The "pit filling" storm will be the veteran domestic cosmetics company Shangmei once again pulled into the spotlight, this subsidiary has Han Shu, a leaf, red elephant three major brands of enterprises, in recent years encountered a development crisis, by the perfect diary, Hua Xizi's rise impact, and due to years of "heavy marketing, light research and development" led to its 20 years of prosperity is still "eating the old".
Recently, the 20-year-old veteran domestic cosmetics company Shangmei Group encountered a little annoyance.
The reason is that Lu Yixiong, the owner of Shangmei Group, complained in the circle of friends that he was using private money to subsidize the "side business" Yinxi Tea House. This circle of friends stirred up thousands of waves, and many Shangmei employees began to doubt their performance in March, but actually filled the pit of the tea house and detonated the social network.
For the employee's questioning, the Weekly "Finance and Economics" asked the Shangmei Group for verification, and the other party responded that "Yinxi and Shangmei are independent of each other, and there is no subsidy for the use of funds in Shangmei", but did not make a clear response to the problem of deduction of performance. It is only emphasized that as an enterprise in Shanghai, the epidemic has had a certain impact on the normal production and operation of Shangmei Group and the working life of employees, and the company has taken corresponding countermeasures to pay the wages and bonuses due to all employees on time, and provide advance wages to employees in need of help.
Behind the "pit filling" storm, the Shangmei Group, which once lived a prosperous life, and owned three major cosmetics brands of Han Shu, Yiyezi and Red Little Elephant, has suffered from the impact of the rise of new domestic brands such as Perfect Diary and Huaxizi in recent years, and has slowly become less concerned as before. The last time Han Shu went out of the circle was because he terminated the contract as soon as the Wu Yifan incident occurred.
Compared with other domestic cosmetics companies such as Polaria and Marumei, the IPO process of Shangmei Group is also "late". In 2015, Shangmei issued a bold promise to go public in 2018, but until today, 7 years later, this listing target has just reached the stage of formally submitting a prospectus.
Can Shangmei, which is slightly slow in all aspects, regain its original glory?
(Source: Shangmei Group's official WeChat public account)
"Deduct employee performance to fill the pit" storm
Lu Yixiong, the boss of Shangmei Group, who was once known for his "love to brag", probably would not have thought that after several years of low-keying, he would once again bring a storm of public opinion to himself and his company because of a circle of friends.
On May 5, a picture of the circle of friends of the boss of Hidden Creek on the Internet attracted attention from the outside world. The circle of friends said that the Hidden Creek Tea House lost more than 10 million yuan a month, has been losing money for two consecutive months, and currently "there is no end in sight, if it were not for my private money, it would have closed down a long time ago."
Lu Yixiong, the owner of Yinxi, has another more well-known identity - the founder of Han Shu and the chairman and CEO of Shangmei Group.
7 years ago, Lü Yixiong took advantage of his own mixing in the cosmetics industry to engage in the "side business" of opening a tea house, initially called "Chanxi" Tea House, later renamed Yinxi Tea House, and officially registered as Yinxi (Shanghai) Culture Communication Co., Ltd. in March 2016, with a registered capital of 10 million yuan, and Lu Yixiong held 99.86% of the shares, which was the actual controller of the company.
At the beginning of 2016, just about half a year after the tea house business, Lu Yixiong revealed that the single-day turnover of the tea house Yuqing Road store reached 40,000 yuan, and the sales volume of the month was expected to exceed 800,000 yuan, and the future planned to open 30 tea houses in Shanghai to make a chain business. Seven years later, Yinxi Tea House did become a chain, opening 29 tea houses in Shanghai, Hangzhou and Chengdu, and opening a Chaoshan cuisine in Shanghai, but recently due to the impact of the epidemic, it has encountered an unprecedented crisis.
At first, netizens sympathized with Lu Yixiong. Some people said, "Yinxi is a great teahouse brand in Shanghai, it is really a pity", and some people lament that they like their design style and service, "but they are worried about their high-speed expansion, the intention of playing capital is too strong, and the epidemic is just the fuse."
Unexpectedly, the next day, with the successive revelations of the employees of the Shangmei Group, things began to go in another direction.
