Image source @ Visual China
Text | Golden Horn Finance, author | Xiao Di, editor | Silver Horn
When the tide receded, people found that 99% of the people in the blue ocean of new consumption were swimming naked.
On the 8th, the share price of Yixian E-commerce behind Perfect Diary fell to an all-time low of $1.46, down nearly 95% from the peak of $25.47 in February last year, and the market value evaporated by more than $15 billion (95.4 billion yuan), leaving less than $1 billion.
Perfect diary stock price movements
On the 9th, Xicha, which had earlier reduced its price, was exposed to large-scale layoffs, involving 30% of employees, and some departments were fully laid off, and employees complained that "there is no year-end bonus and no subsidy." The cause of this personnel shock points to "poor performance".
Further ahead, in mid-January, the "KFC blind box" was criticized by the China Consumer Association, and Shanghai also issued a blind box operation compliance guideline paragraph, and the stock price of Bubble Mart fell by 4.6% in response. Prior to this, the "blind box first stock" Bubble Mart stock price that landed on Hong Kong stocks at the end of 2020 has been cut.
At the center of public opinion are also Cha Yan Yue and Haidilao. The former lost 20 million yuan a year, because the employee's salary was too low, and the hourly salary was only 9 yuan on the hot search; the latter closed 300 stores at the end of 2021.
In the primary market, brands also lost ammunition support.
According to Consumer Daily data, there were 65 financing incidents for new consumer brands in January this year, down 27% from 89 in December 2021.
Top institutional investors said in an interview with People magazine that investing in new consumption today is equivalent to "standing at the bottom of the chain of contempt."
Its rise is also bold, and its death is also sudden. The new consumption track, from a large amount of hot money pouring into the current dismal, but two or three years.
The cold wind of the new consumer industry has blown.
Disillusionment of the "perfect" model
The Perfect Diary has many imperfections, but thankfully it gets up early enough.
New consumer brands have Internet genes, and the success of Perfect Diary is inseparable from the DTC business model. DTC, or Direct-To-Consumer, is different from the distribution model of traditional consumer brands, and brands that adopt dtc models directly face consumers through e-commerce and social platforms.
Source: Roland Berger DTC study
According to the Boston Consulting Group, the three main drivers of new consumption are: the rising affluent class, a new generation of consumers and omni-channel adoption.
Traditional consumer brands adopt a distribution model, and these brands often need to spend a lot of money to build offline sales channels, through the distributor to deliver goods to the store, and then reach consumers.
The channels of Perfect Diaries are Internet celebrities – and the earnings report also shows that online channels contribute 90% of Perfect Diaries' revenue.
The sales chain of a brand in the DTC model is only two parties, the brand owner and the consumer, but this does not mean that there is no "middleman".
In November 2020, Yixian E-commerce mentioned in the prospectus that it cooperated with as many as 15,000 Internet celebrities, including 800 KOLs with more than one million followers. These KOLs and KOCs, which are spread across China's major social platforms, have opened up the popularity of Perfect Diary and formed a huge gold-devouring team.
In 2018, the revenue of Yixian E-commerce was 635 million yuan, and the marketing expense reached 309 million yuan, accounting for 48.66% of the revenue; in 2019, the revenue was 3.03 billion yuan, and the marketing expense was 1.251 billion yuan, accounting for 41.27%, and in 2020, its revenue increased to 5.23 billion yuan, and the marketing expense also increased sharply to 3.412 billion yuan, accounting for 65.2%. According to the quarterly report of 2021, the marketing expense rate of Yixian E-commerce has been maintained at more than 60%.
Compared with the A-share listed cosmetics brands Shanghai Jahwa, Polaria and Bethanie, they are nearly 20% higher. 30% higher than L'Oréal and Estée Lauder's international brands.
The ideal effect of the DTC model is to publicize and educate fans through KOLs and KOCs on social platforms, force sales conversion growth with the scale of voice, and quickly establish consumer awareness of the brand and occupy the mind. In short, it is "brushing the sense of existence." Relying on the support of fans for opinion leaders translates into consumer trust in the brand and forms stickiness.
Li Jiaqi is the "key mr." who became popular in the perfect diary
But traffic is getting more expensive.
From 2018 to 2020, the repurchase rate of Perfect Diary rose from 8.1% to 41.5%, and was no longer disclosed in the financial report after that. This repurchase rate is close to that of international big names, but the sharp increase in marketing investment in the past two years has not been exchanged for considerable new customers and revenue growth.
The scale of DTC customers in the past three years shows that it was 7 million in 2018 and 23.4 million in 2019, an increase of 234.3% year-on-year, and 32.3 million in 2020, an increase of only 38.0% year-on-year. Entering 2021, The Yixian e-commerce quarterly report shows that the growth of its DTC customers has dropped to about 12%.
In other words, Perfect Diary's marketing conversion rate is getting lower and lower.
The traditional distribution model and consumers' purchasing habits that have been built over the years are still unshakable, and the DTC model of Perfect Diary is just a paper talk that has not been tested by time.
