A perfect plan? Yatsen hinges bets on Douyin and offline retail to ‘ease sales decline’ of Perfect Diary

Launched in 2017, Perfect Diary is the firm’s flagship brand that propelled the company’s meteoric growth. However, the brand and its sister make-up brands have been struggling in China’s waning make-up market.

Founder, chairman and CEO Huang Jinfeng said the firm was moving to improve the brand’s profitability and were looking at several ways to “ease sales decline”​ for the brand.

“There are a few things we are doing right now. For one, we are continuing momentum with Douyin. Right now, we have stronger direct working relationships with the top KOLs. And also, we are also continuing to improve our own brand live streaming capabilities,”​ said Huang during the firm’s earnings conference.

According to the firm, total net revenue from its Douyin channel grew by over 150% year-on-year in the first quarter of 2022, making it the third-largest channel behind Tmall and offline stores.

Perfect Diary ranked third in colour cosmetic sales on Douyin during the first quarter.

Furthermore, the company is aiming to expand Perfect Diary’s third-party distribution and is targeting “major offline beauty retail chains,”​ said Huang.

“We really want to improve the bottom line for the brand, so which we will eventually improve –optimising Perfect Diary's offline stores network throughout the whole year.”​

Colour drags down Q1

For the first quarter of 2022, the firm’s total net revenue decreased by 38.3% to RMB891.0 million (US$140.5 million).

Huang said the first quarter was challenging for the firm with the resurgence of COVID-19 in China, which led to widespread restrictions in major Chinese cities such as Shanghai.

“It’s clear that we are facing one of the toughest business environments in recent years,” ​said Huang.

The firm’s colour cosmetics division, which comprises brands Perfect Diary, Little Ondine, and Pink Bear, was hit particularly hard and against this backdrop, declined by 45.6% in revenue.

On the bright side, the company had managed to improve the profitability of its colour cosmetic brands.

“Our colour cosmetic brands are now operating with a much-improved profitability profile for online business compared with the last year. Specifically, we’ve significantly improved Little Ondine’s profitability profile by streamlining operations and concentrating on the hero product category, namely the eyeliner, where it enjoys strong brand recognition among our core group of loyal customers,” ​said Huang.

Skin care success continues

While colour cosmetics took a tumble, Yatsen’s skin care division recorded revenue growth of 68.5%. The portfolio, which consists of Abby’s Choice, Galénic, Eve Lom, and DR. WU, now accounts for 20.5% of total net revenue.

The growth was driven by new product launches such from DR.WU and Galénic, as well as the repositioning of Eve Lom as a luxury brand through a new campaign.

“Looking forward about the skincare expansion, we will devote more resources into Galenic, DR.WU, Eve Lom as I believe those brands have high gross margin,” ​said Huang.