Domestic beauty cosmetics have sprung up everywhere. How to go further after ＂crazy＂ marketing？

Beijing News (Reporter Wang Shengnan) With the increasing recognition of domestic brands by young consumers, a number of cutting-edge domestic beauty brands, such as Perfect Diary and Hua Xizi, have sprung up in recent years, attracting unprecedented attention in both the consumer market and the capital market.

The cake of domestic beauty cosmetics is getting bigger and bigger, and the problems follow. Experts point out that the operation mode of low R&D and high marketing can never break the low-end positioning of domestic beauty brands. With the strength of international brands overweight after the recovery of China market, it is not easy for domestic beauty brands to go more steadily and further.

The market value of domestic beauty brands soared, and sales led the double eleven.

In the early morning of November 1st, the first wave of Tmall Double Eleven snapped up, and the domestic beauty brand Perfect Diary became the first Tmall makeup brand with a turnover of over 100 million yuan that night, surpassing international brands such as Armani and MAC. Last year’s Double Eleven, Perfect Diary won the first place in the makeup brand list and entered the top ten of the final beauty brand list; Hua Xizi, another domestic beauty brand, participated in the Double Eleven for the first time and achieved an opening turnover of over 100 million in one hour. In addition, established domestic products such as Nature Hall and Baique Ling, as well as Winona, a domestic brand that focuses on sensitive skin care, have also entered the top ten beauty brands list for two consecutive years.

Compared with the previous list of international brands, domestic beauty brands are rising rapidly in the past two years. From the epitome of the consumer market, we can see that domestic beauty brands are breaking the situation that international brands dominate the China market. According to the 2019 Insight Report on Domestic Beauty released by Tencent, in terms of market share, national cosmetics brands accounted for 56%; Judging from consumers’ willingness to buy, 42% of consumers are more willing to choose domestic beauty brands, and 90% of consumers said they would buy domestic beauty products again in the future.

Domestic beauty brands have sprung up everywhere, and the market value and share price of related listed companies, such as shanghai jahwa (parent company of herborist and Meijiajing), Polaiya and Yujiahui (parent company of Royal Nifang), have also risen. Polaiya was listed at the issue price of 15.34 yuan in 2017. As of November 2 this year, the closing price has risen to 175.46 yuan, with a market value of 34.9 billion yuan. This year, the share prices of shanghai jahwa and Yujiahui rose by 40% and 99% respectively; On October 30, Yunnan Betaini Biotechnology Group Co., Ltd., the parent company of Winona, a domestic beauty brand, announced that it had successfully held the meeting, just one step away from listing; On September 28th, Hyaluronic acid giant Aimeike successfully listed on Shenzhen Stock Exchange; At the end of 2019, Huaxi Bio, which focuses on medical and beauty raw materials and functional skin care products, landed in the A-share market, and its share price rose by more than 80% this year.

Before the Double Eleven, the perfect diary of the head players of domestic beauty brands was even more popular. First, on October 19th, it was officially announced that actor Zhou Xun became the first global spokesperson of the brand, and then its parent company, Guangzhou Yixian E-commerce Co., Ltd. (hereinafter referred to as "Yixian E-commerce") announced that it would formally submit the US stock prospectus, and the perfect diary would become the first China beauty group to be listed in the US stock market. According to the prospectus of Yixian e-commerce, the total sales of Yixian e-commerce in 2019 was 3.5 billion yuan, an increase of 363.7% over 2018; In the first three quarters of 2020, the total sales of Yixian e-commerce was 3.8 billion yuan, an increase of 70.2% compared with 2.2 billion yuan in the same period of 2019.

Social e-commerce, national tide and fast iteration, promote domestic beauty corners to overtake.

From the consumer market to the capital market, the attention of domestic beauty brands has been greatly improved, and new marketing methods such as social e-commerce and live broadcast have undoubtedly played a vital role in the driving force for domestic beauty to overtake in corners. "Hua Xizi, who I learned in the live broadcast", "I grabbed the perfect diary and Li Jiaqi’s joint puppy tray" and "Little Red Book blogger planted grass" are common in the evaluation of this batch of domestic beauty explosions. The data of Perfect Diary also shows that as of September 30, 2020, it has cooperated with nearly 15,000 KOLs.

Hou Cong, a health and beauty consultant and life aesthetician, told the Beijing News reporter that with the sales model of "live broadcast+＋KOL with goods" being recognized by consumers in the past two years, the spread of fast messages such as short videos, live broadcasts and new media has brought opportunities to the development of domestic beauty brands. Intensive marketing and word-of-mouth building by stars or beauty bloggers has become a common marketing method, and this new marketing method has seized the current main consumer-young people.

According to the consumption trend of China cosmetics industry in 2019 released by CBNData, post-90s and post-90s have gradually become the main consumers of online cosmetics, contributing nearly 50% of the sales, among which post-90s are the people with the highest online consumption power. Some insiders pointed out that the current consumer structure is getting younger and younger, and young people prefer to shop through social e-commerce, no longer limited to international brands, willing to try new things and pay more attention to cost performance.

