Customers are trying on makeup at the Perfect Diary Guangzhou Zhengjia Store. Perfect diary for the picture
A joint lip balm jointly launched by shanghai jahwa’s Meijiajing and White Rabbit. Photo courtesy of Tmall
The perfect diary and the 16-color eye shadow jointly launched by China National Geographic magazine. Perfect diary for the picture
On the cosmetics track, China brand is facing the situation of "falling behind at the start". China 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 advantages in capital, technology and publicity.
However, local cosmetics companies have not been "routed" as many people feared, but have gradually gained a foothold. What’s the secret? In recent years, a number of emerging domestic beauty brands have emerged, which makes consumers exclaim "the light of domestic products". What are the reasons behind it?
The reporter visited two China cosmetics companies: shanghai jahwa and Yixian E-commerce. The former is a century-old shop established in 1898, and it owns famous brands such as herborist, Liushen, Yuze and Meijiajing. The latter is a cutting-edge market that was born in 2016, and its "perfect diary" has become one of the hottest 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 with a new look.
In 1915, the cosmetics "Shuangmei" brand "Pink Cream" from China won the gold medal in the evaluation of Panama World Expo in San Francisco, USA.
This "Shuangmei" brand, which was widely welcomed by celebrities at that time, was produced by China Guangshenghang, one of the oldest national enterprises in the daily chemical industry, which was established in 1898. After the founding of New China, Guangshenghang changed its name to "Shanghai Household Chemicals Factory" after several reforms, mergers and reorganizations, which is today’s shanghai jahwa. Its brands such as "Meijiajing" Pearl Tremella Cream and "Ya Shuang" Cream, which were launched in the 1960s, have long been the collective memory of generations of Chinese people.
However, even shanghai jahwa, a local industry leader with profound knowledge, has a big gap with international cosmetics giants in terms of technology accumulation and market expansion. However, shanghai jahwa skillfully used the strategy of "Tian Ji Horse Racing" and broke out his own road of differentiated development.
The second trick is to "avoid its sharpness and open up a new track for Chinese medicine." No matter at home or abroad, consumers have a common pursuit for the "natural" attribute of cosmetics. Traditional Chinese medicine has a unique advantage as a cosmetic raw material because of its natural selection of materials and outstanding efficacy. If there is a clear gap between China enterprises and foreign brands in chemical technology in consumers’ impression, the gap is not obvious in the new track of Chinese medicine cosmetics, and even China enterprises are more knowledgeable.
Shanghai jahwa keenly grasped this point, and used the compound concept of "monarch, minister and assistant" in traditional Chinese medicine (that is, blindly taking Chinese medicine as the main ingredient, supplemented by several flavors) to prepare raw materials, thus creating a unique brand of Chinese herbal medicine cosmetics "herborist". "herborist" was a great success once it was launched. In 2008, it entered the Sephora cosmetics store on the Champs Elysé es, becoming the first cosmetics brand in China to go abroad.
"Domestic brands have a better understanding of China consumers and are better at telling brand stories with Chinese expressions." When summing up the competitive advantages of China brands and foreign brands, the relevant person in charge in shanghai jahwa told reporters. At the same time, the new product development of foreign brands often needs to be approved by the headquarters first, and shanghai jahwa believes that "local enterprises have a faster response speed in decision-making, consumer communication and channel adjustment and upgrading."
For the cosmetics market in China, it is easy to make a single "explosion" with differentiation strategy, but it is difficult for enterprises to grow at a high speed for a long time. Since 2003, local brands such as "Little Nurse", "Dabao" and "Ding Jiayi" have been acquired by foreign investors, and then they have been silent. Some insiders believe that relying too much on a single product is one of the reasons why these local enterprises are unsustainable.
In this regard, shanghai jahwa decisively adopted a multi-brand strategy to build its own "moat". On the one hand, the continuous research and development of "herborist" series of new products impacts the mid-to high-end market, on the other hand, it creates brands in different market segments. For example, in view of young people’s oily and sensitive dry skin, shanghai jahwa and Shanghai Ruijin Hospital developed "Yuze" series, which is the first medical skin care brand jointly developed with hospitals in China. At the same time, it has also developed "Goufu" which focuses on men’s skin care, and "Kaichu" which aims at the maternal and infant care market.
Behind the establishment of brand matrix in shanghai jahwa, there is high-intensity research and development as the support. The 2019 financial report shows that shanghai jahwa’s total R&D investment reached 183 million yuan, which is in a leading position in the domestic industry, and its R&D ratio of 2.41% is close to the level of international brands such as L ‘Oré al and Shiseido.
