Where Is the Opportunity Facing the New Turning-Point As Skin-Care Market Grows Against Trend

Long Yanyu

Guangzhou Zhuangzhuhui Information Technology Co.,Ltd.,China

The year of 2020 saw the dramatic changes of live e-commerce with international brands seeking opportunities in second and lower-tier cities.Besides,domestic brands have consolidated or enriched their own “barn”.The online skin-care market grows against the trend.Thanks to the new channel,the layout of the skin-care brand has been rewritten again this year.With the execution of Regulations on Supervision and Administration of Cosmetics in 2021,the new turning point is around the corner.What about the features of the skin-care market in 2020? Who will dominate the market in 2021?

International brands accelerate to seek opportunities in lower-tier cities while domestic brands fall back

Changes in the online skin care pattern can be seen as a bellwether of the overall skin care market.It is clear that despite the growth of three major e-commerce platforms against trend in 2020,namely Taobao,Tmall and JD,there is only one domestic brand included in online TOP 10 in terms of either the “Double 11” in 2020 or the whole year in 2020.The ranking of such domestic brand keeps declining.A key reason behind is that the international brands have made more efforts regarding live streaming and social media.While digging into target consumer groups,they will accelerate their reach to lower-tier cities and continue to squeeze the share of domestic brands in online channels.However,Winona has set itself apart from the international brands,which in turn brings hope to domestic brands:focusing on sub-divided track and compete with big brands with small size.On October 30,2020,Botenee,the parent company of Winona,succeeded in the 39th meeting held by GEM Listing Committee,which greatly improved the confidence of skin-care brands;on January 14,2021,Botenee released the draft registration of prospectus,marking a step closer to listing.According to the registration draft,between January and September,2020,Botenee gained a revenue of 1.427 billion yuan,an increase of 32.99%comparing with the same period in 2019; the net profit belonging to parent company is 215 million yuan,15.15% higher than the same period in 2019;according to the preliminary performance forecast,the expected revenue of 2020 is 2.48 billion～2.71 billion yuan,growing 27.59%～39.42% against 2019; the net profit belonging to parent company is expected to reach 478～558 million yuan,a growth of 16.03% ～ 35.45% in comparison with a year ago.Among them,the sales revenue of Winona occupies over 99% of the major business revenue of Botenee.Winona achieves amazing growth by focusing on sensitive skin care.Apart from Winona,Dr.Yu,MedRepair,Biorrier and other brands also focus on sensitive skin care.Dr.Yu achieves three-digit growth in 2020.The performance of Chcedo and Pechoin,both as the TOP domestic skin-care brands,has been stable in online channel.Such two brands also achieve steady performance according to the feedback of CS channel offline,which is uncommon.

Capital continues to be optimistic about the subdivision of special skin care in order to boost the rapid growth of new brands

Against the background of the emerging domestic brands,special and new domestic brands keep popping up.All kinds of capital competition have been triggered,which,in turn,further promote the growth of the domestic brands.

Ban Min Dou,the functional cosmetic research and development enterprise,announced it has completed the angel investment fundraising of 50 million yuan in March,2020.The fund would be mainly used in the research and development of raw materials of functional products,so as to build core competitiveness from industrial supply chain and improve the channel development of self-owned products.

In September,2020,“Grain Rain”,the new domestic skin-care brand,announced its completion of tens of millions of financing,mainly invested by Jinding Capital.“Grain Rain” also set up its own MCN organization called “root heart”,which supported the development of its own brand on track of live broadcast,and also succeeded in incubating lots of great anchors.It has become the TOP organization in South China.

PMPM,the new domestic skin-care brand,founded in the end of October,2019,mainly features as the skin beauty function and the unique tourist culture in terms of package style.It could meet the product demand of those caring about ingredients and those caring about efficacy.Besides,it satisfy the aesthetic and emotional needs of new-generation consumers.PMPM completed consecutive three-round financing:it got the angel financing from Source Code Capital in January,2020; it received the investment from BA Capital and the continuous investment from Source Code Capital as well as the following investment by Xinyi Capital worth of tens of millions of yuan in the Pre-A round financing;it announced it obtained the independent Pre-A round investment by HARMAY,a high-end beauty collection shop in October 2020.

In November 2020,Shanghai URTE Bio-Technology Co.,Ltd,parent company of Geoskincare,wrapped up the E-round fundraising worth of 350 million yuan invested mainly by Cathay Capital following the equity financing worth of hundreds of millions of yuan earlier in 2020.It also plans to declare the growth enterprises market in 2022.It is introduced that the fund will be used in the preparation for listing,brand marketing investment,research and development investment,overseas supply chain expansion and other areas.In the first half of 2020,during the most serious period of the COVID-19,Geoskincare still has achieved a growth 3.5 folds higher than that of the previous year with simultaneous increase of its profit.Also,its CS channel has increased by 3.2 folds,e-commerce has increased by 5 folds and the private e-commerce has been doubled.In 2019,the revenue reached 500 million yuan.