At the same time, the promotion of the national style craze has also made domestic beauty brands popular, such as the previously popular Forbidden City lipstick and Huaxizi national style concept products, while the old beauty brands herborist and Baiqueling have played sentimental cards, and the nostalgic marketing of old domestic products has become "popular" among young people. In addition, Hou Cong pointed out that affected by the epidemic, consumers are more cautious and rational, and will consider cost-effective domestic beauty brands in the choice of skin care products. Compared with international brands, domestic brands have a better understanding of China consumers, are more flexible in responding to demand, and have a faster response speed and development cycle, which is the problem that international beauty brands face when they enter the China market.

The high marketing expenses hinder profitability.

"Recently, Hua Xizi’s advertisement was circulated in the elevator every day", "I saw the advertisement of Perfect Diary in the elevator, and actually found Zhou Xun to endorse it" … On the eve of the Double Eleven, Hua Xizi and Perfect Diary, domestic beauty brands that rely on online channels to grow day by day, chose Baping elevator to seize the consumer market through offline media. At the same time, it is still accelerating the layout of offline stores. By the end of September this year, Yixian E-commerce has opened more than 200 offline experience stores in more than 90 cities in China.

As for the reasons for developing offline channels, Hou Cong pointed out that, on the one hand, domestic beauty brands need to continue to explore potential offline customers, expand brand awareness, and conform to the traditional consciousness of "a monk can’t run away from a temple" in the China consumer market. For first-and second-tier cities, offline channels have the function of "brushing the sense of existence" and "shooting the face", while for consumers in sinking cities, what is real and within sight is still their important consideration.

On the other hand, relying on online channels is not a long-term solution. Although online marketing has brought high sales, the cost is also huge. For example, the annual report of Polaiya, which occupies a place in the recommendation list of beauty bloggers, shows that in 2019, the annual net profit of Polaiya was 393 million yuan, but the sales expenses reached 1.223 billion yuan, a year-on-year increase of 38.03%, of which the image promotion expenses were 839 million yuan. The high sales expenses contributed to the performance growth, but did not change the profitability. In 2019, the net interest rate of Polaiya decreased from 12.14% in 2018 to 11.73%, and the gross profit rate also decreased slightly from 64.03% to 63.96%. At the same time, the insiders also pointed out that the current way of marketing to create explosions is limited to the overall improvement of the brand, and users have not generated high loyalty to the brand. Continuing to create explosions means long-term high sales expenses.

R&D costs are low, and it is difficult to break the dilemma of low-end positioning.

In contrast to the high sales expenses, there are unmatched R&D expenses. In 2019, the sales expenses of Polaiya reached 1.223 billion yuan, and the research and development expenses were 74.6026 million yuan, and in 2018 it was 51.2918 million yuan. After large-scale marketing, the quality and reputation of domestic beauty cosmetics are not satisfactory. In the comments on Hua Xizi’s explosive powder, there are many comments such as "it’s not as good as shaking audio and video", "the packaging is really beautiful, but it’s really difficult to use" and "the advertising is too boastful".

Hou Cong pointed out that at present, the positioning of domestic beauty brands is still dominated by the low-end and middle-end, and the operating mode of low gross profit and high marketing has aggravated the financial burden of brands. At the same time, low-cost means can easily make brands reach the profit bottleneck ahead of time, which can only be used as one of the chips to enhance competitiveness, not a long-term solution. Nowadays, consumers’ loyalty to brands and commodities is not as good as before, so it is the key to seize consumers through product innovation and technical iteration, which is why many cosmetic products with indicators will be updated on the original basis every few years. The rapid development cycle and reaction speed of domestic beauty cosmetics meet the needs of consumers faster, but the quality system and related technologies are still not perfect, which can’t keep up with the development speed, and the quality and safety that follows will also become a problem.

Compared with international brands, Hou Cong said that in addition to the low-end positioning of domestic beauty products, some brands still have a "three-minute fever" operation mode, which is difficult to adhere to product research and development, technological innovation and consumer service, and the technology and high professionalism are still not as good as international brands. In addition, the enthusiasm of domestic beauty brands for independent research and development is also being hit by endless imitations. Insiders pointed out that after a domestic beauty product became popular, some brands that wanted to rub traffic would copy the original, launch their own products, and dilute the original traffic and sales. Over time, it weakened the enthusiasm of domestic beauty brands for independent research and development.

From skin care, make-up to medical beauty, China’s beauty market has great potential. According to the report released by data analysis agency GlobalData in June this year, the beauty market in China is expected to grow from 39 billion yuan in 2019 to 59.5 billion yuan in 2024, with a compound annual growth rate of 8.8%. After the outbreak of the epidemic, the China market is the first to recover. Although domestic beauty brands occupy the home advantage, international brands are also overweight, which is bound to carve up the existing market. How to go far and stabilize after the rise, there are still many problems that domestic beauty brands need to ponder.

Beijing News reporter Wang Shengnan

Editor Jake proofreads Chen Yanyan.

Source: Beijing News