On March 19th, the 2024 (9th) Conference on China Cosmetic Trends, hosted by CHAILEEDO and supported by MeiDD, was held in Hangzhou. The theme of this year’s conference was “Offline Reconstruction.” During the event, Fu Zichong, the Sales Director of the Distribution Division of CHICMAX Co., Ltd., delivered a keynote speech titled “CHICMAX’s Confidence in Returning to Offline.” He provided a comprehensive analysis of CHICMAX’s offline positioning journey, shared the success experience of the Han Shu brand, and expressed his own views on the future direction of offline channels.
The following is a transcript of the speech:
I am honored to be invited to this conference. Since I entered the industry, I have been dedicated to offline channels. CHICMAX has relatively limited external sharing on the sales end because we felt that our performance and presentation were not good enough. However, with the growing enthusiasm for “returning to offline,” I also want to take this opportunity to share some insights.
The content of my presentation includes CHICMAX’s offline development history, CHICMAX’s confidence in returning to offline, considerations and measures for returning to offline, Han Shu’s focus on offline, and CHICMAX’s long-term offline planning.
1.The Offline Development Journey of CHICMAX
CHICMAX was established in 2002 and currently owns numerous brands such as KANS, One Leaf, and Baby Elephant. On December 22nd, 2022, we officially went public on the Hong Kong Stock Exchange. Speaking of offline channels, CHICMAX truly started to make an impact in the offline market in 2013-2014 and experienced a significant breakthrough in 2015. During that period, the entire industry regarded CHICMAX as the company that was the best at “burning advertisements,” and it became a period of dividends for CHICMAX’s offline presence. In 2017, CHICMAX’s entire offline channel reached its peak. However, starting from 2018, the offline sector experienced a sharp decline, facing great challenges. Nevertheless, we continued to explore new directions for offline operations.
In 2022, Shanghai experienced a resurgence of the pandemic, and we went through the most difficult year in our history. CHICMAX’s corporate culture can be summed up in four simple words: “Because we love it.” We believe that a person can only tirelessly strive for something they truly love. However, in 2022, the only three words visible in our office area were “Survive and endure” because we felt an unprecedented crisis. In the second half of 2022, under the leadership of our founder, Mr. Lv, all channels made joint efforts, conducted research, and learned together, seizing the breakthrough point of Douyin (TikTok) live streaming. In 2023, we officially broke through on Douyin, ushering in a new era of brilliance for CHICMAX.
Furthermore, I would like to share with you CHICMAX’s industry sector plans for the present and the next decade. In the mass skincare sector, our main focus remains on KANS and One Leaf. In the hair care brand category, we mainly promote 2032, Ji Fang, and the upcoming One Leaf and KANS hair care products. In the mother and baby brand category, we already have the Red Elephant and One Page as our two major brands. Looking ahead, we will also expand into the fields of makeup, medical skincare, beauty devices, and high-end skincare, which will become the focal points for CHICMAX in the next decade.
2.CHICMAX’s Confidence in Returning to Offline
Our confidence in returning to offline primarily stems from our attitude and determination. Without a disruptive mindset, it is impossible to make decisive decisions to solve problems. In 2024, CHICMAX officially sounded the horn to “strengthen offline.” We believe that offline is the foundation of a brand. No matter how well a brand performs in online channels, if the offline presence is weak, it means lacking a solid foundation and cannot sustain long-term development.
3.Reflection and Measures for Returning to Offline
I noticed in the previous sharing that KANS was not included in the top rankings of excellent offline brands in 2023. This is because at the end of 2022, we discovered that CHICMAX’s overall management and control of products in cosmetic stores were not in place, and we temporarily did not have effective control measures. Therefore, in 2023, we took a significant measure to halt the supply of KANS, One Leaf, and Baby Elephant products to all cosmetic store channels nationwide and terminated our channel cooperation with all distributors. We reflected on the future development of CHICMAX and considered whether we could effectively manage our inventory. If we couldn’t, we decided to temporarily abandon that channel.
We believed that we lacked the ability to effectively control product management in the distributor sector of cosmetic store channels at that time. Therefore, we made the decisive move to halt the supply through those channels. As a result, our data was scarcely seen in cosmetic stores last year. However, we continued to maintain cooperation with top 100 chain channels. Distributor channels involve distribution, with products scattered and prone to unauthorized sales, which can have an impact on the market. But retail stores, such as the top 100 chain stores, do not engage in unauthorized sales, so we could control our inventory there. At the same time, we did not want the top 100 chain stores to engage in nurturing-type products. Therefore, starting in March of last year, we officially announced the nationwide supply of the first hit product on Douyin, the “Hong Man Yao Gift Box,” to the top 100 chain stores. We empowered these chain stores with our traffic, allowing them to sell well-performing products.
Here is a brief introduction to CHICMAX’s five major offline channels:
(1) Top 100 Chains: In addition to the top 100 chain enterprises in the industry rankings, we also select nationwide fast-fashion and trendy stores.
(2) Cosmetic Store Channels: This channel mainly relies on distribution through internal distributors. In 2017, it was the peak period for our cosmetic store channel. We had a total of 88 KANS distributors nationwide. With the current national layout, we have divided it into 135 distributors. The goal is to enable distributors to expand their business through intensive network expansion in segmented markets.
