Is 2022 the Life-and-Death Year for New Prominent Beauty Brands?

Wang Shuai

Qingyan Network Technology (Wuhan) Co.,Ltd.,China

Another beauty brand has fallen.The new prominent domestic make-up brand “Partial Sweet,”which previously released its “Store Closure Diary”through the official channel,is currently basically emptied of its Tmall flagship store:only one product is listed,and the sales volume is displayed as 0.In regard to this situation,the brand’s customer service staff confirmed the closure of the store and said,“The sales of products have been bad,and the store will be officially closed when the last batch of goods is cleared.” In addition,brands such as Romance Baby Bear and Girlcult have also encountered different business difficulties in recent times.Since 2021,the intensive clearance and closing of stores by new prominent brands is worth thinking about in the industry.Many people in the industry believe that the reshuffling time for new prominent brands is coming.In 2022,a large number of new prominent brands with small volumes and weak bargaining power may usher in their “life-and-death year.”

A large number of new prominent brands are in trouble

Since 2022,many new prominent brands have fallen into a big dilemma in business including the above-mentioned Partial Sweet.Recently,the new prominent makeup brand Romance Baby Bear has released a “Store Closing Letter” through its Tmall flagship store and held a store closing and clearance event.At present,the five products on sale in the store are all marked with the words “Closing-store Clearance.” Among them,two products named“Little Triangle Eyebrow Pencil” and “Peach Beauty Blender” are priced at less than ten yuan.Earlier,the new prominent skin care brand Zhiben suffered a crisis of trust due to the supply shortage of its popular makeup remover cream;the new prominent makeup brand Girlcult held a “funeral” for the purpose of clearing the goods.On Xianyu,39 Girlcult products were sold at an ultra-low price of 0.1 yuan.The brand revealed that “this batch of clearance products will not be put on the shelves or resume production.”

In addition,a number of Douyin brands can hardly hide their declining tendency.Data shows that“Qianrujiao,” a brand created by the Douyin beauty anchor “cici Qian” herself,once achieved a GMV of over 50 million on the Douyin platform in June 2021,while its GMV dropped to 22.21 million in the past 30 days (from January17 to February15,2022)although the number of related videos and related live broadcasts did not decline significantly.Another brand “Laiziyan” founded by cici Qian is also doing a low-price clearance.On Xianyu,“Laiziyan sea fennel single use essence,” whose original price was 998 yuan per box,was sold to 30 yuan per box.According to the seller,this batch of goods came from cici Qian’s live broadcast room,and the reason for the low price was “excessive stock.”

“A life-threatening straw”

The reasons why new prominent domestic products encounter survival difficulties may be inseparable from the following factors.

First of all,the foundation of new prominent brands is unstable,therefore when the wind blows,they fall.New prominent brands emerge with the explosion of Internet traffic.In the early days of the rise of social e-commerce platforms such as Taobao and Douyin,they cultivated their own direct-line brands by offering support in traffic.However,as the platform traffic peaks,it is difficult for emerging brands to obtain traffic at low cost.

In addition,the growth rate of the cosmetics industry has also slowed down significantly in recent years.An industry insider who did not want to be named said that it is difficult for brands to make profits in a “low-growth” market environment,with peak traffic and no hope of profitability,which also directly leads to a decline in the enthusiasm of capital.

In the past,with the help of capital and traffic,a large number of new prominent brands completed within 2 to 3 years the accumulation that traditional brands took nearly ten years to reach.However,the rapid development also means that these brands are short of sediment and have an unstable foundation.Homogeneous competition has also intensified the survival battle among the new prominent brands.According to Deng Jun,the founder of Xiaomei360,the categories of skin care and make-up are limited,and there are limited tracks for new prominent brands.In such case,these brands are faced with fierce competition and involution,during which process the brands lacking innovative abilities or excellent products will inevitably be eliminated.

Second,with rising costs,most brands cannot withstand the pressure.Now,every claimed piece of efficacy must take the efficacy test.According to a person in charge of a cosmetic testing agency,at present,the cost of a moisturizing test is at least 20,000 yuan,and the cost of a whitening test may go beyond a hundred thousand yuan.Many brands with low prices and low net profits cannot withstand this cost pressure.

In addition to testing costs,the extended cycle of the filing process also puts pressure on brands.Since the implementation of the filing policy,many brands have slowed down the speed of releasing new products,and the development cycle for new product has been at least 1～2 months longer than in the past.This is undoubtedly a fatal blow to new prominent brands that rely on the strategy of continuously launching new products to maintain sales and popularity.In fact,many new prominent brands became popular simply because of one or two single products.Once the filing cycle becomes longer,it means that it is difficult for the brand to stimulate purchases and maintain brand popularity through continuous release of new products.

In addition,the rising cost of talents has also increased the pressure on businesses.At present,the demand for related talents such as “Quality Safety Officer”,“Cosmetic Ingredient Researcher,”“Cosmetics Filing Specialist” on the major recruitment websites,has almost reached a blowout state,and the salary of related positions has also been rising accordingly.The recruitment websites show that the annual salary of some of the abovementioned positions once exceeded 200,000 or even 300,000 yuan.Even so,many businesses still struggle to hire people.A person in the cosmetics-related industry said that it is conservatively estimated that the current talent gap in the industry in terms of quality and safety leaders and filing specialists is as high as tens of thousands of people.Under such huge gap,it is difficult for some small and medium-sized enterprises to compete with large manufacturers.

