News: The strong rise of the skincare sector Yixian e-commerce has more than just makeup stories

Where is the spring of | domestic makeup?

In recent years, the beauty market pattern has been constantly changing, with the decline of Korean beauty, the slowdown in the growth of European and American makeup, the strong rise of domestic brands, and the rapid increase in the market share of brands such as Perfect Diary.

The data shows that from 2015 to 2021, the scale of China's beauty and personal care market will continue to grow, and it is expected to grow at an average compound annual growth rate of 9.5%, and the market size will exceed 600 billion yuan in 2024. However, since 2021, the beauty and personal care market has undergone ingenious changes, the "only traffic theory" has begun to recede, and today's beauty brands have begun to move towards the era of brand king and product drive, and the brand omni-channel layout has become the norm.

In the survival of the fittest, the moat of domestic brands that laid a solid foundation in the early days gradually became clear. Recently, Yixian E-commerce released its 2021 annual financial report. According to the data, the company achieved revenue of 5.84 billion yuan for the whole year, an increase of 11.6% year-on-year; Gross profit margin reached 66.8%, an increase of 2.5 percentage points year-on-year.

In the face of changes in the beauty and personal care industry, the secondary market response is also very strong. On March 9, the stock price of Yixian E-commerce soared by 16.96%, with a total market value of 883 million US dollars; but on March 10, five Chinese stocks entered the US SEC 'scheduled delisting list', causing market panic, and Yixian E-commerce fell by more than 30%.

At present, although Yixian E-commerce is not on the list, investors' worries still exist. The industry believes that in the face of uncertainty about relevant measures, enterprises should eventually return to their own value development. What is certain is that Yixian E-commerce has deliberately changed the development mode, and from the financial report, marketing expenses have gradually tightened, focusing on research and development costs instead. The high investment in research and development also reveals the determination of Yixian e-commerce to turn to "technology beauty".

Under the competitive pattern of stagnating growth in the cosmetics industry and fighting with domestic beauty brands in the Red Sea, Yixian E-commerce has laid out skin care categories in advance, opening up a new growth situation.

Traffic dividend peaks Beauty industry returns to the "era of product power"

The new version of the "Cosmetics Supervision and Administration Regulations" has come into effect in January 2021, which puts forward new requirements in terms of product safety and compliance of marketing publicity, promotes the standardization and scientific operation of beauty brands, and also raises the product testing cost and new time cost threshold of beauty brands.

With the impact of external factors such as the peak of traffic, the domestic beauty industry is gradually changing from channel dividend drive to product and brand drive stage, which also means that the industry is moving towards the stage of big players in all-round ability competition.

As mentioned in the research report of Minsheng Securities, domestic brands with R&D technical strength and omni-channel operation capabilities are expected to expand their market share and enhance profitability by virtue of their advantages, and there is still broad room for growth of head domestic products. Compared with the international echelon brands MAC, Loreal, Maybelline, and local cutting-edge brands Huaxizi, Orange, color key, etc., Yixian E-commerce has specific advantages in product strength, supply chain fast response ability, digitalization, and brand matrix.

Compared with international brands, the Perfect Diary brand under Yixian E-commerce is more flexible and meets the needs of young consumer groups in a timely manner. Perfect Diary has been committed to tailoring new makeup forms for young consumer groups, pursuing the ultimate cost performance.

It is understood that Perfect Diary began to achieve profitability in 2019 and continued to grow in the following 2 years. In 2021, Perfect Diary won the first place in the "Double Eleven" Tmall makeup category domestic brand.

With the gradual improvement of the perfect diary product line, brands such as Little Odin and Pick Bear under Yixian E-commerce have also entered a period of rapid development, and the multi-brand strategy has become increasingly clear. In 2021, "Double Eleven", Little Odin and Pi Ke Bear, who participated in Double Eleven for the first time, all entered the top ten of Tmall domestic makeup.

Efficacy skincare became the basic disk for growth

The financial report shows that the perfect diary, the main brand of Yixian e-commerce, is no longer the main backbone supporting the company's high growth. Under the impact of the decline in sales in the entire beauty category, the sales of makeup brands such as Perfect Diary have declined, while the new skincare brands have performed well, and the annual revenue has increased significantly.

Yixian e-commerce said that from the internal incubation of the skin care category - the completion of the choice, to the listing, through independent incubation and acquisition and other ways, continue to expand the company's high-end, efficacy skin care category matrix, including high-end skin care brand France Coran Li, France EVEOM, Taiwanese efficacy skin care brand DR.WU.

