Domestic beauty "battle royale"

Article/Zhong Wei

Editor/Ye Lili

On September 28, 2020, the domestic beauty brand Perfect Diary's offline stores have reached 200 stores.

It took Perfect Diary only 20 months from the opening of its 1st store in Guangzhou's Zhengjia Plaza to the completion of its 200th store. Another amazing speed is that in the 4th year of its establishment, Perfect Diary is going to IPO in the U.S.

According to reports, Perfect Diary recently completed a new round of financing of 140 million U.S. dollars, and if we compare it to the post-investment valuation of 4 billion U.S. dollars (about 26.84 billion yuan), Perfect Diary's market capitalization has exceeded that of Marmalade and is close to that of Pernod.

The latter two are the twin giants of the domestic beauty industry today, with Perrier's market capitalization ranking first in the A-share beauty industry at 29.108 billion yuan and Marimekko's at 26.221 billion yuan as of press time.

From the beginning of 2018, domestic beauty brands such as Perfect Diary, UNNY, and Tangerine Duo have seen explosive growth, they have the same characteristics on them: they have seized the traffic dividend brought by new channels such as Xiaohongshu and KOL, and they are good at the marketing game, and they started from the line.

Rooted in the online Chinese beauty brands have gradually become the "barbarians" in the eyes of many people.

Kosmet, a publicly traded South Korean cosmetics company with a history of nearly 30 years, entered the Chinese market in 2004, and its assistant general manager, Yingjie Shen, mentioned in a media interview that the rise of online channels and affordable brands in China has changed the overall logic of the supply chain, and the online model has led to the industry being flooded with barbarians at the gate. ".

Brands that have gone online, as represented by Perfect Diary, have changed the overall logic of the supply chain, affecting the entire beauty market in ways that may be fatal to traditional beauty brands.

China's beauty industry has gone through several stages of development, and challenges are everywhere.

Chinese brands have also experienced the "best-selling era", the product does not worry about sales, with the European and American beauty brands to enter the Chinese market, intensifying the competition, different brands of product features, price points, etc. become more segmented.

From around 2010, the online channel change, but also to the beauty industry to add a lot of new players, which also means more intense competition.

On one side is born in Taobao beauty Amoy brand, Estee Lauder and other European and American brands are mostly positioned in the high-end, the delay in Taobao, to the rise of domestic beauty Amoy brand space. On the other hand, the traditional domestic beauty brand, rooted in the offline they, the attempt to the online channel also appears to be too slow.

When the traditional beauty brands reacted to the layout of the online, Amoy brand as a rival can not be ignored, in front of a new ambush waiting for them - the perfect diary, flowers, such as Xizi and other emerging brands, through the Internet marketing to bring the traffic dividend, mastered the right to speak in the online market.

The forces in China's beauty market have now entered an unprecedented melee.

Back in the past, every change, there must be many companies in the downhill, but there must be emerging strong and survivors.

In this domestic beauty "battle royale", who survived, and who eventually disappeared?

Once A-share cosmetics market value of the first Shanghai Jahwa, has been Marimekko, Perrier beyond, as of now has not been overturned.

Earlier this year, Ge Wenyao, former chairman of Shanghai Jahwa, sent a microblogging, he wrote: "Today, the stock market value of Perrier 20.66 billion, exceeding Shanghai Jahwa 20.64 billion." Three tearful emojis were attached at the end.

It is hard to believe that this cosmetics company, which has created famous brands such as Meijiajie, Herborist, and Lukshen, has fought a lot of victories and gone through several phases of change, but ultimately fell off the wagon.

Many domestic beauty brands have similar encounters: born in the 1980s "Prana", in 2010 because of raw materials and other issues were reported by dealers, gradually disappeared in the field of vision of consumers; was China's first brand of herbal skincare, the first KA channel Xiangyi Benqiao, because of the aging of the brand, the performance of the decline in serious. The performance decline is serious.

Shanghai Jahwa's fall has a distinctive mark of the times.

In the 1990s, the rise of China's beauty industry, a large number of entrepreneurs, through the production technology, marketing, offline and other aspects of the learning and adjustment, so that the domestic beauty brands can be spread throughout China, the beauty of the net, Dabao, Ophelia, Avon and other brands, were once no one knows of the domestic beauty brands.

This period is known as the "best-selling era", the fear is not not sold, the fear is not produced. It was against this backdrop that many domestic brands rose to the top.

