Image source @ Visual China
Text | Fat whale headlines
At the beginning of 2022, the beauty new retail brand HARMAY Mei completed nearly 200 million US dollars of C and D round financing, during the same period, the beauty collection store brand WOW COLOUR also announced at its annual meeting and 2022 strategic conference that it received another hundred million US dollars of A+ round of financing; "B + oil tank" announced the completion of a round of strategic financing, which indicates that the new beauty retail species that began to erupt in 2020 is still the "fragrant food" in the eyes of capital.
A few joys and a few sorrows, in contrast, is the beauty of the new domestic brand into the "collective anxiety". Perfect Diary, as the benchmark for new domestic products, bore the brunt of the diary, with stock prices falling from $25 in early 2021 to less than $5, and the market value evaporated by nearly 80%. According to Tao data, during the Double 11 period last year, the sales of new brands such as Perfect Diary, Huaxizi and Tangerine generally fell by more than 30% compared with the same period last year.
In fact, not only the beauty industry, but also the fields of coffee, tea, shoes and clothing, there is no discussion about "new consumption is going downhill", and new changes and transformations have quietly arrived.
New domestic brands are "contained"
2018-2020 is the "honeymoon period" for the accelerated development of new domestic beauty brands, and the rush of hot money; the incubation and support of new brands in the Tao system; the rise of new traffic platforms such as Xiaohongshu and Douyin, making a group of cutting-edge brands that are well versed in traffic and content marketing play, relying on rapid product iteration capabilities and the pricing strategy of "big brand equalization", quickly create explosive single products, and break through in the e-commerce channel.
Along with the highlights, there are constant doubts, including burning money for growth, emphasizing marketing over research and development, and serious homogenization of products. According to the perfect diary financial report, the company's net loss in Q3 2021 was 360 million yuan, although the loss margin of 640 million yuan compared with the same period last year has narrowed, but the high marketing expenses are still criticized, accounting for nearly 70% of the revenue. As traffic costs get higher and higher, online growth is stuck in a bottleneck, and the enthusiasm of the capital circle for this model is gradually fading.
What's worse is that international big names have comprehensively "wrapped up" the new domestic brands from the aspects of price, marketing methods, and talents. Starting from double 11 in 2020, the international big names have concentrated on the lowest discount in history, providing a special "price line" for the Chinese market, combined with buying and giving away some brands even 2-3 discounts; marketing has increased the intensity of KOLs, online live broadcast rooms, private domain channels, and even Taobao promotion and other previous "unsightly" delivery models have also begun to be adopted by the top level; in terms of talents, a new round of local talent recruitment has been opened, and the proportion of local talents in middle-level positions and key positions has continued to rise. To better get closer to the Chinese market and its Generation Z youth.
This series of "grounded gas" practices has also doubled the brand potential accumulated by international big names for a long time, and the market share has been continuously expanded. According to the latest financial report data, L'Oréal, Estée Lauder and Shiseido all achieved double-digit year-on-year sales in 2021. Among them, L'Oréal Group's financial report pointed out that in 2021, it achieved double-digit growth in the Chinese market, achieving a growth rate of twice the average level of the beauty market. Estée Lauder Group also stressed in its financial report that the performance of the Asia-Pacific region, especially Chinese mainland, has grown significantly.
It is worth mentioning that these international groups are optimistic about the growth prospects of Chinese cosmetics in the medium and long term and further strengthen their layout. For example, L'Oréal will land its North Asia regional headquarters in Shanghai; Estée Lauder will adjust its organizational structure, and the China region will report directly to the international president; and Shiseido will give China a 16% expected revenue growth rate in 2022 (statement +7%). Many signals show that the international giants are "ambitious" for the Chinese market.
In addition, the "old big factories" that have encountered strong challenges from cutting-edge brands in previous years are also regaining favor, ushering in a secondary expansion of revenue and profits. Taking Polaria as an example, in the past two years, with ruby essence and double anti-essence large single products, it has successfully opened up an incremental customer group in the field of affordable anti-aging, anti-aging, antioxidant and sensitive skin care, forming a word-of-mouth effect; and from the second half of 2020, it began to develop a makeup brand - Caitang, which achieved revenue of 120 million yuan in that year, and a year-on-year growth rate of 84% in the first three quarters of 21 years, becoming the second largest incremental business point in addition to the main brand of Polaria.
