Beauty And Sadness Of "Perfect Diaries"

As the first Chinese beauty group to be listed in the US stock market, the first financial report of Yixian e-commerce has attracted much attention: from the perspective of 2020, the total net revenue of Yixian e-commerce is RMB 5.23 billion (about USD 802 million), which is 72.6% higher than RMB 3.03 billion in 2019; in terms of profit, it has a net loss of RMB 2.69 billion (about US $412 million), while the net profit in 2019 is RMB 2.69 billion It is 75.4 million yuan, which is a huge contrast. According to non GAAP, its net loss was RMB 787.8 million (about US $120.7 million).

Even if the annual income growth, it is difficult to cover up the embarrassment of loss, the outside world began to question the expensive traffic behind the high growth of perfect diary.

Yixian e-commerce is just a microcosm. The domestic beauty cosmetics represented by perfect diary, huaxizi and Guoduo occupy a place in the market situation monopolized by international brands. But what are the moats of these brands outside the "bustling" screen of social platforms?

Perfect embarrassment: revenue 5.2 billion, net profit loss 2.7 billion

Founded in 2016, Yixian e-commerce currently owns cosmetics and skin care brands including perfect diary, little Ondine and Abby & apos; s choice, as well as French high-end beauty brand gal é NIC, which was acquired in November 2020.

As a result of the young positioning, the price is close to the people, and the new products are on line quickly, the most well-known perfect diary has become the largest color cosmetics brand in China. In addition, according to the prospectus of Yixian e-commerce, as of September 2020, the number of fans in the official accounts of all brands of Yixian e-commerce exceeded 48 million.

It can be seen that, on the one hand, the revenue of Yixian e-commerce in 2018 reached 635 million yuan, reaching 3.031 billion yuan in 2019, with a year-on-year increase of 377%. In the first three quarters of 2020, the revenue reached 3.272 billion yuan, exceeding that of the whole year of the previous year. In 2020, the annual income was 5.23 billion yuan, still maintaining a high growth rate.

On the other hand, it is the embarrassment of Yixian e-commerce to increase revenue but not to increase profits. According to the financial report, the main reason lies in the "sales and marketing expenses" of high-level enterprises of Yixian e-commerce, including three parts: advertising, marketing and brand promotion costs, and expenses incurred during the development of experience stores.

The data shows that the sales and marketing expenses of Yixian e-commerce in the fourth quarter of 2020 will be 1.38 billion yuan (about 211.3 million US dollars), with a year-on-year increase of 209.21%. In addition, the annual sales and marketing expenses in 2020 are as high as 3.412 billion yuan, with a year-on-year increase of 172.74%, accounting for 65.24% of the total revenue, an increase of 23.96% compared with that in 2019, which has seriously swallowed up the company's profits.

In fact, the marketing expenses of Yixian e-commerce have been high: from 2018 to now, the marketing expenses of Yixian e-commerce accounted for 48.7% in 2018, 41.3% in 2019, 62.2% in the third quarter of 2020, and 65.4% in the whole year of 2020.

Despite the sharp increase in marketing expenses in the past year, the market does not seem to be satisfied with the customer acquisition ability of Yixian e-commerce.

With the dominant DTC mode (direct to Consumer (direct to customers), the coverage of e-commerce platforms including tmall, Jingdong and vipshop, as well as social platforms such as wechat, Shuo Yin, Kuaishou, xiaohongshu and bilibilibili. The number of customers increased from 23.4 million in 2019 to 23.5 million by the end of September 2020, while the number of DTC customers in the fourth quarter of the same year was 14.4 million, with a year-on-year growth of 30.9%, but it was far lower than that of marketing The year-on-year growth rate of expenses.

Of course, one detail that needs to be pointed out is that a considerable part of the net loss of Yixian e-commerce in 2020 is equity incentive expenses. According to non GAAP, the annual net loss of Yixian e-commerce should be 787.8 million yuan.

The explanation of Yixian e-commerce is that 2020 is the key strategic investment period of the company, and key investment has been made in offline, R & D and brand upgrading. The brand is still in the growth period, and the loss mainly comes from the increase of strategic investment. The new brand matrix has not entered the harvest period.

In sharp contrast to the expensive sales and marketing expenses, Yixian e-commerce has a lower R & D investment.

From 2018 to 2020, the R & D expenses of Yixian e-commerce are RMB 03 million, RMB 23 million and RMB 67 million, accounting for 0.5%, 0.8% and 1.3% of the total revenue respectively.

At present, the total market value of Yixian e-commerce has shrunk from a high of US $12.2 billion to US $7.4 billion.

