China's Medical Aesthetic Industry is a Mess, Reputation On the Line for the Platforms
COVID-19 and China
Photo: Credit to So-Young

China’s aesthetic medical industry has been growing furiously. Online platforms like So-Young (新氧) already saw the opportunity and began to fill the gaps that arise from the information asymmetries. However, as the market expands and competitors get into it, the risk appetite increases too.

The medical esthetic market is expected to grow 25% annually and be worth CNY 300 billion by 2020, according to CITIC Securities. As the market brutally expands; counterfeits and fakes proliferate in the market. The China Association of Plastics and Aesthetics has revealed that it believes 70% of the country’s Botox and hyaluronic acid, a type of dermal filler, to be either counterfeit or smuggled into China illegally, The Paper reported.

There are end-customers, medical aesthetic service providers and intermediaries in the market. The primary function of the intermediaries is to clear the information between the hospitals and end-customers. The need for an intermediate platform increases as the number of SMEs increase in the market: the aesthetic medical industry chain is changing from the value chain of “vendor-institution-consumer” to “vendor-institution-platform-consumer.”

What brings the need for an information cleaner and an intermediary in this sector is the weak oligopolization within the industry. The industry is diverse and decentralized with a myriad of clinics and hospitals which motivate patients to exchange information through these platforms.

The reputation is the most critical asset of an aesthetic medical service provider in China since the market is full of fakes, imitations and scandals. When it comes to protecting the brand image and providing transparency, clinics and hospitals are choosing to cooperate with medical aesthetic service platforms like So-Young.

So-Young enables its users to discover and consider more options in the market. It provides an ecosystem for people who want to know more about medical aesthetic services. In an environment where the market is full of crooks, the platform’s revenues skyrocketed.

Frost & Sullivan estimates 111% increase of the medical aesthetic service platforms in China between 2014-18 and 59% increase between 2018-23*. In such an environment, providing such a business seen as a profitable one and the market is invaded by different platforms. So Young,  GMei (更美), literally “More Beautiful” and YueMei (悦美), literally “Happy Beauty” dominate the market.

So-Young is the most most significant player in the market; however, there is no a convincing barrier to entry in its business model, i.e. there is no reason at all for GMei and YuMei not to replace So Young in future.

In the long-term, resistance to degeneration will decide the dominant one. The business model of these platforms is problematic due to the significant source of revenue is generated via self-proclaimed adds placed by the SMEs on the platform. If the platform loosens its procedures in promoting the services, it can create a massive branding and reliability crises for the platform; and in the medical sector, reliability and trust are even vital than the price.

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