In the same month,Forest Cabin,focusing on mono-brand shop,walked out of the darkest moment and announced it wrapped up the A round financing worth of hundreds of millions of yuan.SIG led the investment,followed by organizations such as Toutoushidao Capital and Country Garden Venture.

They tried to help the building of new scientific research base of Forest Cabin and its brand development.

In January 2021,Simpcare received B round financing worth of tens of millions of American dollars,mainly used in key technology research and development,global supply chain development and team building.It was jointly invested mainly by Coatue Capital and a certain American fund,with continuous investment by Hony Capital,and Cygnus Equity as the independent finance consultant.Set up in 2019,the brand of Simpcare completed 6 rounds of financing within one year and a half.

Different kinds of enterprises join the competition of functional skin-care business

With the robust development of social media,consumers of skin-care products caring about ingredient,science and efficacy keep growing,which directly causes the tough competition of functional skin-care business and draws different types of enterprises to join the game.According to data,during October,2019 and September 2020,the sales of functional skin-care products at the platform of Taobao/Tmall reached over 79 billion yuan,accounting for 66% of the overall skin-care market.

Dr.Yu,as the representative of functional skincare brand,was popular in the live channel in 2020.It adopted the medical research development and also strengthened the feeling of brand reliability and efficacy.Within a short period of time,Dr.Yu released many products which gained much popularity on the Internet.Geoskincare,a brand with rapid growth in 2020,newly introduced the allnatural and functional brand of Aloe Vera.

In terms of the competition of functional skin-care business,the pharmaceutical company enjoyed natural advantages as Voolga,Yaodurenhe,Xiuzheng and Pien Tze Huang Pharmaceutical Co.,Ltd.increased by leaps and bounds this year.Mircoecology and hemp cosmetics closely related to functional skin-care became the new opportunities.Data showed that the online market for probiotics reached $848 million in 2018.Among them,the American market occupied the lion’s share,followed by China.Besides,the Chinese market size of skin microecology was 4.1 billion yuan in 2019.And it was expected that the market size would increase to 10.54 billion yuan in 2025 with the compound growth rate as 26%.Possibly,new brands may appear in subdivided sector.

Yatsen e-commerce incubated new strategic brands and filled in the blank of skin-care business of cosmetics enterprises

In June,2020,thanks to Perfect Diary’s success in breaking the monopoly by international brands within several years,Yatsen e-commerce managed to become the leading cosmetics enterprise,which officially introduced Abby’s Choice,a new brand with strategic importance.According to the brand plan,the products of Abby’s Choice would cover various categories such as skin-care,cosmetics,beauty facility and personal care,different from the pure skin-care brand.At present,it focuses on skincare products,succeeding in filling in the blank of skin-care business of cosmetics enterprise.So,it offers a new idea of development to other cosmetics enterprises.After a half year of since its launch of Tmall store,the sales have grown rapidly,with over 10 million yuan in September.

JALA leads the revolution of integrated stock for digital channel transformation

Frequent goods fleeing and disorderly have been a lot of brands and distributors’ trouble.By way of new thinking and new technology,JALA group,the leading enterprise in skin care industry in China,took the lead in revolution of digital channel transformation,so as to improve the operation efficiency.On September 23,2020,JALA integrated its stocks and its first warehouse was launched in Xi’an.

According to Zheng Chunying,president and chairman of Jala group,the originally “scattered”goods are put into separate warehouses in a unified manner across China.The third party logistics provider (S.F.Express) will manage these goods and S.F.will deliver them to stores according to terminal orders,so as to realize the sharing of stocks in all channels,unified distribution and visualized operation.In so doing,the pressure of stock can be greatly reduced while the turnover efficiency can be elevated,and behaviors like commodity fleeing and disorderly price can be prevented.These actions can also relieve the burden shouldered by distributors afflicted by the “black swan” of COVID-19.Brand agents can keep up with the times and transfer into digital service providers.

Steady performance of medium-level quality brand and expected potential of aging products

In Chinese market,the premiumization of local cosmetic brands has been the difficulty faced by enterprises.After years of efforts,only the brand of MARUBI sets itself apart.According to Xie Qian,due to the economic development,the medium-level quality brands in terms of skin care consumption remains stable such as L’Oreal and URARA,which have been supported by the large number of the group of civil servants with consumption power.Xie Qian,founder of Up Club.On the other hand,the demand for skin care of the elder people rises while the products used by consumers born in 1960s and 1970s such as astragalus cream and Kose moisturizer have been on hot sale.In his opinion,as China’s aging society intensifies,the potential of low price aging skin care market can be tapped into.