The battlefield has shifted from online to offline and entered the high-end market

Wang Qinglin, an AI media consulting analyst, also said in an interview with the media, "statistics show that about 32% of new cosmetics brands enter the market every year, but at the same time, 25.5% of products disappear. At present, in China's cosmetics market, famous foreign brands such as L'Oreal and Shiseido, domestic classic brands such as baiqueling and pelaia, the original niche online Red brands such as the ecolorist and Mao Geping, and other cross-border brands such as run Baiyan palace lipstick and Yunnan Baiyao caizhiji are engaged in a big scuffle. Domestic cosmetics brands and products are facing low bargaining power, serious product homogeneity and competition The grim situation of increasing competition. "

With the rise of generation Z and the trend of domestic products, "perfect diary" must build its own moat if it wants to continue to be the "black horse" of beauty track.

We can see that Yixian e-commerce, which relies on online channel expansion, is moving the battlefield offline.

According to the prospectus, Yixian e-commerce company will open 40 and 163 experience stores respectively in 2019 and the first nine months of 2020.

On December 26, 2019, at a new retail sharing meeting, Feng Qiyao, President of the new retail business department of Yixian e-commerce, once mentioned that "Yixian e-commerce has opened perfect diary experience stores in Shanghai, Hangzhou, Suzhou and Nanjing. Next, perfect diary will speed up the opening of stores. In the next three years, it plans to open 200 stores in East China and 600 stores in China.".

A simple calculation shows that in 2019, the relevant expenses of experience stores will be 52.9 million yuan, compared with 196 million yuan in the first nine months of 2020, and the average cost of each store in the past two years is 1.2623 million yuan. If the total number of perfect diary stores is planned to exceed 600 in 2022, it means that at least 397 stores will be opened next Calculated by 1.2623 million yuan, it means that Yixian e-commerce will spend at least 500 million yuan for offline stores.

In a recent interview by the 21st century economic reporter, some people in the daily chemical industry also expressed similar views, "a brand similar to a perfect diary has strong capital strength and can afford to burn money. The products in the past two years are quite out of circulation". However, we should keep an eye on whether it can continue to shine.

Behind the e-commerce of Yixian, there are many first-line investment institutions, including Hillard capital, Tiger Fund, Zhenge fund, Gaorong capital, Hony investment, Warburg Pincus investment, etc.

Up to now, there is such an investment story circulating in the public: from May 2018, the a + round entered the perfect diary, each round of financing increased, continuously invested 5 rounds of high-altitude capital, gave it high expectations, and launched a long-term running mode.

Hillard has explicitly proposed to Yixian e-commerce the positioning of "let girls quickly become beautiful" by opening offline stores; secondly, it should guide its transformation from a single brand to a beauty platform, and promote it to embark on the road of "L'Oreal in China"; finally, it helped it acquire French high-end beauty brand gal é NIC (coranly) and move towards high-end.

However, for the performance of Yixian e-commerce in 2020, on March 25, the reporter of 21st century economic report contacted Hillhead capital and was declined to interview.

It can be seen that in a short period of half a year, Yixian e-commerce has made up for the short board of high-end beauty products by acquiring international high-end skin care brands.

Just in March, Eason said it had reached an agreement with manzanita capital, a London based venture capital firm, to acquire Eve LOM, its high-end skin care brand. After the deal is completed, manzanita capital will retain a minority stake in the business and enter into a partnership with Yixian e-commerce. The acquisition is expected to be completed in the next few weeks.

According to public information, Eve LOM was founded in London in 1985 by well-known beautician Eve LOM. The classic cleansing cream products launched by Eve LOM are sold at tmall's flagship store for up to 630 yuan / 100mL, which is nicknamed "Hermes in makeup remover".

Huang Jinfeng, founder, chairman of the board of directors and CEO of Yixian e-commerce, said that Eve LOM has a deep brand foundation and efficient exclusive formula. The acquisition will enhance Yixian e-commerce's competitive advantage in product development and category layout in the field of skin care, and continue to expand its multi brand strategy.

Prior to that, on October 30, 2020, Yixian e-commerce also reached an agreement with Pierre Fabre group, one of the largest skin medicine and care groups in Europe, to acquire gal é NIC, a high-end beauty brand of the group. After the deal was completed, Pierre Fabre continued to hold a 10% stake in the brand.

The way of self preservation of "the light of domestic products"

Just on March 25, the product (Winona) often appeared in Li Jiaqi's live broadcast room. Betaine (300957. SZ), a domestic skin care brand focusing on sensitive skin care, landed on the gem with a market value of nearly 70 billion yuan on the first day of listing.

