Chinese herbal medicine skincare products enter the European market, "big brand replacement" makeup is sought after by the Chinese
How is the domestic beauty makeup made? ("National Tide" was at the time ②)
On the cosmetics track, Chinese brands are faced with the situation of "behind the start". Chinese customers really began to accept the concept of cosmetics consumption, after the reform and opening up, but at this time foreign brands have accumulated huge capital, technology and promotion advantages.
But local cosmetics companies haven't "broke up" as many people worry, but have gradually gained a foothold. What is the secret? In recent years, a number of emerging domestic beauty brands have emerged, causing consumers to exclaim the "light of domestic products". What is the reason behind it?
The reporter visited two Chinese cosmetics companies: Shanghai Jahwa and Yixian e-commerce. The former is a century-old store established in 1898. It owns well-known brands such as Herborist, Liushen, Yuze, and Meijiajing; the latter was born in 2016. The market is new, and its "perfect diary" has become one of the most popular domestic makeup brands in recent years. Through their stories, we may be able to find the answer to the rise of domestic cosmetics.
Shanghai Jahwa: a century-old shop renewed
In 1915, in the appraisal of the Panama Universal Exposition in San Francisco, the cosmetics "Shuangmei" brand "Pink Tender" from China passed all the way and successfully won the gold award.
The "Shuangmei" brand, which was popular at the time by the celebrities, was produced by Hongsheng Guangxing, one of the oldest national enterprises in China's daily chemical industry, established in 1898. After the founding of New China, Guangshenghang was restructured, merged, and reorganized several times, and was renamed "Shanghai Household Chemical Factory", which is today's Shanghai Jahwa. In the 1960s, it launched the "Meikan" pearl Tremella cream, "Ya cream" cream and other brands, which have long become the collective memory of generations of people.
However, even a local industry leader like Shanghai Jahwa has a deep gap in technology accumulation and market expansion with international cosmetic giants. However, Shanghai Jahwa used its "Tian Ji horse racing" strategy to break its own path of differentiated development.
The first measure is "encircling the city from the countryside". Although the foreign giants are "violent", their brand products can only occupy about 10% of the high-end market. There is a broad mid-to-low-end market. Due to the small profit margin, foreign brands often lack the motivation to enter, which just gives Shanghai Jahwa a place to take root. "Occupy the market of 1 billion people first, and then the market of 100 million people" once became the core business philosophy of Shanghai Jahwa's management.
The second measure is to "avoid its edge and open up a new Chinese medicine track". Both Chinese and foreign consumers have a common pursuit of the "natural" nature of cosmetics. Traditional Chinese medicine has unique advantages as a raw material for cosmetics due to its natural selection and outstanding efficacy. If Chinese companies in consumer impressions still have a clear gap with foreign brands in chemical technology, then this gap is not obvious in the new track of Chinese medicine and cosmetics, and even Chinese companies are more "knowledgeable."
Shanghai Jiahua keenly grasped this point and used the compound concept of traditional Chinese medicine "Junchen Zuoshi" (that is, one Chinese medicine is the main, and several flavors are the supplement) to configure the raw materials to create a unique herbal medicine cosmetic brand of "Herbs Herb". "Herba Herb Collection" was a great success once it was launched. In 2008, it entered the Sephora cosmetics boutique on the Champs Elysées in Paris, becoming China's first cosmetics brand to go abroad.
“Domestic brands know more about Chinese consumers and are better at using Chinese expressions to tell brand stories.” In summing up the competitive advantages of Chinese brands and foreign brands, the person in charge of Shanghai Jahwa told reporters. At the same time, new product development of foreign brands often needs to be approved by the headquarters first, and Shanghai Jahwa believes that "local companies have a faster response in decision-making, consumer communication, and channel adjustment and upgrade."
It is easy for the Chinese cosmetics market with "no flowers in a hundred days" to make a single "explosion" with a differentiated strategy, but it is difficult for the company to grow at a high speed for a long time. Since 2003, popular local brands such as "Little Nurse", "Dabao", and "Ding Jiayi" have been acquired by foreign investors, and they have been quiet. Some in the industry believe that relying too much on a single product is one of the reasons why these local companies are unsustainable.
In this regard, Shanghai Jahwa decisively adopted a multi-brand strategy to build its own "moat". On the one hand, we continue to research and develop new products of the "Herbs Herb" series to impact the mid-to-high-end market, and on the other hand, we build brands in different market segments. For example, for young people's oily and sensitive dry skin, Shanghai Jahwa and Shanghai Ruijin Hospital have developed the "Yuze" series, which is the first medical skin care brand jointly developed with the hospital in China. At the same time, it has also developed "Gao Fu" which focuses on male skin care, "Qi Chu" which is aimed at the pregnant and infant care market, and so on.
Behind the establishment of the brand matrix of Shanghai Jahwa, it is supported by high-intensity R&D. The 2019 financial report shows that Shanghai Jahwa's total R&D investment reached 183 million yuan, which is a leading position in the domestic industry, and its 2.41% R&D revenue ratio is also close to the level of international brands such as L'Oreal and Shiseido.
