Domestic perfume is catching up? Can a perfect diary be born in the perfume category?

Let us first talk about perfume, such a niche market, why has it been so popular in recent years? With the outbreak of a new round of incremental market, will domestic perfume brands be able to produce unicorns like perfect diaries in the future?

We see that in 2020, the sales of all cosmetics sub-categories have declined to varying degrees from the same period in 2019, and only perfumes have maintained a growth rate of nearly 50%. This is closely related to the "lipstick economy" in economics. "Lipstick economy" refers to the increase in sales of lipsticks during the economic recession, and people are eager to use affordable "luxuries" to please themselves. Not only that, in the days when face masks were popular, perfume became a substitute for make-up and became another kind of "beauty."

However, even if there is no epidemic, perfume as the last stop of the "sensory economy", the "olfactory economy", itself is an inevitable "rise". Because the definition of beauty by modern women is far more than just the superficial "beauty". Why is there such a name as "exquisite pig girl"? You will find that today's young women are not only exquisite faces, from head to toe, from face to body, from hair to manicure, from vision to smell, are all indispensable to create "delicate beauty".

Perfume is a category that can make these girls more comprehensive and personalized. It has indeed come on the eve of a new round of accelerated development.

Perfume consumers are not just a group of "beauty-loving" consumers. If they can be summarized by a few labels, they should be the "high purchasing power", "high stickiness", and "high awareness" people with three highs. This is also due to the relatively light luxury, high-end, and niche positioning of perfumes in China.

What does "three highs" mean? The main buying force of Chinese perfumes is a relatively high-quality customer base. They pay a higher price per customer (high purchasing power), compared to 150-250 yuan per customer in the United States, 250 yuan per customer in Europe, and 500-800 yuan per capita in China, and prefer high-end brands. Not only that, once they enter the perfume category, the frequency of use and repurchase frequency of this group of users maintains a high level (high viscosity). According to the "Iresearch China Perfume Industry Research White Paper", more than half of users use perfume every day. Users who are accustomed to perfumes are also more willing to understand the story behind perfumes. Their scent, tonality, and brand awareness are also deeper than other categories (high awareness). For them, the story of perfume is "true fragrance."

Not only that, Chinese perfume consumers are also a group of younger users. According to iResearch data, in 2020, young consumers under 30 will account for nearly two-thirds. Perfume has become an expression of the personality of more young people and even a personal label.

Positioning differentiation between international brands and domestic brands

There is no doubt that the future of the brand is this group of young people. However, in attracting young people, international brands and domestic brands are taking two completely different paths. This is due to differences in positioning caused by strategic differences.

Making a perfume product is actually a technical job. Perfume has front, middle and back notes and a certain retention time, which means that there are higher requirements for a series of complex technologies such as the extraction and research and development of fragrances. Perfume is an imported product, and international brands have strong barriers in these technologies and brands.

It is these international brands that support elementary education in the Chinese perfume market. Estee Lauder Group (including Zumalong, Tom Ford, Kilian, LE LABO, etc.), L'Oréal Group (including Lancome, Saint Laurent, Armani, Atelier Cologne, etc.) and Coty Group (including BURBERRY, GUCCI, Chloé, TIFFANY&CO., miu miu, etc.) ) Has long entered China's first- and second-tier cities, and began to penetrate from high-tier cities. "Big-name classic perfume" is their "introductory fragrance" and "first fragrance" for many first- and second-tier consumers. International perfume brands have first-mover advantages.

However, after a period of market education, the appetites of young people in high-tier cities have gradually opened up, and with their further requirements for personalization, the commercial brands of major brands can no longer be satisfied with them and begin to chase more "salon" perfumes. .

Salon perfumes are produced by perfume salons that specialize in perfume production. Compared with commercial fragrances, salon perfumes are less common, have bolder fragrances, and can better meet people's needs for expressing their individuality. From the perspective of the top ten perfumes with the fastest year-on-year growth on the Tmall platform in 2020, Salon Fragrance occupies four seats, among which Pan Heiligen takes the first place, with a year-on-year increase of 238.1%. As the overseas supply chain of Tmall International has matured, some of the more niche salon brands have also begun to enter the market.

Overseas brands temporarily occupy first- and second-tier highlands, but because of the higher prices, the sinking has also been blocked. They don't even pay too much attention to sinking the market, because the penetration rate of perfume in China is very low and the high-tier cities are not yet saturated. As a latecomer, domestic brands choose to position in the low-end and low-end to avoid direct conflicts with high-end international brands. They target more young people in sinking cities, or students with lower consumption, and other “entry novices”. Blue ocean.

At the same time, this choice is also "have to". Due to the late start of China's perfume industry, domestic brands are more forced to accept limited upstream fragrances, and are restricted in technology and talent. It is difficult to beat foreign brands and successfully seize consumers in first- and second-tier cities.