With the global beauty giants accelerating their development of the Chinese market, the status of domestic beauty brands has been impacted, and their product positioning has been squeezed in the mid-range and low-end markets, and many brands need to survive through Sino-foreign joint ventures.

It has been found that companies like Shanghai Jahwa, despite creating many successful brands and products, have a hard time catching up with the European and American giants in terms of sales systems, marketing capabilities, and corporate cash flow.

From the European and American giants of the sword has been racked in the neck of the national brands, the latter can only survive in the cracks.

Before and after 2009, the European and American giants almost occupied the industry, Dingjiayi was acquired by the Coty Group, Dabao was acquired by Johnson & Johnson, Xiao Nursing and Feixi was acquired by L'Oreal. Acquisitions continue to occur, many "national products" gradually become "foreign goods".

At the same time, the beauty industry market has a broad prospect, but from Europe and the United States or the local head of the enterprise, has monopolized the market, the market is a little bit famous brand, in fact, are grasped in the hands of a small number of enterprises. Small startups want to carve out a path to success, is undoubtedly tough.

But there are still a large number of domestic beauty companies that are setting up and incubating new national products.

Shanghai Jahwa was founded in 1989, but it was after 2000 that domestic beauty exploded. Marimekko and Hanshu were founded in 2002, Perrier was born in 2006, and Kazran was founded in 2009.

The growth and activity of Chinese beauty brands became more dramatic, with advertisements such as Marimekko's "Bouncing, Bouncing, Bouncing, Bouncing away Crow's Feet", Naturally Plus's "You're beautiful as you are", and Han Shu's "Unleash your beauty" being placed on the market. "The advertisements are placed on TV channels and other channels.

Shanghai Jahwa has gone downhill with Herborist falling out of the head brand camp. Perrier and Marimekko have become the twin giants of the domestic beauty industry today.

Young female consumers, most of them walked into their offline stores, counter sales model was once their main sales channel. Their revenue, 100% from the core business of cosmetics private label operations, a factor that makes them more favorable to investors, the market value is also rising.

20 years, the industry ups and downs, player turnover, someone just stabilized position, there is a new dark horse to break the pattern of unstoppable momentum.

In this new phase, competition has intensified.

At this point in the beauty industry, the market competitiveness of European and American brands is still strong, they no longer hesitate to accelerate the integration of e-commerce platform. Traditional domestic beauty brands are the same, online channels have even become a major source of revenue.

New players are also starting to jump into the fray, perfect diary, flowers, such as Xizi and other up-and-coming brands, with a different model to come, mastered the right to speak in the market.

The pattern has been changing for a long time. In the field of technology, behind the iteration of technology is often pregnant with opportunities, and in the field of consumption, the channel change is the same, this round of change around the online.

Before 2010, beauty brands were mostly dealer models, and the annual beauty expo was an important way for companies to recruit agents and boost sales, but the beauty industry's sales channels have been changing.

Regarding the change in sales channels of Chinese beauty brands, Liu Yuliang, executive president of Galan Group, once mentioned in an interview that 27 years ago, most of the sales channels of Chinese cosmetic products were sold over the counter in department stores.

Later, supermarket hypermarkets entered China in a big way, and the cosmetic brands that followed the supermarket hypermarkets quickly occupied a certain market share. After that, the CS channel - a system of cosmetic stores, cosmetics stores, boutiques and a network of sales terminals began to prevail.

Now comes the era of the rise of e-commerce channels. With the official launch of Taobao Mall beauty hall in 2010, beauty Amoy brand has become the industry's new force, which gave birth to the Royal Mud Square, film family, Aphrodite, Fangcaosi and other well-known domestic beauty brands, they are to seize the channel change of the pioneers.

After that, Herborist, Natura, and other domestic beauty brands with offline roots flooded into the e-commerce, launching a fierce competition between traditional brands and Amoy brands.

New churners are starting to emerge again.In 2017, Huang Jingfeng went through several jobs, working at P&G and joining Yixian as a vice president, before finally leaving Yixian to set up Yixian E-commerce, the parent company of Perfect Diary.

Yixian Ecommerce is a beauty company that is different from P&G and Royal Nai Fang, and Perfect Diary's model is different from many traditional brands and Amoy brands.