On May 6 this year, Shanghai Jahwa welcomed the new chairman and CEO Pan Qiusheng. In his letter to employees, Pan Qiusheng bluntly said: The past few years have been a year of rapid advancement and rapid evolution in China's daily chemical and beauty market, and the new generation of young consumers have undergone tremendous changes in their perception and pursuit of beauty.
This century-old store in Shanghai Jahwa is actively adjusting its attitude, trying to find a way that young consumers like and establish an emotional link with them. In terms of understanding young people, this emerging domestic beauty brand may provide some useful experience.
Perfect Diary: Attract more young people
Compared to the century-old history of Shanghai Jahwa, Perfect Diary is definitely a "young man" in the Chinese cosmetics market. But this "young man" report card should not be underestimated.
According to Chen Yuwen, co-founder of Yixian E-commerce, the parent company of Perfect Diary, Perfect Diary has more than 25 million fans on the whole network, and its monthly exposure has exceeded 1 billion. In this year's "38 Queen's Day" promotion, the perfect diary cat eyeshadow tray and puppy eyeshadow tray were sold out within 4 minutes of listing, setting a record of selling 2,000 pieces per second...
In the capital market, the performance of the perfect diary is also very eye-catching: 4 rounds of financing have been completed in 4 years, and the valuation is 2 billion US dollars. There are many investors such as real funds, Gao Rong Capital, Gao Yuan Capital and other well-known institutions.
Why did a startup founded in 2016 dare to enter the cosmetic market with strong competitors?
In Chen Yuwen's view, because the Chinese cosmetics market has entered an era of drastic changes: the market is changing, the channels are changing, and consumers are also changing. These changes together constitute the "time and place" of emerging domestic cosmetics.
"Compared with countries with similar GDP levels, China's beauty makeup penetration rate is lower. We judge that China's beauty products still have a lot of market space." Chen Yuwen told reporters that in 2017, Japan and South Korea's makeup penetration rates were both It has exceeded 80%, while China’s penetration rate is only 30%.
"On the other hand, it is the emergence of the Internet." Chen Yuwen said that the rapid development of China Mobile's Internet, e-commerce and social media has established an online channel for perfect diaries to communicate directly with young consumers. It provides accurate data and can provide very timely and powerful guidance for the development of new product categories and needs. "So we chose the beauty track and chose the Internet as the core." Chen Yuwen said.
But the more important change is the change of people. Behind the rise of new brands is often the rise of new consumer groups.
The users of Perfect Diary are accurately targeted at young women aged 18-28, of which "post-00" accounts for 50% and "post-95" accounts for 70%. "This is a generation that has grown up with the Internet. According to our observation, they have a broader vision, open and confident, like creativity, and generally accept the domestic brand more than before." Chen Yuwen said that the new generation of consumers is in The first stage of contact with cosmetic products, but the price threshold for foreign brands is too high for them, which brings a good opportunity for new domestic brand.
As a result, China's “post-95s” have been able to buy products of similar quality to international brands but at a much lower price and with a new wave of creativity, becoming the entry point for the perfect diary to enter the beauty market. This kind of "parity replacement" strategy for international big names has also become an important source of its product power.
The way to guarantee quality is to cooperate with high-quality foundries. Perfect Diary found the world’s largest cosmetics foundry Cosmetics for its own production. The latter is also a cooperating foundry of Dior, L'Oreal, Lancome and other international big names. The price of similar products is only about half of the international diary.
The way to update creativity is to let consumers become designers. Perfect Diary not only analyzes product word-of-mouth and fan preferences through data, but even directly communicates product plans with consumers, allowing consumers to participate deeply in all aspects of product design.
"In fact, the quality of domestic cosmetics is not worse than that of foreign brands. Foreign brands can sell premiums in the Chinese market, and most of them are brand bonuses." Chen Yuwen said, "And we focus on originality, when the perfect diary is done on visual style and product creativity. When it is ahead of many international big names, consumers will naturally choose us."
But Chen Yuwen also remained calm. He bluntly said that if domestic brands rely too much on foundries, there is no way out, so Perfect Diary is also investing in research and development. This year Perfect Diary and Cosmetics invested 700 million yuan to start the construction of the largest cosmetics production base in Asia. At the same time, they are cooperating with Sun Yat-sen University to establish a research and development laboratory. "In the next three years, we expect to invest not less than 100 million yuan in research and development."
Comparing the development process of Shanghai Jahwa and Perfect Diary, the common thing is that they have completed the first two steps of "insight of consumer demand, developing differentiated products, and building a brand moat", and are working hard to take the third step. Whether it is the transformation of the "big brother" Shanghai Jahwa into a younger one, increasing its investment in online communities such as Xiaohongshu, B Station, and Douyin, or the "young man" perfect diary turning to the front line of new retail, opening hundreds of lines The lower experience store, although it seems to be in the opposite direction, is essentially the improvement of its own channel short board and the reinforcement of its own brand moat in a rapidly changing environment.
China's market potential is large enough, and there are more and more new changes in domestic cosmetics. In the future, can "China Cleaning" or "China L'Oreal" be born on this hot spot? We will wait and see.
Han Weizheng
Han Weizheng