's revenue continues to decline, and it is becoming more difficult to turn losses into profits and resolve delisting risks.
is written by Douya. The full text is 3,600 words and takes about 3 minutes to read.
Yixian E-commerce, the parent company of the cutting-edge cosmetics brand Perfect Diary , may not be so "colorful" this year.
After receiving the delisting warning of from the New York Stock Exchange, the recently released Q1 financial report for 2022 showed that the revenue for this quarter was 890 million yuan, a year-on-year decrease of nearly 40%, and the net loss attributable to shareholders was 290 million yuan. Not only that, Yixian e-commerce also stated that in the second quarter of 2022, total net revenue is expected to be between 808 million yuan and 960 million yuan, a year-on-year decrease of approximately 37% to 47%.
’s revenue continues to decline, and it is becoming more difficult for Yixian e-commerce to turn losses into profits and resolve delisting risks.
from Oriental Fortune
As the “first domestic beauty stock”, in less than a year and a half, Yixian E-commerce has gone from listing to the cliff of delisting, and its stock price has also increased from its highest point of US$25.47 in February last year. It once dropped to the recent US$0.39, and its market value evaporated by more than 100 billion yuan. Behind the roller coaster market of
, what does the celebrity brand Perfect Diary bring to Yixian e-commerce? What other hidden worries exist? Go to Yixian e-commerce, which is a perfect diary, how to turn around next?
01
The magic of perfect diary
Yixian e-commerce can be listed on the market, mainly driven by external factors and internal factors.
The external factor is that it has ushered in the rise of national trendy beauty cosmetics. The internal factor is that its Perfect Diary has stepped on the traffic dividends of social platforms such as Xiaohongshu, Douyin, and through "in-depth cooperation with 15,000 kol", "Cooperating with Li Jiaqi ", coupled with the DTC (Direct-To-Cosumer) operating model, proves its own growth.
Specifically:
From the user side, data shows that as of September 30, 2020, in the quarter before listing, the number of official account fans of all brands under Yixian E-commerce exceeded 48 million.
In terms of sales, Perfect Diary’s total sales in 2019 were 3.5 billion yuan, a year-on-year increase of 363.7%, which was approximately 30 times the retail sales growth of China’s beauty market during the same period. From 2019 to the first three quarters of 2020, Perfect Diary was the only domestic makeup brand with a monthly GMV of over 100 million on Tmall .
In terms of revenue, from 2018 to 2020, Yixian e-commerce revenue continued to rise, from 635 million yuan to 3.031 billion yuan, and then to 5.233 billion yuan. Especially in 2019, the revenue growth rate reached 377.3%.
02
traffic is both an antidote and poison.
traffic is both an antidote and poison for Perfect Diary and Yixian e-commerce.
First, the strategy of relying on traffic dividends to become popular is difficult to form competition barriers.
It is reported that every new product launched by Perfect Diary will first be set by “stars + head KOLs”, and then spread through “waist KOLs + amateurs”. However, this KOL-based marketing approach is difficult to establish competitive barriers. It is true that new domestic beauty brands such as Hua Xizi, Juduo, Zhiyouquan , etc. have also "crossed the river" and emerged with the help of Perfect Diary.
Compiled from Yixian E-commerce Financial Report
The traffic dividend soon turned into a red ocean. After investing a large number of KOLs in the early stage, Yixian E-commerce still needs to continue to invest huge amounts of money to attract new customers. The sales and marketing expense ratio further increase height.
The average sales and marketing expense rate of Yixian e-commerce and before its listing (2019Q4-2020Q4) was 58.9%, while the sales and marketing expense rate in the five quarters after its listing (2021Q1-2022Q1) was 68.4%. Although it is slowly improving has declined, but overall remains at a high level.
Second, as the base of users and income scale increases, the growth rate will inevitably decline.