In 2017, Perfect Diary officially launched and opened a Tmall flagship store, which does not rely on Ali's traffic support like Amoy brands generally do. Perfect Diary has a wider range of marketing positions - Xiaohongshu, microblogging, jittery tone, B station and other platforms are highly sought after, and consumers tend to use these platforms to "plant grass" before buying. In August of the same year, Perfect Diary opened the Little Red Bookstore.

According to Ai Rui consulting statistics, the post-90s and post-00s learn about new brands mainly through social platforms such as WeChat, Weibo and QQ, as well as e-commerce platforms.

And the three major social media for beauty are Weibo, Xiaohongshu and WeChat. The small red book has been successfully connected with Taobao in the content, merchants in the editing of a product introduction, you can choose to quote the small red book related "notes".

Huang Jingfeng has mentioned that the perfect diary sales were not good at first, until the opening of the bookstore, Tmall sales have increased significantly.

In addition to Perfect Diary and Huaxizi, the list of new domestic beauty brands also includes Mary Degree, HFP, and Tangerine Duo.

As this list gets longer, the competition gets tougher and the industry gets crowded, with investors regretting missing out on the Perfect Diary guys and new entrepreneurs continuing to join the industry.

The heat in China's beauty industry doesn't seem to be cooling down, with traditional beauty brands, upstart players, and foreign giants all standing at this demarcation point.

As we enter 2020, the transformation of the beauty industry continues.

In fact, this change happened long before the epidemic drove companies to strengthen their online channels.

In 2019, the arrival of the live broadcast e-commerce wind mouth, "lipstick brother" Li Jiaqi sold 15,000 YSL lipsticks in five minutes, "live broadcast + net red with goods" model has driven the sales of many beauty brands

This year, the concept of national tide also began to take off, food, clothing and other areas of the brand began to focus on Chinese elements, Chinese style, ancient style of national goods to impress young consumers, beauty brands also took this opportunity to realize the transformation or rise.

At the same time, brands are tapping into online traffic, not forgetting that offline channels still have value.

Most traditional beauty brands rely on offline channels. In recent years, Perrier has vigorously developed online channels, but the offline channel still contributes a lot of revenue. According to Perrier's financial report, in 2019, the offline channel revenue of 1.462 billion yuan, accounting for 46.91% of the total revenue.

Emerging beauty brands with roots in online are also heavily laying out offline. in January 2019, Perfect Diary opened its first experience store in Guangzhou, and as of the end of September this year, Perfect Diary had 200 stores and claimed to open 600 stores by 2022.

Perfect Diary has stood out over the years as beauty has become one of the fastest growing categories in China's retail industry.

In the past, most of the popular cosmetic brands in China came from countries such as the United States and South Korea, and even in the era of the rise of Perrier and Marimekko, the pattern of being ruled by foreign brands was not broken.

But today, this pattern is being rewritten. 2020, the Cato Consumer Index released the latest beauty market trends report, in the skin care category, Bajaj, Dabao, L'Oreal Paris, Olay, Nivea ranked the top five, although only Bajaj is a national brand, but ranked first.

And in the makeup category, the only domestic player, Perfect Diary, also took first place, with Maybelline New York, Meeko, Dior, and Kaslan coming in behind.

Put online, the trend is even more obvious, with more and more seats for national brands in the list of beauty brands. On Double Eleven 2019, Nature's Church, Bakelite, Perfect Diary, and Winona were among the top ten on the list.

Among the new brands, the first time to participate in the Double Eleven, Huaxizi realized sales of more than 100 million in one hour, and the perfect diary broke 100 million in 13 minutes, which is the first national makeup brand to reach the top of the Tmall list.

However, the model of low gross profit and high marketing of domestic emerging beauty brands is facing controversy.

At present, the product positioning of the new beauty brand is still in the middle and low-end, the product price is mostly between 20 and 200 yuan, is in the context of compression of gross margins to improve sales.

Corresponding to this is the brand's high marketing expenses. According to the Times reported in May this year, the perfect diary public relations department said the company's gross profit is currently lower than the industry level, and there are reports that the perfect diary marketing costs accounted for 40% -50% of revenue.

Players ultimately towards the end will be to enhance the pricing, so that the input-output ratio is positive, not to mention the current perfect diary people are still in the layout of the offline, which also increases the financial burden of the enterprise. It's not until they turn a profit that the Perfect Diary guys will be able to usher in a real victory.

The new beauty brands are still vulnerable, and the old players are also making up for their shortcomings. The competition is far from over, and products, marketing, and channels will all be variables in this war.

The newest beauty brands are still vulnerable.