Perfect Diary and the Rise of China’s D2C Unicorns
A beauty brand created by three men has become a legend of domestic beauty: On the evening of November 19. 2020, Perfect Diary’s parent company Yixian E-Commerce was officially listed on the New York Stock Exchange.
It not only became the first share of the US stock China Beauty Group but it also became the youngest listed company in China’s A-share market. On the close of its first day, the share price of Perfect Diary rose 75.24 percent to 18.40 US dollars, with a market value of 12.2 billion US dollars.
“Made in China” means more than manufacturing
The success of Perfect Diary is the success of a new consumer brand where “Made in China” is transforming into the “New Retail.” Its growth path is also clearly in line with the needs of the capital market.
Ten years ago, it would be hard to believe that a brand could successfully list on the US stock market within 4 years of its establishment. Perfect Diary did it.
In the 10 years from 2007 to 2017, there were 394 capital-related incidents in the cosmetics industry in China, involving approximately 11.64 billion yuan, and only 8 major capital incidents related to IPOs. Before Lafang’s successful listing, the difficulty of listing Chinese daily chemical companies was a long-term shadow that the industry could not get rid of. The capital market did not look good for beauty and daily chemical stocks.
Due to the rise of cutting-edge brands, the combination of capital and brands has become more intensive in recent years. In 2019, the total financing amount and average single financing amount of China’s cosmetics industry reached record highs. The total financing amount reached 13.816 billion, and the average single financing amount reached 337 million. More than one-third of these financing cases are related to cutting-edge brands.
It’s clear that the consumer goods ecology is being subverted and new consumption has become a new economy—allowing entrepreneurs and investors to see dividends.
Yixian E-commerce owes its performance to the data-driven direct-to-consumer model. With this model, a new brand can complete the concept proposal, development, and launch of new products within six months while it usually takes 18 months for international big names.
In addition, the in-depth insight into the beauty needs of Gen-z is also the secret to the success of Yixian e-commerce. Perfect Diary clearly knows where its users are and can deliver goods to them at precise prices.
“There are too many new brands coming out this year. This is not an accident. There must be logical support behind it,” Chen Yuwen, co-founder and COO of Perfect Diary told members of the Chinese press.
There are various signs that China has the conditions for the birth of a new generation of brands, including product innovation capabilities, digital technology, digital marketing, market, and supply chain power. The Internet has built a business infrastructure for low-cost entrepreneurship.
At the same time, domestic demand is strong, cultural self-confidence has increased, and young people have a high sense of identity with domestic products, indicating that new C-brands can usher in a golden age of retail in China and abroad.
Will the next Perfect Diary be born in the Chinese market?
Huang Yong, president of the Procter & Gamble Alumni Association and founding partner of the Procter & Gamble Innovation Consumption Fund, believes that in the future, there will be more cutting-edge brands like Perfect Diary and Huaxizi in China’s beauty market.
The three major market segments, comprised of hair care and anti-hair loss, beauty, and men’s care, are all worthy of attention.
During a recent press event, Hu Huanxin, the founding partner of Baoding Technology Consumer Venture Capital Fund and the co-founder of Meichu Smart Home, stated the three indispensable conditions behind the rapid rise of new brands such as Perfect Diary and Huaxizi are still “excellent teams,” “high-quality products” and “strong channel ability.”
“At the moment, skincare is still a hot topic, with opportunities for cosmetics, scalp care, body care, and beauty equipment,” Hu said. “As long as we achieve the ultimate in these segments, more “Perfect Diaries” may be born in the future.
In July of 2020, Tmall announced the launch of the “New Brand Growth Plan”, which plans to promote 5,000 brands to become emerging brands in the industry within two years.
Gu Mai, vice president of Alibaba Group, also said: “If you ask me where the future growth momentum will come from, I would vote for emerging merchants, regardless of its sales scale or growth potential, in the next two or three years.”
Gu’s claim can be evidenced by the 100,000 new brands that have already grown on Tmall in the past three years. These “Houlang” brands accounted for 40 percent of the total number of Tmall merchants. Perfect Diary and Huaxizi grew up during this period. What’s more, during last year’s Single’s Day event, a whopping 357 emerging brands became top sellers in their respective subcategories.
As TMall has demonstrated, the ability to directly reach consumers, accumulate fans, recruit members, understand user needs, maintain customer relationships, and increase brand identity has become imperative to today’s emerging brands—and Tmall’s digital technology brings clearer consumer portraits and more specific product requirements to brands.
In fact, not only Tmall, but other e-commerce platforms have also released the “New Brand Plan” to help Chinese manufacturing companies build new brands.
So, while everyone is cheering for the listing of the Perfect Diary unicorn, smart investors are already out looking for the next one.
Gabriella Bock contributed to this story.