(3) Key Accounts Channels
(4) Watsons
(5)Mother & baby-care channel
4.Offline Focus of KANS
The current situation of online and offline channels is that over the past decade, online channels have gradually become dominant as the mainstream channel due to competitive prices and convenient services. On the other hand, offline channels have had to face a harsh reality: they are no longer the mainstream channels in the industry. This decline of offline channels occurred because the cosmetic store channels blindly raised prices over the past decade, resulting in the loss of a large number of consumers.
In terms of the KANS brand, this year we have decided to return to offline channels, and we have made a promising start. Moving forward, there are four key aspects we need to focus on: super brand, super quality, super hit products, and super cost-effectiveness.
Super brand: First, let me share why KANS is referred to as a super brand. In 2023, KANS achieved a GMV (Gross Merchandise Volume) of 3.34 billion on Douyin live broadcasts, ranking as the top brand on Douyin. In the first two months of 2024, we achieved sales of 1.4 billion. These figures demonstrate that KANS currently has sufficient traffic and is truly a super brand.
Super quality: More than traffic, I am concerned about super quality. KANS has a high online repurchase rate, with an average repurchase rate of 20.99% within 30 days, which is three times higher than the industry average and ranks first on Douyin. I want to emphasize that quality is the utmost priority for CHICMAX at present. In the past decade, the most common feedback we received regarding KANS was that the repurchase rate was too low. I can only say that back then, we wanted to create good products but had limited capabilities. However, the current CHICMAX no longer has the ability to produce low-quality products.
As a traditional domestic brand, brand aging is a common issue we face. Consumers perceive these brands as catering to older generations. However, after the reform of KANS, we have targeted the most desirable age group of 18 to 35 years old, which is the greatest asset for KANS at present. It is the wealth brought by product quality.
Super hit products: As many of you know, we have the KANS Polypeptide Collagen Softening Series and the KANS Whitening Spot Fading Series. Among them, the KANS Polypeptide Collagen Softening Series sold a total of 7.71 million sets throughout the year, ranking first across all platforms.
Super cost-effectiveness: Our current focus is not blindly increasing prices for products but rather creating essential products. As ordinary people, we can feel the economic downturn and the downgrading of consumption. However, in the process of consumption downgrading, it is not about pushing consumers to buy cheaper products but rather encouraging them to purchase products with ultimate cost-effectiveness. There is a powerful chain store in offline channels called Miniso, and we have also studied the core advantages of Miniso. Besides having a robust supply chain, its main advantages can be summarized as “frequent new arrivals” and “ultimate cost-effectiveness” in just nine words. Two chains that received a lot of attention last year, Sanfu and LESHAER in Shenzhen, also highlight the concept of ultimate cost-effectiveness in their product selection. Currently, whether it is the exclusive products for cosmetic store channels or the traffic-hit products directly supplied to top 100 chain stores, KANS is moving in this direction.
5.Long-Term Offline Plans for CHICMAX
(1) Be patient and adhere to a long-term perspective. Success in business is not achieved through haste but through restraint. Let me share an example. After reopening our cosmetics store channels, we did not set targets for our nationwide distributors. Instead, we imposed monthly purchase limits on them. The purpose is to control the market effectively. Slow and steady wins the race. We need to exercise patience to establish a solid presence in the market. We are determined to strive for long-term success.
(2)Have a selfless mindset. Focus on doing things that benefit consumers, whether it’s the initial product concept or policy guidelines. Consumer interests should be the guiding principle for all our decisions.
(3) Rebuild consumer trust over the next decade. This statement may sound serious to some, but I believe we must confront our problems head-on. Only by facing our problems can we gain the confidence and determination to solve them. In the past decade, we have received a significant amount of criticism from consumers. Moving forward, we need to confront these issues directly. Whether it’s product quality or price system confusion, many consumers have lost faith in our offline stores and brands. As brand owners and retailers, we need to deeply consider how to regain consumers’ trust and bring them back to our stores.
(4) Strictly control products and prices. This is the most crucial step for “CHICMAX” in its offline endeavors. In March of last year, I started directly supplying products to the top 100 chain stores and introduced strict controls on both product supply and pricing. The mechanisms for online and offline channels are now the same. If anyone offers a product at a price lower by even 1 cent, we immediately terminate the partnership. Currently, I collaborate with 160 of the top chain stores in China, but I ended partnerships with 18 chain stores last year. Some raised concerns about the local saturation of the top chain stores, suggesting that terminating one partnership would be unlikely to find a replacement in the same area. They believed that gradually terminating partnerships would lead to a decline in business. However, I believe that such measures will demonstrate my determination to control the market effectively. The better we manage, the more customers and chain stores will be willing to cooperate with us. Currently, we can see that the overall offline data has been gradually increasing from last year to this year.
(5) Mutual benefits and shared success from multiple parties. In this era, I believe it is a time of overflow for KANS in terms of traffic. We need more channels to handle this traffic and, at the same time, we are willing to share the benefits of this traffic with these channels. I firmly believe that as long as we provide fair and favorable trade terms and offer high-quality products, everyone will be willing to cooperate and work together to sell more and better products to consumers.
“Our department’s slogan is to be a collaborator in the offline channel.” We will never be industry leaders because, in the retail sector, every retailer is our teacher. We will play the role of a collaborator, satisfying everyone’s needs, and growing alongside everyone’s development. This is what we need to do now. “The beginning of all things is simplicity,” is a motto we currently uphold.
Thank you!
