Once upon a time, Perfect Diary and its parent company, Yixian E-commerce (NYSE: YSG), were both infinitely beautiful.
With the "big name flat replacement" label and many Internet celebrity platforms, Perfect Diary has rapidly grown into a new generation of "light of domestic products". On November 19, 2020, Yixian E-commerce was successfully listed in the United States with an opening price of $17.61 per share; in February 2021, the company's stock price climbed to $25.47 per share, with a market value of more than $16 billion.
Perfect Diary Beauty Chain Picture Worm Creative
However, a year later, such a good situation is long gone.
Red Star Capital Noted that as of March 11, 2022, The closing price of Yixian E-commerce was $0.6765 per share, and the company's market value was only $427 million; it evaporated more than $15.5 billion from last year's high, a plunge of more than 97%.
There is no shortage of products called "good quality and low price" in the beauty track, and the cost performance is a shortcut to quick success, but it is also a poison that consumes brand power.
Part I
The first share of beauty e-commerce, the hit of Internet celebrities
Perfect Diary's parent company, Yixian E-commerce, has just been established in 2016, and if the company wants to grow up in a short period of time, it is impossible to focus on time-consuming, laborious and costly product research and development. Therefore, the production of Yixian e-commerce products mainly relies on the OEM model, and the company focuses on channels and marketing.
I have to say that Yixian e-commerce really understands operations.
In February 2018, Perfect Diary became the first batch of domestic brands to enter The Little Red Book, positioning itself as "the light of domestic products" and "the replacement of big brands". According to the Yixian E-commerce Prospectus, Yixian E-commerce describes itself as "one of the first beauty platforms in China to use KOLs on a large scale on all major social platforms", cooperating with nearly 15,000 KOLs of different popularity, including Li Jiaqi and Wei Ya.
Overall, Perfect Diary uses a pyramid content marketing matrix (stars, head KOLs, waist and tail KOLs, and vegetarian combination marketing), and large-scale marketing materials such as grass soft and wide. Continuously strengthen users' awareness of the brand, users are "planted" and jump to the e-commerce platform for paid conversion.
At the same time, Perfect Diary also emphasizes private domain traffic operation. After purchasing the product, the user will add the "little finisher" customer service WeChat. In addition to daily customer service work, "Little Finisher" will also maintain about 1 dynamic release frequency per day on its own circle of friends and video numbers, including promotions and new product promotions, and constantly brush the sense of existence in the user's private domain traffic to improve user stickiness.
In addition, perfect diary also lays out the star spokesperson matrix in the later stage, creating a popular "harvest" fan economy through traffic stars; laying out a cross-border joint matrix to activate the young group's taste of new psychology.
In summary, Perfect Diary makes the DTC (Direct-to-Consumers; Direct Consumer) operating model very clear. Reduce the intermediate links in the channel, mainly in the direct operation (online + offline) model; In social media marketing, the marketing matrix strengthens the interaction with consumers and deeply binds users.
But at the same time, the overwhelming publicity has also brought huge marketing expenses to the company, and Yixian E-commerce has also been jokingly called a company that "works for Internet celebrities".
Yixian e-commerce financial report shows that the company's marketing expenses have been running wild since 2019, from 310 million yuan in 2018 to 3.41 billion yuan in 2020; the growth rate of marketing expenses in 2019 and 2020 reached 304.85% and 172.74% respectively.
Source: Corporate Finance Report, Red Star Capital Bureau
The latest financial report shows that in 2021, the marketing expenses of Yixian e-commerce were 4.006 billion yuan, an increase of 17.41% over 2020, accounting for 68.60% of revenue. From a single quarter point of view, in 2021, the investment of Yixian e-commerce in marketing began to be rational, but the overall marketing expenditure was still increasing.
Part II:
The traffic dividend has peaked, and the company has fallen into continuous losses
Huge marketing has been thrown out, but from the perspective of revenue, the company is losing money and making money.
According to the financial report, in the fiscal years of 2019-2021, the revenue of Yixian E-commerce was 3.03 billion, 5.23 billion yuan and 5.84 billion yuan, respectively; the revenue growth rate was 377.11%, 72.6% and 11.6% respectively. It can be seen that the revenue growth rate of Yixian e-commerce reached a peak in 2019, and then declined year by year.
At the same time, in a single quarter, the total revenue of enterprises in 2021Q4 was 1.53 billion yuan, down 22.1% compared with 1.96 billion yuan in the same period of the previous year, which means that the revenue in the quarter has shown negative growth.
In addition, although enterprises are constantly burning money for marketing, the efficiency of burning money is not satisfactory.
According to the financial report, the revenue growth rate of Yixian e-commerce in 2021 is 11.60%, while the growth rate of marketing expenses is 17.41%, and the revenue growth rate is significantly lower than the marketing growth rate.