On May 6, according to the screenshots of netizens exposed by the official Weibo of the "Market Value Wind and Cloud APP", some HanShu employees said that "the performance of Hanshu's internal employees has been deducted to fill the pit of the teahouse", and "the deduction performance does not give instructions and written notices, but only verbal notices are deducted in full". Soon after, a number of Shangmei employees broke the news one after another, "from March the salary is 0 performance", "a group of employees were forcibly taken off by the company, and the people who were taken on leave only paid low wages"...
"Finance and Economics" weekly inquiry found that in fact, as early as mid-April, there were already Shangmei employees on the pulse of the news that because of the epidemic, their "performance in March was all deducted, accounting for more than 20% of wages." The employee also said that since April, employees affected by the epidemic must stay at home and cause performance to be deducted, but it is very difficult for them to recognize the performance of everyone in March.
(Source: Pulse screenshot)
Xiaoni, who works in Shangmei Group, confirmed to the "Finance and Economics World" Weekly that the rumors of the company deducting performance and forcibly taking leave of a group of people are true, most employees work normally in the company in the first half of March, and only scattered in the second half of the month When people began to work from home for a short time, but when the March salary was paid in early April, many people were deducted 100% of the March performance, only got the basic salary, and "there was no official document notice, just the leaders of various departments sent a message to inform", and those who were forced to take leave did not have to participate in the follow-up work. But only the minimum wage can be taken.
"The company's excuse is that it is affected by the epidemic and its performance is not good, but whether everyone works in the company in the early stage or follows up in home isolation, it is a normal office state, and even some departments have a greater workload after working from home." Xiaoni added that as far as they know, the performance of Shangmei companies has not been so seriously affected.
In this regard, the Weekly "Finance and Economics" weekly asked For clarification from the Shangmei Group, and the other party did not make a clear response to the problem of deducting performance, but emphasized that during the epidemic, Shangmei paid the wages and bonuses due to all employees on time, and provided advance wages to employees in need of help, and set up a special anti-epidemic team to help employees' lives at the first time, and also distributed anti-epidemic packages to more than 600 employees one-on-one in early April, when materials were most difficult to obtain.
As for the problem of "filling the pit of the Hidden Creek Tea House", Shangmei Group said that Hidden Creek and Shangmei are independent of each other, and the relevant situation can be queried in public information, and stressed that "there is no subsidy situation in the use of funds in Shanghai and the United States".
History of the Chaoshan boss
The story of Shangmei Group began in 2002 when Lu Yixiong founded Han Shu.
From 1987 to 2000, the average annual growth rate of the output value of China's cosmetics industry was about 18%, and the number of production enterprises increased rapidly from about 100 to more than 3,000, and a large number of domestic cosmetic brands came into being.
In March 2000, Feng Shuai, who came from a family of traditional Chinese medicine, resolutely resigned and founded Xiangyi Materia Medica in Shanghai; in the same year, the 31-year-old Sun Huaiqing based in Guangdong and founded Marumei of "bouncing bullets, bouncing away crow's feet". In 2001, Zheng Chunying, a former civil servant, also launched an attack on the cosmetics field, moving his beauty center (Galan Group) from Shenyang to Shanghai and began to produce brands such as Yaglibai, Nature Hall, and Meisu. In the following years, a number of brands such as Kazilan, Polaria, and Meiji Mask have also emerged.
Lu Yixiong, who works in the cosmetics wholesale business at the Rehabilitation Road Wholesale Market in Xi'an, noticed this wave of entrepreneurship.
Born in 1977, Although Lu Yixiong was still a young man who had just turned 25 at this time, he had the innate business talent of Guangdong Chaoshan people and had been in the business sea for many years. In Lu Yixiong's later words, he belonged to the kind of person who "liked to do business since he was a child, and had no other ideals and hobbies", and since he was 10 years old, he has begun to help his family do some business, and in the process of going to school, he has also set up a stall to sell CDs, run a box lunch business, and open a convenience store.
At the end of 2001, Lu Yixiong went to Shanghai on a business trip and was attracted by Shanghai's superior business environment, so he resolutely decided to leave Xi'an, which had been operating for 3 years, and took an 8-person team to Shanghai, determined to make a domestic brand that "let the aunt who sells vegetables on the street know".