The "rejuvenation" of international giants and local big brands, in addition to their more skillful operation of new marketing models, stable funds and R & D and manufacturing systems, long-term accumulation of brand equity, omni-channel layout capabilities are the cornerstones under the iceberg, so that increased exposure can be quickly converted into sales and stable repurchase. The anti-audience more cutting-edge brands, proud of the DTC model and private domain operations and failed to effectively solve the problem of "loyalty" and "repurchase", according to dolphin society data, the repurchase rate of Yixian e-commerce has maintained at a level of about 40% in recent years, almost no improvement, into the dilemma of "do not continue to spend money to buy traffic income may decline exponentially".
The "new store" of beauty in the limelight
With the online competition has become a red sea and tends to be homogeneous, more brands have begun to turn their attention to offline. For brands, the significance of stores has gone beyond the scope of retail channels, and it is also an important way to connect real consumers, express their own differentiation, and build brand characteristic content; at the same time, with the application of digital means and the continuous iteration of consumer needs, offline formats have also been revitalized.
From the initial department store channel, to the traditional CS/KA channel, to the new beauty collection store that is now in time, the application of digital tools and technologies has become an important starting point for improving retail efficiency and changing the user experience. Through the use of mini programs, live broadcasts and other means, as well as the opening of the membership system, the surface of a single offline contact point is transformed into a rich online and offline consumer network, and the private domain attribute of the store can also help the brand reach consumers more accurately and establish deep links. At the same time, digitalization also penetrates into all aspects of product selection, inventory management, logistics and distribution, etc., to improve operational efficiency in an all-round way and release new imagination space for consumers to obtain an unexpected experience in beauty consumption.
Social aesthetics + multi-format experience is becoming a new focus on the growth point of offline space, as Generation Z has become the main force of beauty consumption, the behavior and characteristics of TA have greatly affected the direction of change of beauty channels, such as more preference for undisturbed self-service shopping, more love to taste, willing to pay for the value and trend, the pursuit of immersive interactive experience, etc. These have become important forces driving the rise of beauty collection stores.
Looking at the current popular beauty collection stores, all of them work space quality and scene aesthetics, such as the industrial style of The Plum and the design style of one store and one theme, WOW COLOUR's INS girlish style, the future technology style of B+ oil tank, etc., the store itself is very social topic communication, bringing consumers a deeper interactive experience and stronger brand recognition, thus driving the generation of consumer behavior.
In addition, beauty collection stores represented by Talkmei are extending the residence time of users and increasing the repurchase rate by expanding their business and ecology. In The talk plum, you can not only buy beauty products, but also buy coffee, snacks, drinks, pet supplies, small household appliances, etc. In fact, the talk mei is not only a retail channel provider, but also an investor. According to the statistics of China Investment Network, the main body of the company "Beijing Yumei Lexiang Technology Co., Ltd." has invested in nearly 10 new consumer brands, and the shots are mainly concentrated in 2021, involving skin care, health care, fragrance and other subdivisions. In the face of increasingly fierce competition, how beauty collection stores use their sensitivity to trends and selection capabilities to tap and even empower new niche brands one step at a time is considered an important source of differentiated competitiveness.
If the expansion of categories has no shortage of questions that have led to vague focus, then digging deep into the service value of beauty is another path to superimposed experiences. Lan Tingyuan, project director of L'Oréal China Consumer Center, said when talking about the trend in the next 5 to 10 years that future products will not be just the product itself, but will need some combination with instruments or medical beauty, and even with data and services.
In this regard, the beauty brands as well as the traditional department store/CS channel have an innate genetic advantage. For example, Estée Lauder will provide offline SPA services such as frozen age platinum, black diamond luxury energy, and platinum storage for members of different levels; Sephora stores provide diversified services such as hair salons, professional service counters, and professional beauty consultants; high-end makeup Mao Geping offline counters will design consumer makeup trial areas, equipped with professional BA to make up half of the face for customers to present product effects, these offline services have a great role in narrowing the distance between brands and consumers and establishing brand fan stickiness.
In the past two years, the beauty shops in department stores have been expanding and have been welcomed by beauty brands and customers. Taking Hangzhou Wulin Yintai as an example, by the end of 2021, 18 high-end beauty brands have opened a total of 21 beauty shops, including La Prairie, Aquamarine Mystery, CPB, Sisley, Helena, Fresh, etc. These beauty shops usually cover an area of 10㎡-25㎡, which allows consumers to enjoy quiet, high-end and private professional skin care, while different brands of beauty care are different in terms of techniques, instruments, special products and projects, becoming a weapon for brands to maintain high-end customers and enhance brand added value.