In addition, the Red Star Capital Bureau also noted that in 2021 Tmall Double 11, among the top ten makeup brands in terms of sales, international brands such as YSL, Estée Lauder, and 3CE won the top three, and Perfect Diary fell from the first place in 2020 to the fourth place.
Source: Taobao, Red Star Capital Bureau
From the perspective of profits, Yixian E-commerce has been losing money since its listing. The net loss in 2020 was as high as 2.688 billion yuan, and the loss in 2021 was narrowed, but the net loss still reached 1.55 billion yuan.
It is worth mentioning that the narrowing of the loss of Yixian e-commerce also does not stand up to scrutiny.
According to the financial report, the general and administrative expenses of enterprises decreased from 2.143 billion yuan in 2020 to 941 million yuan in 2021, and the expenditure decreased by 1.202 billion yuan, mainly due to the reduction of its equity incentive expenses.
In other words, the reason why the loss of Yixian E-commerce last year narrowed sharply was not because of the increase in the cost control ability or management ability of enterprises, but due to the reduction of equity incentives.
After the announcement of the financial report, Yixian E-commerce also expects that the revenue in the first quarter of 2022 will be about 867-939 million yuan, which is expected to fall by 35% to 40%.
Why is the capital market so sensitive to the continuous losses of Yixian E-commerce? This is mainly due to the difference between the consumer goods market and Internet companies, Internet companies at first in order to seize the market, will also burn a large area of subsidies, such as Meituan, Ali, Pinduoduo and other enterprises are so, but this is mainly to consolidate the market position, the formation of a later head oligarchy effect. On some levels, the money burning war of these Internet companies is also called strategic losses.
But the consumer goods market is different, the consumer goods market threshold is low, the audience is scattered, it is difficult for companies to be a single company, even if there is no perfect diary, there are many brands that have followed suit. Therefore, the burning war in the consumer market is endless, and capital pays more attention to the ability to make money.
Part III:
Can you go to sea to save yourself?
Under the dual dilemma of slowing revenue and continuous losses, Yixian E-commerce chose to go to sea to save itself. According to the official public information of Yixian E-commerce, it has now covered Japan, the Philippines, Malaysia, Vietnam, Singapore and other places, and has been listed on the top 1 of Shoppee makeup, lip makeup, loose powder, eyes and other categories of Shoppingpee, lip makeup, loose powder, eyes and other categories in Southeast Asia.
However, brand going overseas has become a common choice for domestic beauty companies, and the market competition is unprecedentedly fierce. According to the previous China Business Daily news, as of September 2021, there are more than 20 domestic cutting-edge beauty brands such as Perfect Diary, Huaxizi, Kelaqi, and Kating, which are actively exploring overseas markets.
Domestic brands often have to accompany the export of culture, such as the popularity of Korean cosmetics in China that year, and it is highly bound to the K-pop culture, and it is inseparable from enjoying the traffic dividend. For Chinese brands, Huaxizi, which is labeled "Oriental Aesthetics", may have a more obvious advantage in going to sea.
In addition to the characteristic advantages of "oriental aesthetics", HuaXizi is also good at using social media and the power of local talents to open up foreign markets. For example, at the end of 2019, through the cooperation with the Japanese blogger "@Deer の間", japanese netizens triggered a hot discussion on Hua Xizi, and related topics once climbed to the 7th place on the Japanese Twitter hot search list; at the beginning of this year, the domestic makeup flower Xizi evaluation video pushed by the top American makeup blogger "J Sister" Jeffree Star with 10 million+ fans on YouTube and a sharp "poisonous tongue" once again boosted the heat.
In addition to the large number of opponents, there are also limitations in the target markets for domestic beauty brands to go overseas, mainly focusing on the Southeast Asian and Japanese markets where makeup habits, fashion trends and culture are more in line. For the European and American markets with high entry barriers, large skin types and more fierce local competition, the space for development is still relatively limited.
It can be seen that beauty domestic products going to sea is by no means simply to transport domestic products to overseas markets, if the lack of market research and product research and development capabilities, may lead to the brand "water and soil dissatisfaction", the risk is very large.
Finally, it should be emphasized that most of the beauty domestic product companies, including Yixian E-commerce, have not built a solid brand power in China, and they are still walking the old road of creating explosive models to complete the cold start overseas, even if it is still unknown whether they can have the ability to fight a protracted war in the later stage of the scenery.
brief summary:
Looking back at Yixian e-commerce in recent years, it was once hot and purely driven by traffic; when consumers tended to be rational, enterprises failed to complete the transformation from traffic-driven to product-driven. Only by improving the product power and brand power can the brand leverage the business value be leveraged, and the perfect diary and the Yixian e-commerce behind it are obviously the opposite.
Red Star News reporter Yu Yao Liu Mi
Edited by Tao Yueyang
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