Text | No two studies
Recently, Shanghai Shangmei Cosmetics Co., Ltd. ("Shangmei"), the parent company of the veteran domestic beauty Hansu, handed over the watch to the Hong Kong Stock Exchange and is expected to become the first beauty company listed on the Hong Kong stock market in 2022.
Under the tide of the beauty track, Shangmei is facing the siege of new and old opponents. Old rivals such as Shanghai Jahwa and Polaria have already landed on the capital market, and latecomers such as Bethany and Yixian E-commerce have also achieved overtaking.
At the same time, Shangmei itself also has many problems: high marketing costs, dilution of net interest rates; multi-brand matrix is not completed, Han Shu is difficult to stand on one foot; sales have not been opened, and high-end has been frustrated.
No longer young, Shangmei tried to break through by landing on the capital market. Is there an antidote to the anxiety disorder of "Twenty Puzzles"?
Marketing expenses drag down net profit margins
Since its birth, the veteran domestic product Shangmei has its own marketing genes.
In 2002, Shanghai Hanshu, the predecessor of Shangmei, was established, rubbing the popularity of the Hallyu; in 2009, Shangmei entered tv shopping and opened up domestic popularity; in 2014, in the first year of micro-business, Shanghai United States bet on micro-business, setting a record of 40 days of sales exceeding 100 million.
In 2019, shangmei became the first batch of beauty companies to open a live broadcast room in Kuaiditao; it successfully resolved the spokesperson crisis and broke the circle in 2021, and the number of online viewers in the Taobao live broadcast room exceeded 3 million on the night of the termination.
Now Shangmei has entered the year of "not confused". According to the Frost & Sullivan report, in 2020, Shanghai United States ranked in the top 3 of the domestic market with a share of 0.9%.
Although there have been achievements, with the latecomers Polaria, Marumei and Yixian E-commerce have been listed, new brands have emerged in an endless stream. In order to maintain market competitiveness, Shanghai and the United States urgently need a capital breakthrough.
The "No.2 Study" found that Shangmei's performance is in a period of steady growth.
According to the prospectus, from 2019 to the first three quarters of 2021, The revenue of Shangmei was 2.874 billion yuan, 3.382 billion yuan and 2.596 billion yuan, respectively, of which the first three quarters of 2021 increased by 12.7% year-on-year. Net profit was RMB114 million, RMB265 million and RMB285 million, respectively, showing a doubling increase.
Although it is constantly breaking through itself, the gap between Shangmei and its peers cannot be ignored. Financial data show that in the first three quarters of 2021, Polaria's revenue was 3.012 billion yuan and net profit was 364 million yuan; Bethany's revenue was 2.113 billion yuan and net profit was 355 million yuan; And Shanghai Jahwa's revenue was 5.830 billion yuan and net profit was 421 million yuan. Compared with companies in the same industry, Shangmei's revenue scale is not dominant, and its net profit ranks low, which can be described as a medium student in the industry.
The same is true from the gross margin point of view. According to the prospectus, from 2019 to the first three quarters of 2021, the gross profit margin of Shangmei was 60.9%, 64.7% and 65.2% respectively. In contrast, in the first three quarters of 2021, the gross profit margin of Shanghai Jahwa was 62.77%; the gross profit margin of Polaria was 64.59%; and the gross profit margin of Bethany was 76.9%. Shangmei does not have outstanding highlights in it.
For the chronic disease of the beauty track - high gross profit margin and low net profit margin, Shangmei has not successfully avoided.
According to the prospectus, from 2019 to the first three quarters of 2021, Shangmei's net profit margin was 2.1%, 6.0% and 9.6%, which was in stark contrast to the gross profit margin of up to 60%.
The reason is that high marketing expenses or dilution of the us net profit margin are the primary factor.
According to the prospectus, from 2019 to the first three quarters of 2021, Shangmei's marketing expenses were 1.325 billion yuan, 1.536 billion yuan and 1.119 billion yuan, accounting for 46.1%, 45.4% and 43.1% of revenue, respectively. The marketing expenses of Polariya, Marumei and Shanghai Jahwa in the first three quarters of 2021 were also above 40%, while Yixian E-commerce, which is famous for marketing, spent more than 60% of its revenue on promotion.
