On September 10th, Chinese renowned beauty livestreaming influencer Li Jiaqi faced controversy while promoting Florasis eyebrow pencils during his livestream. Consumers left comments in his livestream expressing that the price of 79 yuan per pencil was too high. However, the top livestreaming influencer, who gained fame through livestreaming sales, responded by saying, “Don’t make false claims. The price of the eyebrow pencil has always been 79 yuan. It’s not easy for domestic products. Sometimes, you should reflect on yourself. Have your wages increased over the years? Have you been working diligently?” These remarks quickly stirred discussions among consumers on the internet. The issue of domestic beauty products continuously raising prices despite sluggish growth, as well as the problem of domestic brands losing autonomy in marketing by being strongly tied to major influencers, has once again drawn attention from industry insiders.
Li Jiaqi is a name that can never be avoided
2017 was an extremely important year for the development of the Chinese domestic cosmetics market. It was the year when Perfect Diary, known for its affordable and rapidly marketed products, was established, and the culturally distinctive cosmetics brand Florasis was also launched.
By around 2018, Chinese cosmetics had rapidly gained favor among consumers due to China’s new consumer demographic, platform dividends, and supply chain dividends. Among the numerous emerging Chinese cosmetics brands, Perfect Diary and Florasis stood out prominently at the time. According to Euromonitor data in 2017, there were few Chinese brands among the top 20 brands in the cosmetics market, with Maybelline and L’Oréal Paris ranking first and second, occupying 20.4% of the market share. With the skyrocketing success of Perfect Diary and Florasis, more domestic cosmetics brands came into consumer focus.
Established in 2017, Perfect Diary achieved annual sales exceeding 2 billion yuan within two years. Perfect Diary’s explosive popularity was attributed to its swift and aggressive marketing strategies, offering products at low prices below 100 yuan, rapid product launches, and widespread promotion during the era of traffic dividends. Similarly, Florasis, also established in 2017, quickly crossed the threshold of 1 billion yuan in sales and achieved nearly 2 billion yuan in Tmall sales by 2019.
However, unlike Perfect Diary, which entered the market with a low-price strategy and rapid product launches, Florasis positioned itself in the higher-end segment from the beginning and aimed for product differentiation. Florasis creatively incorporated many Chinese elements into its brand and products, such as relief sculptures, small lattice windows, traditional Chinese colors, as well as Miao silver, Luoshenfu, and peonies. These refreshing products quickly gained popularity.
When it comes to Florasis’ explosive success, Li Jiaqi’s name can never be avoided.
From its early days, Florasis recognized the potential of livestreaming. In 2017, despite the industry norm of 20% commissions, Florasis offered commissions of 60% to 80%, far exceeding industry standards, and collaborated with over 300 small and medium-sized livestreamers, KOLs, and content creators within three months. However, the results were minimal.
By 2018, after Li Jiaqi’s live streaming showdown with Alibaba’s founder, Florasis began to establish a deep cooperation with Li Jiaqi to explore new marketing models. This immensely popular livestream host brought unparalleled influence to the Florasis brand.
In March 2019, Li Jiaqi started recommending Florasis’ Air Loose Powder during his livestreams, which triggered Florasis’ first breakthrough. Li Jiaqi spared no effort in promoting the brand, making Florasis the biggest winner of the Singles’ Day shopping festival that year. On Singles’ Day, Florasis achieved a total transaction volume of 220 million yuan, ranking as the second-highest domestic beauty brand. According to Tmall data, Li Jiaqi’s livestreams contributed to nearly 80% of the total visits to Florasis’ Tmall flagship store around Singles’ Day 2019, and over 64% of transactions came from his livestreams.
Florasis gradually losing the initiative
The decline of Florasis can be attributed to two main factors.
Firstly, its deep association and reliance on popular internet celebrity Li Jiaqi made it difficult for the brand to shake off the label of being a “web celebrity brand” in a short period. Initially, Florasis heavily relied on the traffic generated by Li Jiaqi’s livestreams, resulting in a lack of brand recognition of its own. Consumers’ repeat purchases and interest in new products mainly stemmed from Li Jiaqi’s core audience, who typically prioritize the recommendations of the livestream host rather than a specific brand or product. This gradually led to excessive dependence on Li Jiaqi’s livestream traffic, with consumers focusing more on the products sold during the livestream rather than the brand itself, leading to a diminishing sense of brand identity for Florasis.
Moreover, the deep association with Li Jiaqi has led to another issue, namely the increasing marketing costs. There have been reports claiming that Li Jiaqi received profit-sharing from the collaboration with Florasis, with the profit share ranging from 100% to 120%. This means that the brand was essentially subsidizing Li Jiaqi’s promotion of its products, even sacrificing product profits. According to multiple media reports, Florasis’ monthly marketing expenditure on platforms like Li Jiaqi’s exceeded 20 million yuan, accounting for more than 20% of its total marketing expenses. The high marketing costs directed towards Li Jiaqi squeezed Florasis’ profit margins, further exacerbating its dependence on Li Jiaqi and creating a vicious cycle.
The second reason for the decline of Florasis is its insufficient product strength. Initially, Florasis attracted widespread consumer attention with its incorporation of Chinese cultural elements such as carved patterns. However, it is important to recognize that for a consumer product like lipstick, the core lies in its performance rather than its appearance and packaging. While attractive packaging and unique designs may initially provide consumers with novelty, in the long run, overly complex packaging can become inconvenient for consumers and even backfire for the product.
