Participant Jun said
In 2022, the first beauty company listed on the Hong Kong stock market may be born.
On January 17, Shanghai Mei Group submitted a prospectus to the Hong Kong Stock Exchange and will soon go public in Hong Kong. Shangmei Group is the parent company of brands such as Han Shu, Yiyezi, and Red Elephant – yes, it is the Han Shu that used to brush frequently in variety show advertisements, and the Yiye leaf mask that occupied Watson's shelves.
According to a report by consulting firm Frost & Sullivan, Shangmei Group is the only domestic cosmetics company with two skincare brands with retail sales of more than 2 billion yuan in 2020 - its brand Hanshu retail sales are about 2.9 billion yuan, Yiyezi retail sales exceed 2.2 billion yuan, and red baby elephant retail sales exceed 1.5 billion yuan. In 2021, Shangmei Group ranked fourth in the market share of domestic beauty brands, of which masks and maternal and child care categories ranked first.
Founded in 2002, the cosmetics company has single-handedly embraced the category of BB cream in China, and won a big victory with a leaf mask during the period of hair and barbaric growth of the mask industry. To this day, Shangmei Group still occupies a place in the domestic mask market.
Its main brand Han Shu opened the market with BB cream, but when it comes to explosive models, it still depends on masks. In 2019, Han Shu put on the shelves of the "King Kong Golden Mask" in Li Jiaqi's live broadcast room, and sold 400,000 sets in less than half an hour. This product is known as the SK-II senior scientist Yamada Kozo personal research, is the main model of Han Shu that year. This year, Han Shu sent the main product "small capsule applicator mask" into the live broadcast room, hoping that it would become the next blockbuster.
Today, a decade after the golden age of Shangmei Group, the mask market has shifted from low-price competition and channel-oriented to competition for technical components and online strategies. In the face of international big names and endless domestic competitors, can Shangmei Group continue to be brilliant?
When it comes to Han Shu and Yiyezi, many people think of its once overwhelming advertising. Behind this is a massive investment of money. In 2016, Shangmei Group's annual advertising investment has reached 1.5 billion yuan. According to its prospectus, in the first nine months of 2019-2020 and 2021, the marketing and promotion expenses of SG Group were RMB803 million, RMB1.07 billion and RMB735 million, accounting for 46.1%, 45.4% and 43.1% of the revenue of the same period, accounting for 27.9%, 31.6% and 28.3% of the total revenue, respectively.
Source: "Shangmei Group Prospectus"
It can be said that strong marketing ability is one of the secrets of the success of Han Shu and Yiyezi mask, but this also brings some hidden dangers. With the gradual maturity of the industry and the increasingly fierce competition, consumers are paying more and more attention to the composition and efficacy of the mask, and they no longer easily believe in advertising and celebrity endorsements. In the face of these changes, Shangmei Group has also begun to attach importance to product research and development.
From heavy marketing to increased investment in research and development, the changes in Shangmei Group are also a microcosm of the domestic mask market. In the early stage of development, this market was firmly occupied by international brands, and domestic masks were almost synonymous with low prices, inferior quality and micro-business. However, in the past two years, whether in terms of sales or word of mouth, domestic masks have signs of overtaking in curves.
According to data from consulting firm Euromonitor International, China's mask market has expanded rapidly from 2015 to 2019, with the scale growing from 15.8 billion yuan to 29 billion yuan, with a compound growth rate of nearly 17%. At present, masks have become the largest consumer goods category of skin care products, and the domestic market size is about 30 billion yuan.
In 2020," "Double 11", masks became the first category of skin care products on the Taoshi platform with sales of 37.04 million pieces, with a turnover of 4.836 billion yuan. It is worth noting that in addition to L'Oréal, which ranks first, the rest are local brands, including Nature Hall, Royal Mud Fang, WIS, Membrane Law Family, Yiyezi, Baijiling and so on.
This year, the performance of domestic masks is more eye-catching. Tmall beauty data shows that among the domestic beauty brands, nine of the 24 single products with sales of more than 20 million "double 11" are mask products, and the meeting film has become the most fierce competition category for brand manufacturing.
When the market of water milk, essence, cream and so on is still firmly occupied by international brands, domestic masks have opened a window. Can't help but wonder, why is it a mask?
