Image source @ Visual China
Text | Giant Tide WAVE, author | Jingyu
With the peaking trend of Chinese growth in 2021, the development logic of many industries has been further confirmed by the market, and the performance of the home appliance industry is particularly distinct.
Zhongyikang, a consulting organization for the home appliance industry, pointed out that with the weakening of the population and Internet dividend, the market size of the mainland home appliance industry has entered the era of stock. It can be seen that since 2021, the white electric "double male" Gree and Midea have been set at a pessimistic valuation of less than 20 times PE in the secondary market.
In this context, in addition to going overseas to seek increments, the only thing left in the entire home appliance industry is the structural opportunities of subdivision categories. Among them, the subdivision track with growth potential and optimistic about capital is a small household appliance.
Public information shows that the market size of China's personal care small household appliances continues to expand, achieving total sales of 48 billion yuan in 2021, compared with 23.6 billion yuan in 2017, doubling the growth in five years.
And the improvement of consumer income level and the attention to personal health and appearance have spawned a small household appliance market from simple electric shavers, hair dryers, etc., to hairdressing, teething, beauty, body "four beauty" parallel situation. New demands continue to arise, and a number of startups that have seized the opportunity have continued to grow in the process.
At the end of the year and the beginning of the year, the personal care of small household appliance companies in the capital market to seek scale expansion in the pace of non-stop. In addition to Sushi Technology, a Xiaomi ecological chain company that has submitted a prospectus, Guangzhou Interstellar Yuedong Co., Ltd., the parent company of electric toothbrush brand Usmile, has also recently launched listing counseling.
These cutting-edge start-up brands generally adopt an asset-light model - outsourcing production and manufacturing, only responsible for product design, research and development and sales, and generally use social e-commerce to carry out marketing, with online as the main sales channel, which is obviously different from Dyson, Philips, Feike and other traditional brands at home and abroad that adopt distribution models.
So, can these newly created brands stand out from the competition and become China's Dyson and Philips? This is the issue that this article is trying to explore, and it is also the topic that capital is most concerned about. After all, for a brand new small brand to survive, enough capital may be the first important.
01 "Double Low" mode
The successful "double low model" of electric toothbrushes is to attack the low-penetration market at a low-end price
How does a startup go from 0 to 1 and stand out from the crowd of giant companies?
The choice is greater than the effort, and the most critical thing may be to choose the right subdivision track.
In 2015, domestic brands that focus on cost performance have entered the electric toothbrush market, including Sushi, Usmile, MengYajia, Jideng, Huashang and other brands were founded in this year.
In 2016, Sushi's first generation of sonic electric toothbrush launched a crowdfunding in Xiaomi, and the first 10,000 were sold out in 48 hours at a shocking price of 39.9 yuan. Usmile's new products listed in January 2017 are positioned at Y1 Roma pillars between 200-400 yuan in 2018, and the sales of single products exceeded 100 million.
Although the two companies have different initial product positioning, they have the same destination, benefiting from the unique advantages of the electric toothbrush track.
On the one hand, in 2015, the domestic oral care market is still in its infancy, and the penetration rate of electric toothbrushes is only 3%, compared with the 42% product penetration rate of the European and American markets.
Since 2015, the electric toothbrush market has started rapid growth. Euromonitor caliber data shows that the domestic electric toothbrush market size reached 7.7 billion yuan in 2020, and the compound annual growth rate of 2015-2020 reached a staggering 40.1%, which is called the outbreak of the industry.
And the domestic electric toothbrush market was previously dominated by foreign-funded enterprises. Euromonitor data shows that between 2010 and 2015, the top four in China's electric toothbrush market share were Procter & Gamble (Oule B), Chechi Dewey (Xuanjie), Colgate, and Philips. These foreign brands are more high-end and have a weaker layout in the middle and low-end product lines, giving domestic players the opportunity to overtake in curves.
On the other hand, thanks to the overall reduction in the production cost of electric toothbrushes, domestic players can better achieve whether it is a low price or a high premium.
According to AI Finance and Economics, a standard set of electric toothbrushes containing toothbrushes, brush heads and charging cables costs fifty or sixty yuan. The electric toothbrushes on the market price of 300 to 400 yuan and 1,000 yuan are only 40 or 50 yuan in production costs.