In 2002, Lu Yixiong's first cosmetics brand, Han Shu, was officially established. At that time, when the domestic "Korean Wave" was prevalent, many companies tended to label their products with Korean labels, and Lu Yixiong named the brand "Han Shu", which was also a bit of a rubbing of the meaning of The Korean Wave.
However, at this time, the market in first- and second-tier cities has been occupied by many powerful international cosmetics brands such as Shiseido and Estée Lauder, and Han Shu, who knows that he cannot confront them head-on, has embarked on a "side attack" route involving positioning, channels and other levels.
In terms of positioning, Han Shu bypassed the first- and second-tier markets lined with giants, took the route of "rural encirclement of cities", and began to vigorously expand third- and fourth-tier cities and exert efforts on small-town youth consumer groups. At the channel level, Lu Yixiong keenly grasped the channels such as TV shopping and micro-business that have emerged in those years.
In the period of TV shopping, Han Shu once reached cooperation with more than 30 TV shopping channels across the country such as Hunan Happy Shopping, and claimed to be "the first sales in the TV shopping channel industry". Lu Yixiong also revealed in an interview with the media that in 2011, Han Shu accounted for almost 38% of the national TV shopping cosmetics category. Han Shu thus ate the dividends of TV shopping until September 2012, when he officially announced his entry into offline channels.
In 2014, with the fire of the micro-business industry, Han Shu followed up with the establishment of the micro-business division and entered the micro-business channel in a big way. Although this model was later questioned as a "pyramid scheme" due to the lack of a direct sales license, it was soon gradually stopped in 2015 as Han Shu was deeply involved in the "pyramid scheme door" storm, but Han Shu gained a lot.
According to data, from 2014 to April 2015, the sales of Hanshu micro-business channels reached 1.6 billion yuan, and the Hanshu micro-business division once set a record of "40 days to pay back 100 million, 4 months to achieve the first in the country" in 2014. As a result, Han Shu has been crowned by many people as the "first micro-business".
(Source: Shangmei Group's official WeChat public account)
A large part of Han Shu's explosive growth in those years was due to the huge advertising investment. Lu Yixiong once said bluntly: "Advertising may not be able to make a brand, but without advertising, it is difficult to make a brand." ”
To this end, in the early days of its establishment, Han Shu invited Korean star Cui Zhiyou as a spokesperson, and later signed a number of domestic popular stars such as Lin Zhiling, Guo Caijie, Lu Han, Xie Tingfeng, Yang Ying, Jing Tian, Di Li Reba, etc., playing the marketing card.
The most generous is the title of various variety shows and film and television dramas. In January 2013, Han Shu sponsored the "Non-sincere Do Not Disturb" link of the heartwarming girl, did not expect to be a hit, so in November of the same year, concentrated most of the budget, with 240 million yuan to grab the title of "Non-sincere Do Not Disturb". The marketing effect was good, and after only 14 days, Han Shu's sales on Taobao increased by 20%.
After that, Han Shu, who tasted the sweetness, became one of the number one sponsors of various variety shows and film and television dramas. In 2015, Han Shu first renewed his contract with 500 million yuan for "Non-sincere Do Not Disturb", directly setting a new high in the history of Chinese television advertising, and then titled "The Masked Singer", "Fancy Sister" and other popular variety shows. According to the data, in 2015 alone, Shangmei invested more than 1 billion yuan in advertising on Platforms such as Jiangsu Satellite TV, Zhejiang Satellite TV, Hunan Satellite TV, Wanda and Jingmao Cinema Line.
In the following years, Shangmei has always adhered to this advertising strategy of "holding high and hitting high", and in many popular variety shows and TV series such as "Happy Base Camp", "Every Day Upward", "Three Lives and Three Worlds and Ten Miles of Peach Blossoms", "Thirty Only", "An Jia" and so on, Shangmei's products are indispensable.
This was also a common operation for most domestic cosmetics brands at that time. Han Hou, a cosmetics brand that also begins with the word "Han", named the show with more than 100 million yuan of advertising investment before Han Shu titled "Do Not Disturb".
But What distinguishes Han Shu from other domestic makeup brands may also be that it has a very topical founder.
