Beauty businessmen suffer from the ＂cold winter＂： the price volume can’t be rolled, so they can only spell other things.
Image source: Ying Caitang
Open the take-away App in your mobile phone, buy cosmetics like ordering food, and then wait for the rider to deliver it to your door within a few minutes. This real-time retail format called "beauty take-away" is becoming a new Nugget track for beauty retail entrepreneurs.
Liu Bo, the founder of Meiyou Beauty, a chain brand of beauty take-away shops, told Interface News that in autumn of 2022, he opened the first direct store of Meiyou Beauty in Hangzhou. One year later, the monthly sales volume of this store increased from 1,000 to 5,000. At the same time, Meiyou Beauty has been rapidly spread across the country through the franchise model. In less than two years, the number of stores has reached more than 260.
Liu Bo recalled that when he opened his first beauty takeaway shop, there was only one colleague nearby. By 2023 and 2024, the number of peers was obviously more than one year.
Liu Bo has been engaged in the new retail industry for many years. From about mid-2022, he frequently listened to friends in the industry and said that the new retail of beauty is at the forefront. At that time, major e-commerce platforms have begun to grab local life business, and one of the trends is to open up more categories of instant retail in addition to food and beverage takeout, group purchase and other businesses.
Beauty take-out is not completely new. As early as 2022, Meituan, Hungry and other platforms began to cooperate with some beauty brand stores and beauty collection stores like Watsons and Sephora.
The year 2020 when the epidemic broke out is an opportunity.
In Liu Bo’s view, beauty take-out shops have no direct competition with those beauty brand stores and collection stores that have settled in the take-out platform. Most of the latter are mid-to high-end famous products, while beauty take-out shops, especially Meiyou Beauty, have the advantage of covering a more affordable price range and opening 24 hours a day, which is especially important to meet emergency needs, and emergency is a common scene of instant retail.
However, Liu Bo believes that the customer base of beauty take-out is not limited to this, but also those "young people with convenient and quick pictures". "Now many people in big cities have this kind of consumption habit. Eating, drinking, and buying necessities can be solved in one stop on one platform."
Liu Bo believes that people will gradually accept this new shopping method like online shopping. "What we are optimistic about is the stability of this project, and consumers at this level will always exist."
Although the profit rate of the new beauty retail is much lower than that of the high-margin categories such as flowers, cakes and fruits he has done before-the profit of the latter can be as high as 200% or even 300%, but the homogenization and competition of beauty takeaway are far lower than the latter, which is "relatively stable".
Meiyou beauty cosmetics takeaway shop Image source: Meiyou beauty cosmetics
For entrepreneurs, the attraction of opening a beauty takeaway shop lies in the relatively low start-up cost.
Compared with setting up a beauty store or an e-commerce C store (personal store), a beauty take-away store can save a lot of money on rent, manpower and traffic. According to Liu Bo, the cost of joining a single store of Meiyou Beauty Cosmetics is about 100,000 yuan to 150,000 yuan, mostly for couples. Of course, if you open your own store, only sell low-priced sample goods, locate in non-first-tier cities, and SKU only meets the minimum requirements of the platform, the cost can be reduced. The entrepreneur who runs a beauty take-out shop in Jinan, Shandong Province told the interface news that his start-up cost did not exceed 50,000 yuan.
Goods are the bulk of the cost of opening a store. As an unofficial retail channel such as beauty take-away shop, its supply chain is generally divided into domestic beauty products and imported beauty products. The supply chain of domestic beauty cosmetics is relatively simple. For example, some big retailers can purchase goods directly from brands, eliminating the link of middlemen. The supply chain of imported beauty products is longer, and the source is often brand counters, duty-free shops or brands at home and abroad. Because of the large order volume and involving transnational logistics and customs declaration procedures, a large supplier specializing in procurement and warehousing logistics has emerged.
Chen Xiaohu, the head of Zhonghuirongxin, a beauty supply chain service provider, told Interface News that large suppliers mainly rely on bulk purchase, tax exemption and exchange rate spread to reduce the purchase cost. Take Zhonghui Rongxin as an example, its procurement sources include duty-free shops in Asian countries such as South Korea and Thailand, as well as department store counters in Europe, and some of them are first-class sources provided by brands.
