Author/ Author of "Finance and Economics" Weekly Zhang Jikang
Editor / Chen Fang
The great retreat of foreign brands
The world's largest flagship store, Innisfree, located on West Nanjing Road in Shanghai, opened in 2015 and was once a hit when it first opened, but now its iconic green sign has been removed and replaced by Bubble Mart.
The store is a microcosm of Innisfree's presence in China, witnessing the decline of the Korean makeup brand. Today, seven years later, Innisfree's store in China has been quietly closed.
A Beijing Innisfree Fengyin counter clerk told Caijing Tianxia Weekly that it has recently heard news of the closure of the store, but has not yet received a clear notice. In Xidan Joy City, the counter of Innisfree has been withdrawn for more than half a year. This is not an isolated case, and recently a number of media reported that Innisfree's stores in China have shrunk by nearly 80%, from more than 800 at the peak to about 140.
Founded in 2000, Innisfree is a Korean cosmetics brand owned by Amorepacific Group in South Korea. In 2012, Innisfree entered China and opened its first offline store in Shanghai. After 2015, many Korean dramas such as "You from the Stars" and "Descendants of the Sun" have brought many K-pop stars to the popularity, signed a number of popular stars of Innisfree, and the water has risen to become the "top stream" of the Korean makeup industry.
At the most beautiful time, Innisfree opened more than 100 stores in China every year, and was the leader among foreign makeup brands. In 2016, in a list, Innisfree surpassed Shiseido and Estée Lauder with a ratio of 13.94% to become the most popular foreign women's skin care brand.
However, since 2017, as the Korean Wave has gradually receded in China, Innisfree's performance has declined. Amorepacific's earnings report shows that in 2020, Innisfree's sales were 348.6 billion won, down 37% year-on-year, and operating profit was 7 billion won, down 89% year-on-year, less than a fraction of 107.9 billion won in 2017. Performance continued to decline in the first half of 2021, with sales of 87.9 billion won, down 0.5% year-on-year.
In order to save itself, Innisfree has been closing stores for the past two years, closing about 40 loss-making stores in 2019, closing 90 stores in 2020, and closing 170 stores in May 2021, and the recent store has further contracted. The relevant person in charge of Amorepacific revealed that the relevant store adjustment will continue in 2022.
Amorepacific's other Korean makeup brand, Itie House, which focuses on Barbie fans and princesses, is also being abandoned by consumers. Consumer XiaoHan, who was once a die-hard fan of Itie's House, told Caijing Weekly that she hadn't bought their products for a long time because it was too cheap.
Itti House revenue is also not as good as before, the financial report shows that its operating income in 2020 was 111.3 billion won, down 38% year-on-year, and recorded a large loss. Like Innisfree, Itie's House is closing the shop to save itself.
The exit of Innisfree and Itti House is not an isolated case, and also involved in the trend of closing stores, there is also "KATE Kaiduo", which is known as the "fighter in the cheap", and is currently "withdrawing the cabinet and clearing the warehouse". Kao Group, the parent company of KATE, responded, saying, "It will not withdraw from the Chinese market, but it will focus on online e-commerce channels in the future." ”
Beauty brand Pei Lingfei, which has been in the Chinese market for 14 years, also sent a signal to withdraw from China's offline counters in 2021. According to the official information of Pei Lingfei, at present, there is only one offline counter in Beijing, Sanlitun, and the remaining 28 are Sephora stores. The special eyebrow repair service "Eyebrow Bar" of The Belle Princess offline counter has also been subtracted with the withdrawal of the counter, although the official said that the project will be retained in sephora's China store, but some consumers said that not all Sephora stores provide this service.
In addition, there are seven beauty brands rumored the news of closing stores and delisting, including foreign brands such as L'Oréal and Estée Lauder, which can be said that the road of foreign makeup in the Chinese market is not very good.
Local brands are also "rolling"
Foreign monks are difficult to chant, and local makeup brands are constantly consuming in the torrent of "inner volume". Traffic is no longer a panacea, relying on capital marketing to promote the head of the beauty brand, is encountering the traffic boom fading dilemma. Haitong Securities shows that during the double 11 period in 2021, the sales of Perfect Diary, Huaxizi and Yiyezi have all declined sharply, down by 45%, 30% and 42% respectively year-on-year.
Yixian E-commerce, the parent company of the perfect diary, which was once known as the "first share of beauty", has shrunk by more than 90 billion yuan compared with the highest point. According to its financial report for the third quarter of 2021, The revenue of Yixian e-commerce was 1.34 billion yuan, an increase of 6% from 1.27 billion yuan in the same period of the previous year, and a significant slowdown compared with the growth rate of 67% in the same period last year.
The makeup industry is becoming more and more "inward-rolled" and has become a unified judgment in the industry. Ms. He, the founder who has failed on the domestic makeup track, told Caijing Weekly: "The makeup industry is really getting more and more volumetric. "She is more Buddhist and is not willing to get involved in this battle.
Ms. He founded the makeup brand sweetener after opening the store six months after entering the stage of store closure clearance, "once not invested in promotion, there is no traffic in the store, the cost of investment in promotion and marketing and the actual conversion rate is too much difference, so we choose to clear the warehouse directly." She said helplessly, "The clearance is the best time for the store's business, the original thousand eyeshadow plates were sold for more than a month, and the clearance was only sold for two days." ”
In 2021, many makeup brands like Sweetism that rely on the founder's own traffic have fallen, some are liquidating, and some are being acquired. HAZELFEEL, a brand founded by zz Xiaohei, an internet celebrity with 3 million Weibo fans, issued an announcement of liquidation and closure four years after going online; CROXX, a make-up brand of Internet celebrity Dong Zichu, who has 4 million Weibo fans, also entered the clearance and closure process; and Lin Shanshan, an internet celebrity anchor who belongs to the same company as the anchor Sydney, also announced in November 2021 that her makeup brand MumaSunny, as the brand manager, will close its stores from now on.
