This article was originally writen by the Chinese media Yuanchuan Research (远川研究所) and translated by PandaYoo.com after it was licensed. Copyright belongs to the original author and it is forbidden to reprint without permission.
Author: Ren Xiaojiu / Dong Xiaowei
Support: Yuanchuan Research consumption Group
In 1900, Bai Xihe, a small businessman in Xuchang County, accidentally met a German businessman. The German businessman proposed to exchange “sewing needles for human hair”, the free trade was fed to his mouth, and Bai Xihe mobilized the whole village to “look for hair and change needles.” The German businessmen did not expect that after laying the groundwork for a hundred years, Xuchang dominated the worldwide wig business.
In 2018, Liberian President George Weah came to China to attend the Forum on China–Africa Cooperation, but while other presidents were leisurely savoring China’s Kungfu Tea, President George traveled by plane and train from Beijing to Xuchang, a small town in Henan Province.
Xuchang is a fashion mecca for Africans, from former US first lady Michelle Obama to entertainment mogul Beyonce wearing wigs from Xu Chang. The Libyan president went to Xuchang to seek cooperation for the wig factory Rebecca.
Wigs are a hot spot for cross-border e-commerce exports from China, with an average of one wig being bought every 2 seconds, topping the list of overseas merchandise. About 80 percent of the world’s wigs are made in China, which means that for every 10 wigs bought by foreigners, 8 are “Made in China”. In 2018 alone, sales of wigs grew by 300% in African countries such as South Africa and Nigeria, while sales in Europe grew by more than 50% compared with 2017.
Why do wigs sell so well in China?
Wigs are all made in China, but people of different skin colors have different demands for wigs.
In “The Bad Kids”, Qin Hao takes off his wig, and the semi-bald scene casts a shadow on the audience. For Asians, wigs also play a major role in covering up hair loss. More than half of Japanese hair accessories consumers use hair accessories to hide baldness or hair loss and some of them are also used as fashion accessories.
Besides Asians, whites and blacks have different needs for wigs, which eventually leads to the diversification of wig products.
The demand for Chinese wigs in black, white and yellow has made the Xuchang-based wig brand, Rebecca, the world’s largest manufacturer.
According to the distinction of raw materials, wigs are generally divided into two types: chemical fiber wigs and human hair wigs. Among them, although the human hair wig has many advantages such as high authenticity and long service cycle, due to the limited supply of raw materials and the higher price than the chemical fiber wig, the authenticity of the chemical fiber wig is getting closer and closer to the human hair after the improvement of chemical fiber wig technology. In recent years, the growth rate of the chemical fiber wig market is faster than that of the human wig market.
The whole wig has the advantages of high unit price, easy to wear and long use cycle (generally can be worn for more than 6 months); the winding product has a lower unit price and needs to be worn in a hair salon after processing, and the wearing cycle is relatively short (usually about 1-2 months). Therefore, hair products have the characteristics of fast consumer goods, and consumers with higher income levels will use and consume hair products for a long time, high frequency, and repeatability.
Different regions have different consumption levels, corresponding to different wig prices and products. Africans have low consumption levels and are sensitive to the price of wigs, so Rebecca has set up factories directly in Africa and production bases in Nigeria and Ghana to supply low-cost chemical fiber clockwork in Africa. In regions with a high level of consumption in China, Rebecca’s low-end products are not competitive, so they embark on a fashionable high-end line, producing high-priced artificial wigs worth thousands of yuan.
Same wig, different world
Asia, the most populous region in the world, has a relatively small market for hair products, while China’s overall wig market is also small, estimated to be about 4.5 billion yuan in 2018. This is mainly due to the Chinese people’s preference for hair loss prevention products. Foreigners have a historical tradition of wearing wigs, so they are easy to accept wig products. However, since ancient times, China has been particular about ‘authenticity’ and seldom uses wigs as a means of prevention and treatment after hair loss, even subconsciously ashamed of it.
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At present, women account for more than 80% of the consumers in China’s wig market, of which middle-aged and elderly women over 40 accounts for about 70% of the total. This group’s demand for wigs is mainly to cover white hair and sparse hair; about 10% of consumers are men over the age of 40 with hair loss problems.
Japan, whose hair quality and consumption habits are similar to China, has a wig market of 6.3 billion yuan in 2018, which is much higher than the consumption of China’s wig market. This is because Japan entered an aging society earlier than China, entering a deep aging society in 1990 (14% of people aged 65 and over), while China is expected to accelerate aging after 2020. Therefore, aging is a major factor driving the growth of the wig market.
The post-80s / 90s generation has become a reserve force for people with hair loss and is expected to become a major consumer of wigs in China. According to a survey of college students from 643 universities across the country conducted by the China Youth Network Campus News Agency in 2019, more than 50% of the universities have hair loss, and more than 70% of the population is in a state of mild hair loss.
The online shopping survey of Ali Health and Ali data shows that the proportion of post-90s (36.1%) who buy anti-shedding products is basically the same as that of post-80s (38.5%), and hair loss occurs earlier and earlier.
