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Viewpoint Network People's pursuit of beauty has no end, and the weak economic environment has not dampened this enthusiasm, but only complicated it.
Say goodbye to the era of rapid growth and huge financial resources from opening stores and expanding stores. A number of beauty and personal care brands have entered the deep water area of industry adjustment. After the epidemic prevention and control was relaxed, the short-term rebound exceeded expectations, which affected the judgment of many companies and also paved the way for a larger ebb after mid-2023.
According to the latest financial reports released by Estee Lauder Group and L'Oreal Group, the world's two largest beauty giants have suffered setbacks.
L'Oreal's sales in the Chinese market will be mediocre due to various reasons. The resumption of outbound travel, changes in consumer behavior and high inventory have all added complexity to the domestic beauty business. The brutal knockout rounds of
continue to take place, and some "players" have already chosen to quit. According to incomplete statistics, more than 20 beauty brands have announced their closure or withdrawal from the Chinese market since this year, including Benefit, Kose, and Baum under lvmh Group.
The life of beauty collection stores is naturally not easy. For offline retail stores, facing more rational consumers, they can no longer win by relying solely on price advantages and "online sense".
As a channel provider, where does the irreplaceability of beauty collection stores come from? How to improve customer stickiness? How to tell your own story well, find a suitable development path, and create unique value? These are all problems that a collection store brand needs to solve.
In Wu Tao’s view, afiona Yanli Group has its own way of doing business.
Thanks to its innovative exploration in terminal channels, retail scenarios, membership systems, and digitalization, this 29-year-old beauty retail brand has achieved surprising growth against the market trend in the past year and a half.
html At the end of July, Guanduan New Media had the honor to meet with Yanli Group CEO Wu Tao. In his office at the Shenzhen headquarters, we learned about the future that Yanli is heading towards.Wu Tao has been involved in the retail business for nearly 20 years. Before joining Yanli, his longest career was spent at Kids King , a leading domestic maternal and child enterprise, where he held the position of director and coo.
In July 2020, Warburg Pincus, one of Kidswant’s major investors, teamed up with Tencent, Xingnahe Capital, and Huaxing New Economy Fund to acquire a majority stake in Yanli Group. Wu Tao took this opportunity to serve as Yanli’s CEO.
Growth in adversity
But even such an experienced expert can only sigh when talking about the current industry situation: "The situation encountered in the past two years is unprecedented."
It is reflected on paper, from national statistics According to the latest retail sales data of consumer goods released by the bureau, the total retail sales of cosmetics in the first half of 2024 were 216.8 billion yuan, a year-on-year increase of only 1%, which was lower than the 3.7% growth rate of the broader market, and showed a downward trend.
html In the single month of 16, cosmetics retail sales recorded 40.5 billion yuan, down 14.6% year-on-year. It was the consumption type with the largest decline in the statistics. Although there is the impact of the changes in 618's playing style, the overall market is still slightly cold.The actual experience of front-line practitioners may be even stronger.
"The growth of the entire beauty industry has encountered challenges." Wu Tao said that after the epidemic was relaxed, it has not yet returned to the level of 2019.Data show that total retail sales of cosmetics will grow by 8.6% in the first half of 2023, while the same period in 2019 was 13.2%.
He said that last year some big international brands, including beauty collection stores, were relatively active in opening stores, but this year they have all scaled back their operations.
Wu Tao deeply feels the changes in the market. First, the scarring effect caused by the three-year epidemic, combined with the impact of the economic cycle, has greatly changed the shopping behavior of many consumers.
Under the consumption stratification, the middle and low-end consumer groups have become extremely rational and pursue quality-price ratio; although wealthy consumers have the spending power, their willingness to consume is limited. "Don't use routines and don't make customers do math problems."
Second , the emotional value factor in mass consumption behavior is highlighted. “Now consumers are pursuing some spiritual needs besides purchasing behavior, such as whether shopping has a sense of ritual.”
Thirdly, in terms of consumer trends, it should be “get rid of the glitz.” , return to the essence”. Wu Tao pointed out that the marginal effects of eye-catching and traffic-generating marketing practices commonly used in the industry in the past will become increasingly low.
Consumer customer groups are stratified, consumption behavior is differentiated, and physical channels are in urgent need of reconstruction. The industry is becoming more and more complex, and the means of competition among peers are no longer superficial, but are linked to the overall strength and historical heritage of the brand. According to
data, Yanli Group was founded in 1995. It has used 29 years of steady progress to build terminal layout advantages, high-quality brand matrix, refined operation system, multi-line access to online channels, etc., and has gradually become a leading Chinese company in China. Provider of high-end beauty products and services.