The above two factors are crucial to the rise of Sushi and Usmile from 0 to 1, and being able to step on the electric toothbrush outlet is a blessing for both founders.
For Meng Fandi, the founder of Sushi with a background of product managers of Glory, his previous entrepreneurial project body fat said that it failed to PK too large a company to end in failure, and entered the electric toothbrush track to get the support of Xiaomi.
For Chen Jianqun, the founder of Usmile with a Procter & Gamble background, he actually faced a great test in the early days of the company's establishment, and his self-proclaimed pressure was also facing the pressure of "running out of food".
Panda Capital once pointed out in an article that the thinking and experience of large companies in large-scale management make Procter & Gamble people better at going from 10 to 100. The reason why Chen Jianqun was able to complete the accumulation from 0 to 1 was closely related to the high growth rate of the electric toothbrush track, the high gross profit margin and the relatively loose competition pattern at that time.
In this context, sushi and Usmile two companies finally successfully achieved a breakthrough from 0 to 1, and with the support of a round of financing from the institution, they made up for a number of capabilities such as products, channels and supply chains, and won the ticket to the giant enterprise PK.
02 How big is the middle ground?
Sushi and Usmile are positioned in the middle of foreign brands such as Dyson and Philips and domestic brands such as Feike and Superman.
The reason why the personal care home appliance market is optimistic about entrepreneurs, the growth rate is relatively fast, and there is a growth potential is very important reason.
Public data show that the current penetration rate of the domestic personal care small household appliance market is still low, and the current mainland ownership is 135.6 units per thousand people, far lower than the 481.2 units in the United States in 2019, with a large room for growth.
On the other hand, personal care home appliances are not a monopoly market that squeezes the space of new entrants. On the contrary, there are still many emerging small home appliance brands coming forward.
The chief analyst of a brokerage home appliance told Juchao that the characteristics of the personal home appliance market are characterized by strong personalization, and their purchase decisions are made by individuals, unlike major appliances such as air conditioners and refrigerators, which are decided by families.
The advantage of this is that the industry is not easy to form a monopoly, new players always have a certain opportunity, and the disadvantage is that it is difficult to make the scale larger, which is not in line with the expectations of capital.
In the design of products, both companies have personalized characteristics.
Usmile product managers have told the media that the design of Philips and Oule B is completely in the style of European and American functional small household appliances, and the colors are mostly white, blue and green, which lacks emotional reach for Chinese consumers. So from the first product, Usmile consciously made a differentiated design.
Similarly, Sushi's products are also more personalized, their color saturation is higher, and they are relatively more feminine. Yang Jun, founding partner of Yuanyi Investment, pointed out that women are the opinion leaders of daily consumption in Chinese families, not only are warm categories such as electric toothbrushes, hair dryers, and teeth washers dominated by women, but even half of the sales of men's razors are bought by women to send to their partners or elders.
Personalization has become a common differentiated choice for startups in the field of personal care for small household appliances, which is an important way to survive in the early days.
But the other side of the coin is that being friendly to newbies leads to overcrowding of the track. Even in the Xiaomi ecological chain, there are many competitors of Dr. Bei, Sumei Technology, Yingqu and so on.
It is reported that at present, domestic beauty and personal care small household appliances have gradually evolved into a number of main camps:
First, foreign brands represented by Dyson, Philips and Braun;
Second, traditional home appliance brands such as Haier and Jiuyang have incubated or invested in new personal care brands such as LINGLEE and Zhibai;
The third is a traditional domestic brand on the track of small household appliances, such as Feike and Superman;
The fourth is to represent the cutting-edge start-up brands represented by Sushi and Usmile.
The positioning of Sushi and Usmile is differentiated from foreign brands such as Dyson and Philips and domestic brands such as Feike and Superman, that is, it is mainly based on mid-range products, and the overall positioning is lower than that of foreign brands, but higher than that of domestic traditional brands.
Compared with domestic brands such as Feike and Superman that take offline distribution channels, cutting-edge start-up brands such as Sushi and Usmile generally adopt an online direct sales approach, which can drive production and marketing decisions with data, and the brands are more dynamic and more technological.