In the skin care category, masks are almost the entry products of almost all skin care brands due to their low production costs and technical thresholds, and the competition is extremely fierce. For consumers, masks are much cheaper per unit than essences and creams, and the cost of trial and error is also lower. Therefore, the mask is easy to be a hit through marketing means, but it also faces the problem of low loyalty.
This allows domestic brands to see opportunities. Around 2002, the first wave of domestic mask wars began, and mask brands such as Yiyezi, Meiji, Yunifang, and Membrane Fa Shijia rose one after another. In 2003, Meiji pioneered the sale of mask sheets, which reduced the unit price of masks, making masks an affordable skin care product, and Meiji's sales also increased rapidly.
It was also during this period that Chinese consumers began to develop the habit of applying masks. Interestingly, no one can say whether the mask is really effective. From the beginning, it was a product that relied heavily on marketing. The worship of domestic consumers for masks may come from the legend that popular actresses have free to apply masks, and the frequent planting of grass by Internet celebrities on social platforms. The relatively cheap domestic mask gives ordinary girls a chance to realize the dream of "becoming beautiful in 20 minutes".
In the fierce competition, the domestic mask itself has also moved towards the "inner volume road" of price, channel and quality, which can be said to be the "king of inner volume" in the field of skin care products.
Volume price: disorderly market, low price competition
The composition of a mask can be as simple as a membrane cloth and water. The extremely low threshold has led to a serious homogenization of masks, and in order to compete for the market, merchants have continuously reduced costs and started a price war.
According to industrial and commercial data, as of the beginning of 2016, there were more than 20,000 kinds of mask products that had been filed in Guangdong alone. In 2017, the number of above-line membrane brands exceeded 600. According to industry insiders, the cost of a single mask is generally around 1 to 2 yuan, and even some factories use recycled materials to make film cloth in order to save costs. The retail price of a single mask is generally around 10 yuan, resulting in its low cost and high gross profit characteristics. This is also why whenever there is a discount promotion, the mask can always be used as a giveaway, or give a great deal.
According to the "2019 Tmall Mask Annual Report", 70% of the mask brands are priced in the range of 50 to 100 yuan / box, and only 15% are priced above 150 yuan / box. But the other side of the coin is that the net interest rate of mask brands is generally only single digits. This is the counter-effect of marketing. In the first three quarters of 2021, Shangmei Group's gross profit margin exceeded 60%, net profit margin was only 9%, and more than 50% of the cost was spent on marketing.
In order to stimulate consumers' desire to buy, merchants continue to push new products, but they have never been able to solve the problem of low net interest rates. As marketing expenses become higher and higher, they can only continue to reduce costs in exchange for profit margins. In the case of such disorderly competition, it is needless to say that the quality is improved, and even the safety of the product is difficult to guarantee.
Volume Channel: From Watsons to Live Room
In addition to fighting a price war, the competition of mask brands for channels is extremely fierce.
Ten years ago, when e-commerce was not yet popular, CS channels such as Watsons (a sales terminal network system composed of cosmetics stores, daily chemical stores, and boutiques) were a must for mask brands. To find out who is the highest-selling mask brand, look at the Watsons shelf to guess one or two.
At that time, Ichiba and Mie were competing for the top spot in domestic masks. In 2009, Meiji ranked first with a market share of about 15% in the mask market. In 2012, the sales of Meiji mask exceeded 1 billion yuan, and the market share was as high as 26.4%. The key to its rapid preemptive market is to master the CS channel. At its peak, Watsons alone contributed 70% of its sales to Meiyi.
In 2013, the retail sales of Meiji in Watson's channel were 470 million yuan. But just three years later, things took a sharp turn for the worse. In 2016, the market share of Meiji was only 2.1%, and the top three brands were Yiyezi, Membrane Law Shijia and YuNifang. In the face of the impact of e-commerce, when other brands have laid out online, the advantages that were once there have become the reasons for the backwardness of the United States.
Under the temptation of online dividends, many pure online brands have emerged. They have no physical stores, sales channels are e-commerce platforms or circles of friends, and social media is gradually replacing TV advertising. Three or five years ago, if your circle of friends had micro-businessmen, 90% of them were selling masks.