The phrase “this trouble makes me bald” is changing from teasing to reality
According to the China hair loss population survey, there are 200 million people with hair loss in China, including males and females are 130/70 million people respectively, and the number of Chinese suffering from hair loss far exceeds the total population of Japan and South Korea. In the future, with the aggravation of aging and the increase of life pressure under urbanization, hair loss will be advanced, and the audience of wigs in China will continue to increase.
Wigs have gone from unspeakable to fashionable in China, and the logo of this turning point is Fan Bingbing’s endorsement of Rebecca in 2010. She claims to have hundreds of wigs at home. Wearing hair products is becoming fashion-leading behavior. In addition, the popularity of Cosplay culture is expected to become a new growth point in the wig market. According to CIC consultants, in 2016, the number of core ACG users in China reached 80 million, and the number of ACG-related users reached 220 million.
Therefore, in the context of accelerated aging, early hair loss in the post-80s / 90s, and increased awareness of appearance, people are more willing to spend money on hair to improve their image.
Wigs have outstanding cost-effective and safety advantages compared with hair transplants and hair dyes, and with the progress of technology, the problems that hinder people from using wigs in the past, such as lack of fidelity and air permeability, have been effectively solved. At the same time, people who are more receptive to wigs after 70-80-90 are gradually entering the target age of 40, and China’s wig market is ushering in a period of accelerated penetration.
At present, China’s middle and high-end wig market is developing rapidly, and the low-end market is out of scale. The mid-and high-end wig market is mainly composed of four national brands: Rebecca, Iremy, VS, and Aderans, of which Rebecca is the leader, with a terminal market share of about 9%, which is not too high; the remaining 85% share is made up of thousands of middle-and low-end brands.
In 2018, China exported US$3.6 billion in hair products, accounting for 80 percent of the world’s hair products, of which Xuchang, the capital of wigs, contributed US $1 billion (mainly OEM), accounting for 28 percent of China’s exports. The export destination corresponds to the demand. The United States is the main export destination for Chinese wigs, accounting for 39.2% of the total. Africa’s total share reached 37%.
After being listed as the first stock of Chinese hair products in 2003, Rebecca has gone out of China to the world. At present, it has four major production bases in China, Nigeria, Ghana, and Cambodia, and its sales network covers Europe, North America, Africa, and Asia. The company’s export income accounts for about 80%, of which the main export places are Africa and the Americas, accounting for about 40% and 20% respectively. Rebecca’s domestic sales account for less than 20% of its sales.
The core means of Chinese wig marketing in the world: adjust measures to local conditions
In an effort to capture the US market, when Obama was elected president, Rebecca launched the same hairstyle of Michelle, a wig named “Michelle” that was unexpectedly popular and out of stock for several months in a row. Later, they registered the FirstLady brand in Africa, and sales have been good.
The United States hair accessories account for about 30% of the world hair products market, and the United States is the world’s largest consumer market for hair products. The main reason lies in the high demand for hair accessories in the United States and the strong spending power of consumers. African-American women with a slightly better quality of life have 6-7 sets of wigs on average, each costing an average of $100, according to AliExpress.
In the past, Korean brands were the main players in the American wig industry, and Chinese companies mainly provided OEM services for them. But in recent years, with the help of cross-border e-commerce, Rebecca has taken advantage of e-commerce and began to seize the market with its own brand. In 2018, only AliExpress platform wigs sold about $500 million in the United States, accounting for about 13% of annual wig sales in the United States.
The African market is also an important consumer market for hair products. In developed cities in Africa, only 10% of women are using wigs, and with the improvement of the living standards of local residents, the African market is expected to become the world’s largest market for hair products in the future. According to the data of the hair products Branch of the China Chamber of Commerce for the Import and Export of Light Industrial Crafts, the market share of Chinese hair products in Africa has reached about 35%. Rebecca’s business in Africa is mainly wholesale, with general distributors in South Africa, Nigeria, Ghana, and other places, from which it distributes at lower levels.
As the hair products industry is a labor-intensive industry, Rebecca has transferred its production base to countries and regions with lower labor costs due to rising labor costs. Since 2010, Rebecca has gradually transferred its production capacity to Africa, Southeast Asia, and other regions, taking advantage of cheap labor in Africa, saving transportation costs and enhancing market responsiveness. Local production and local sales bring obvious advantages to Rebecca. At the same time, a Cambodian factory has been set up to serve the United States and African markets.
Europe is the birthplace of the hair products industry, with the longest history, high market maturity and relatively stable consumer groups. The demand is mainly fashion consumption, and the overall grade is higher. In recent years, European economic growth has been slow, the hair products market has also been affected, and market demand has been in the doldrums for years. On the whole, the European market will remain stable for a long time.
Rebecca has become the largest wig maker, but its profitability has been hampered. According to its 2019 annual report, due to a marked decline in wig sales in overseas markets, especially in the United States, Rebecca achieved operating income of 1.819 billion yuan and net profit of 212 million yuan, down 3.30% and 9.56% respectively from the same period last year.
Affected by trade frictions between China and the United States, a 15% tariff on Chinese exports of chemical fiber products to the United States has been imposed, disrupting some orders. However, it is still impossible for hair products to be removed from China in the short term, and it is difficult for China to be replaced as the “factory of the world”.