Photo: VCG

China's hair care market is booming with about 250 million people in the country suffering from various stages of hair loss, among them - more and more young people are beset by early onset hair loss, and are willing to pay to redress the problem. 

In 2020, the medical service market for China's hair care reached 18.4 billion yuan ($2.84 billion), and is expected to grow at an annual compound rate of 22.3 percent to 138.1 billion yuan in 2030, according to a report issued by global consulting firm Frost & Sullivan. 

The rapidly-expanding market is on display at a high-end wig store in Beijing's Chaoyang district, where young women arrive and try on different wigs and hair pieces - with prices ranging from several hundred to several thousand yuan. 

The store's manager, surnamed Chen, told the Global Times on Monday that its business, both online and offline, has witnessed a noticeable upswing in new customers over the last two years. "In the past, our main customer is middle-aged bald men, but now, our customers are becoming younger. Last week we even saw a customer that was born after the year of 2000," she noted.

Market is not limited to wigs 

The hair transplantation, as well as hair strengthening and maintenance market is also gaining popularity among young Chinese consumers, attracting billions of "hot money" seeking to capitalize on a potentially lucrative business. 

According to the Frost & Sullivan report, China's hair transplantation economy is valued at 13.4 billion yuan in 2020, accounting for about 73 percent of the hair care market. And the market is estimated to hit 75.6 billion yuan in 2030, with an annual compound growth rate of 18.9 percent. 

However, unlike the wig market where early starters such as Rebecca and Hengyuan Hair have completed fundraising and claimed major market shares, competition at the niche market of hair transplantation is cut-throat. 

With a clear business model yet to be consolidated, some hair care organizations have to spend a lot on advertisement and promotion, as well as in opening more stores across China to differentiate themselves from other rivals and gain foothold in the early stage, the Global Times learned.

Hair transplantation on the rise

Data from the National Health Commission showed that the number of people who have hair loss issues reached 250 million. In other words, one out of six Chinese people experienced hair loss.

In contrast to the 250 million hair-loss population, only 516,000 have received hair transplantation, relevant data showed. That translated to a market penetration rate of 0.21 percent, underscoring a potentially very large market on an upwards trajectory. 

In June, Beijing-based Yonghe Medical Group Co has filed its IPO application to the Hong Kong stock bourse, seeking to raise HK$1.9 billion. Barley Microneedle Hair Transplant, another hair transplantation chain organization, also told media over the weekend that the company does not rule out the possibility of filing an IPO, and has communicated with numbers of capitals at the current stage.

In addition to these two brands, a total of 21 hair care firms have engaged in fundraising since 2003, according to a report by news website yicai.com. Total fundraising amounts have hit over 700 million yuan. 

"A market of low permeability brings both opportunities and risks. Medical organizations need to spend on promotion, so as to reach their potential customers and educate them, this spending could eat up their net profit if a sustainable business model is not developed in the long term," Wang Xinmiao, a manager of a Beijing-based advertising company, told the Global Times on Monday. 

She added that the cost of customer acquisition typically exceeds 10,000 yuan, while a customer will spend 27,000 yuan on a single hair transplantation surgery on average. 

The yicai.com report noted that about 70 percent of ads by hair transplantation organizations are campaigned online and target female customers, who are more interested in beauty surgery than men. 

According to the Yonghe Medical's prospectus, the company's expense on sales and marketing accounts for half of its revenue from 2018 to 2020. Despite a gross profit over 70 percent for three consecutive years, Yonghe's net profit margin fell to only 10 percent in 2020 due to huge spending on acquiring customers.

'Once-and-for-all' deal

For hair transplantation companies, another way to secure a leading market position is to embark on rapid expansion, which industry insiders said is conducive for acquiring more customers to "dilute" marketing expense and risks. 

Yonghe Medical currently has 51 medical organizations across China, and the money it raised through IPO will reportedly be used to set up 50 more hair transplantation outlets and 60 nonsurgical medical centers in China. Barley Microneedle has 35 outlets and plans to open 10 more this year, according to media reports.

Some market observers have pointed out that many customers would only purchase a hair transplantation service once, and the low-frequency consumption and low user stickiness could become a critical issue that hinders the long-term development of the industry.

To address such issue, some hair organizations have marched into hair strengthening and maintenance sector, hoping to create a new business growth point on the downstream of hair transplantation and cultivate more royal customers. 

"If a customer just pays for a transplant without receiving enough hair care, he may still get bald afterward. Then what is the meaning of hair transplantation?" Barley Microneedle's founder Li Xingdong was quoted as saying in the yicai.com report. Li said that hair loss is a chronic disease that requires long-term therapy. 

Wang said that the hair strengthening and maintenance business is an important supplement to hair transplantation market, and such dual business model could be compared to an "enclosed business circle that retains customers inside." 

The Frost & Sullivan report reveals that the market scale for hair strengthening and maintenance was only 5 billion yuan in 2020, but is expected to grow to 62.5 billion yuan in 2030, accounting for 45.3 percent of China's hair-related medical service market.