Refined from Dongxing Securities: "from nothing to the upgrading of superimposed consumption, the demand for appearance boosts the prosperity of the industry."

1. The consumption structure changes and the domestic cosmetics industry is booming.

Since bottoming out in October 2016, the cosmetics industry has entered a phase of explosive growth. Under the background of the slowdown in the overall growth rate of social zero, cosmetics are the leader in all categories, with outstanding performance.

The makeup market is expanding at a high speed, and the trend of middle and high end is obvious. The skin care and makeup sectors grew 10.3 per cent (yoy+4.9pct) and 21.3 per cent (yoy+8.7pct) respectively in 2017 compared with the same period last year. And the growth rate of domestic middle and high-end cosmetics has always been higher than that of Volkswagen cosmetics, with year-on-year growth rates of 25% and 10.3% respectively in 2017.

Consumption is getting younger, cosmetics consumption ushered in vitality, the voice of consumer groups gradually shifted to young people, promoting the growth of cosmetics.

• In terms of consumption structure, the increase of cosmetics consumption by post-95 and post-00 groups has become the main driving force of market expansion.

• In terms of consumer behavior, short video APP develops the consumption habit of beauty makeup, which enhances the breadth and density of consumers' exposure to brands from the media, and helps to create "popular style" beauty makeup.

• In terms of consumer preference, China is in the transition period from the second consumption period to the third consumption period, and consumers with high preferences are expected to continue the consumption upgrading of cosmetic products.

Dongxing Securities believes thatDouble main line leads the development of cosmetics market.On the one hand, young and high-line groups experience the consumption process from "0" to "1", and the market scale expands rapidly; on the other hand, high-preference consumers gradually shift from the low-end market to the high-end market.The rise in volume and price continues to boost the prosperity of the cosmetics industry.

2. the purchasing power of new consumers is strong, and the quantity and price of cosmetics are on the rise.

The range of domestic cosmetics consumer groups continues to expand along the following three dimensions, and the market scale is expanding at a high speed.

• AgeThe right of consumer discourse is transferred to the post-950s and post-950s who are young and have a strong desire to buy

• GenderYoung men join the army of make-up

• AreaThe channel sinks and the cosmetics market opens up to the vast 34th and 5th line market.

Millennials (20-35 years old) have a large population base and are the backbone of boosting consumption. There are about 323 million people born in the 1980s and 1990s, accounting for 23.28% of the country's population. As they gradually occupy a major part of China's labor force, millennials have become the backbone of boosting consumption.

Generation Z（10-20岁）It is becoming the main force to promote consumption and lead the trend in the future. The post-95 and post-00s, which account for 11% of the population, have begun to come to the fore and gradually become the consumption force of the new generation.

The new consumers' high preference and high expenditure on cosmetics are far higher than those of other age groups. Dongxing Securities believes thatThis group of consumers have increased their consumption of cosmetics, resulting in an explosive growth in cosmetics sales since the second half of 2016.With the expansion of cosmetics groups and the continuation of category consumption, the high growth of cosmetics market can be expected.

In addition, the cosmetic consumption potential of young men broke out, and post-1995 men became an upstart in the cosmetics market. According to a joint report by Vipshop Holdings Limited and iRui, cosmetics sales for men increased by 42.9% after 2017 compared with the same period last year, with an increase of 26.2pct over last year. Euromonitor predictionBy 2019, the average annual growth rate of China's male cosmetics consumption will reach 13.5%, much higher than the global average of 5.8%.Young men are becoming an upstart in the market.

3. Make-up society creates "popular style", and personalization becomes a new direction.

In the era of mobile Internet"good goods need to be shared"The attitude towards life integrates the consumption and socialization of young people, and emerging social platforms such as self-media and short videos have become a new starting point for creating "fashionable styles".

Social platforms help to double the economic benefits of good looks and greatly improve the efficiency of sharing. The accelerated development of social groups such as Weibo Corp and Xiao Hongshu APP, as well as short video platforms such as Douyin and Meipai, and the creation and sharing of zero threshold make the short video platform meet the social needs of consumers; through mature algorithms to achieve accurate delivery and efficient dissemination, short videos greatly improve the sharing efficiency of consumers.

In the era of self-media, the breadth and density of consumers' exposure to brands have increased greatly. The extremely high popularity of KOL can be directly translated into brand influence: a video shares dozens of products, forming a huge consumer-oriented role; as consumers "recommend" each other, the scope of brand communication is further expanded.

Fan economy stimulates cosmetics consumption willingness. The prevalence of idol culture, on the one hand, imperceptibly cultivate young people's pursuit of appearance and image, on the other hand, the "fan economy" gives birth to a huge consumer market.

The awareness of beauty makeup is enhanced, and the demand tends to be professional and personalized. With the improvement of consumer awareness, the cosmetics market is showing a trend of diversification and differentiation. Consumer groups' cognitive and aesthetic upgrading, consumption towards diversification and fragmentation, giving birth to a huge market segment. To meet the changing personalized needs of consumers will become a new growth point of the beauty market.