Behind the year-on-year increase in performance is the step-by-step operation of veteran domestic products. Shangmei's achievements alone may be gorgeous enough, but in the beauty track surrounded by strong enemies, the pace of Development of Shangmei is still slow. The "rich disease" of high-value marketing makes the unsound profitability more burdensome. If this continues in the long run, it will drag down Shangmei's revenue.
The effectiveness of multiple brands is questionable
Contrary to the stereotype of the old domestic products, the layout on Shangmei Online can be described as very positive.
Liu Ming, vice president of Shangmei, said in an interview with Pinguan in 2020 that Shangmei has increased its online layout in 2019 and dug deep into new traffic positions such as Douyin, Xiaohongshu, and live broadcasting.
According to the prospectus, Shanghai Midea's online channels contributed more than 70% of its revenue, with 1.505 billion yuan, 2.543 billion yuan and 1.893 billion yuan in the first three quarters of 2019-2021, accounting for 52.4%, 75.2% and 72.9% respectively, and offline revenue was 1.314 billion yuan, 770 million yuan and 625 million yuan, respectively, accounting for a sharp decrease from 45.7% to 24.2%.
The data shows that in 2021, the GMV of all brands in Shanghai and the United States will increase from 5 million to 160 million in a single month. According to Feigua statistics, Han Shu ranked fourth in the beauty category of Douyin e-commerce with annual sales of 890 million yuan.
In such an express train as e-commerce live broadcasting, in addition to the head anchor live broadcast room, Han Shu and other brand live broadcast rooms also have higher attention.
However, e-commerce live broadcasting is not a life-saving straw for Shangmei. The large amount of traffic pouring in in 2021 due to the spokesperson's emergency has receded as the hot spots dissipate and the anchors fly alone; e-commerce live broadcasting seems to have returned to the origin before the traffic outbreak.
It can be seen that Shangmei has not yet formed a mature methodology in the undertaking of hot spot traffic, and the loss rate of hot spot traffic into its own traffic is too large. In the final analysis, the channel of e-commerce live broadcasting is not a shortcut, and the core competitiveness and attractiveness of the brand still comes from the product itself.
The multi-brand strategy has come to this day, and Shangmei is most famous for Han Shu and Yiyezi.
According to the prospectus, Shangmei's revenue mainly comes from three brands: Han Shu, Yiyezi and Red Elephant.
From 2019 to the first three quarters of 2021, Han Shu contributed revenue of 920 million yuan, 1.333 billion yuan and 1.137 billion yuan, accounting for 32.0%, 39.4% and 43.8% respectively; Yiyezi's revenue was 1.051 billion yuan, 1.007 billion yuan and 645 million yuan, and the proportion of revenue decreased from 36.6% to 24.9%; the proportion of revenue of the red elephant was about 20%.
At a time when the beauty track is common to build a brand matrix, multi-brand strategies are commonplace. In addition to the above brands, Shangmei also has brands such as Flower Fans and Cosmetea, covering skin care, masks, high-end washing, maternal and child care, makeup and other categories. However, from the prospectus, the revenue contribution of these brands is not outstanding.
With the rise of domestic brands, Shangmei is facing problems such as imperfect brand matrix and aging product lines, and it is still difficult to change the status quo of Han Shu supporting half the sky.
The internal differentiation of many brands has intensified, and the effectiveness of multi-brand strategies has also been questioned; the influence of new brands is limited, and it will take a long time to become a pillar of revenue.
Domestic dividends can only bring phased traffic, and quality is based on the fundamental. In addition, the online traffic competition has become fierce.
Under the expectation of increasing e-commerce marketing expenses and gradually decaying channel dividends, the advantages of strong experientiality of offline channels will be highlighted, the growth focus of domestic products may return to offline channels, and the focus of Shangmei's business may also be adjusted.
The anxiety disorder of "Twenty Confusion"
According to the "2021 National Cosmetics Industry Regional Research Report" released by Qixinbao, the scale of China's cosmetics market will reach 340 billion yuan in 2020; the market size from January to November 2021 will reach 367.8 billion yuan, with a growth rate of 15.3%.
Under the rapid growth of the market, domestic beauty brands are still facing the old problem of more than a decade: the absence of high-end lines.
Whether it is Shangmei or Polaria, or Shanghai Jahwa's Baijiling and other brands, the domestic goods veteran is nothing more than the development path of "rural encirclement of the city".
