Image source @ vision china
Text | Fat Whale Headline
In the beginning of 2022, HARMAY, a new retail brand of beauty products, completed nearly $200 million in C and D rounds of financing. During the same period, WOW COLOUR, a beauty collection store brand, also announced at its annual meeting and 2022 strategy conference that it had won another $100 million in A+ rounds of financing; "B+ Oil Tank" announced the completion of a round of strategic financing, which indicates that the new beauty retail species that broke out in 2020 is still the "toon" in the eyes of capital.
Several families are happy and worried. In contrast, the new domestic brands of beauty products are caught in "collective anxiety". Perfect Diary, as the benchmark of new domestic products, bears the brunt. Its share price dropped from $25 at the beginning of 2021 to less than $5, and its market value evaporated by nearly 80%. According to Amoy data, during the period of double 11 last year, the sales of many cutting-edge brands such as Perfect Diary, Flower Xizi and Orange Blossom generally declined by more than 30% compared with the same period last year.
In fact, not only in the beauty industry, but also in the fields of coffee, tea, shoes and clothing, the discussion about "new consumption is going downhill" is endless, and new changes and transformations are quietly coming.
2018-2020 is the "honeymoon period" for the accelerated development of new domestic brands of beauty products, with the influx of hot money; Amoy incubates and supports new brands; With the rise of new traffic platforms such as Xiaohongshu and Tik Tok, a group of cutting-edge brands, who are well versed in traffic and content marketing, rely on the fast product iteration ability and the pricing strategy of "big brand replacement" to quickly create explosive items, which are in full swing in the e-commerce channel.
Along with the highlight, there are still constant doubts, including burning money for growth, emphasizing marketing and neglecting research and development, and serious homogenization of products. According to Perfect Diary Financial Report, the net loss of Q3 Company in 2021 was 360 million yuan. Although the loss range has narrowed compared with 640 million yuan in the same period last year, the high marketing expenses are still criticized, accounting for nearly 70% of the revenue.With the increasing cost of traffic, online growth has fallen into a bottleneck, and the enthusiasm of the capital circle for this model has gradually faded.
To make matters worse,International brands have completely outflanked the new domestic brands in terms of price, marketing methods and talents.. Since double 11 in 2020, the international big brands have concentrated on the lowest discount in history, providing a special "price line" for the China market, and some brands even have a 2-3 discount combined with buying and giving; Marketing gameplay has increased the efforts to launch KOL, online live broadcast rooms and private domain channels, and even the previous "disdainful" launch mode such as taobao guest promotion has begun to be adopted by the top management; In terms of talents, a new round of enrollment expansion of local talents has been launched, and the proportion of local talents in middle-level and key positions has continued to rise, so as to be closer to the China market and its Z-generation young people.
This series of "grounding gas" practices has also multiplied the brand potential accumulated by international big names for a long time, and the market share has been expanding.According to the latest financial report data, the sales of L ‘Oreal, Estee Lauder and Shiseido all achieved double-digit year-on-year growth in 2021. Among them, the financial report of L ‘Oré al Group pointed out that in 2021, it achieved double-digit growth in the China market, which was twice the average growth rate of the beauty market. Estee Lauder Group also stressed in its financial report that the performance of the Asia-Pacific region, especially Chinese mainland, has increased significantly.
It is worth mentioning that these international groups are optimistic about the growth prospects of cosmetics in China in the medium and long term, and further strengthen the layout. For example, L ‘Oré al will land its headquarters in North Asia in Shanghai; Estee Lauder adjusts its organizational structure, and China directly reports to the international president; Shiseido expects China’s income to increase by 16% in 2022 (statement+7%).Many signals show that the international giants are "ambitious" for the China market.
In addition,In the past few years, the "old brand manufacturers" who encountered strong challenges from new brands are also regaining their favor and welcoming the second expansion of revenue and profits.Taking Polaiya as an example, in the past two years, with the large single product of ruby essence and double anti-essence, it has successfully opened up an incremental customer base in the fields of affordable anti-aging, anti-aging, anti-oxidation and sensitive skin care, forming a word-of-mouth effect; And from the second half of 2020, Caitang, a make-up brand, achieved a revenue of 120 million yuan that year, with a year-on-year growth rate of 84% in the first three quarters of 21 years, becoming the second largest incremental business point besides the main brand of Polaiya.
The "rejuvenation" of international giants and local brands, in addition to TAs being more proficient in the operation of new marketing models, stable funds, R&D and manufacturing systems, long-term accumulated brand assets, and omni-channel layout capabilities are the cornerstones under the iceberg, enabling increased exposure to quickly translate into sales and stable repurchase.On the other hand, the proud DTC mode and private domain operation of many new brands have not effectively solved the problems of "loyalty" and "repurchase". According to the data of Dolphin Society, the repurchase rate of Yixian e-commerce has remained at around 40% in recent years, and it has hardly improved, and it has fallen into the dilemma that "if you don’t continue to spend money to buy traffic income, it may double down".
