In the past, Perfect Diary and its parent company, Yixian E-commerce (NYSE: YSG), were both glorious existences.
Perfect Diary has rapidly grown into a new generation of "light of domestic products" with the "big name replacement" label and many Internet celebrity platforms.
On November 19, 2020, Yixian E-commerce was successfully listed in the United States, with an opening price of US$17.61 per share; in February 2021, the company's stock price once climbed to US$25.47 per share, with a market value of over US$16 billion.
However, a year later, the good times are gone.
The Red Star Capital Bureau noticed that as of March 14, 2022, the closing price of Yixian E-commerce was US$0.68 per share, and the company’s market value was only US$430 million; US$15.5 billion was evaporated from last year’s high, a plunge of 97%.
The beauty track has no shortage of products known as "good quality and low price". Traffic and cost performance are quick shortcuts, and they are also poisons that consume brand power.
aggressive marketing
4 billion spent a year
"The Light of Domestic Products" and "Big Brand Replacement" have earned a good reputation for Perfect Diary, and cooperation with nearly 15,000 KOLs of different reputations, including Li Jiaqi, has attracted huge traffic.
Perfect Diary plays the DTC (Direct-to-Consumers; direct-to-consumers) operating model very clearly.
Perfect Diary's parent company, Yixian E-commerce, was only established in 2016, and it mainly relies on the OEM model. The company focuses on channels and marketing, rather than time-consuming, labor-intensive and expensive product development.
Yixian e-commerce really understands operations very well.
In February 2018, Perfect Diary became the first domestic brand to enter Xiaohongshu, positioning itself as the "light of domestic products" and "replacement of big brands".
According to the prospectus, Yixian E-commerce describes itself as “one of the first beauty platforms in China to use KOLs on a large scale on all major social platforms,” and has cooperated with nearly 15,000 KOLs of varying popularity, including Li Jiaqi.
On the whole, Perfect Diary adopts a pyramid content marketing matrix (stars, head KOLs, waist and tail KOLs, and amateur combination marketing), and large-scale marketing materials such as grass-based soft broadcasts.
Continuously strengthen users' awareness of the brand, and users jump to the e-commerce platform for paid conversion after being "planted".
At the same time, Perfect Diary also emphasizes private domain traffic operations.
After the user purchases the product, the customer service WeChat of "Xiao Wanzi" will be added.
In addition to the daily customer service work, "Xiao Wanzi" also maintains about 1 dynamic release frequency per day on its own circle of friends and video accounts. The content includes promotions and new product promotions, and constantly brushes the presence of users' private domain traffic. , to improve user stickiness.
In addition, in the later stage of Perfect Diary, a matrix of celebrity spokespersons was also deployed to create a "harvest" fan economy through popular stars; a matrix of cross-border co-branding was also deployed to activate the new psychology of young people.
To sum up, Perfect Diary plays the DTC (Direct-to-Consumers; direct-to-consumer) operating model very clearly.
In terms of channels, the intermediate links are reduced, and the direct sales (online + offline) model is mainly used; in social media marketing, the marketing matrix strengthens the interaction with consumers and deeply binds users.
Yixian e-commerce financial report shows that the company's marketing expenses have been running wild since 2019, from 310 million yuan in 2018 to 3.41 billion yuan in 2020; the growth rate of marketing expenses in 2019 and 2020 reached 304.85% and 172.74% respectively. %.
The latest financial report shows that the marketing expenses of Yixian e-commerce in 2021 will be 4.006 billion yuan, a year-on-year increase of 17.41% over 2020, accounting for 68.60% of revenue.
From the perspective of a single quarter, Yixian e-commerce's investment in marketing in 2021 will begin to become more rational, but the overall marketing expenditure is still increasing.
money-burning game
The consumer goods market is difficult to replicate
In order to seize the market, Internet companies will burn large-scale subsidies, mainly to consolidate their market position and form a head effect.
However, the threshold of the consumer goods market is low, the audience is scattered, and it is difficult for a company to be a dominant player. Therefore, the battle for money burning in the consumer market is endless, and capital is more concerned about the ability to make money.
Huge marketing has been thrown out, but from the perspective of revenue, the company is losing money and making a profit.
The financial report shows that from 2019 to 2021, the revenue of Yixian e-commerce was 3.03 billion, 5.23 billion and 5.84 billion respectively; the revenue growth rate was 377.11%, 72.6% and 11.6% respectively.
It can be seen that the growth rate of Yixian e-commerce revenue peaked in 2019, and then declined year by year.
At the same time, in a single quarter, the total revenue of the company in 2021Q4 was 1.53 billion yuan, down 22.1% from the 1.96 billion yuan in the same period last year, which means that revenue in the quarter has experienced negative growth.
In addition, although companies are constantly burning money for marketing, the efficiency of burning money is not satisfactory.
