Perfect Diary’s parent company Yatsen lists on the US stock market — here’s a look back at its success story
Yatsen, the company that runs Chinese cosmetics brand Perfect Diary, launched its initial public offering on the New York Stock Exchange in November 2020. Yatsen represents the first Chinese cosmetics brand to list on the US stock market. How did it defy tough market conditions to grow so much so fast?
Launched in 2017, the Perfect Diary brand is characterized by its reasonable price ranges and its Western-style branding. The brand has grown through an e-commerce-focused D2C model that targets Gen-Z consumers. According to Yatsen’s IPO registration statement submitted to the US Securities and Exchange Commission (SEC), for three years since its launch, the brand maintained the most online sales out of all Chinese D2C brands.
Their 2019 sales saw amazing growth, increasing by 363.7% over the previous year to 3.5 billion yuan (US$539.8 million), and their performance was also strong in 2020 despite the pandemic — sales in the third quarter up to September grew by 70.2% over the previous year to 3.8 billion yuan (US$586 million), already surpassing the total sales of the previous year. The current market capitalization of Yatsen has also surpassed 12 billion dollars.
The reason for Perfect Diary’s rapid growth in such a short period lies in their rigorous “digital supremacy” approach, and the crucial element backing their sales have been KOL. Perfect Diary is partnered with close to 15,000 KOLs and they’ve utilized their own data-driven management system to sidestep agencies and directly partner with them. Around 800 of these KOLs are said to have over a million followers each.
Outside of e-commerce, Perfect Diary has also opened accounts on a variety of platforms that include social media and video services, and their overall followers amount to over 48 million as of the end of November 2020. In particular, they’ve built up their WeChat presence, having attained 15 million followers there. Not only do they have an official WeChat account but they also run accounts for sales staff from stores across the country through the use of mini-programs. These are used to communicate with their userbase, allowing them to notify about new campaigns and take in user feedback.
These efforts have proven successful, and customer loyalty to the brand has risen significantly — while their repeat purchase rate in the second quarter of 2019 was 38.9%, come 2020 it had risen to 41.5% for the same period.
Even with over 200 offline stores, 90% of their sales remain online
No matter how many KOL you mobilize, crucial products need to be evaluated for profits to continue to grow. Perfect Diary has been able to perform product development that carefully analyzes collected consumer data to bring to market products that consumers find appealing. They’ve also actively collaborated across industries, releasing products jointly developed with diverse entities from the Discovery Channel to the British Museum, and have worked hard to build publicity.
Another characteristic of Perfect Diary is the short life cycles of their products — they release on average 5 to 6 new products per month. Thanks to have partnered with so many KOLs, they can rely on them to spread information on all these products in a short span of time.
Once Perfect Diary established its reputation online and built up a consistent position, they embarked on establishing brick-and-mortar stores. After opening their first store in Guangzhou city in January 2019, they went on to grow to 200 stores by September 2020. They plan to have expanded to 600 stores by 2022.
Walk-in stores are however not so important for Perfect Diary in terms of profit. The aforementioned registration statement mentions that their percentage of online sales in 2019 grew up to 96.7%. In 2020, the opening of additional stores caused that percentage to decline, but even so, online sales comprised 91.3% as of the end of September 2020.
Aiming to become the next L’Oréal
Perfect Diary’s ability to invest extensively in digital technology has been thanks to strong financial backing. Four months after its founding in May 2017, Yatsen successfully completed a series A round of funding. Qiang Wang, the co-founder of Zhen Fund Inc. which invested 300,000 dollars during the series A, recently told local media “we believe Perfect Diary can become the next L’Oréal”.
Yatsen is aiming for further growth through developing new makeup and skincare brand products as well as by stepping up strategic investments, buyouts, and partnerships. In April 2020, they bought out the emerging Chinese brand Little Ondine. Meanwhile, in June 2020 they launched Abby’s Choice, a sister brand to Perfect Diary, and at the same time opened a flagship Tmall store as well as a brick-and-mortar store for the brand within Guangzhou city.
Furthermore, in November 2020, they bought out luxury brand Galenic, a subsidiary of France-based Laboratoires Pierre Fabre. They plan to maintain the brand’s growth in the European market while expanding it into China, and further into the future, they will expand it into other Asian countries. Galenic’s R&D and production operations will also be performed in cooperation with Pierre Fabre.
Perfect Diary has also begun work on improving its supply chain. The brand doesn’t have its own production base, however, is a joint venture with major South Korean ODM Cosmax, they’re currently building a production base equipped with R&D facilities within Guangzhou city. They’re aiming for operations to begin in 2022.
In December 2020, they announced a strategic collaboration with US-based perfume and pigment manufacturer Sensient Technologies to establish laboratories in Shanghai, Guangzhou, and Singapore. Sensient Cosmetic Technologies, a subsidiary of the US firm, supplies raw materials and coloring ingredients to major brands that include L’Oréal, Estée Lauder, and Shiseido. Yatsen seems to be collaborating with Sensient Cosmetic Technologies in their R&D efforts to develop more global-oriented products.
Indeed, this global outlook is likely what led Yatsen to list on the US stock market rather than stock markets in China or Hong Kong. Perfect Diary has already established its own English and Japanese e-commerce sites and is selling goods from them. However, as indicated in the registration statement, they plan to first focus on Southeast Asia and get a foothold into the market there. At the same time, they’re also planning to team up with local partners to localize their products.
Text: Ching Li Tor
Original text (Japanese) : Team Roboteer