In fact, for a long time, Lu Yixiong was known for his "love to brag". He likes to publicize the achievements and layout of Shangmei Group in the WeChat circle of friends, and from time to time comments on China's cosmetics industry, and has said a lot of bold words, some even look unscrupulous and not marginal. For example, in 2015, when Yiyezi was listed, he once shouted in the circle of friends that "in five years, the annual retail sales of a leaf will reach 13 billion yuan and the annual return of 6 billion yuan", and for example, in 2016, he shouted in the circle of friends that "within 7 years, the cosmetics sector of Shangmei should achieve undisputed first in the comprehensive goal, and press Procter & Gamble and L'Oréal"...
Of these blown "cows", some are realized and some are not. But in those years, Lu Yixiong was indeed full of spirit, self-confidence, walking with the wind, and Shangmei did develop rapidly, and some data show that from 2012 to 2017, The sales collection of Shangmei grew rapidly from 300 million yuan to 4.8 billion yuan. According to Euromonitor consulting data, in 2017, Han Shu became the local cosmetics company with the highest market share with a market share of 2.6%.
Not only that, the fierce expansion of Shangmei also won the favor of capital for the first time in 2015, obtaining financing of 400 million yuan, directly setting a record for the largest financing of local cosmetics companies at that time, and the investors were Ximei Capital, which was jointly founded by Lianxin Capital, CITIC Capital and Ge Wenyao, former chairman of Shanghai Jahwa.
Also in this year, Lu Yixiong changed the company's name from "Shanghai Hanshu Cosmetics Co., Ltd." to "Shanghai Shangmei Cosmetics Co., Ltd.", began group operations, and for the first time mentioned the company's listing plan, saying that "it plans to complete the listing in 2018".
Founded 20 years ago, it is still "eating the old book"
Lu Yixiong's ambition to "complete the listing in 2018" has finally failed. As a veteran domestic product with a history of 20 years, the "first micro-business" that has set a record of 100 million sales in 40 days, the road to listing of Shangmei Group can be described as full of ups and downs.
Looking at the large domestic old beauty companies, there are few left that have not yet been listed. Marumei, YuNifang and Polaria, which were established at the same time, have all landed on A shares, and the parent company of Perfect Diary, Yixian E-commerce, and Winona's parent company Bethanie, which were established later, have also been successfully listed. It was not until January 17, 2022 that The Shanghai American Group finally handed over the watch to the Hong Kong Stock Exchange and took a step belatedly. At this time, nearly 7 years have passed since Lu Yixiong "mouthed out the listing crazy words" in the circle of friends.
This is not the first time that Shanghai Mei has tried to sprint to the capital market, in February 2021, Shangmei Group signed a listing counseling agreement with CITIC Securities to list on A-shares, but as the conditions for A-share listing become more stringent, the ambitious company turned to Hong Kong stocks.
It can be seen from the prospectus that the performance of Shangmei has continued to improve in recent years. From 2019 to the first three quarters of 2021, Shangmei's revenue was 2.874 billion yuan, 3.381 billion yuan and 2.595 billion yuan, respectively, while adjusted profit for the same period was 114 million yuan, 264 million yuan and 284 million yuan.
In this listing, Shangmei shouted out the slogan of "multi-brand strategy" and proposed to expand its business scope and market segmentation. Looking at the development of Shangmei over the years, it is not difficult to find that the company has been incubating new products and trying to break the single brand situation. Since 2019, Shangmei has successively launched "high muscle energy" for sensitive skin, "Amilla" for pregnant women, and "Jifang", a washing brand, hoping to harvest more consumer groups. However, the effect is not good, and the total revenue of new products only accounts for about 10% of the total revenue.
Since the "red BB cream" of Han Shu, Shangmei has not recreated explosive products for a long time, and this 20-year-old domestic product is still "eating the old book". Opening the official website of Han Shu, we can see that the "red BB cream" listed in 2012 is still occupying the throne of "the first place in the hot sale of BB cream in this store".
In the first three quarters from 2019 to 2021, the three brands of Han Shu, Yiyezi and Red Elephant contributed about 90% of the total revenue, which is the three major cash cows of Shangmei. Among them, the revenue contributed by Han Shu is still increasing year by year, from 32% in 2019 to 43.8%, almost supporting half of the revenue of Shangmei Group.
