Beautification obsession

By Li Xuanmin Source:Global Times Published: 2017/9/10 17:53:40

As China’s demand for cosmetic treatment escalates, hospitals suffer rising expenses




 

A woman gets a hyaluronic acid injection at Soyoung, a plastic surgery hospital in Beijing. Photo: Li Xuanmin/GT



The domestic cosmetic surgery market is capitalizing on residents' growing demand for looking as good as possible. Industry insiders told the Global Times that the popularity of plastic surgery hospitals and cosmetic filler products is increasing, reaping gross profit as high as 70 percent of the total industry revenues. Nevertheless, the industry is plagued with slim net profit margins, generally lower than 10 percent, largely because of rising expenses on marketing and hiring experienced surgeons. Also, as uncertified cosmetic surgeries emerge, experts are suggesting that Chinese authorities should beef up regulation.



"I just completed two hyaluronic acid (HA) injection surgeries and one rhinoplasty this morning, and in the afternoon, there are three more plastic surgery appointments waiting for me…I need to hurry up," Zhang Zheng, a surgeon at a Beijing-based plastic surgery hospital, told the Global Times as he rushed for a quick lunch with a cup of coffee to refresh himself on Friday.

The schedule of Zhang, who is also the director of the hospital, has been quite tight in recent months, filled with at least five plastic surgery appointments every day.

"The numbers of clients who are willing to make themselves look prettier [via surgery] have skyrocketed in recent years, mainly thanks to the growing social acceptance of cosmetic surgery as well as shrinking operation costs," Zhang said.

Customer demographics are also changing quickly, he added. ''There is no longer the stereotypical thinking that only actresses would come for plastic surgery, [now,] more and more ordinary young women, students and male customers are flocking in."

A 24-year-old fresh college graduate, who had a double-eyelid operation at Zhang's hospital just last week, believes that her cosmetic surgery will tip the scales to her advantage in terms of job searching. "Also, the recovery process is short, only about one to two months," she said, giving only her surname as Wang.

Like Wang's case, the pursuit for physical beauty among Chinese is causing the country's cosmetic treatment market to expand at an unprecedented speed. It is estimated that China will become the world's third largest cosmetic surgery market by 2019, with market size expected to double to 800 billion yuan ($124 billion) from the current level, according to industry reports released by pharmaceutical company Allergan.

And by the end of 2017, the number of Chinese who go under the knife will surge 42 percent year-on-year to 14 million, surpassing the global average growth rate of 7 percent, according to an online report cosmetic surgery platform Soyoung sent to the Global Times.

Huge gross profit, slim net profit

Wang, the college graduate who transformed her looks with deep double-eyelids, spent about 10,000 yuan on the surgery.

But what she does not know, is that "the cost of the operation only stood at several hundred yuan," a business insider, who spoke on the condition of anonymity, told the Global Times.

In fact, "industry players, including hospitals and upstream suppliers, reap on extravagant gross profits," the insider said, taking the example of the inflated gross profits over HA injections, which is one of the most popular types among Chinese consumers.

"Generally, the price of a HA injection ranges from 1,500 yuan to 4,000 yuan a time, depending on the type of HA the consumers choose, yet the cost of the most expensive imported HA injection type averages only at dozens of yuan," he said.

However, in contrast to the huge gross profit rates, which sometimes can sit at 70 percent, the net profit margins for hospitals and filler suppliers remain slim, Jin Xing, the founder of Soyoung, told the Global Times.

"The general public tends to think that plastic surgery hospitals are very lucrative, but that's not the case…In fact, most institutions' net profits are lower than 10 percent," Jin said.

The Global Times also found that some cosmetic treatment companies that are listed on China's New Third Board such as ARSMO had gross profit margins of 58 percent, yet, their net profit ratios fell to 5 percent in 2016.



Surging costs

One of the reasons behind small net profits is the surging marketing expenses, which can take up about 50 percent to 70 percent of an institution's revenue, Liu Di, the founder of cosmetic surgery application Gmei, told the Global Times on Thursday.

Besides those numbers, it generally costs a cosmetic hospital about 5,000 yuan to acquire one client, according to a report published by financial services company Guosen Group.

Jin from Soyoung agreed on the calculation. He noted that, to acquire just one consumer, "the first step for plastic surgery hospitals is directing consumers to the company's website through launching advertisements on search engines like Baidu. After potential consumers view the website, customer service staff will try to obtain their phone numbers and invite them to come to the hospital for a consultation. As clients visit the institution, the consultant there will try to sell them surgery products."

"It is widely agreed upon within the industry that ad bills on Baidu at the beginning of each year determine the whole industry's profitably," Liu said.

Besides advertising, for a hospital that hires 500 employees, a total of 150 staff usually play roles in consumer service in their attempt to persuade clients who view the company's website to have on-spot consultation visits, Jin said, noting that the amassing labor costs are also eroding hospitals' net profits.

In addition to customer service staff costs, costs of hiring experienced plastic surgeons are also shooting up, according to Liu.

"Training an experienced plastic surgeon generally takes 10 years. But China's plastic surgery industry is developing so fast that supply of those surgeons cannot catch up with market demand, which in turn drives up hiring costs," Liu elaborated.

Zhang noted that his hospital pays high salaries to qualified surgeons to retain them. "The monthly salaries for surgeons at the basic level are above 30,000 yuan, and for top talents, salaries could amount to 400,000 yuan to 500,000 yuan a month," he said. 

Regulation

Apart from slim net profits, the surging market demand has lured a troop of investors and entrepreneurs to jump on the bandwagon, fueling intense competition and prompting a price war.

But that has led to some market chaos, such as the birth of "illegal cosmetic clinics" or beauty institutions which operate without certificates and hire unqualified surgeons, attracting but duping consumers with relatively cheap prices, Liu said, adding qualified practitioners account for only 40 percent of the total medical personnel.

To curb the scenario, the National Health and Family Planning Commission (NHFPC) mulled over new rules on the industry on May 27, vowing to crack down on "illegal plastic surgery."

But there are certain "grey areas" which fall out of the supervision scope of NHFPC and penalties of violating regulations are proportionally trivial compared with the windfall gains, Jin noted.

"Maybe] in the future, the government can establish third-party institutions to solve such problems and clean up illegal cosmetic clinics in the market," Liu said. 



Posted in: INSIGHT

blog comments powered by Disqus