Among them, it is worth mentioning the "first share of e-commerce mask" Yu Ni Fang. Founded in 2006, Yu Ni Fang started from Taobao and relied on e-commerce channels to give birth to brands such as "Yu Ni Fang", "Little Confused" and "Hua Yao Hua". By 2016, the operating income of "Yu Ni Fang" and "Little Confused" reached 958 million yuan and 111 million yuan respectively, of which "Yu Ni Fang" accounted for 82% of the company's total revenue.
An important way to open the market is to avoid the fiercely competitive offline market, break through from the online, take Taobao as the starting point, and step on the online dividend through network agencies, TV advertising, Internet marketing and other ways. To this day, online sales are still the main source of income for Yu Ni Fang.
According to the financial report of Water Sheep Shares, the parent company of Yu Nifang, its online channel sales revenue in 2020 is still more than 90%, of which the sales revenue of third-party platforms such as Taoshi platform and Vipshop accounts for 86.78%. However, with the increase in online traffic costs, the company is also accelerating the layout of offline channels to achieve double-digit growth in offline sales revenue throughout the year, of which Yu Ni Fang ranked in the top three in the retail share of Watsons channel masks in 2020.
In the past two years, with the rise of live broadcasting, more and more brands have begun to compete for live broadcast rooms. From January to November 2021, Han Shu's GMV in Douyin was about 820 million yuan. During the "6·18" event in 2021, the double membrane group of Oushi Manhua Whitening Spot was listed in Li Jiaqi's live broadcast room, and sales increased by 680% year-on-year during the live broadcast. In the face of such a rapid way of traffic acquisition, many brands even hesitate to "lose money and make money" in order to squeeze into the live broadcast room of the head anchor.
But all coins have two sides. In November 2021, L'Oréal and Taobao anchor Li Jiaqi had a dispute over the preferential treatment of a mask product, which reflected the anti-phagocytosis of the brand by live broadcasting. The essence of live broadcasting is still to use low prices to obtain traffic, but how to retain users and improve the repurchase rate is not enough to rely on discount promotions.
Roll composition: cost-effective is king, big names fail
After years of market education, consumer demand for masks has gradually rationalized. Consumer awareness has increased, and even a group of "ingredient parties" who are keen to study formula lists have been derived, forcing mask brands to upgrade products and improve quality. Improving the research and development capabilities of functional ingredients has become a new trend in the competition of masks.
All along, Shangmei Group has been criticized for its low investment in research and development. In 2016, the Shangmei Group began to invest in basic research and development, and established an R&D center in Kobe, Japan. At the same time, more and more domestic brands have begun to pay attention to the research and development of ingredients and raw materials. Domestic masks have gradually entered a virtuous cycle of competition, and have the trend of catching up with super brands.
Sagime Group R&D Center in Kobe, Japan
Veteran domestic products Polaria and Han Shu have played a beautiful turnaround battle with new products, and Shandong Freda's Brands such as Yilian, Dr. Yaoer, and Winona have also become dark horses due to their research and development capabilities. The rise of domestic mask brands in the past two years is not so much the emotional preference of consumers for domestic products, but rather the result of voting with their feet on quality and cost performance.
Looking back, Meiyi, which was acquired by L'Oréal, is now also developing on the road to high-end. After 2017, Meiyi has successively launched innovative products such as hyaluronic acid mask, vitamin C vase mask, and whitening mask. In 2019, it became the first L'Oréal brand to launch a line of niacinamide, hyaluronic acid, peptides and other stock solutions. But today's mask market is different from a decade ago, and it is not easy for beauty to regain its glory.
According to the "China Mask Product NPS User Experience Study" released by iResearch, in the first half of 2021, 50% of the mask purchase amount was 200 to 600 yuan, and 10% of consumers purchased more than 1000 yuan. Compared with the current mainstream mask price, this shows that there is still a lot of room for upgrading market consumption.
At present, there are many brands in the market that have launched products with a unit price of more than 30 yuan per piece. In the field of beauty and skin care, new brands are emerging in an endless stream, and masks are still the preferred products for brands to open up the market, and they are also the product lines that are most likely to be explosive and create revenues of various brands. However, the new round of mask competition is not low price, but quality and cost performance, which is also a sign that the market has entered a virtuous circle.