Compared with foreign groups that can rely on the perfume brand matrix, and acquire other salons and commercial brand positioning to increase market share, the current domestic perfume brands can only use low-end brand positioning and create more basic peripheral "fragrance" categories such as aromatherapy. , Body lotion, shower gel, hand sanitizer, body scrub, etc., to establish a broader field of "olfactory economy".

According to the top ten sales of Tmall in 2020, most of them are international brands, and only one domestic brand is on the list for the third- and fourth-tier markets. For more entry-level "early users", domestic brands can only continue to introduce new products to retain their freshness.

Therefore, whether it is a high-end or a low-end brand, the perfume industry in the future can only innovate to cater to young consumers and become more and more segmented and personalized.

Fragrance, another eye-catching battlefield

In addition to the perfume field, domestic brands are struggling to catch up, and another battlefield has long been on fire, and that is fragrance.

Although perfumes and fragrances share the industry chain, they are also a billion-dollar market, and the penetration rate is very low, but they are two different business logics.

Perfume is a light luxury product from the perspective of positioning, and it is more "scarce". In order to create individuality, packaging design must also be willing to work hard. Perfume bottles need to be moulded separately, and the cost is more expensive. Some perfume bottles even need crystals or diamonds, and the materials are more expensive. Moreover, the extraction source of natural raw materials is limited, and the extraction price is very expensive. For example, to extract one kilogram of rose essential oil, 3.5 tons of rose petals and about 1 million roses are needed. Such non-standard products cannot achieve economies of scale.

The fragrance products are diverse, including fragrance personal care, car fragrance, commercial fragrance and home fragrance. They are more standard products and hard-needed products, which are less difficult and cheaper than perfume production. For high-end brands, it is a good opportunity and good category for them to sink, and it is also a position that domestic brands need to hold to establish a "olfactory group".

Not only that, but capital also favors such "standard products" and markets that are easier to cultivate. China's local fragrance brands have also begun to be sought after by the capital market, and the development of start-up brands has received relatively sufficient financial support. In 2020, there will be 4 companies involved in fragrance financing. Among them, Modernbach is mainly engaged in fragrance care, and its chairman and general manager is also the founder of RECLASSIFIED fragrance room.

Fragrance is not only a perfume brand, but also a secondary development curve of a care brand. In 2015, the Face Shop, a LG brand, introduced fragranced care products, and subsequently, FMCG brands began to launch fragranced care products. The care industry regards fragrance products as a new growth curve brought about by "emotional change". From 2019 to 2020, China's fragrance care products accounted for the proportion of the total toiletry market sales. In 2020, Alibaba platform fragrance care products Sales accounted for 35.1% of cleaning products.

Fragrance has a lower barrier to entry than perfume, which results in a large number of players and a more crowded fragrance track.

Who will be the next unicorn? Capital is keen to find unicorns.

In the cosmetics industry dominated by many international brands, the "Light of Domestic Products" Perfect Diary has been properly released, supported by Hillhouse Capital, Sequoia Capital, etc., and has been successfully listed as a "Yixian E-commerce". Not only that, it has successfully eroded the share of international makeup brands, with more than 4% of the makeup market share.

And the current Chinese perfume industry is still dominated by European and American brands at this stage, and it is obviously slower than makeup. In 2019, only 4.6% of the sales of the Top20 brands on the Ali platform were local Chinese brands.

They are all trending under domestic products. Can a unicorn like a perfect diary be born in a domestic perfume fragrance brand?

Take the current domestic head smell library as an example. Just like Perfect Diary, it also uses various online celebrity items as gimmicks, such as the unique Chinese scented white rabbit, cool white opener, and Erguotou, to create momentum for the brand and marketing.

At the same time, they are constantly expanding their categories. Perfect Diary starts with subdivided eye makeup and color makeup, but because the ceiling is too low, it is also creating a skin care sub-brand such as Wanzi's favorite. The scent library not only makes perfume, but also jumps into the river of "olfactory economy" to develop aromatherapy, hand cream, shower gel, etc. to raise the ceiling.

But what is different is that Perfect Diary has done better in several places. One is that the product is more innovative and iterative. Second, in order to quickly improve the R&D capabilities of skin care products, we chose to acquire high-end skin care brands eve lom and Galénic to build a moat, but this was done with the support of more capital.

In addition, the stage of industrial development is also different. The upstream development of China's perfume industry is not mature enough, which also results in the insufficient supply chain of domestic brands. At present, domestic perfume brands are still in the stage of establishing marketing power and brand power, and they are all going to a more elementary level.

Drawing lessons from the perfect diary, in the future, domestic perfume brands will not only have a good marketing, product innovation and brand building, they will also need to integrate the supply chain instead of OEMs to build their own R&D technical advantages and overcome more technology, capital, and talents. Wait for barriers.

As a category of perfumes and fragrances, despite the sluggish growth of makeup, we are still going against the trend. We will wait and see whether more capital will be favored in the future and new unicorns will be born.