With online competition becoming a red sea, it tends to be homogeneous, and more brands begin to turn their attention to offline. For the brand,The significance of stores has gone beyond the scope of retail channels, and it is an important way to connect real consumers, express their own differences and build brand-specific content.; At the same time, with the application of digital means and the continuous iteration of consumer demand, the offline format has also given new vitality.
From the initial department store channel, to the traditional CS/KA channel, and then to the new beauty collection store at that time, the application of digital tools and technologies has become an important starting point for improving retail efficiency and changing user experience.Through the use of small programs, live broadcasts and other means, as well as the opening of the membership system, the seemingly single offline contact has been transformed into a rich online and offline consumer network, and the private domain attribute of the store can also help the brand reach consumers more accurately and establish deep links. At the same time, digitalization also goes deep into product selection, inventory management, logistics and distribution, etc., improving operational efficiency in an all-round way and releasing new imagination space for consumers to get unexpected experience in beauty consumption.
Social aesthetics+multi-format experience is becoming a new growth point of offline space.With the Z generation becoming the main force of beauty consumption, the behavior and characteristics of TAs have greatly influenced the direction of change in beauty channels, such as preferring undisturbed self-service shopping, preferring early adopters, being willing to pay for face value and trends, and pursuing immersive interactive experience.These have become an important force to promote the rise of beauty collection stores.
Throughout the current popular beauty collection stores, all efforts are made in space quality and scene aesthetics, such as the industrial style of Huamei and the design style of "one store, one theme", the INS girlish style of WOW COLOUR, and the future technology style of B+oil tanks.Stores themselves are very social topics, which bring consumers a deeper interactive experience and stronger brand awareness, thus driving the emergence of consumer behavior.
besidesThe beauty collection store, represented by Huamei, is extending users’ stay time and increasing the repurchase rate by expanding business and ecology.. In Huamei, you can buy not only beauty products, but also coffee, snacks, drinks, pet products, small household appliances, etc. In fact, Huamei is not only a retail distributor, but also an investor. According to the statistics of China Investment Network, Beijing Huamei Lexiang Technology Co., Ltd., the main company of Huamei, has invested in nearly 10 new consumer brands, mainly in 2021, involving skin care, health care, fragrance and other sub-tracks.In the increasingly fierce competition, it is considered to be an important source of differentiated competitiveness for beauty collection stores to use their sensitivity to trends and their ability to select products to explore and even empower new niche brands first.
If the expansion of categories is not without doubt, thenDigging deep into the service value of beauty is another path of overlapping experience.Lan Tingyuan, project director of L ‘Oré al China Consumer Center, said when talking about the trend in the next 5-10 years,Future products will not only be products themselves, but also need some combination with instruments or medical beauty, even with data and services.
In this regard, beauty brands and traditional department stores/CS channels have innate genetic advantages. For example, Estee Lauder will provide offline SPA services such as frozen platinum, black diamond luxury energy and platinum energy storage for members of different levels; Sephora stores provide diversified services such as hairdressing centers, professional service counters and professional beauty consultants; The offline counter of high-end makeup in Mao Geping will design a makeup trial area for consumers, and be equipped with a professional BA to make up half a face for customers to present the product effect.These offline services can greatly promote the distance between brands and consumers and build brand fan stickiness.
In the past two years, the beauty shop in department stores has been continuously expanded, which has been welcomed by beauty brands and customers.Take Hangzhou Wulin Yintai as an example. By the end of 2021, 18 high-end beauty brands had opened 21 beauty salons, including La Prairie, Mystery of Hailan, CPB, Sisley, helena rubinstein and Fresh. These beauty salons usually have an area of 10㎡-25㎡, allowing consumers to enjoy quiet, high-end and private professional skin care. At the same time, different brands of beauty care are different in techniques, instruments, special products and projects.Become a sharp weapon for brands to maintain high-end customers and enhance brand added value.
Hangzhou Wulin Yintai La Prairie brand beauty house
However, the offline expansion of Zhang Zhilu has not been smooth sailing, especially under the influence of the epidemic, many brands have delayed their plans to open stores. In the past 2021, in addition to Sephora’s accelerated expansion plan, nearly 40 new stores were opened, which is about twice the average annual growth rate since it entered China in 15 years. Compared with the target, the opening rhythm of new beauty collection stores has been greatly reduced. According to the statistics of interface news, the total number of WOW COLOUR stores in China at the end of 2021 is about 135, which is half of the peak of 300, which is contrary to its goal of laying out 1,000 offline stores within three years. Black hole once proposed the rhythm of opening 20 stores in 2021 and aiming for 50 stores in 2022, but so far there are only 14 stores.Behind the competition for high-quality offline space, there is still a need for strong financial strength and stable profitability.
