There are two beds in the small, stuffy room. Assorted beauty products, creams, facial scrubs, and spray bottles are scattered haphazardly across a table in front of a mirror.
Two migrant girls, likely fresh off the train from northwest China's Qinghai Province, or perhaps southwest China's Yunnan Province, tend to customers.
The fact that they probably don't know anything about beauty treatment is irrelevant. Their job is simply to "work on" your face for an hour and a half, before ushering you back onto the noisy street. They will tell you how bad your skin is, and will aggressively hawk skincare products that promise to "save your face" within two weeks.
This is a typical scene in Beijing, home to over 30,000 beauty salons. They can be found everywhere, in neighborhoods, commercial centers, office buildings and on street corners. Some of them offer prices as low as 20 yuan (US$2.47) for basic services.
This is the main reason why there has been little foreign investment in the sector, despite the fact that China's service industries have opened to the outside world, says Pan Xiaoming, secretary-general of the China Beauty and Cosmetics Chamber (CBCC) under the All-China Federation of Industry and Commerce.
According to its statistics, foreign-invested beauty salons only account for 4.11 percent of the country's total, compared with 91.57 percent for domestic private companies.
Pan says that market saturation has limited the involvement of overseas capital.
Foreign enterprises are better at cosmetics production, but when it comes to services, they are still unfamiliar with the market, Pan adds.
Market saturation has made it difficult to identify potential business opportunities, he says.
Taiwanese cosmetician Li Sha, who in 1999 established her first salon in Beijing, Maryanna, agrees.
"The market has not matured yet. Small stores compete on prices, and larger ones focus on luxurious decor and expensive equipment."
Many salons in Beijing offer similar, simple services because they lack money, professional experience and advanced technology.
"Owners of those shops look at short-term profits, and they offer low prices to attract clients from whom they can collect membership fees. Owners can earn back their initial investments within a few months this way," Li says.
In skin treatment centers, for example, women pay for months of weekly treatments. Salons with sufficient funds try to show off with luxurious dcor and imported equipment.
"Professional service unfortunately tends to fall by the wayside," Li says.
She estimates that there are only 50 to 100 professional beauty salons in Beijing, and that overseas investment mainly comes from Taiwan and Hong Kong. Western enterprises have largely held off so far.
Pan says there is actually huge market potential for foreign firms, especially at the high end of the market. There are still not enough choices for affluent customers.
He suggests foreign investors form joint ventures with local enterprises, in order to become more familiar with the market.
"They should bring technology, personnel and unique services," Pan adds.
Li predicts that foreign enterprises will flood to the mainland from 2007, before poorly managed domestic operations are eliminated by fierce competition.
Li has managed to survive in the mainland market.
"I have a 1,000-square-metre beauty center in Beijing's central business district, and I also franchise my brand throughout the country. There are 46 Maryanna franchise stores."
Li plans to open additional outlets, but her current goal is to earn back a recent investment within a year and a half. She invested more than 10 million yuan (US$1.23 million) to expand her salon 10 months ago.
She also says that an increasing number of male customers are seeking health and relaxation. The salon offers a two-hour spa service for men, which costs 400 to 800 yuan (US$49.3 to US$98.63) per visit.
"The men's service accounts for more than 30 percent of our income. If we build that to 50 percent, we can easily achieve our goal."
Li's franchise sales also bring revenue to the company.
"More than one-third come from franchising," she says.
Li established a cosmetician training school in mid-2000, and started selling her products to franchise stores.
Statistics from the CCBC indicate that beauty shops posted total revenues last year of 220 billion yuan (US$27.13 billion), while cosmetic sales accounted for 85 billion yuan (US$10.27 billion).
The sector experienced rapid development over the past two decades, with annual revenue increase rates standing at 15 percent since the mid-1980s. This is much faster than the national gross domestic product's (GDP) growth rate. Women between 20 and 50 years of age are the major consumers of beauty services, although they are becoming increasingly popular with men.
The ratio between female and male consumers is 80.39 percent women, according to the CCBC.
Regardless of gender, the key is to deliver products that increasingly affluent consumers in a growing market will buy.
(China Daily October 12, 2005)
