Author | Chen Yan
Edit | Gale
Recently, Huaxizi opened its first offline flagship store by the West Lake in Hangzhou, creating a two-storey space with a total area of 1,000 square meters with the concept of “hiding in the city”.
In 2022, when other brands are reducing the number of offline stores and optimizing the structure, Huaxizi, which has always insisted on not opening stores and relying on online channels to win, will do the opposite and start the idea of offline stores, which makes people curious: What is this trying to do?
Only from the perspective of the layout of online brands to offline physical stores, Huaxizi’s strategy still makes sense. First of all, as an extension of the online brand, the offline physical store has its own traffic, which can play a role in publicity and promotion, and enhance brand awareness; secondly, the physical store allows consumers to try, try out new products and solve product failures, which is beneficial The brand finds a problem and adjusts the product.
The industry’s bigger speculation about Huaxizi’s operation is that Huaxizi may have new moves in the capital market. After all, expanding offline stores can greatly increase brand valuation, and it is reasonable to regard it as a precursor to financing and listing. However, Huaxizi claimed that there is no clear plan for future store opening and other channel layout.
Compared with Perfect Diary, which has been raising money frantically since its inception, its parent company was successfully listed in just 4 years. At the same time, Huaxizi has always been cautious in financing plans and IPOs, and it seems that it does not want to disrupt the company’s own development due to the influx of capital. pace. But for new consumer beauty brands, obtaining capital support seems to be a must if they want to grow bigger and stronger.
Huaxizi has achieved great growth by relying on short video marketing and e-commerce live broadcasting, but its over-reliance on marketing, substandard product quality, and insufficient R&D capabilities have also caused it to fall into word-of-mouth controversy. There is still a long way to go before the “century-old national makeup” that Huaxizi wants to achieve.
Mysterious movements in capital markets
It is not new for beauty brands to open offline stores, but Huaxizi has neither opened a store nor raised funds in the past few years since its establishment, and is like a “heterogeneous” among many new consumer brands. This has also made the market more sensitive to any movement of Huaxizi, linking its offline store opening with financing and listing.
In fact, as early as 2021, there were media reports that Huaxizi was in contact with Sequoia and Hillhouse Capital, and was seeking a new CFO to join. However, this news was quickly denied by Huaxizi. Since then, Huaxizi has never announced the CFO candidate, and the news has disappeared.
Huaxizi products
Until April this year, there was a new personnel development in Huaxizi. The former executive director of Morgan Stanley, April Fan (Chinese name: Fan Xinpeng), joined Huaxizi as CFO, and the introduction of CFO is often regarded as the company’s desire to make a difference in the capital market. Signal. In this regard, Huaxizi said that the company has a very healthy cash flow and currently has no clear financing or listing plan. But at the same time, it was mentioned, “If we can find a like-minded long-term strategic partner in the future, which is conducive to the long-term and healthy development of the brand, we are open.”
So far, Huaxizi has not completed a single round of financing. In 2021, Feiman, the co-founder of Huaxizi, responded to this matter, “First, there are a large number of investment institutions and the process is complicated. It takes a lot of time to research and understand if you want to raise funds. Second, what Huaxizi wants to achieve is a century-old brand, and if capital intervenes too early, it may change the rhythm and method of Huaxizi’s brand building to a certain extent.”
Co-Founder of Huaxizi Feiman
To some extent, Huaxizi did avoid the capital bubble of the past two years. In recent years, after the rapid rise of many new consumer brands, they quickly disappeared. In the early stage, a lot of money was spent and large-scale, and subsequent financing or listing continued. Under the aggressiveness, the foundation of the brand is unstable, and many myths of wealth creation are quickly disillusioned. For example, Yixian E-commerce, the parent company of Perfect Diary, once had a market capitalization of US$16 billion when it went public, but now its stock price has fallen to 1.50 yuan per share, and its total market value has shrunk by more than 90%. It is struggling on the verge of delisting.
Screenshot of Xueqiu.com
Therefore, Huaxizi does not start financing and listing at this stage, perhaps because of the volatility of the secondary market this year and the great uncertainty in the IPO, so there is no need for Huaxizi to take risks.
In the long run, Winona, Perfect Diary and other brands have been further developed through financing and listing, and it may only be a matter of time before Huaxizi goes public. Huaxizi’s layout of offline stores, introduction of CFO, and “open” tone to capital all seem to be preparing in advance, and when the time is right, it can enter the capital market.
Don’t want to be an online celebrity brand anymore
In recent years, the trend of national trends has risen. With the help of “Oriental aesthetic makeup” and indiscriminate marketing, Huaxizi has achieved sales from zero to billions of online channels. “Internet celebrity brand” and “Li Jiaqi live broadcast room” are not only Huaxizi’s wealth code, but also a label that it cannot tear off.