Despite the current online retail boom, offline is still the main place for cosmetics consumption. According to kantar's consumer index, as of the second quarter of 2021, new beauty retail channels accounted for 21% of beauty omni-channel sales, and more than 80% of beauty brand sales were still happening outside of online e-commerce. Some people say that relying on a large-scale offline system, any product of the big brands is not worried about sales.
Essentially, the deep difference between the traditional distribution model and the DTC model is whether the brand is creating demand or catering to the market.
A future that is overdrafted by capital
The target consumers of the new consumer brands are Generation Z, and this group is undoubtedly the mainstay of the future of the consumer market, but the cruel thing is that many new consumer brands have no future.
The units of investment and financing of new consumer brands have always been hundreds of millions, or even billions. Capital support, outlet help, brands have long come to a height that is inconsistent with their own value.
Perfect Diary has experienced five rounds of financing in the four years since its establishment in 2016, with a pre-IPO valuation of up to $16 billion, and a valuation that has risen from $100 million to $4 billion, and after listing, the post-IPO share value of Yixian E-commerce is about $5.7 billion to $7 billion. After a brief climb, since February 2021, the stock price of Yixian E-commerce has plummeted, and before and after the release of each quarter's financial report, it has faced a decline in stock prices and market doubts.
On November 18, 2021, Yixian E-commerce released its Q3 financial report, showing that the revenue during the reporting period was 1.34 billion yuan, an increase of 6% year-on-year, and the gross profit also increased slightly. But the day before, with a premonition of poor performance, Yixian e-commerce shares fell at the opening, closing down nearly 18%, quoted at $2.7.
Perfect Diary Financing Journey (Source: Tianyancha)
Some people say that the sharp decline in the stock price of Yixian E-commerce is affected by Sino-US relations and the strengthening of the supervision of Chinese stocks in the United States. However, the decline in the stock price and market value of Yixian E-commerce came earlier than the overall decline of Chinese stocks.
Change the soil, the same has to fall.
In June last year, the tea of the new tea star brand Nai Xue landed on the Hong Kong stock market. In the six months from the Series C financing in December 2020 to the IPO, the valuation of Nesher's Tea soared from HK$12.46 billion to HK$34 billion, an increase of nearly 3 times. But investors in the secondary market were very interested in the star brand, and Nai Xue's tea broke at the opening, plunging 13.54% on the first day, and the closing market value of the day fell below HK$30 billion.
A Hong Kong fund manager said bluntly: "The valuation of Naixue's tea is expensive, and the market value is more reasonable to drop to more than HK$20 billion." ”
As it turned out, he still overestimated Nesher's tea. As of the close of trading on the 11th, The share price of Naixue's tea was HK$7.2, down nearly 62% from the issue price, which was also the highest price of HK$18.86, and the market value fell back to HK$12.46 billion.
Nesher's tea stock price trend
Yao Rongjun, president of Shanghai Kemet Enterprise Management Consulting Co., Ltd., once said that capital is the "first customer" of new consumption.
New consumer brands need capital transfusions to maintain high exposure rates, and investment institutions push up valuations, hoping to list brands and recover investment.
However, investors in the secondary market are obviously not as good as the VCs of investment institutions. These brands rely on stories to impress the market, but the performance continues to fail the test.
Disappointment is inevitable. Investors value solid results more than tantalizing stories.
But the truth is that the business model of Perfect Diary and Nesher's tea has not been able to achieve a positive cycle. The former has a huge loss of 2.7 billion yuan in 2020, and the loss in the first three quarters of 2021 has also exceeded 1 billion, and the performance forecast released on February 9 also shows that The loss of Nesher's tea in 2021 reached 135 million yuan to 165 million yuan, which has been a loss for three consecutive years.
Nesher's tea brand vision (Source: brand official website)
This account is not difficult to calculate.
Taking the gross profit of 64.3% disclosed in the 2020 financial report of Yixian E-commerce, consumers buy a lipstick of 100 yuan, and Perfect Diary earns 64.3 yuan, but as mentioned above, the marketing expenses of Yixian E-commerce in that year accounted for 65.2% of the revenue of the year, that is to say, the cost of earning 100 yuan is 65.2 yuan.
Selling 100 yuan of goods, a net loss of 9 cents.
In order to remedy the situation of selling more and more losses, Yixian E-commerce quietly transferred the pressure to consumers.
In Q2 2021, Perfect Diary's losses narrowed for the first time. But behind this, although the revenue of Perfect Diary has risen, the unit price of customers is also increasing. According to the financial report, the unit price of Yixian e-commerce in 2020 has risen from more than 80 yuan in 2018 to nearly 140 yuan, and in 2021, the unit price of Yixian e-commerce has continued to rise, breaking through 150 yuan.
This makes Perfect Diary lose its competitiveness in a number of domestic cosmetics with a unit price of 70 to 80 yuan. What's more, the perfect diary that has always used "big name equalization" as a marketing phrase has lost customers in self-contradiction.
