China suppliers of beauty and cosmetic products are expanding their reach by tapping new markets and using natural, organic and mineral ingredients. This is according to Global Sources' (Nasdaq: GSOL) China Sourcing Report: Beauty & Cosmetics.

The Report, which covers makeup for the face, lips and eyes, application brushes and tools, skin and nail care, cosmetic bags and cases, and facial appliances, reveals that suppliers are confident of generating more orders in the year ahead.

Publisher of the Report, Livia Yip, said: "Manufacturers in China's beauty and cosmetics industry eagerly anticipate export growth of at least 20 percent in the next 12 months. This follows exports of makeup and skin care products shooting up by 22 percent year-on-year to $358 million in January-June 2010, according to industry estimates. China customs statistics show outbound shipments in the brushes, applicators and nail care line soaring by 34 percent to $55.4 million in January-May.

"Optimism is strong despite less-than-brilliant growth prospects in traditional markets such as the United States and Europe. Suppliers are compensating quite successfully by tapping much deeper into emerging markets such as Asia, the Middle East, Russia and South America," added Yip.

China Sourcing Report: Beauty & Cosmetics shows that manufacturers' efforts to broaden revenue sources also include venturing into new product lines. Companies are purchasing special machinery for production of natural, organic and mineral cosmetics that are rising in popularity. In addition, innovative packaging that applies makeup directly is being used to attract more buyers.

Suppliers launch strategies to deal with challenges

The upbeat outlook prevails even with several problems confronting the industry. Of China suppliers surveyed for the Report, 37 percent pointed to rising labor costs as their main challenge. Stricter overseas standards, design piracy and the yuan-U.S. dollar exchange rate are also perceived as threats to competitiveness.

Strategies for coping include upgrading equipment and asking employees to work overtime, giving greater scrutiny to ingredient quality, and issuing quotes with shorter validity periods to avoid currency losses.

The increased labor and material outlay also forced 85 percent of suppliers surveyed to push up prices in recent months. Markups at most companies exceeded 5 percent.