The luxury beauty industry in Southeast Asia and India is set to flourish, forecasting a potential market of USD7.6 billion by 2026, with a projected CAGR of 11 percent between 2021 and 2031.
A new report by global consultancy Kearney and brand distributor Luxasia delves into the intricacies of the region’s beauty industry, outlining the potential opportunities and challenges available to luxury brands operating in the Asian market.
The region’s exponential growth in the beauty space indicates a nearly threefold increase in market size over the span of a decade. “Southeast Asia and India should be on the agenda of every global luxury beauty CEO as these markets are poised to lead the next stage of growth in luxury beauty,” says Siddharth Pathak, senior partner and head of consumer industries and retail for Asia Pacific at Kearney.
As the Asian luxury beauty market continues its upward trajectory, challenges abound for brands looking to break into key markets
With over half of the global consumer population, Asia presents a wealth of opportunities as the largest and fastest-growing region for luxury beauty. But highly developed markets such as China, Japan, and South Korea, which have long been key markets for brands, are gradually reaching saturation points with more competition and increasingly sophisticated consumers.
Global luxury beauty giants including Chanel, Dior, Estée Lauder, and L’Oréal, which entered the market early, have capitalised on the rising demand for luxury products and the associated social status among the thriving middle-class, while Asian powerhouses such as Shiseido, SK-II, and Sulwhasoo have built strong brand legacies, enjoying local dominance as well as international recognition. These early players have solidified their market share and experienced robust organic growth.
Southeast Asia and India poised for growth
Meanwhile, the luxury beauty market in Southeast Asia and India is set to soar, with an estimated market potential of USD7.6 billion by 2026 and an 11 percent compound annual growth rate (CAGR) from USD4.5 billion in 2021. This translates to an average of USD1 billion additional luxury beauty spending entering the market every two years.
In comparison to the global luxury beauty industry’s estimated growth rate of 4 to 6 percent, SEA and India emerge as prime investment destinations and crucial markets for luxury beauty brands.
“This golden window to capture accelerated growth cannot be missed. New-entry brands need to act urgently to secure the platform to grow. Existing market brands ought to rejuvenate their omni-channel presence, adding greater operational agility, to better navigate market developments,” says Luxasia group CEO Wolfgang Baier.
For international brands, the key to maximising returns and establishing a strong market presence lies in expanding into these rapidly emerging markets. While maintaining a presence in China, Japan, and South Korea is essential, the golden opportunity for the next decade lies in these burgeoning markets.
By diversifying their geographic footprint and entering these markets early, brands can benefit from higher capital returns, significant business growth, and the advantage of being early movers in markets poised for structural growth.
Each market requires a unique brand strategy
Gone are the days of a simple operating model in emerging markets.
The previous approach of partnering with in-market importers to register and distribute products is no longer sufficient. The current landscape calls for a more intricate approach, with success dependent on the unique dynamics of each market.
In Singapore, for example, the niche fragrance segment is experiencing rapid growth, with brands like Byredo, Creed, Diptyque, Jo Malone, and Maison Francis Kurkdjian establishing new standalone boutiques. In Vietnam, fragrance enthusiasts show a preference for eau de parfum formulations. Makeup takes centre stage in India and Indonesia, where the prevailing aesthetic favours heavier makeup looks. And in the Philippines, American brands such as Calvin Klein and Ralph Lauren tend to gain in popularity.
Adding to these complexities is varied consumer behaviours that require nuance in brand interactions. The rise of social selling and live streaming has opened up direct-to-consumer sales opportunities. Additionally, conversational and quick commerce are gaining traction, facilitated by messaging apps such as WhatsApp, Messenger, Viber, and Line.