On May 6th this year, shanghai jahwa welcomed Pan Qiusheng, the new chairman and CEO. In a letter to employees, Pan Qiusheng bluntly said: The past few years have witnessed rapid development and evolution of the daily chemical and beauty cosmetics market in China, and the cognition and pursuit of beauty of a new generation of young consumers have changed greatly.
Shanghai jahwa, a century-old shop, is actively adjusting its attitude, trying to find ways that young consumers like and establish emotional links with them. In terms of understanding young people, this emerging domestic beauty brand may provide some useful experience.
Perfect diary: attracting more young people
Compared with the century-old history of shanghai jahwa, Perfect Diary is definitely a "young man" in the cosmetics market in China. But the report card of this "young man" should not be underestimated.
According to Chen Yuwen, co-founder of Perfect Diary’s parent company, Yixian E-commerce, at present, the fans of Perfect Diary have exceeded 25 million, and the monthly exposure has exceeded 1 billion. In this year’s "Queen’s Day 38" promotion, the perfect diary’s cat eye shadow tray and puppy eye shadow tray were sold out within 4 minutes, setting a record of selling 2,000 pieces per second …
In the capital market, the performance of Perfect Diary is also very bright: four rounds of financing have been completed in four years, with a valuation of 2 billion US dollars. Among the investors, there are many well-known institutions such as Zhenge Fund, Gaochun Capital and Gaochun Capital.
Why does a startup company established in 2016 dare to enter the cosmetics market surrounded by "strong enemies"?
In Chen Yuwen’s view, because the cosmetics market in China has entered an era of drastic changes: the market is changing, the channels are changing, and consumers are changing. These changes together constitute the "right time and place" of emerging domestic beauty products.
"Compared with countries with similar GDP levels, China’s beauty penetration rate is low. We judge that there is still a lot of market space for beauty products in China." Chen Yuwen told reporters that in 2017, the penetration rate of Japanese and Korean cosmetics has exceeded 80%, while that of China is only 30%.
"On the other hand, it is the emergence of the Internet." Chen Yuwen said that the rapid development of cmnet, e-commerce and social media, on the one hand, has built an online channel for Perfect Diary to communicate directly with young consumers, on the other hand, it has also provided accurate data, which can provide very timely and powerful guidance for its 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 the perfect diary are accurately positioned as young women aged 18-28, of which "after 00" accounts for 50% and "after 95" accounts for 70%. "This is a generation that grew up with the Internet. According to our observation, they have a broader vision, are open and confident, like creativity, and generally have a higher acceptance of domestic brands than before." Chen Yuwen said that the new generation of consumers are just beginning to get in touch with makeup products, but the prices of foreign brands are on the high side for them, which brings good opportunities to new domestic brands.
Therefore, it is the breakthrough point for the perfect diary to enter the beauty market to let the post-1995 generation in China buy products with similar quality to international brands, but with much lower prices and more innovative ideas. This "parity substitution" strategy for international brands has also become an important source of its product strength.
The way to ensure quality is to cooperate with high-quality foundries. Perfect Diary found Cosme Meishi, the world’s largest cosmetics foundry, for its own production. The latter is also a cooperative foundry of international brands such as Dior, L ‘Oreal and Lancome, and the price of similar products is only about half that of international brands.
The way to renew creativity is to let consumers become designers. Perfect Diary not only analyzes product reputation and fan preferences through data, but also directly communicates product solutions with consumers, allowing consumers to deeply participate 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 China market, and most of them are brand additions." Chen Yuwen said, "And we pay attention to originality. When the perfect diary is ahead of many international brands in visual style and product creativity, consumers will naturally choose us."
However, 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 increasing investment in research and development. This year, Perfect Diary and Cosme Meishi invested 700 million yuan to start building the largest cosmetics production base in Asia, and 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 no less than 100 million yuan in research and development."
Comparing the development process of shanghai jahwa and Perfect Diary, the common point is that they have completed the first two steps of "understanding consumer demand, developing differentiated products and establishing brand moat", and are striving for the third step. Whether "Big Brother" shanghai jahwa is transforming into a younger generation, increasing its investment in online communities such as Little Red Book, bilibili and Tik Tok, or opening hundreds of offline experience stores under the "Young People’s Perfect Diary" transformation, although it seems to be in the opposite direction, its essence is the improvement of its own channel shortcomings and the reinforcement of its own brand moat in a rapidly changing environment.
The market potential of China is large enough, and there are more and more new changes in domestic cosmetics. In the future, can "China Cleaning" or "L ‘Oré al China" be born in this hot land? We will wait and see.