The layout of the skin care sector has become an important part of the optimization of the revenue structure of Yixian e-commerce. According to the financial report, the annual revenue of skin care increased by 361.7% year-on-year, accounting for 21.3% of the company's total revenue from 4%, benefiting from this, the revenue structure of Yixian e-commerce continued to be optimized, which is conducive to enhancing the company's future profit resilience.

Overall, a number of domestic brands are also interested in the transformation of skin care categories, but most of them are concentrated in a specific category such as makeup removal and masks. Yixian e-commerce has basically formed a full age and full price range coverage on skin care brands, whether it is cost-effective or high-end skin care has product coverage.

It is worth noting that in the skin care category, Yixian e-commerce presents different sales trends in the beauty category, that is, high-end skin care products have become the main sales force. During the double 11 period in 2021, the sales of the e-commerce skin care section of Yixian increased by more than 400% year-on-year, and the total sales of high-end skin care brands exceeded 100 million yuan in the first year of double eleven. Among them, its high-end skin care brand France's Coran Li broke the international record of Tmall, and EVE LOM opened for two hours to sell sales exceeding the total sales of Double 11 in 2020. French Coran li and EVE LOM can perform so well in the Chinese market in a short period of time, which to a certain extent also verifies the growth of the "highway" model of Yixian e-commerce.

Looking at the development trend of international brands in recent years, it is also relying on high-end skin care categories to support revenue. L'Oréal's 2021 financial report shows that the high-end cosmetics division achieved revenue of 12.346 billion euros, an increase of 21.3% year-on-year, which has surpassed volkswagen cosmetics as the company's largest revenue segment and contributed 38% of the company's revenue; Estée Lauder's 2022Q2 financial report shows that skin care products contribute nearly 60% of revenue, higher than the pre-epidemic level for two consecutive years, due to the sales of Aquamarine Mystery exceeding expectations.

Overall, high-end and efficacy have become the consumer trend of skin care products. According to magic mirror data, Tmall's 2021 skin care sales increased by 9% year-on-year in 2020, with unit prices increasing by 12%, while sales decreased by 3% year-on-year; makeup sales increased by 16% year-on-year, unit prices increased by 14%, and sales increased by only 1% year-on-year. The growth of Tmall's beauty industry in 2021 is mainly driven by the increase in the unit price of goods.

Take Eve Lom, a brand of Yixian e-commerce, as an example, the previous star product was called "Lady Remover", but the sales volume is still considerable. After the acquisition is completed, Yixian E-commerce also bluntly said that it will work with the EveLom team to create a beauty brand with global influence in the next era.

R&D supports growth logic Yixian e-commerce has entered a new value cycle

Previously, whether in the field of makeup or skin care, domestic brands have been called "heavy marketing, light research and development". However, behind the strong growth of beauty and skin care categories, Yixian e-commerce is inseparable from the support of research and development.

According to the financial report, the R&D investment of Yixian E-commerce in the fourth quarter of 2021 was 43.31 million yuan, an increase of 69% year-on-year, and the proportion of R&D investment in net income reached 2.8%, and the R&D investment in 2021 was 142 million yuan, an increase of 113.6% year-on-year, and the proportion of R&D investment in net income reached 2.43%, ranking the head of domestic beauty group and the same as the global industry R&D level.

Huang Jinfeng, founder, chairman of the board and CEO of Yixian E-commerce, has publicly stated: "R&D empowers category innovation, and promotes R&D breakthroughs with category innovation." Only with excellent product strength and more scientific and technological beauty achievements can we meet the expectations of more consumers for beauty. ”

Specifically, the hard-core technology and patented ingredients in many products of the main brand Perfect Diary are inseparable from the research and development and technological innovation of the parent company, Yixian E-commerce Open Lab. Different from the traditional model, Open Lab is led by Yixian E-commerce, absorbing top partners in the world such as raw materials, research and development, and production. Among them, the SmartLOCK Smaro locking technology, which is jointly researched by the Institute of Chemistry of the Chinese Academy of Sciences, has a brilliant performance, in addition to pearl powder, the technology has also been applied to the perfect diary small silver mirror cushion, liquid lock powder spray and other products.

At the Expo, Yixian E-commerce announced that it had officially signed a strategic cooperation with Shanghai Ruijin Hospital, Cosmethe, and Inteli, three top scientific research institutions at home and abroad, and upstream and downstream partners, and would continue to carry out in-depth cooperation in solving the problems of beauty research in the future.

At present, the moat built by Yixian e-commerce through channels, research and development and the enhancement of the company's anti-risk ability through multi-brand strategy have been initially formed, and it is expected to create a new round of value cycle for Yixian e-commerce through the construction of multi-brand matrix and the accumulation of R&D strength.