The first is the user growth rate. The number of DTC customers of Yixian E-commerce was 23.4 million in 2019, compared with 7 million in 2018, with a growth rate of 234.3%. In 2020, it was 32.3 million, and the year-on-year growth rate dropped to 38.0%. Entering 2021, Yixian E-commerce’s Q1 and Q2 quarterly reports show that its average growth rate of DTC customers has dropped to around 12.5%.From the second half of 2021 to now, in the quarterly highlights, there is no relevant progress in the number of DTC users.
In this regard, Yixian E-commerce stated that due to the " Personal Information Protection Law ", the collection and analysis of these data are not as comprehensive as in previous years, so the number of DTC users will no longer be calculated. However, combined with the declining growth rate of DTC users in previous years, even if it is announced, the number of DTC users may not be so impressive.
As the growth rate of DTC users declines, its revenue contribution is also declining. From 2019 to 2021, the net income generated by Yixian e-commerce through DTC channels accounted for 88.1%, 86.9% and 83.5% of the total net income respectively, which continued to decline.
Looking at the overall revenue growth rate, from 2019 to 2021, Yixian e-commerce's revenue growth rate continued to decline year-on-year. In Q1 of 2022, the revenue growth rate dropped by 38.3% year-on-year and 41.7% month-on-month, both of which were negative numbers.
Behind this, newly launched and acquired brands replaced Perfect Diary, sales replaced traffic growth, and skin care surpassed makeup as factors driving revenue growth.
Take a closer look at each quarter's financial report. Specifically, In 2020Q4, Yixian E-commerce also stated that revenue growth mainly depends on the increase in user volume. By the first half of 2021, in addition to the contributions from user volume and channel diversification, newly launched and acquired brands began to become one of the factors driving revenue growth. Starting from Q3 of 2021, the traffic dividend has faded, and the sales growth of newly launched and acquired brands has basically become the only factor in the increase in revenue. From 2021Q4 to 2022Q1, the revenue from the makeup business of Perfect Diary began to decline, and Yixian e-commerce began to rely on skin care products to achieve revenue growth.
03
Do marketing with your heart, but make products with your feet?
Whether it is difficult to form barriers in marketing or the growth rate is slowing down, the core problem behind Yixian e-commerce's difficulty in meeting capital expectations is the lack of product strength. Some netizens even called it "marketing with heart, product with feet ”
In terms of the size of the technical team, as of the end of 2021, the total number of Yixian e-commerce employees is 3,497, most of whom are offline tellers, with only 160 engineers, and 273 in formula R&D, product development and production management. Accounting for 12.4%. Although there are few technical talents, Yixian e-commerce R&D and production is very fast. It claims that it can complete the concept, development and launch of new products within 6 months, which is far lower than the 7 to 18 required by international brands. moon. It is reported that Yixian e-commerce has launched a total of more than 1,500 new SKUs in 2019 and the first three quarters of 2020.
from the official website of Perfect Diary
In terms of capital investment, its R&D expense rate in each quarter since its listing has been approximately 2%. Although it rose to 4% in 2022Q1, it is not even a fraction of the sales and marketing expense rate of 67.9% , Yixian E-commerce’s investment in R&D is evident.
From the perspective of research and development, the 2021 annual report shows that Yixian e-commerce has a total of 118 patents, including 5 utility model patents, 74 design patents and 39 invention patents. There are more patents in the design aspect than , which to a certain extent reflects that Yixian e-commerce is more inclined to use appearance marketing, combined with low prices, to stimulate users' impulse consumption marketing strategy.
Not only do they have few technical talents, they also invest less money, their R&D direction is focused on appearance design, and their R&D and production cycles are short. Yixian e-commerce also mostly adopts the ODM/OEM model in the production process. Under various circumstances, there are doubts about the quality of Yixian e-commerce’s products.
04
Is it going to be a perfect diary in the future?
Yixian E-commerce, which relies on Perfect Diary to enter the capital market, seems to be gradually de-regulating Perfect Diary in the future.
Multi-brand strategy moves to the skin care track
Yixian E-commerce has said that in 2022, the most important plan is to launch new brands, from the cleaning field to skin care brand building, to lead future development and growth. This also means that skin care is expected to become the second growth curve of Yixian e-commerce.