2021 Double Eleven, although the perfect diary discount is still very large, but the turnover has fallen from the first in 2020 to the fourth, and even fell out of the top five on the first day of pre-sale.
Past Tmall Double Eleven Makeup Brand List (Source: CBNDATE)
In addition, as more and more brands enter the game, the track is gradually broadened. These star brands are also losing their first-mover advantage.
It is not difficult to copy a perfect diary, whether it is a simple DTC model or a product with serious homogenization, after all, the production mode that mainly relies on OEM means that the walls of perfect diaries are not high.
High marketing investment will inevitably compress R&D investment, and the R&D expenditure of Perfect Diary in 2020 is only 67 million yuan, accounting for less than 1% of revenue. Since 2021, Yixian E-commerce has increased the scale of R&D investment, with R&D investment of 27.74 million yuan in the first quarter, accounting for 1.92% of revenue, but the capital market still does not buy it. Five years after its establishment, Perfect Diary has not yet had a single product patent.
The lack of product power determines that capital cannot take the road of long-termism, and simply shoots a shot to change a place.
After harvesting the dividend, the brand invested in the secondary market, leaving only a pale story.
This year 'Half Dead'
In 2021, some senior industry insiders believe that "in three years, 99% of new consumption will die, and next year it will die first."
Behind this sentence, in addition to the poor performance of new consumer brands in the secondary market, they are also facing challenges in the basic consumer market.
Since the second half of 2021, affected by the epidemic and other factors, the growth rate of domestic consumption, investment and other indicators has declined year-on-year, of which the growth rate of consumption has dropped significantly. In August, data from the National Bureau of Statistics showed that the total retail sales of consumer goods increased by 2.5% year-on-year, the lowest level since August last year, of which catering revenue fell by 4.5% year-on-year.
The central bank report also shows that residents' willingness to consume is declining.
The weak demand has been fed back into the consumer market, and the data shows that since the second quarter of this year, nearly 40% of new brand sales have shown different degrees of decline.
36kr mentioned in the report in September last year that there were 600 million food brands with sales in 2020, only 20 to 30 million in recent months; the repurchase rate of almost all brands of low-grade wine in 3 months was negligible; a food brand once claimed to have "300 million yuan in online sales in a few months", but the real data has fallen below 20 million yuan...
This has seriously dampened the confidence of primary market investment institutions to enter the market, and the capital with a keen sense of smell has long fled.
Statistics from the new consumer daily show that in July last year, there were a total of 153 investment and financing incidents in the new consumption field, and by August, it dropped sharply to 127, in September it dropped to 109, and by December, it was less than 100.
What made the capital panic even more was that in August last year, a round of industry "group annihilation" began from education and training. The state has pruned branches and leaves for irregular industries, and it is difficult to save feathers no matter how fast it is.
Overheated new consumption is being forced to cool down, which is also accelerating the progress of squeezing out bubbles on the new consumption track.
It is foreseeable that in 2022, most new consumer brands will not be too good to let go.
It is worth noting that while the "living water" of new consumer brands is cut off, the old consumer brands are rapidly awakening, quickly learning the marketing methods of new consumer brands, and carrying out dimensionality reduction attacks on new consumer brands.
Estée Lauder brand self-broadcast
Starting in 2020, international big-name beauty such as Estée Lauder has begun to exert its strength online. In 2021, Estée Lauder's official boutique 618 Gala GMV increased by more than 100% year-on-year, and the official website Mini Program Live GMV increased by 600% year-on-year. On Tmall Double Eleven that year, it was the international brands YSL and Estée Lauder that took away the crown and runner-up of perfect diary and Huaxizi beauty sales.
Aspire to be the perfect diary for China's "L'Oréal", in fact, it has long realized the importance of offline channels. On December 26, 2019, Perfect Diary's parent company, Yixian E-commerce, announced the establishment of a new retail headquarters in Fengxian, Shanghai, and said that it would speed up the opening of stores in the next step, planning to open 600 offline stores in 100 cities across the country in the next three years.
Last year, its founder Huang Jinfeng publicly said that it has opened 280 stores, but due to the impact of the epidemic, one-third of the stores have repeatedly closed and opened, opened and closed.
That is to say, although 2/3 of the time has passed, perfect diary's goal of opening a store is not yet half completed.
That's a big investment. According to the prospectus, the expenditure related to the Perfect Diary experience store in 2019 was 52.9 million, and as of September 2020, the related expenditure of the experience store was 196 million, and the average cost per store in the past two years was 1.2623 million yuan. According to this expenditure, these 280 stores will add nearly 200 million yuan to the cost of Perfect Diary every year, and only contribute 10% of revenue.
But even so, it is much more cost-effective than online marketing.
99% of new consumers will die after three years, but the remaining 1% of new consumer brands that have been tested by time and the market may have the hope of becoming China's L'Oréal or Coca-Cola.
But the most important thing is to survive this big wave.