Yanli has dug a solid moat in the field of mid-to-high-end beauty and personal care. Wu Tao said: "Many international brands want to enter the Chinese offline market, and Yanli is the first choice."
After more than ten years of accumulation, Yanli It has helped many brands expand their market share in China, such as Japanese high-tech brand Albion, Swiss luxury skin care brand Cellcosmet, and anti-aging brand Juvena.
According to reports, Yanli’s stores currently sell more than 300 brands, focusing on mid-to-high-end professional skin care. Among them, international brands account for more than 80%. In the past two years, with the rise of the national beauty trend, Yanli has also launched comprehensive cooperation with domestic brands. In 2024, the proportion of domestic brands will also continue to increase, and currently it has occupied Yanli Nearly 20% of sales.
As Wu Tao enters his third year at the helm, under his guidance, Yanli Group continues to promote the expansion of categories such as cosmetics, perfumes, baby products, fragrances, and health foods, and develops new online and offline channels and conducts targeted marketing activities. , digital intelligence construction and other investments have yielded corresponding results.
More importantly, Yanli Group’s deep exploration of the membership system and private domain traffic has produced obvious positive effects.
The most important thing in the beauty retail industry is how to get customers to enter the store and pay. The factors that affect the consumer mentality have gone from the store looking beautiful and making shopping comfortable in the past to a deeper level, closer to human nature, and what is most often mentioned by people. And the details - the service.
Therefore, Yanli has leveraged digital intelligence construction to strengthen the expansion of the membership system and the interaction with members. Data shows that in 2023 alone, more than 6,000 offline consumer interaction meetings such as store salons and high-level member appreciation parties will be held, with more than 100,000 interactions, new members increasing by 24% year-on-year, and consumer members increasing by 19% year-on-year.
At the same time, Yanli has created the Black Gold Plus paid membership system, which adds benefits such as cash rebates, card opening/renewal gifts, monthly specials, and free shipping coupons on top of basic membership services.
"We will start in 2022, and the initial number of black gold members will be about 30,000." Wu Tao revealed that in 2023, the number of existing black gold members will increase by more than 100% year-on-year, reaching nearly 60,000. This year's goal is to reach 100,000.
On this basis, Yanli achieved growth against the trend in 2023. According to the Yanli Group's 2024 Supplier Summit held on May 27, Yanli's overall operating profit in 2023 increased by 66% year-on-year, and omni-channel sales increased by 19% year-on-year. At the same time, 20 new stores were opened during the year and achieved profitability for the year.
From January to July this year, Yanli’s service revenue increased by 350% year-on-year, and its o2o business increased by 70% year-on-year.
New terminal "war"
How to properly handle long-term goals and short-term operational details on the road to large-scale development is undoubtedly a severe test for the CEO of a chain enterprise.
In Wu Tao’s plan, Yanli Group’s long-term goals are: “First, to become the preferred provider of beauty products and services for Chinese consumers; secondly, to create a better ecosystem for the domestic beauty retail industry .”
’s ambitious long-term goals are based on the long-term potential of China’s beauty retail market. "The entire market is actually far from being fully developed." Wu Tao said that even the number and density of stores of leading brands are still quite different compared with the international market.
data shows that regardless of the well-known brands such as Sephora and Watsons, Germany's largest chain of drug and cosmetics supermarkets, dm-drogerie markt, has 2,108 stores in the local market as of fiscal year 2023, accounting for 26.2% of the country's market share;
U.S. Beauty Cosmetics retailer Ulta Beauty operates 1,385 stores in 50 states across the United States; Korean beauty chain Olive Young also has more than 1,300 stores in South Korea.
In the long run, China’s beauty retail market still has great opportunities to dig deeper. However, in contrast, Yanli's store expansion in the past was very cautious. So far, it has deployed more than 200 stores in 50 cities across the country.
Wu Tao pointed out that Yanli will urgently need to maintain stability in the future and continue to expand its scale at a steady rate of 20-30 new stores every year. Among them, the number of stores is expected to reach double-digit growth in 2024. The steady development of
does not mean that more attempts will not be made. It is understood that Yanli has tried to build flagship stores, Yanli standard stores, Yanli outlet stores, Yanli concept stores, Yanli brand experience stores and other store types in retail terminals in recent years to explore different offline beauty retail stores. area.