Hangzhou Wulin Yintai La Prairie brand beauty shop
However, the road to offline expansion is not smooth, especially under the influence of the epidemic, many brands have delayed their store opening plans. In the past 2021, in addition to Sephora's accelerated expansion plan, nearly 40 new stores have been opened, which is about 2 times the average annual growth rate since entering China in the past 15 years; the pace of opening new beauty collection stores has shrunk significantly compared with the target, according to interface news statistics, the total number of WOW COLOUR stores in the country at the end of 2021 is about 135, which is half of the peak of 300 stores, which is contrary to its goal of laying out 1,000 offline stores within 3 years Black Hole has proposed to open 20 stores in 2021 and target 50 stores in 2022, but so far there are only 14 stores. Behind the competition for high-quality offline space, it still needs strong financial strength and stable profitability.
It is worth mentioning that the new domestic brand does not have a strong sense of existence in this offline battle. The Yixian e-commerce company where Perfect Diary is located has begun to lay out offline stores since 2019, and as of the end of November last year, there were 280 stores. However, according to the founder, due to the impact of the epidemic, one-third of the stores have repeatedly closed, opened and closed, and will implement a more cautious store expansion strategy in the future; Tangerine has opened 10 stores from September 2020 to the end of November 2021, "each of which is very cautious"; Huaxizi still has no offline stores and counters. For new domestic brands that are native to the Internet and have limited profit margins, it is not an easy task to involve the location of offline stores, supply channels, service experience, and control of personnel operating costs.
How do you spend the Darkest Hour?
Under the double dilemma of online and offline, many founders of new domestic brands said that this is the most difficult moment, if you can survive this "life and death test period", it is likely to give birth to a number of new local international brands, but in which direction to break through?
Brand going to sea has become the next choice under pressure in China. According to the statistics of China Business Daily reporter, more than 20 domestic cutting-edge beauty brands are actively exploring overseas markets. Among them, Hua Xizi relies on the characteristic advantages of oriental aesthetics, and is particularly firm on the road to the sea, and in the past two years, it has carried out intensive brand voice around the achievements and cases of going to sea.
Nowadays, Huaxizi has opened an english and Japanese official website, successively opened logistics in Japan, the United States, Europe and other countries, and laid out a number of overseas mainstream social media such as Instagram, TikTok, Twitter, etc., of which the number of TikTok fans has exceeded 200,000, and the number of fans has increased rapidly.
However, domestic brands often go to sea with the export of national strength and culture, just as Korean cosmetics became popular in China in the past, which is inseparable from its highly bound K-pop culture and the use of traffic dividends. At present, the gathering place of beauty domestic brands is more in the Southeast Asian and Japanese markets, which is more suitable for makeup habits, fashion trends and culture, while for the European and American markets with high entry thresholds, large skin types and more fierce competition, the space that can be opened up is still relatively limited.
Maintaining and strengthening the brand mentality of a certain segment of efficacy/ingredient/category is a relatively wise and cost-effective way. Taking the skin care track as an example, iResearch consulting data shows that today's consumer demand for effective skin care is increasing, driving the continuous increase of functional skin care products with an average annual compound growth rate of nearly 30%, while the chinese medical doctor association survey data shows that more than 70% of the population believes that they have sub-health conditions of the skin, can solve skin problems in a targeted manner, and have exclusive ingredients and formulas that are more likely to be favored by consumers.
For example, Winona, which has risen rapidly in the past two years, has become the first brand of sensitive skin care in China with natural plant ingredients and medical background, and has achieved a certain dominant position in the blue ocean of dermatological skin care products. Bloomage Biology's Runbaiyan and Quadi, with the exclusive advantage of patented technology of hyaluronic acid ingredients, have formed a appeal not to lose the big name in the medical beauty circle; and some time ago, the boiling Lin Qingxuan cannon shell Chanel incident, the core lies in the red camellia this ingredient of the user mental dispute, although netizens have mixed praise, but in strengthening the cognition and association between Lin Qingxuan and red camellia, at least gained a free publicity bit.
If the above two are more short-term and medium-term strategies, it is difficult but necessary to adhere to the long-term doctrine of effectively improving research and development and product strength and precipitating brand equity. At present, the leading new domestic brands are already making changes, such as perfect diary gradually upgrading the R & D team, the proportion of R & D expenses has risen from 0.4% in 2018 to 1.3% in 2020; Huaxizi recruited Li Huiliang, deputy general manager, chief technology officer and core technical personnel of Bloomage Biology, responsible for the brand's brand scientific research work, in the past year, the number of patents of Huaxizi's parent company reached 106, including 28 invention patents, and the number of new patents reached 50.
Although there are still many gaps compared to international beauty brands, this R&D race has begun. Blessings and misfortunes depend on each other, and it is expected that the consolidation of the R&D foundation will make the user thinking and product iteration ability that the new domestic brand has always been good at burst out of the potential energy, rather than just "floating on the surface".