Compared with cosmetics, skin care products have higher gross profit margins.The 2022 "China Beauty and Skin Care Products Industry Investment Research Report" shows that the gross profit margin of facial makeup is 60%-80%, and the gross profit margin of basic skin care products can reach 70%-85%.
from the official website of Yixian E-commerce
In addition to the internally incubated skin care brand Wanzi Xinxuan, Yixian E-commerce has begun to acquire some skin care brands in 2020, such as French Coranli, DR.WU (only including mainland China business), Eve LOM and an state , etc. In the first quarter of this year, many skin care brands under Yixian E-commerce achieved higher growth than the overall market. For example, Q1 omni-channel sales of French Coranli increased by more than 60 times year-on-year; Q1 omni-channel sales of EVE LOM's China business increased by 145% year-on-year; Q1 sales of DR.WU increased by 120% year-on-year.
Although the growth rate is fast, the revenue share of skin care brands is low. In the first quarter of 2022, Yixian e-commerce's total net revenue from skin care brands increased from 108.4 million yuan in the same period last year to 182.7 million yuan, an increase of 68.5%, accounting for only 20.5%.
Although capital holds expectations for double-speed growth in Yixian e-commerce, among so many self-developed and acquired brands, it may be difficult to achieve the next perfect diary in a short time. For example, Anta Sports, one of the leaders in China's sports market, although it also "buys, buys" a bunch of international brands, judging from the revenue data in 2021, except for FILA and Anta, other brands account for only 7.1%.
Perfect Diary struggled offline
As for Perfect Diary, as the online traffic dividend faded and the conversion effect declined, Perfect Diary changed its previously commendable marketing strategy and began to focus on offline.
But for new consumer brands, online marketing investment is more about exchange for growth, while the offline development logic is generally to open large-scale stores in exchange for growth. Perfect Diary had previously planned to open 600 stores in three years. However, due to the impact of the epidemic, as of December 31, 2021, Yixian E-commerce had operated a total of 294 stores, with only more than 50 new stores added compared to 2020. It is reported that some unprofitable stores may be closed in the future.
How are the operating results of these offline stores? In its Q1 financial report, Yixian E-commerce made few and negative remarks about offline stores, such as the costs incurred by closing some offline experience stores and the impact of the epidemic on offline store sales.
In this regard, Yixian E-commerce said that the focus of Perfect Diary in 2022 is to improve the operational capabilities of offline stores, such as launching more categories of products and opening stores. However, under the background that the impact of the epidemic is difficult to subside in the short term, it remains to be seen whether the offline store operation results of Perfect Diary, which started online, can live up to its advertising slogan: The next step is better.
05
Conclusion
Industry data shows that in 2021, the CR5 of the beauty industry will be about 45%. In addition to international brands, the only domestic brand is Yixian E-commerce. The emergence of its Perfect Diary has allowed the light of domestic products to shine again in the public eye.
In fact, in the process of rapid growth, new consumer brands generally have immature, unstable, and even flawed business models. The problems that Yixian e-commerce encountered in terms of product , marketing, and R&D have also been encountered or are being experienced by other new consumer brands such as Huaxizi, Naixue's Tea, Yuanqi Forest , Bubble Mart , etc. . What is the future of
? Luckin went from financial problems that caused brand damage to full profitability in the first quarter of this year, which also shows that new consumer brands can still hope to rebound after bottoming out.
Therefore, perhaps the public should not be too harsh on Yixian e-commerce. The company also claimed that "the risk of delisting due to this law and regulation is approximately zero," and stated that it would use all possible means to save the stock price through buybacks, even mergers of stocks, and secondary listings in Hong Kong.
As of March 31, 2022, the company's cash, cash equivalents and short-term investments were 2.97 billion yuan. It was burning money in exchange for growth on a large scale, lacking strong financial support, and the effect seemed to be doubtful. Against this background, how can Yixian E-commerce, with its revenue declining and continuous losses, prop up investors' confidence and the company's stock price, and resolve the delisting crisis?