In fact, Florasis’ packaging design has been criticized by some consumers who believe that the overly elaborate and ornate designs do not equate to high quality and instead appear tacky. Some consumers have complained, “Are half the price and effort spent on packaging?” or “Carved lipsticks are too old-fashioned. I dare not take them out for touch-ups in public.” and “Complex designs do not represent luxury.” Essentially, consumers are willing to pay for high-quality products rather than just packaging. To shed its “web celebrity brand” label, Florasis announced a 1 billion yuan investment in basic research and development. In 2022, Florasis hired Li Huiliang, a former research and development engineer at Shanghai Jahwa and Bloomage Biotech, to establish a comprehensive “Eastern Beauty Research and Development System.”
Public information reveals that Florasis has filed 177 patents, but more than half of them are related to the product’s packaging design rather than substantive innovations. Florasis’ flashy packaging coupled with weak product performance has given consumers the impression that it prioritizes aesthetics over quality control. The high pricing has led many consumers to question the brand’s value for money. As of the end of 2022, 52.14% of Florasis’ patents were primarily focused on appearance.
The inability to escape its web celebrity attributes, as well as shortcomings in research and development and product offerings, have gradually led Florasis to lose autonomy and fall behind other domestic beauty brands.
Chinese beauty brands are increasing products prices one after another
In the backdrop of an uncertain economic situation, Li Jiaqi’s viewpoint that “it is difficult for domestic products” does have some validity. In reality, raising prices alone cannot be the sole survival strategy for brands during an economic downturn. In the consumer goods industry, the global economic impact of recent years, particularly in terms of supply chains, has put pressure on various industries to cope with rising upstream raw material prices. Consequently, increasing sales prices has become a routine measure to expand profit margins. However, this approach must be done within a reasonable range, as going beyond that may lead to consumer backlash and damage to the brand’s image.
For example, consumer goods giant Unilever raised prices for its Beauty & Wellbeing products by an overall increase of 7.5% in the 2022 fiscal year, while revenue surged by 20.8%. This indicates that the main driving force behind the revenue growth in Unilever’s beauty business was not price increases, but rather the ability to gain consumer trust in its products. In the 2022 fiscal year, Unilever’s cosmetics business had three brands with revenues exceeding 1 billion yuan each: Dove, Lux, and hair care brand Sunsilk.
Procter & Gamble (P&G) raised prices by 8% in its beauty business for the 2023 fiscal year, resulting in a 2% increase in net sales. The 2% increase also took into account a -5% impact caused by exchange rates, meaning that the growth in P&G’s sales was largely in line with the magnitude of the price increase.
In comparison, during the first half of this year, Shanghai Jahwa, the leading player in China’s beauty and personal care industry, witnessed a significant overall price increase of 20.16% for skincare products in the second quarter, 3.26% for personal care and home cleaning products, and 9.52% for maternal and infant products. However, Shanghai Jahwa’s revenue slightly declined by 2.3% during the first half of this year. The production volume of its main products far exceeded the sales volume. For example, the production volume of skincare products was 55.088 million units, while the sales volume was only 12.75 million units. The production volume of personal care and home cleaning products was 184 million units, but the sales volume was only 69.57 million units, and only half of the maternal and infant products were sold. Furthermore, Shanghai Jahwa stated that the company’s main raw material procurement prices, including soap granules and surfactants, had fallen by more than 30%, and other raw material procurement prices, such as solvents, had decreased by 5%. In other words, despite the significant decline in raw material prices, Shanghai Jahwa still raised prices for its products.
The price increase by Proya was even more significant. In the second quarter of this year, prices for Shanghai Jahwa’s skincare products surged by a staggering 43.54% year-on-year and 14.7% quarter-on-quarter. Beauty and makeup products experienced a sharp increase of 45.94% year-on-year and 14.98% quarter-on-quarter. The price increase for hair care products reached an astonishing 61.96%, with a quarter-on-quarter increase of 33.47%. It is worth noting that Pechoin’s raw material procurement prices also witnessed varying degrees of increase, with a more than 40% increase in both year-on-year and quarter-on-quarter prices for active ingredients.
Apart from Shanghai Jahwa and Proya, other domestic beauty brands have also increased their prices to varying degrees. Consequently, the price increase in domestic beauty brands has sparked discussions among consumers.
Industry experts also believe that in any industry, the quality of a product should match the magnitude of its price increase. These brands that have raised prices should provide consumers with more convincing reasons. Otherwise, if prices are blindly increased without establishing brand influence, those domestic brands that were once popular due to their low prices may be replaced by a new generation of products that offer better value for money.
According to Professor Wu Xianming from the School of Economics and Management at Wuhan University, the most significant reason may be that many domestic beauty brands adopted a marketing model of “small and fast growth” in the early stages. In recent years, with the rapid development of the internet, many emerging brands have engaged in large-scale marketing campaigns through social media, often emphasizing slogans such as affordability and cost-effectiveness. Over time, such marketing approaches can easily create fixed impressions in the minds of consumers, leading to aesthetic fatigue and a decrease in brand trust.
In general, when faced with various difficulties and challenges, domestic brands cannot rely solely on price increases to shift costs. They need to invest more resources in product development and quality improvement to create high-quality products that can truly attract and retain consumers. Regardless of market conditions, consumer needs and satisfaction will always be at the core of brand development. Only by genuinely putting consumers at the center and providing products that meet their needs and expectations can brands stand undefeated in fierce market competition.