Although some makeup brands want to go out of the circle by vertical subdivision, they still have not survived the winter of 2021. The national style makeup brand "Brand Technology", which once received 20 million financing in the angel round, currently has only 6 washing products in the official flagship store. There is also OXFOR, a makeup brand famous for the future cyber style, Tang Shiyayun, which is mainly based on Hantang style, and Rome Baby Bear rabbit and bear season, which is mainly based on lolita culture, and has also issued notices of closing stores and clearing warehouses.
The enthusiasm of the capital market for the makeup industry is cooling. In 2019, the average single financing amount of the makeup track was 337 million yuan, but in 2021, most of the makeup brands' financing was in the angel round or A round financing stage, and the financing amount ranged from several million to tens of millions.
In 2021, the makeup track has become a siege, and people on the outside want to come in, but people on the inside want to go out.
Where is the future?
The makeup industry is getting more and more volumetric, essentially because "there are many people with more money". A beauty e-commerce source in the industry told the "Finance world" weekly, "If the makeup track was still a blue ocean before, then it has now become a red sea, even if it is a fine category inside, everyone is also playing very hard, and there are too many businesses that lead to fierce competition." ”
The influx of players was oversaturated, while the platform's traffic growth hit a ceiling. Taking the head platform of e-commerce with goods as an example, Kuaishou's daily active users have reached 300 million, and Douyin's daily active users are nearly 600 million, and under such a large user scale, it is an indisputable fact that user growth has slowed down. According to the above-mentioned beauty e-commerce sources, the cost of customer acquisition in the entire makeup market is about to rise from the original 80 yuan / person to 100 yuan / person, and the return on investment in the makeup category has dropped from the original 1:1 to the current 1:0.8, and the gross profit margin of the makeup category is also declining.
Everyone wants to eat meat, which means that someone must not even be able to drink the soup. After entering the stock market, makeup players opened a zero-sum game game, volume channels, volume marketing, volume price.
Product upgrading and marketing promotion have become the hardest hit areas for makeup brand rolls. Ms. Qian, the founder of Romance Baby Bear Rabbit Bear Season, once told the "Finance world" weekly that the inner volume of domestic makeup brands is mainly reflected in the creative aspect, and the brand should always update the product, so as to present different ideas to consumers.
In the past, the beauty product development cycle in the global market was at least 7-18 months, and the R&D cycle of Korean makeup, which first led the trend of beauty fast culture, also reached 4-6 months. In the Internet era, the foundry and the brand side launched the OEM (Original Entrusted Manufactur), ODM (Original Design Manufacturer) cooperation model, the domestic makeup new product development cycle has been further shortened to 1-3 months.
Taking Perfect Diary's newly launched puppy disk eyeshadow at the end of February 2020 as an example, the cooperation between this product and Li Jiaqi's pet Never was reached at the end of December 2019 and launched at the end of February 2020, and the whole process took only about two months, which shows the speed of update.
This further leads to the involution of upstream supply chains. From the perspective of supply chain, the domestic head of the makeup foundry overlap is high, whether it is foreign or domestic brands, the supply chain traced back to the source is the source of several. South Korea's Kosmax, South Korea's Koma, and Italy's Intreli are known as the three leading domestic makeup foundries. Taking Cosmex as an example, it not only serves well-known foreign brands such as Estée Lauder, Lancôme, Dior, etc., but also commissions domestic brands such as Perfect Diary, Huaxizi and Colorkey.
In order to meet the needs of customers, in 2020, Cosmes began to form a "small production system" team, launched a "500 minimum order" small batch production model, lipstick, water milk, powder can be ordered at 500 minimum, customers can complete the delivery in a single month to a month and a half. In this regard, Shen Yingjie, director of the general manager office of Cosmethe, believes that the construction of a small number of production teams is to meet the needs of the current beauty consumer market that is changing too fast, and the factory is reducing the cost of trial and error for customers through its own changes.
The volume of perfect diaries and huaxizi in marketing promotions has also been criticized in the change of time. For consumers, Perfect Diary is a well-known "marketing coffee", "once bought a piggy plate of Perfect Diary, but the powder is not good, bought several times has not been opened, feel that they have suffered marketing losses", consumer Xiao Song told "Finance and Economics" Weekly.
According to the financial report, the total marketing expenses of Yixian E-commerce in 2020 were 3.5 billion yuan, accounting for 66% of the total revenue, and by 2021, the marketing proportion of Yixian e-commerce increased without decreasing, and in the third quarter of 2021, the marketing expenses of Yixian E-commerce were 911.3 million yuan, accounting for 67.9% of the total revenue. Burning money marketing, but can not see the trend of profitability, according to the third quarter of 2021 financial report, Yixian e-commerce net profit loss of 361.8 million yuan, compared with 643.8 million yuan in the same period last year has narrowed, but is still in a state of loss.
Foreign makeup brands have retreated, and domestic cutting-edge makeup brands are also facing a dilemma, where is the future makeup road? Shen Hong, a researcher at the New Media Marketing Communication Research Center of Peking University, told the "Finance and Economics" weekly that due to the impact of the epidemic and economic downturn, the slow decline of domestic makeup brands is a foreseeable trend, but it should also be seen that the development curve of a brand must not be rising all the time, and future makeup brands will definitely tend to be more normalized.
"For a brand, if you want to do it for a long time, you must have your own brand power." In studying the lifestyle and cultural characteristics of the target population to create products, it is still the most important brand story for future makeup brands to tell," Shen Hong said.
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