The intersection of the perfect diary and Winona is that they are deeply bound to Li Jiaqi.

In the prospectus of Yixian e-commerce, Li Jiaqi was also mentioned, "we often work with Austin Jiaqi Li, who is a live KOL of beauty products with more than 34 million fans.".

In addition, the rise of another new domestic brand huaxizi is inseparable from the boost of Li Jiaqi.

According to statistics, from January to July 2020, Li Jiaqi will broadcast 118 live shows in total, of which 45 huaxizi has participated.

With perfect diary, Huaxi, orange flower as the representative of the domestic beauty make-up strong rise. According to the data of "top 30 sales volume of double 11 color cosmetics over the years" produced by Guoyuan Securities Research Journal, the perfect diary and huaxizi rank high in the sales ranking of "double 11" cosmetics in recent two years.

However, in addition to the traffic dominating screen of social networking platforms, where are the moats of these domestic brands?

"Toushuyin, xiaohongshu and KOL on microblog are ways to quickly spread the popularity of cosmetics brands, but they also need to expand their own flow sources." on March 25, an industry person who once worked on the cosmetics e-commerce platform told the 21st century economic report, "compared with Estee Lauder, L'Oreal and other European and American brands, perfect diary, huaxizi and other brand products, the price ratio is higher Cheaper, this is an advantage, how to keep the younger generation from quality control, brand story, peripheral, etc., in order to improve the overall brand premium, more energy is needed. ".

In addition, from the mature supply chain of the domestic cosmetics industry, the OEM system has everything from raw materials to formulations to packaging materials. The products of perfect diary are mainly OEM (OEM production) and ODM (OEM production). In 2019, Yixian e-commerce and cosmetz, the world's largest cosmetics ODM enterprise, jointly established a cosmetics R & D and production base in Guangzhou—— Yixian Biotechnology (Guangzhou) Co., Ltd. holds 49% of the shares. According to media reports, the planned investment is 700 million yuan. It is expected to be put into production in 2022, with an output value of 2 billion yuan.

It is worth mentioning that cosmetz is the OEM of Dior, L'Oreal, Estee Lauder and other international famous beauty brands.

The prospectus of Yixian e-commerce also revealed the next development route. The purpose of the IPO raised funds is: 30% for daily operation of the company, 30% for potential strategic investment and M & A, 20% for technology research and development, product R & D and formula R & D, and 20% for offline experience store expansion.

From the perspective of A-share companies, the practices of pelaia (603605. SH) and Maru Mei (603983. SH), which are both cosmetics enterprises, are also worth learning from.

In the first three quarters of 2020, perleya achieved revenue of 2.29 billion yuan, with a year-on-year growth of 10.14%; the net profit attributable to shareholders of listed companies was 285 million yuan, with a year-on-year increase of 18.74%.

In new product research and development, brand marketing, channel fine management, etc., pelaia has a good performance.

According to public information, pelaia owns brands such as "pelaia", "youzilai", "yuefuti", "Hanya", "Maoyu rose", "YNM" and "Caitang", covering three categories of products: skin care, skin cleaning and color makeup.

It is mentioned in the semi annual report of 2020 that in the first half of 2020, main brand pelaia will launch new products such as Ruby essence, double anti essence, Xiaoyun cleansing, time fish roe essence, thirst quenching and repairing facial mask; meanwhile, Sun Li and CAI Xukun have joined the brand star matrix for the main brand of perair, and carry out the "young do not panic", "take risks for love while young" and "recover your dream when young" A series of theme marketing; cross border cooperation with "Naixue tea" to launch a series of gift boxes for discovering, pursuing and guarding dreams; and implanted brands and products through film and TV series and variety shows such as settling down, qingpingle and you from mobile phone.

In addition, pelaia continued to deepen the channel and fine management. E-commerce is divided into three business groups: Meili Valley traditional Chinese products business group (pelaia, etc.), Sun Island new brand business group (Caitang, yincaibaha, etc.), Yueliangwan overseas brand business group (eurotree, wycon, etc.).

Wan Mei shares, regarded as the leader of domestic eye cream, are also making efforts for young customers.

In 2020, MARUMI will successively launch two popular products: xiaohongbi eye cream and butterfly bandage eye mask, focusing on the youth mass market and realizing the rejuvenation and upgrading of products. Sun Huaiqing, chairman of the board of directors of Maru, said in a recent media interview that "young people like to shop online, and our new products are launched online; young people like high cost performance, so we launched the first 30g eye cream; young people like black technology, and we add a massage head that can shake 12000 times a minute. Not only is the product audience positioned in young groups, but the company's team is also very young. Many excellent talents are born in the 90s. "