It is worth mentioning that the new domestic brands do not have a strong sense of existence in this offline battle. Yixian e-commerce, where Perfect Diary is located, has laid out offline stores since 2019. By the end of November last year, there were 280 stores. However, according to the founder, affected by the epidemic, one-third of the stores have repeatedly closed, opened and closed, and will implement a more cautious store expansion strategy in the future; Tangduo opened 10 stores from September 2020 to the end of November 2021, "each one is very cautious"; Hua Xizi still has no offline stores and counters.It is not an easy task for new domestic brands that are native to the Internet and have limited profit margins, involving the location of offline stores, supply channels, service experience, and the control of personnel operating costs.
Under the double dilemma of online and offline, many founders of new domestic brands said that this is the most difficult moment. If we can survive this "life and death test period", it is likely that a number of new local international brands will be born, but in which direction should we break through?
Brand going out to sea has become a unanimous choice under domestic pressure.According to the statistics of China Business Daily, more than 20 domestic cutting-edge beauty brands are actively exploring overseas markets. Among them, Hua Xizi, relying on the characteristic advantages of oriental aesthetics, is particularly firm on the road of going to sea. In the past two years, she has made intensive brand voices around the achievements and cases of going to sea.
Hua Xizi is very good at using social media and the power of local talents to explore foreign markets. For example, at the end of 2019, the cooperation with the Japanese blogger "@ ????" triggered a hot discussion among Japanese netizens on Hua Xizi, and related topics once climbed to the seventh place in the Japanese Twitter hot search list; In 2021, TikTok "Micro online celebrity" @meredithduxbury, which found 200,000 fans, released a makeup tutorial video using Huaxizi products. The content exposure rate exceeded 5 million, and it gradually entered major international markets such as North America and Western Europe. At the beginning of this year, the evaluation video of domestic makeup flower Xizi pushed by Jeffree Star, an American top beauty blogger with 10 million+fans and sharp "poison tongue" on Youtube, once again boosted the popularity.
Now Huaxizi has opened official website in English and Japanese, successively opened logistics in Japan, the United States and Europe, and laid out many overseas mainstream social media such as Instagram, TikTok, Twitter, among which the number of TikTok fans has exceeded 200,000, which is growing rapidly.
butDomestic brands often go out to sea with the export of national strength and culture, just as the popularity of Korean cosmetics in China in that year was inseparable from its highly binding Korean culture and leveraging traffic dividends.At present, the gathering places of domestic brands of beauty products are more in Southeast Asia and Japan, which are more suitable in makeup habits, fashion trends and culture. However, for the European and American markets with high entry threshold, great skin difference and more intense competition, the space that can be developed at present is still limited.
It is a relatively wise and cost-effective way to keep and strengthen the brand mind of a certain subdivision efficacy/ingredient/category.Taking the skin care track as an example, iResearch data shows that consumers’ demand for effective skin care is increasing, and the driving effect skin care products continue to increase at an average annual compound growth rate of nearly 30%; According to the survey data of the Chinese Medical Doctor Association, more than 70% of the people think that they have sub-health skin conditions, and they can solve skin problems in a targeted manner, and they are more likely to be favored by consumers with exclusive ingredients and formulas.
For example, Winona, with its natural plant ingredients and medical background, has become the first brand of sensitive muscle skin care in China, and has achieved a certain dominant position in the blue ocean of dermatological skin care products. Run Baiyan and Kuadi, owned by Huaxi Bio, have formed the appeal of not losing big names in medical meiquan by virtue of their exclusive advantages in the patented technology of hyaluronic acid components; The core of Lin Qingxuan’s shelling of Chanel some time ago lies in the dispute between users’ minds about the ingredient of camellia. Although netizens have different opinions, they have at least gained a free publicity position in strengthening Lin Qingxuan’s cognition and association with camellia.
If the above two strategies are more short-and medium-term strategies, it is a long-term doctrine that is difficult but must be adhered to to to effectively improve R&D and product strength and precipitate brand equity.At present, the leading new domestic brands are already making changes, such as Perfect Diary gradually upgrading the R&D team, and the proportion of R&D expenses has increased from 0.4% in 2018 to 1.3% in 2020; Hua Xizi hired Li Huiliang, deputy general manager, chief technology officer and core technician of Huaxi Bio, to be responsible for brand research under the brand. In the past year, the number of patents of Hua Xizi’s parent company reached 106, including 28 invention patents, and the number of new patents reached 50.
Although there are still many gaps compared with international beauty brands, this R&D competition has already started. Blessings and misfortunes depend on each other, and it is expected that the consolidation of R&D foundation will make generate’s user thinking and product iteration ability, which new domestic brands have always been good at, have greater potential energy, rather than "floating on the surface".