Per reporter: Zhu Peng Per editor: Duan Lian, Dong Xingsheng
Korean film, television and K-pop music, represented by Squid Games, bulletproof youth groups and BLACKPINK, continue to attract Chinese fans, but the Korean makeup fever that was once highly sought after in Chinese mainland is no longer glamorous.
A few days ago, according to a number of media reports, The Korean cosmetics giant Amorepacific Group (hereinafter referred to as "Amore") brand Innisfree will "withdraw stores" in Chinese mainland, and the final number of stores will be reduced from more than 600 at its peak to about 140, with nearly 80% of stores withdrawn.
According to the report, Amore is optimizing the channel of Innisfree, and the store adjustment will continue in 2022. Allegedly, the adjustment is only for Innisfree stores and does not involve other brands.
Amore's latest financial report shows that the total revenue in the first three quarters of 2021 was 3.9054 trillion won (about 20.71 billion yuan), an increase of 6.5% over the same period last year. Revenue for the third quarter was KRW 1.2145 trillion and profit was KRW 51.7 billion, down 15.3% from the year-ago quarter.
Amore Group revenue for the first three quarters of 2021 Image source: Screenshot of financial report
Every reporter called Amorepacific Trading Co., Ltd., a wholly-owned subsidiary of Amore in China, regarding the matter. The other party replied: "The relevant event cannot be responded to. "Every interview letter sent to the company by the reporter has not received a reply as of press time.
Revenue fell three times in the first three quarters of 2021
The largest year-on-year decline of more than 17%
Innisfree has entered the Chinese market since 2012 and has entered second- and third-tier cities at a rate of 100 new stores per year since 2014, with more than 600 stores in Chinese mainland at its peak.
After 2017, due to the influence of international relations, coupled with the rise of Chinese domestic brands and the strengthening of "mass marketing" of European and American brands, there are more and more alternatives to Korean cosmetics.
Taking Innisfree as an example, from 2017 to 2021, brand sales and operating profits fell five times in a row, and Chinese mainland stores closed in batches. According to reports, 40 stores were closed in 2019 and 90 stores in 2020. IiMedia expects to close 170 stores in 2021. At present, the remaining stores of the brand are mostly located in first-tier and new first-tier cities. According to the incomplete statistics of each reporter, the cities with more stores are Shanghai, Shenzhen, Beijing and Chengdu, with 28, 19, 18 and 17 stores respectively.
Whenever the reporter visited an Innisfree flagship store in Shanghai's Huangpu District, when asked whether the clerk knew about the company's store plans, he said: "This matter needs to be asked to the company, and the store is not responsible." He also said that the store has not received any notice of business changes at present.
Innisfree Fengyin Store Image source: Photo by reporter Zhu Peng
Another flagship store clerk in Shanghai's Pudong New Area said that the company's relevant personnel had a reminder: "There is no response to this matter." ”
Previously, Amore held the 2022 company New Year ceremony online. Chairman Xu Qingpei said that the group should promote digital transformation, while drastically reducing goods that are contrary to the times, optimizing inventory management based on data, checking and improving inefficiencies in the entire business, so as to achieve profitable growth.
Digital transformation is the trend of the current brand choice, but the decline in Innisfree's performance is also a fact. According to Amorepacific Group's financial report, in the first three quarters of 2021, Innisfree's revenue was 89 billion won, 87.9 billion won and 72.2 billion won respectively, which not only continued to decline month-on-month, but also fell by 17.2%, 0.5% and 10.2% respectively from the previous year.
Judging from the current situation, Innisfree and the entire group have not yet been able to get rid of the impact of the new crown epidemic. In 2020, Amore's revenue and operating profit were 4.9301 trillion won and 150.7 billion won, respectively, down 21.5% and 69.8% year-on-year, respectively, compared with 2019. During the same period, innisfree's corresponding figures were 348.6 billion won (about 1.848 billion yuan) and 10.2 billion won (about 54 million yuan), down 36.83% and 79% year-on-year.
There are more and more Korean makeup alternatives
Squeezed in both directions by Chinese beauty and European and American brands
Innisfree's decline in the Chinese mainland market is not unique to Korean makeup. Taking Amore for example, since 2017, its Siqin Skin and Fei Shi Shop have withdrawn from China, and the makeup brand Itie House announced the closure of all offline flagship stores Chinese mainland in March 2021.
The market that once belonged to Korean makeup is being eroded by domestic beauty and European and American brands.
According to the relevant data of the Prospective Industry Research Institute, by 2022, the market size of China's beauty industry will reach 500 billion yuan. According to the iResearch consulting report, in 2020, the size of China's local beauty market reached 157.6 billion yuan. In 2023, the size of China's local beauty market is expected to be about 252.7 billion yuan, and the compound growth rate is expected to reach 16.6% from 2021 to 2023.
In recent years, a number of domestic beauty brands have risen. Perfect Diary, HuaXizi, Mao Geping, Winona, Orange and other brands have all been out of the circle. According to cbnData reports, in the first quarter of 2021, among the top 200 brands in Taobao Tmall sales, the top 10 brands with year-on-year growth are domestic products.
In addition to the Chinese market, domestic beauty is also actively going overseas. For example, Perfect Diary has been working on overseas business since 2020, and as of the end of May 2021, it has won the crown of beauty in Vietnam and the crown of makeup in Singapore and Malaysia.
Overseas business is also one of Amore's important sources of revenue. According to its financial report for the third quarter of 2021, overseas revenue was 384.1 billion won, accounting for 34.63% of the total revenue in the quarter. It is worth noting that the Asian region accounts for 91.74% of this, while the Chinese market contributes more than 70% of the sales.
The contribution of the Chinese market to the Asian market is more than 70% Image source: Screenshot of the financial report
Overseas markets rely too much on the Chinese market, so that once the development of its brands in China is blocked, it will be immediately reflected in the financial report. For a public company, this undoubtedly increases uncertainty. Therefore, it is not difficult to see that the "strategic adjustment" also has the consideration of optimizing the revenue structure and maintaining a stable financial report.
A female customer told reporters: "Now many domestic makeup products are similar in price to it, marketing is more, and it is convenient to buy online." As for skin care products, I am willing to add some money to buy European and American brands or new domestic products. ”
As far as Amore's overall brand camp is concerned, the lack of strong brand power products with multi-point support is the key factor in its revenue decline. When the cost performance is not as good as China's cutting-edge domestic products, the brand power is not as good as that of european and American brands, and the road to innovation of Korean cosmetics is difficult.
A customer told every reporter on the news of the withdrawal of the store by Innisfree: "The product at this price can only rely on the amount of offline flagship store, the profit margin is actually not large, and the withdrawal of the store is also reasonable." ”
Reporter | Zhu Peng
Edited | Duan Lian, Dong Xingsheng, Wang Jiaqi
Proofreading | He Xiaotao
| the original article of the daily economic news nbdnews |
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