The financial report shows that the revenue growth rate of Yixian e-commerce in 2021 will be 11.60%, while the growth rate of marketing expenses will be 17.41%. The growth rate of revenue is significantly lower than that of marketing.
Yixian E-commerce is also dubbed as a company that "works for Internet celebrities".
In addition, the Red Star Capital Bureau also noticed that in 2021 Tmall Double 11, among the top ten makeup brands in sales, YSL, Estee Lauder, 3CE and other international brands will take the top three, and Perfect Diary will take the first place in 2020. dropped to fourth.
In terms of profits, Yixian E-commerce has been losing money continuously since its listing.
The net loss in 2020 will be as high as 2.688 billion yuan, and the loss will be narrowed in 2021, but the net loss will still reach 1.55 billion yuan.
It is worth mentioning that the narrowing of losses of Yixian e-commerce also cannot stand scrutiny.
The financial report shows that the general and administrative expenses of the company have dropped from 2.143 billion yuan in 2020 to 941 million yuan in 2021, and this expenditure has decreased by 1.202 billion yuan, mainly due to the reduction of its equity incentive expenses.
In other words, the reason why Yixian E-commerce’s losses narrowed sharply last year was not due to the enhanced cost control or management capabilities of the company, but the reduction of equity incentives.
After the announcement of the financial report, Yixian E-commerce also estimated that the revenue in the first quarter of 2022 will be about 867-939 million yuan, which is expected to drop by 35%-40%.
Why is the capital market so sensitive to the continuous loss of Yixian e-commerce?
This is mainly because the consumer goods market is different from that of Internet companies. In order to seize the market, Internet companies will also burn large-scale subsidies, such as Meituan, Ali, Pinduoduo and other companies, but this is mainly to consolidate their market position. , forming a later head effect.
To a certain extent, the money-burning war of these Internet companies is also called a strategic loss.
However, the consumer goods market is different. The consumer goods market has a low threshold and a scattered audience. It is difficult for a company to dominate. Even if there is no perfect diary, there are still many brands.
Therefore, the money-burning war in the consumer market is endless, and the ability to make money is more important to capital.
Where is the road?
Can you save yourself when you go to sea under double dilemma?
Under the dual dilemma of slowing revenue and continuous losses, Yixian E-commerce chose to go overseas to save itself.
According to the official public information of Yixian E-commerce, it has covered Japan, the Philippines, Malaysia, Vietnam, Singapore and other places, and has been listed on Shoppee, the largest cross-border e-commerce platform in Southeast Asia, in multiple categories such as makeup, lip makeup, loose powder, and eye makeup. TOP1.
However, brand going overseas has become a common choice for domestic beauty companies, and the market competition is unprecedentedly fierce.
According to previous news from China Business Daily, as of September 2021, more than 20 domestic emerging beauty brands, including Perfect Diary, Huaxizi, Kolaqi, and Kating, are actively exploring overseas markets.
Domestic brands are often accompanied by cultural exports. For example, the popularity of Korean cosmetics in China was inseparable from its high degree of binding to the Korean wave culture and the enjoyment of traffic dividends.
For Chinese brands, Huaxizi, which has the label of "Oriental Aesthetics", may have more obvious advantages in going overseas.
In addition to the advantages of "Oriental Aesthetics", Huaxizi is also good at exploiting the power of social media and local talents to develop foreign markets.
For example, at the end of 2019, the cooperation with the Japanese blogger "@馮の馬" caused a heated discussion among Japanese netizens about Huaxizi, and the related topic once climbed to the seventh place on the Japanese Twitter hot search list; Fans, the sharp "poisonous tongue" of the top American beauty blogger "J sister" Jeffree Star pushed the evaluation video of domestic makeup Huaxizi once again boosted the popularity.
In addition to many competitors, there are also limitations in the target market for domestic beauty brands to go overseas, mainly in the Southeast Asian and Japanese markets where makeup habits, fashion trends, and cultures are more in line with each other.
For the European and American markets with high entry barriers, large differences in skin quality, and more intense local competition, there is still limited space for development.
It can be seen that the export of domestic beauty products to the sea is by no means simply moving domestic products to overseas markets. If there is a lack of market research and product research and development capabilities, it may cause the brand to be "unacceptable", which is a great risk.
Most of the domestic beauty product companies, including Yixian e-commerce, have not built a solid brand power in China. When they go overseas, they still follow the old road of creating explosive models to complete the cold start. capacity is still unknown.
summary:
Looking back at Yixian e-commerce in the past few years, it was once hot and driven solely by traffic; when consumers became more rational, the enterprise failed to complete the transition from traffic-driven to product-driven.
Only by perfecting product and brand power can a brand leverage its commercial value with the help of traffic leverage, while Perfect Diary and the Yixian e-commerce behind it are obviously going the other way.
Chengdu Business Daily-Red Star News reporter Yu Yao and Liu Mi