Wu Tao revealed that the company’s next store expansion strategy will first focus on traditional advantageous areas such as Northeast, Northwest, Southwest, and Central China, as well as strong second-tier and 1.5-tier cities such as Wuhan, Taiyuan, Chongqing, Chengdu, Xi’an, Harbin, and Shenyang. Consolidate market dominance.
At the same time, Yanli will continue to cooperate with China Resources Land , Wanda Group, Joy City and other commercial real estate developers to deepen its penetration into third- and fourth-tier cities.
In addition, another focus is to cooperate with the o2o business and implement more front-end warehouse store models.
"Chain business must have a complete ecological layout." Wu Tao introduced that Yanli has deployed online real-time retail channels such as WeChat mini program, Taobao Tmall, JD Daojia, Meituan , Ele.me, Dianping and Douyin. , currently contributes 10% to the group's overall business performance, and is expected to achieve rapid growth in the future.
front-end warehouse stores can cooperate with it to fulfill customer contracts faster and extend the product categories on sale. "Cangdian stores do not do offline retail, they are all located in office buildings or industrial parks." It is understood that Yanli's front-end warehouse stores will mainly cover domestic core cities with outlets, reducing operating costs through economies of scale.
"We tried to open one in Guangzhou, and the results were good." The prospects are good, Wu Tao said, and the front-end warehouse model will be accelerated.
The following is the interview record (excerpt) of Yanli Group CEO Mr. Wu Tao from Guandian New Media:
Guandian New Media: Can you talk about the establishment of Yanli’s omni-channel, especially online channels?
Wu Tao: When we do chain business, we need to have a complete ecological layout, which requires both offline stores and online ecology; we need to have both a public domain layout and a private domain layout.
offline stores are subject to two dimensions, one is time and the other is space. The online part actually breaks the dimensions of time and space, and actually does something to increase the dimension. Then there are public domain and private domain, which are offline members. Yanli’s goal is to become an omni-channel private domain member.
Each Yanli store has many online clones, including Meituan, JD Daojia, Ele.me, Dianping and Douyin, as well as mini programs.
In terms of real-time retail scenarios, we will add some categories and single products based on the characteristics of the channel, but most of them are public. For example, for business in the mini program community, we use the pallets and inventory of the store.
At present, the revenue contribution of instant retail accounts for about 10% of our overall performance. Next, we will increase cooperation with online platforms, especially in-depth cooperation with companies with leading effects.
From another perspective, these platforms also need the rich ecology provided by Yanli. Currently, Yanli is the most important supplier of high-tech or professional personal care brands on the market. Therefore, these platforms will provide us with more subsidies at some larger nodes, such as 618.
Viewpoint New Media: Why build a front-end warehouse store and what problems are solved?
Wu Tao: warehouse store is a new business model developed by everyone, and major real-time retail platforms have also begun to pay attention to warehouse stores.
First, the target area for warehouse selection is clearer and more targeted. The platform's data will reflect which areas have the strongest immediate retail demand. Based on this area, we can select points within 1 km or 1.5 km of the surrounding area.
Second, Cangdian is a supplement to the gaps in offline stores. If we happen to close a store in a certain area, we can consider launching a warehouse store to take over the demand left by offline stores, including extending some categories.
Third, the cost of warehouse stores is very low. If a store mainly serves online channels and does not need to occupy a location with good traffic, it can choose to place it in an office building or industrial park, which will save more on rent.
We tried to open a warehouse store in Guangzhou, and the effect was good.
Viewpoint New Media: What is Yanli’s store opening strategy this year? Are you considering the first-tier city market?
Wu Tao: The first-tier cities are facing greater challenges this year, but fortunately, we don’t have that many stores in first-tier cities.
currently has only one store in Shanghai and Guangzhou, 10 stores in Beijing, and 8 stores in Shenzhen.
Our focus is, first, on core cities in traditional advantageous areas such as Northeast, Northwest, Southwest, and Central China. Second, we focus on lower-tier markets, in third- and fourth-tier cities.
We not only have good cooperation with national commercial real estate developers such as China Resources, AEON, Wanda, CapitaLand, Joy City, but also have very in-depth cooperation with some regional high-quality commercial real estate developers. In addition, outlet companies such as Shanshan, Sasseur, and Wangfujing also have good interactions. The stores with the best growth this year are also in outlets.
