Face value: Perfect Diary aims to tap into complexion category to achieve profitability

Perfect Diary is the flagship brand of Yatsen Holding, a Chinese beauty company. Established in 2016, the online direct-to-consumer brand established itself as a rival to international colour cosmetic brands like MAC Cosmetics and Maybelline.

After experiencing several years of rapid growth on the back of the swelling domestic make-up market, the COVID-19 pandemic triggered a sales decline for the brand.

For the quarter ending September 2022, Yatsen’s colour cosmetics business experienced a year-over-year decline of 48.8% despite efforts to develop a sustainable business model with channel optimisation and promotion controls.

Irene Lyu, head of strategic investments and capital markets explained that the company’s “key goal is to achieve profitability”​ for Perfect Diary.

“There are two major plans that we're undergoing right now. One is in terms of channel optimisation, and the second one is on the product category optimisation,” ​said Lyu.

For the latter, Lyu elaborated that the brand intends to focus product development more on facial complexion products.

“Perfect Diary used have very high market share on the lip and also eye category. But in terms of complexion and facial makeup, that's actually a larger market that we think we need to tap in and also increase our market share.”​

She added: “We're seeing quarter-over-quarter increase of market share in the facial makeup. So, that's another driver that will help Perfect Diary brand's turnaround and likely turn into a more healthy trend next year.”​

The company is leveraging its SmartLock technology to develop new products. The technology helps to control excess oil on the skin and ‘locks’ make-up in place for long-wear.

It is currently utilised in products like its Translucent Blurring Loose Powder, which has been gaining market share on Tmall over the quarter.

It has also been applied in its cushion foundations, and most recently, to the newly launched clear cover three-colour concealer palette in an attempt to expand it across the facial category.

Culling stores, focusing on Douyin

Additionally, the company is shutting underperforming offline stores. As of September, the brand now has 198 stores in operation, down 88 stores from the beginning of the year.

“In the fourth quarter, this offline store optimisation program will continue, and we are constantly monitoring the market situation of the offline retail space to best support our brand strategies moving forward,”​ said Huang Jinfeng, founder, chairman and CEO of Yatsen.

Instead, the company will focus its efforts on Douyin, elaborated Lyu.

“In terms of channel mix, you can see all the online channels, colour cosmetics are also dropping, except for Douyin. So, we're also investing heavily on Douyin to promote the growth and attracting customers. So, for this quarter, our Douyin has experienced a year-over-year increase of 97%. So, that part, we're pretty comfortable and continue to hope to do well on the Douyin part.”​

For its latest quarter, Yatsen’s total net revenues decreased by 36.1% to RMB857.9m (USD120.6m). While make-up saw a decline, total net revenue from skin care increased by 33.0%.