(Source: Visual China)
Shangmei is slightly weak in product innovation, which is inseparable from its strategy of "heavy marketing and light research and development". From 2019 to the first three quarters of 2021, Shanghai Mei's R&D expenditure declined year by year, only about 70 million yuan to 80 million yuan, and the proportion of investment was less than 3%. Although Shangmei claims that this data is higher than the industry average, it is still dwarfed by Shanghai Jahwa and Bethanie, which spend more than 100 million yuan on research and development.
On the contrary, Shangmei's investment in marketing can be described as "a thousand dollars". From 2019 to the end of September 2021, The sales and distribution expenses of Shangmei were 1.325 billion yuan, 1.536 billion yuan and 1.119 billion yuan respectively, accounting for 46.1%, 45.4% and 43.1% of the current revenue, respectively, and the sales expenses accumulated nearly 4 billion yuan in the past three years.
Spending a lot of money on marketing seems to be a "common disease" of domestic makeup brands, but looking at the entire cosmetics market, Shangmei's investment in marketing is also at a high level. The sales expense ratios of the domestic brands that have been listed at present, Shanghai Jahwa, Marumei and Polariya, will be 41.58%, 32.33% and 39.90% respectively in 2020.
Following TV and micro-business, Shangmei also invested heavily in sales on the tracks such as traffic endorsement and head live broadcast with goods. Since 2019, Shangmei has focused on the development of online sales channels, long-term cooperation with e-commerce platforms such as Tmall and JD.com, and also established a full-time live broadcast team to carry out layout in new media positions such as Douyin, Kuaishou, and Xiaohongshu.
According to public information, in May 2020, Shangmei cooperated with Kuaishou anchor Xiao Yiyi to hold a special live broadcast of Han Shu & Yiyezi, with a single GMV of 13.03 million yuan. In 2021, its monthly GMV on the Douyin platform will rise from 5 million yuan to 160 million yuan. In Li Jiaqi's live broadcast room, Han Shu King Kong Mask also set a record of 400,000 boxes sold in 8 minutes and 12 seconds.
In 2021, the solution with Wu Yifan brought heat to shangmei, and a large number of netizens poured into the Han Shu live broadcast room on the night of the termination, and the live broadcast that was originally only watched by dozens of people instantly reached 300,000 people. Subsequently, Han Shu also cooperated with the Chinese National Swimming Team in a high-profile manner, and the short film film received 5 Weibo hot searches in two days, and the topic read reached 130 million.
Hitching a ride on the express train of e-commerce, the revenue of Shanghai's online channels has climbed sharply from 52.4% in 2019 to 72.9% at the end of September 2021, becoming its main source of revenue. In contrast, Shanghai Midea's offline sales channels have shrunk. Before 2019, the proportion of online and offline sales can reach 550, and with the growth of online channels, the number of offline distributors has shrunk from 965 in 2019 to 557 at the end of September 2021.
Despite its vision of becoming a multi-brand company, Shangmei has no corresponding brand advantage, and even its intention to enter the high-end market with new products has been frustrated. This company, which started with TV shopping and micro-business, and mainly focuses on the sinking market of the third and fourth tiers, has always been favored by young people in first- and second-tier cities. Shangmei has reached cooperation with more than 4,000 Watsons stores, but its products have not been placed in a prominent position, and the once explosive products such as red BB cream and King Kong Mask have disappeared.
On the one hand, the current domestic cosmetics high-end market has been occupied by foreign brands, Euromonitor data shows that the high-end market is mainly occupied by international top brands, the top three brands are divided into L'Oréal, Estée Lauder and Louis Vuitton, with a market share of 18.4%, 14.4% and 8.8% respectively. On the other hand, new domestic brands continue to emerge, since 2018, Han Shu and Yiyezi have completely disappeared from the Tmall Double 11 beauty TOP10 list, while Perfect Diary, Hua Xizi, Winona and other rising stars have successively appeared on the list. Even the beverage industry, which is 18,000 miles apart, also wants to share a piece of the skin care and makeup track, and in recent years, beauty hyaluronic acid drinks have emerged in an endless stream.