Compared with foreign giant enterprises, although the start-up brand is not technically inferior, it is flexible in response, and the main focus is the mid-range products with a relatively weak foreign layout. Chen Jianqun once told the media that Philips and Oule B only produced new products in three or four years, but domestic brands are closer to the consumer end, research and development end and supply chain end.
Yang Jun told Juchao that the existing personal care home appliance brands, whether foreign or domestic, have the problem of brand aging and channel iteration, so there are huge opportunities for positioning, design and price to cater to the feelings and psychological needs of young people.
03 Do branding by burning money
In the past two years, the cost of traffic has become increasingly high, and both Sushi and Usmile are facing a lot of pressure from marketing investment.
Judging from the performance of the traditional brand Feike, it has indeed had the problem of brand aging in recent years. Feike's performance in 2019 and 2020 has continued to decline. And in its strong razor field, The market share of Feike and Philips "double faucets" has decreased, and the concentration has decreased.
However, in terms of the scale and the absolute value of R&D investment, new entrepreneurial brands still cannot be compared with traditional domestic brands. Sushi's R&D investment in the past three and a half years was 148 million yuan, lower than Feike's 265 million yuan in the same period.
With the increasingly fierce competition in the small household appliance industry, foreign brands are launching mid-range products with downward prices to seize the sinking market, while traditional brands such as Feike are doing high-end upgrades through brand and channel innovation, and there are start-up companies that have obtained financing such as Dr. Bei, Xumei Technology, and Yingqu to grab shares.
Among them, the biggest challenge may come from the efficient delivery of the brand.
A few years ago, there was a saying in the Weibo circle that "the big V that did not receive the electric toothbrush advertisement is not the real big V", which shows that startups such as Sushi and Usmile have made great efforts in brand operation.
For Philips and Feike, the concern may be that the brand is aging and not personal enough, but for Sushi and Usmile, no one knows more. This requires a lot of marketing costs, and a long enough time.
Wu Bingjian, vice president of Jianfeng Changqing, pointed out that the brand formation of consumer electronics is the multiplication of three factors: good enough word of mouth, significant market share, and a time window that can maintain the two for a long enough time. The industry seems to have seen quick fixes and marketing-driven success stories alone.
Since Usmile has not yet released relevant information, it can be seen from Sushi's prospectus that in the first half of 2018-2021, the advertising and marketing fees of Sushi were 14.9747 million yuan, 66.1729 million yuan, 185.6373 million yuan and 133.613 million yuan, respectively. It burned out more in 2020 than it did in the Pre-IPO round ($175 million) that year.
Especially in the past two years, the cost of traffic has become increasingly high, and both Sushi and Usmile are facing a lot of pressure. Information from parklu, a popular market research platform, shows that the price of mid-rise KOLs and head KOLs increased by more than 18% on average from 2018 to 2020.
It is foreseeable that Sushi and Usmile, who want to consolidate their brand position, need to continue to invest in brand building and seize the user's mind after obtaining capital support after listing.
Compared with the advantages of foreign companies such as Philips, Dyson, and Braun in terms of brand, as well as the user awareness of traditional home appliance giants midea and Haier, the problem of occupying the user's mind and handling high traffic costs is more severe for Sushi and Usmile.
It is worth mentioning that in the marketing and operation of the brand, Usmile, whose founder has a Procter & Gamble background, seems to be slightly better than Sushi with a product manager background.
The two companies were founded at the same time in 2015, and according to Sushi, after joining the Xiaomi ecological chain, it sold more than 2.5 million electric toothbrushes in 2018, ranking first among Chinese brands in the price band of more than 100 yuan.
But at present, Usmile has completed the catch-up, taking the second place in the market share of electric toothbrushes, after Philips. In addition to electric toothbrushes, Sushi has expanded its business to a range of products such as toothbrushes, electric shavers, hair dryers and even nose hair trimmers.
Some analysts pointed out that in 2019 and 2020, when the cooperation fee of B station and Xiaohongshu has not yet soared, Usmile has carried out bold marketing on the platform on these two outlets, thus reaping the dividend of traffic, which is an operation that can no longer be reproduced.
Scaled marketing capabilities, i.e. maintaining efficient delivery in an environment with declining ROI, remain a challenge for both companies.