The success rate of new brands is less than 1%

Next,the frequency of new brand releases in the industry will slow down relatively.The abovementioned insider who did not want to be named believes that in the past stage,new prominent brands can quickly complete the transition from 0 to 1 with the help of capital,platform,traffic and other bonus conditions,but the new brands born later have obviously lost this kind of convenience and there will not suddenly appear so many brands in the industry that can grab dividends.

Besides,with the implementation of the new cosmetics regulations,the threshold for branding has been raised,and the cost of corporate compliance has increased significantly.A group of “new players” or“speculators” who are not strong enough will also think twice before entering the game.

In the past,companies could quickly create a brand by preparing the start-up capital and finding an OEM.Now the industry tends to be standardized,especially since the efficacy claim policy was implemented,which regulates that all product efficacy must be “evidence-based.” In this situation,new brands must “throw” real money and strengthen investment in R＆D and technology before they can gain a foothold in the market.

Not only that,the tax reform policy officially implemented from January 1,2022 also makes small and medium-sized enterprises feel insecure.Many small and medium-sized enterprises are actually operating near the “red line.” The founder of a skin care brand in Chongqing said that since the outbreak of tax evasion incidents of the streamers,the state has stepped up tax supervision.At present,many companies are making up the lesson of tax,which has further exacerbated the survival dilemma of small and medium-sized brands,because “once they comply with regulations,profits will be further reduced.”

In addition,international big brands have“marched” at the Chinese market with stronger brand potential,financial strength and supply chain systems,which has also put domestic new brands under considerable pressure.

According to data from Tmall and JD.com,in 2021,international brands such as L’Oreal and Procter ＆Gamble not only increased the number of new products launched in the Chinese market,but also speed up the iteration of SKUs.

In the future,brand competition will enter the era of “comprehensive competition.” In the past,new prominent brands could adopt the strategy and path of “basing themselves on a sub-segment of the blue ocean or on the niche market” to avoid direct competition with international brands.However,with the continuous penetration of international brands into the Chinese market and its major sub-categories,brand competition is no longer limited to “competition of the competing goods,” but has entered a stage of complete melee.

At this stage,it will be difficult for a brand with only a single capability to gain a foothold.As the marketing director of a new domestic brand said,“The influx of big-name new products has led to an increase in consumers’ expectations for ‘good products’,and the competition for Internet traffic will also escalate again.In this case,new brands with weak comprehensive capabilities are likely to encounter ‘encirclement and suppression’.”

And this also means that it is more difficult for a brand to “make itself seen.” At present,the success rate of entrepreneurship in the entire industry is less than 1%,and the success rate of new brand entrepreneurship is far less than this percentage.

Who still has a chance?

But this does not mean that new brands born in the future have no chance.Every era will generate new brands,but they will spring up in different ways and from different dimensions.In the future,emerging channels such as live streaming may also create new brands.The founder of a skin care brand believes that there are still some opportunities for live broadcast,but if a brand wants to seize this opportunity,it must use the “vertical subdivision track+ founder IP self-broadcast” mode:on the one hand,focus should be put on creating brand differentiation and professionalism;on the other hand,the brand should obtain traffic and increase the stickiness of fans by amplifying the founder’s persona.It is not easy to do both at the same time,which not only tests the founder’s ability,but also requires strong content and supply chain support.

At the same time,under the circumstance that the market dividends have obviously subsided and the competition has intensified,only by strengthening the systematic bottom-level construction can the brand have a better chance to gain a foothold in the new market environment and realize the transformation from an “Internet-famous brand” to a “long-lived famous brand” or even a “super brand.”

Among them,the systematic bottom-level construction includes the redefinition of the target group.In the past,almost all new prominent brands were focusing on the Generation Z crowd,targeting themselves at the young consumer market,while the needs of other segments were actually seriously ignored.Under the trend of diversification,the difference in biological age has long been insufficient to define today’s consumers.Concepts such as “punk youth,” “ACGN girls” and “middle-aged old baby”emerge one after another.In this case,new brands should pay attention to the scenes,focusing on serving consumers in different scenarios.

In addition,“creating product differentiation and telling a good brand story” is also very important.To create a brand that is truly integrated into consumers’lives,we must first create high-value points of difference for the brand,and this “high-value point of difference” comes from what problems the product can solve for customers and what kind of spiritual satisfaction it provides for consumers.

The key to creating differentiation is to find the core scarce resources or barriers of the brand.The scarcity of different brands is different,for example,some brands have acquired a certain scarce ingredient,while others have mastered unique supply chain advantages.When brands communicate with consumers,they must first determine the advantages and barriers,and then amplify this advantage and tell the consumers about it.

In fact,the process of telling stories to consumers is also the process of building a brand.In the era of social media,although the essence of brand marketing logic has not changed,the means of media to convey content has been changing all the time.

Therefore,the marketing strategy in “He who has an art has everywhere a part” is no longer feasible.For new brands,finding the best way to communicate with consumers amid rapid changes is the key to success.Those who can tell the brand story in a way that consumers like and who can mobilize consumers to participate in brand building and growth will be the biggest winner in the future.CDC