or driven out by the market within the next ten years.

Given its short history (only 30+ years), the Beauty, Spa & Cosmetics industry in China has a lot of room for improvement, and opportunities for quality brands & legitimate suppliers.

The window is closing if Hong Kong business people do not act quickly, to bring their talented & professional team, their quality services and imported products into this market and establish a strong foothold as quickly as possible.

Before 2009, consumers’ demand and willingness to spend were not significant enough to support and sustain a successful high-end beauty, spa and cosmetics industry.

However, tremendous changes happened after Q4/2008 when the Chinese government decided to restructure the economy and made it more dependent on domestic consumption.

Since then, imported brands (genuine ones) in all sectors, enjoyed higher-than-expected sales growth. US McKinsey research found that Chinese consumers with a personal monthly income of RMB 5000 (2009 level, considered as mid-level consumers) or about RMB 7000 (2012 level) are willing to pay 60% more for branded products across all categories, and in particular, for the category of Personal Care (including cosmetics), they are willing to pay four times (400%) as much for quality products, with bias towards imported brands.

Beauty is the lifetime business of all ladies. And, the middle/up class consumers are no longer willing to risk their beauty face & health, with inferior products and services.

Doing the same business in the Mainland could get you 100 times more return than that in Hong Kong. That is the market that we should be chasing after.

In order to establish a successful and sustainable business in this sector, please consider adopting the principle of “Safe Cosmetics, and Healthy Body Shaping” (安全美容、健康塑身), plus an integrated 3-prone model, comprising of Product, Services & Education.

Each of these three SBUs can make good money by itself, while providing the needs and support required by the other two. They are highly inter-related and integrated.

I am going to share more of my observation and experience with the readers in the upcoming issues.