In the sinking market, consumer price sensitivity is prominent, market share tug-of-war is scorching, brands are often troubled by prices, and it is difficult to transform to high-end.
According to CBNData consumption big data, domestic consumption in first- and second-tier cities accounted for 6.3%, and third- and fourth-tier cities accounted for 23.85%, with growth rates of 22.43% and 45.79% respectively.
With the rise of national tide consumption, domestic beauty brands have tried to take the opportunity to tear off the low-price label and open the high-end brand process.
Shangmei also has a layout in high-end brands, but from the perspective of product research and development, there is still a big gap with international brands.
From 2019 to the first three quarters of 2021, Shanghai U.S. R&D expenditure was 82.9 million yuan, 77.4 million yuan and 71.7 million yuan, respectively, accounting for 2.9%, 2.3% and 2.8% of revenue, of which 2019-2020 declined.
In fact, compared with Polaria, Bethanie and Shanghai Jahwa, Shangmei's R&D investment is not low; but this is obviously not convincing enough for the high-end market. International Estée Lauder spent $243 million on research and development in fiscal 2021, several times that of Shangmei.
According to the prospectus, Shangmei's full-time employees reached 4,067 on September 30, 2021, including 3,379 sales and marketing personnel and 307 administrative staff, while the proportion of R&D personnel was only 5.58%.
At present, Shangmei's high-end product brands such as Amilla, Jifang, and Gao Muscle Energy lack explosive products and have not opened sales; they still "touch porcelain" Japanese and Korean products in packaging and publicity; sales are sluggish, and Tmall flagship stores have begun to discount promotions, and it is difficult to change the cheap tone.
Under the pain, Shangmei spared no expense to hire yamada, a senior scientist of the former SK-II, to raise new high-end brands, focusing on high-end anti-aging, which also shows its determination to lay out the high-end skin care market.
Putting aside the strength of production and research, There may also be problems in product quality control in Shangmei.
In June 2021, the Shanghai Market Supervision and Administration Bureau randomly inspected and inspected 1184 batches of goods sold and produced by 509 enterprises, of which a total of 119 batches of goods were unqualified in packaging, and a leaf was on the list.
Han Shu has also been found to be unqualified products in the sampling notices in 2019, 2017 and 2016, including the actual detection of ingredients that do not match the product approval and identification, and the packaging is unqualified.
In the process of transitioning to high-end, it is normal for sales to temporarily decline. However, Shangmei still uses the trick of packaging and name "touching porcelain foreign brand", behind which is undoubtedly unconfident in its own production and research capabilities and product quality, and needs to seek endorsement through foreign genes.
However, these two happen to be the "killer skills" for domestic brands to win in the fierce competition, and they are also the key to the successful transformation of Shangmei in the future. Only by practicing scientific research and ensuring quality can Shangmei, who is no longer young, be able to alleviate the anxiety of "twenty confusion".
Under the tide of the inner roll, the upward is the vitality
Domestic beauty is facing an unprecedented wave of inward rolls.
On the one hand, there is a steady stream of new entrants, and new and old brands are competing for market share; on the other hand, the price war is protracted.
The low-cost double-edged sword has become a competitive weapon. Shangmei is undoubtedly one of the "king of the volume": whether it is marketing expenses or research and development expenses, it is necessary to strive for the upstream of the industry. But that doesn't reverse the retreat of affordable brands. Instead of being swept away and dead, it is better to take the initiative to break through and upward is the vitality.
For Shangmei, the layout of high-end still has a long way to go, and heavy marketing costs will eventually become a burden - although this is a common phenomenon of domestic cosmetics, its existence does not mean reasonable.
In the context of stricter regulation, the differentiation of the beauty industry is expected to intensify, and conformism will only accelerate the clearance. Strengthening the strength of production and research may be the antidote to the anxiety disorder of shangmei's "twenty puzzles".
Resources:
1. "Liu Ming of Shangmei Group: Methodology for Cosmetics Companies to Achieve Online Growth During the Epidemic Period", Business and Frontier
2. "Han Shu's parent company Shanghai Shangmei IPO: High marketing expenses pull down net profitS Research and development accounted for less than 3%", Investment Times
3. "If the parent company wants to go public, will Han Shu become the second "perfect diary"? New Retail Business Review