Some suppliers have their own superior categories and can get lower prices, but the overall profit margin of this link is basically stable. "The market is very transparent, and downstream customers also know about our purchase price. Our role can only earn so much profit." According to Chen Xiaohu, usually large suppliers can take 3% to 6% of the final sales profits, while the profit points of downstream retailers are about 10% to 15%.
The warehouse of Zhonghui Rongxin, a beauty supply chain service provider. Image source: Zhonghui Rongxin
Although it seems to be a blue ocean in the Red Sea, beauty take-out shops are inevitably affected by the coldness of the entire beauty market. Liu Bo found that those famous products with a unit price of several hundred thousand yuan became more and more difficult to sell. "Last year, a store in’ 520′ sold 70 or 80 big-name lipsticks, which was like playing. This year, it may only sell a dozen or twenty. Instead, it is a set of boxes with more than 100 yuan and a 925 silver needle necklace with dozens of dollars."
The beauty market did not usher in a strong recovery after the epidemic as expected.
According to the latest data released by the National Bureau of Statistics, from January to May 2024, the total retail sales of cosmetics in China increased by 5.4% year-on-year, much lower than the 11.3% increase in the same period in 2019. Throughout 2023, the total retail sales of cosmetics in China increased by 5.1% at a low base in 2022, an increase of 2.9% compared with 2021; Before the epidemic, from 2015 to 2019, the average compound annual growth rate of total cosmetics retail sales in China was 9.9%.
However, considering that there is still a gap in the market segment of beauty take-out, Meiyou Beauty still has expansion plans, but it has turned its attention from the first-and second-tier cities with fierce competition to the sinking market with relatively small demand and lower operating costs. "Our next plan is to expand in cities below the third tier like Lishui and Quzhou in Zhejiang. In this place, it is possible for franchisees to make three or five hundred orders a month, complete the distribution by themselves, and it is very good to earn five thousand or eight thousand a month when the costs such as rent are not high. " Liu Bo said.
Switching from the takeaway warehouse to the beauty store is a directly rejected choice. One reason is that physical store business may not be easy to do, and its investment cost will be much higher. "The single-store start-up cost of our project is basically capped at 100,000 to 200,000, and it is not so good (joining) if it is higher." Liu Bo said.
Merchants are packing beauty takeaways. Image source: Meiyou Beauty
There are always people who can find new opportunities in the depressed environment, but compared with these enthusiastic new players, the normal state of most beauty suppliers and retailers is to face the shrinking business and try to find a way out while being cautious.
Tao Chengqiu, who runs a regional beauty chain brand "Yingcaitang" in Chongqing, told Interface News that since its establishment in 2006, Yingcaitang Beauty Collection Store has been fully self-operated, and it once opened more than 40 stores in the peak period around 2017, but then the development of online channels and the epidemic have successively impacted physical retail, reducing this number to 11 today.
The situation of local counterparts is also not optimistic. In the Chongqing market observed by Tao Chengqiu, about one-third of the beauty stores have fallen down compared with before the epidemic, including large beauty chain brands. "We are not killed by each other, but by other channels and the whole environment." Tao Chengqiu said.
Because the density of stores is far less than before, "a shopping center may not even have two or three (beauty collection) stores." The competition of beauty stores is no longer from offline peers. The biggest problem they face is the decline of offline passenger flow and the impact of online price wars. This forces merchants to try to lower prices and improve services to retain those customers who will patronize physical stores. Tao Chengqiu observed that after the epidemic, the trend of consumption stratification is obvious, and those who buy beauty cosmetics offline are often those who have requirements for quality and have more consumption power.
Yingcaitang therefore adjusted the product structure and increased the proportion of imported products with higher unit price. At present, the price of the products mainly promoted in the store is around 300 yuan. At the same time, they will also focus on the discounts and prices of online channels and make corresponding adjustments to the pricing of stores. For example, during the 618 e-commerce promotion period, Yingcaitang will also make some discounts and purchase activities in the store alone.