Blowing over the head is easy to roll over
On the way forward with high sales costs, Shangmei is not alone, and the "old" Polaria, which has been established for 16 years and has been listed for four and a half years, also faces the same problem.
In recent years, Polaria's sales expenses have increased year by year, from 886 million yuan in 2018 to 1.991 billion yuan in 2021, and the sales expense ratio has also climbed steadily, jumping from 37.52% to 42.98%. According to the financial report, most of the sales expenses are used for image promotion and brand promotion investment, under the overwhelming publicity of celebrities, KOLs and anchors, Polaria quickly harvested a large number of young consumers and became the "light of domestic products".
But the good times were short-lived, and a sunscreen evaluation video sent Polaria to the hot search. On April 27, a blogger released a sun protection evaluation video, pointing out that Pleia's star products have poor sun protection and problematic composition. Soon, some netizens added firewood and fire, breaking the news that the product "has the risk of stuffy acne and shutting your mouth". Consumers launched a fierce crusade against Polaria, saying that "without sun protection, can it still be called sunscreen?" ”
Although Polaria reacted quickly, it issued a statement the next day acknowledging the discrepancies in some batches of finished products and saying that it would open after-sales. Many bloggers who have brought goods for them have also apologized one after another, saying that they can return goods with the order.
But angry consumers don't buy it. Under the comments of the statement, some people pointed out that The excessive marketing of Polaria is deceptive, and some people have bluntly said "don't buy the water army". In addition, in the Xiaohongshu platform search for feather sense sunscreen, "rollover", "refund", "acne", "collapsed room" and other related words automatically appeared, the page is no longer a uniform praise and recommendation, users have posted refund screenshots.
Feather sense sunscreen is available in 2021, and the price of the 50ml specification is 169 yuan. This sunscreen product, which is mainly "feathery light texture, multiple sunscreen and whitening function", has frequently appeared in KOLs' grass lists and the live broadcast room of head anchors, and has been called "domestic sunscreen ceiling" and "summer life-sustaining charm".
According to the data, from January to November 2021, the sales of feather sunscreen alone in the Tmall flagship store reached 91.84 million yuan, while Poliya's other product, sailing sunscreen, sold 42.26 million yuan, almost half of the former. In just three months from January 1 to March 9, 2022, the cumulative GMV of feather sunscreen products in the Tmall flagship store of Polaia has reached 41 million yuan.
This new influencer product has a good momentum, but the harder it blows, the worse it falls. The sales of money piled up are like illusory bubbles, which are easily punctured. At present, the official website of Polariya has not been able to search for the relevant information of feather sense sunscreen, Tmall, Jingdong and other e-commerce platforms have removed the product, and the former star products can only be retired.
The publicity is too strong, but the quality of the product is problematic, which is easily associated with the meager research and development costs of Polaria. In fact, compared with the sales expenses of almost 2 billion yuan, from 2018 to 2021, The research and development expenses of Polaria are only between 50 million yuan and 80 million yuan. In the past four years, the R&D expense rate of Pleia has been 2.17%, 2.39%, 1.92% and 1.65% respectively, and in the past two years, it has not even risen but declined.
In the increasingly fierce cosmetics track, the head player gradually realized that the product is the foundation of the foothold. New product research and development is not effective, "nibbling on the old" is small, if you accidentally overturn the car, and then use force to publicize it, you can only hit the water in a bamboo basket. Shanghai Beauty, which has slammed into Hong Kong stocks, should learn from the lessons of Polaria's "overturning", after all, in just two trading days since the negative crisis, The market value of Polaria has evaporated by 2.5 billion yuan, and only 38.49 billion yuan was left at the close on May 6.
At present, although the listing target proposed by Lu Yixiong has still not been completed, and the latest progress is still in the IPO stage, in 2021, Lu Yixiong has broken into the Hurun Rich List for the first time with a net worth of 7 billion yuan, ranking 1044 in the list.
(At the request of the interviewee, Xiaoni is a pseudonym)
This article is originally produced by AI Finance and Economics, an account of Caijing Tianxia Weekly, without permission, please do not reprint it on any channel or platform. Violators will be prosecuted.
Author/ Author of "Finance and Economics" Weekly Zhou Xiangyue Yangyang
Editor / Chen Fang