The traffic dividend always peaks. In the early stage of Huaxizi’s development, labels are needed to attract users and increase recognition, but in the later stage, it will become the shackles of the brand. Previously, Hua Xizi said in an exclusive interview that she does not like labels such as Internet celebrity brands. “We want to make Huaxizi a Changhong brand, a cultural brand with long-term values.”
Having long-term values is a good thing, but it is easier said than done. At least for now, in the eyes of many consumers, Huaxizi is still an Internet celebrity brand that focuses on marketing.
When it comes to Huaxizi, many people immediately think of Li Jiaqi. People joked that Huaxizi is “a brand brought up by Li Jiaqi”.
Li Jiaqi recommends Huaxizi products
This is indeed the case. Before deeply binding Li Jiaqi, Huaxizi was just a new beauty product with flat sales on Tmall. After entering Li Jiaqi’s live broadcast room, Huaxizi caught up with the traffic rocket. Within 16 months, Huaxizi’s sales continued to grow, and finally ranked first in Tmall GMV at 618 in 2020.
Li Jiaqi has brought a lot of traffic, attention and GMV to Huaxizi, but there is no free lunch in the world. The head anchor will ask the brand to give the highest exclusive discount, and the traffic will eventually erode the profit. The plan to untie Li Jiaqi and reduce Li Jiaqi’s weight has been quietly launched within Huaxizi, but is Li Jiaqi’s dependence so easy to quit?
On the eve of 618 this year, Li Jiaqi suddenly stopped broadcasting. According to media reports, during the more than three months since Li Jiaqi disappeared, the monthly sales of Huaxizi’s products have also been greatly affected. Expansion of self-broadcast channels has become one of the ways for Huaxizi to “get rid of” Li Jiaqi, but it is not so easy for brands to run through self-broadcast. According to Feigua data, there were only 3 Huaxizi’s self-broadcast accounts participating in Douyin’s live broadcast in November, and in its heyday, this number could reach more than ten.
Consumers’ shopping needs are becoming more and more diverse, which means that they are less likely to pay attention to brand store broadcasts for a long time. As the live broadcast bonus gradually fades, brand marketing costs will gradually increase.
Huaxizi wants to improve its brand style and transform from an Internet celebrity brand to a domestic big brand. The most important thing to consider is whether the brand itself can create a brand premium space in consumer perception. And this space is based on strong product continuity, quality and quality that can stand the test of time, but Huaxizi’s current position is very embarrassing.
Product weakness is the biggest bug
Looking at Huaxizi’s various products, whether it is a carved lipstick or a cloisonné custom-made eyeshadow palette, Huaxizi’s product packaging design is always more outstanding than product quality.
In fact, Huaxizi has always been criticized for its weak product strength. On platforms such as Black Cat Complaints and Xiaohongshu, there are endless complaints about the quality of Huaxizi products, including loose powder, carved lipstick, carved eye shadow palette and other popular products.
Many netizens said that although Huaxizi’s carved lipstick looks good, it is flashy. Lips are dry, chapped and uneven after use. And the price of more than 200 yuan is not cheaper than international brands. Huaxizi loose powder, which became popular earlier, has also been complained about many problems such as “floating powder” and “sticking powder”, and the price performance ratio is not high.
Xiaohongshu bloggers share
Some consumers even got sick from Huaxizi products. In November this year, some netizens reported on the black cat complaint platform that they were allergic after using Huaxizi makeup, which caused cheilitis. The medical expenses alone cost nearly 700 yuan, and the doctor also said that the condition would recur. But Hua Xizifang said that he could only apply for a maximum compensation of 300 yuan.
The threshold of the cosmetics industry is low. Many domestic cosmetics brands lack independent research and development capabilities, and directly hand over the production and design links to OEMs, as is the case with Huaxizi. As of November, Huaxizi has more than 120 patents, most of which are appearance patents. In comparison, L’Oreal has applied for more than 500 patents in 2020, and its research and development expenditure was 964 million euros, equivalent to about 6.75 billion yuan.
Huaxizi may also be aware of the lack of research and development. In March this year, Li Huiliang, who has the title of “China’s first cosmetics research and development person”, joined the Huaxi R&D team.
Li Huiliang
Subsequently, Huaxizi announced that it will invest more than 1 billion yuan in the next five years to develop a layout in multiple fields of product innovation, basic research and applied basic research, and create an Oriental beauty R&D system with complete categories and advanced technology. However, R&D and innovation cannot see results in the short term, and are long-term tasks. It is still unknown whether Huaxizi, which has fallen behind, can achieve a turnaround on the road to high-end.
It is easy to get out of the circle, but difficult to grow popular. Huaxizi’s ambition to become a “century-old brand” still needs strength to support it.
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