However, because the quality and price of the third-party beauty supply chain are often directly linked-too cheap is likely to be fake, Yingcaitang does not dare to reduce the cost of the goods to the extreme, and the lower cost limit is basically the end. In order to avoid being involved in a vicious price war, Yingcaitang will prefer those brands with better market price protection and stable price system when selecting products, especially the main products.
Service and experience are also the advantages that Yingcaitang has strengthened to differentiate itself from e-commerce businesses. Tao Chengqiu told the interface news that Yingcai Tangmen Store has changed from a pure store in the past to a leisure experience scene that can bring more "emotional value" to customers, such as introducing a light beauty service and making more efforts to maintain old customers. "The online price of the same product will always be lower than ours. What we have to do is how to provide other values to customers."
Beauty Collection Shop Yingcaitang Image Source: Yingcaitang
It is a common strategy to enhance competitiveness to provide more soft added value beyond the most basic commodity transactions after the price has been beyond the volume.
The same is true for upstream beauty suppliers. Chen Xiaohu, the person in charge of Zhonghui Rongxin, told Interface News that the homogenization of beauty suppliers is serious now. Apart from the price gap, it is difficult to form a difference in product types, which is mainly determined by market demand. "There may be only a few products that a beauty brand sells well. Those that sell well will always sell well, and those that don’t sell well are not willing to adopt them. So we can only work hard on service and quality control. "
Beauty products are the hardest hit areas for counterfeit goods. A large part of the so-called service and quality control refers to genuine guarantee, such as purchasing from duty-free shops to warehouses, in which no one has touched the goods.
In addition, as the market information becomes transparent, the influx of more peers also makes Zhonghui Rongxin turn to develop other businesses other than pure goods. Since its establishment in early 2018, Zhonghui Rongxin has developed the supply chain services of customs declaration, freight forwarding, bonded warehousing and other systems from the earliest purchasing business, and the latter has become the main business of Zhonghui Rongxin.
These resources once helped Zhonghui Rongxin win more orders during the epidemic than before and after. Because the circulation of goods was limited at that time, the competitiveness of suppliers with better freight forwarding resources was highlighted.
However, after the epidemic, the chill at the downstream retail end also came. Chen Xiaohu told Interface News that the performance of Zhonghui Rongxin after the epidemic was "completely incomparable with those years of the epidemic".
In addition to improving service quality and developing supporting business, Zhonghui Rongxin also turned to overseas (overseas) markets and C-end retail to find incremental.
"Before the epidemic, we tried to export the goods to customers in Taiwan, China and Malaysia, and this year we are also targeting the perfume market in the Middle East countries." According to Chen Xiaohu, in Malaysia, for example, the per capita income level is slightly higher than that of China, and beauty retailers will not over-depress their prices when purchasing, which is better than domestic business.
In addition, Zhonghui Rongxin, like many peers, began to use its own supply chain resources to start C-end retail business. Online private domains such as applets are the first choice, because it can be free from platform rules and avoid "rolling with the platform".
Like Meiyou Beauty, Zhonghui Rongxin basically does not consider offline stores. Because from the experience of Zhonghui Rongxin’s cooperation with physical store customers, the slightly larger beauty chain stores have long account period and slow capital turnover, which does not match the low profit margin of beauty retail; The demand for goods is also high, "a little scratch is not enough", which will also raise operating costs in disguise.
Image source: Ying Caitang
Tao Chengqiu, who is still guarding the beauty store, told the interface news that Yingcaitang is also looking for new growth points online. "As far as the current situation is concerned, the capacity of this market will become smaller and smaller, so how to expand channels and integrate with online will definitely be done."
Offline, Tao Chengqiu expects Yingcaitang to add one or two new stores at most in 2024. The investment in opening a new store is 600,000 to 700,000 yuan. If the situation is ideal, it will take about three years to return to the capital, and vice versa. But it’s better to go one step at a time than to stay where you are.
"The most pessimistic time (2023) has passed, and now it has adapted." Tao Chengqiu believes that although the beauty market or at least the Chongqing market is still cold, it has entered a stable period, and perhaps it will not change much within five years.
At present, surviving the cold winter is the most important thing. (Interface News)
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