Perfect Diary Expansion Plus Acquisition Strategy

In recent years, many Chinese brands of DTC have emerged and quickly become leaders in their product categories. Having achieved huge success in China, we are now seeing many of them start to expand internationally, including cosmetics brand Perfect Diary, collectible toy maker POP MART, and lingerie brand NEIWAI, between others.

Yet establishing themselves outside of China may be easier said than done, especially for these young brands whose main advantages over Western brands in China include their in-depth understanding of Chinese consumers and their use. innovative Chinese marketing and sales channels – advantages that they do not necessarily have by going abroad.

To find out more, I interviewed representatives of several of these brands. In this series of articles, I explore the decisions of these brands to enter international markets, the results they have achieved so far and how they have had to adapt their business strategies.

In this article, we’ll take a look at Chinese cosmetics industry disruptor Yatsen Holding and its flagship brand Perfect Diary.

Previous articles in this series:

Chinese DTC Brands Go Global: Interview with Justin Moon, POP MART Vice President

Chinese DTC Brands Go Global: Interview with Xiaolu Liu, Founder of NEIWAI

A lot has happened in a year

Anyone who does business with China will tell you that things are moving fast there. Founded in 2016, beauty group Yatsen Holding is a perfect example.

One year ago, I interviewed Vincent Chen, co-founder of Yatsen Holding on the success of the company’s flagship brand, Perfect Diary, and its plans to expand into lower-tier cities in China, as well as massively increase its offline footprint by opening 600 stores across China over the next three years.

For those unfamiliar with Perfect Diary, this is one of the pioneers of China’s now flourishing beauty industry. Launched in 2017, just two years later, in 2019, it was ranked # 1 for color cosmetics brands and top 3 for beauty brands on Alibaba’s Tmall.

Shortly before Chen’s interview, Yatsen Holding had just launched its second brand, a skin care brand called Abby’s Choice.

Fast forward to today and Yatsen Holding has since launched another brand (Pink Bear), acquired two national brands (Little Ondine and Dr. Wu), acquired two international brands (Galénic and Eve Lom) and listed on the stock exchange. of New York (NYSE: YSG). All the more remarkable as this happened just as many other businesses around the world were struggling to stay open in the face of a crippling pandemic.

Yatsen Holding’s international expansion is twofold

As if that weren’t enough on its plate, Yatsen Holding began in 2020 to realize its desire to become an international company, launching the Perfect Diary brand throughout South East Asia.

However, unlike the other two brands I interviewed previously, Neiwai and POPMART, Yatsen’s expansion strategy does not end there. In addition to exporting its local brands overseas, Yatsen has also started acquiring international brands which it believes have significant potential in the Chinese market.

When I contacted Yatsen Holding to learn more about its global expansion strategy, the company said, “For us, expanding into international markets also means acquiring appropriate and high-quality international brands to complement our existing product portfolio, bringing more and better beauty choices to Chinese consumers.

We are currently selling our products in Southeast Asia through our international website and plan to gradually expand our existing brands to more markets. In addition, we will continue to seek out quality brands that meet the diverse needs of our customers both at home and abroad, and develop a team with international vision and deep understanding of the Chinese market. Our goal is to make Yatsen a multi-brand beauty group with international influence.

Perfect journal abroad

But let’s get back to Perfect Diary first. Perfect Diary is currently sold in several Southeast Asian countries including Vietnam, Malaysia, Singapore, and the Philippines, through the Perfect Diary website as well as local e-commerce marketplaces such as Shopee.

Despite being on the market for less than a year, Perfect Diary is already Ranked # 1 in Color Cosmetics on Shopee in Singapore and Vietnam. It is also # 1 in Malaysia in the lip products category and # 1 in the Philippines in the setting powders category.

In Southeast Asia, Yatsen follows a similar model of DTC, the leading digital marketing plan in China.

The company said, “Our highly social and digitally native sales and marketing strategy is working effectively, as our target audience – young consumers, is more receptive to marketing through KOLs (Key Opinion Leaders, a term often used in Asia for influencers. ) they identify with. . We are a leader in using a wide range of KOLs and famous partners to run viral online social marketing campaigns and quickly build large and loyal fans for our brands and products. Additionally, our technology and data-driven business model allows us to create performance-based marketing campaigns that deliver higher returns on investment and increase brand value.

Southeast Asia has become a first step for many Chinese companies trying to expand into overseas markets. One of the main reasons for beauty brands is that facial features and skin tones are somewhat similar, requiring less product customization and marketing assets than entry into Western countries would.

Additionally, although the platforms are different, the buying behaviors of Southeast Asian consumers have many parallels with that of Chinese consumers, who tend to connect with brands through marketplaces first. , social channels, and messaging platforms, as opposed to stand-alone websites.

However, not all of the tactics Perfect Diary used to catapult themselves to success in China may work overseas due to different consumer behaviors or simply because comparable platforms and channels are not available.

For example, in China, the brand pioneered the now popular marketing concept of “private traffic,” tapping into thousands of WeChat groups filled with loyal consumers, offering them exclusive discounts, and driving traffic to its WeChat program mini store.

Perfect Diary has also become a classic case study as a leader in the use of Key Opinion Consumer (KOC) marketing. In its early days, Perfect Diary engaged with thousands of micro-influencers and regular consumers on the Chinese social product review platform Xiaohongshu, a relatively inexpensive way to generate big word of mouth marketing. ladder.

And then there’s the ecommerce live stream, which Perfect Diary uses as a key sales channel, with regular appearances on shows from top live streamers such as Austin Li as well as daily live broadcasts from the brand on several channels, including Taobao Live, WeChat, Douyin (TikTok) and Xiaohongshu.

Without these channels, Perfect Diary may have to turn to more expensive marketing tactics and have a harder time developing a solid base of loyal customers.

The rise of Galénic and Eve Lom in China

As mentioned, the second part of Yatsen Holding’s international expansion strategy is the acquisition of foreign brands that have strong potential in the Chinese market. It targets niche prestige brands that can complement its current portfolio of low-cost brands.

In January 2021, the company acquired the French skin care brand Galénic. Then, in March, Yatsen Holding announced the takeover of British beauty brand Eve Lom.

Prior to the acquisitions, both of these brands had decent brand awareness levels among Chinese consumer niche groups. For example, Eve Lom’s iconic makeup remover is well known to Chinese beauty and skincare enthusiasts, but neither brand had a strong market presence.

While it’s too early to tell, it’s safe to assume that Yatsen Global will be able to leverage its well-developed digital and sales channels to rapidly accelerate the growth of these brands in China. In a recent report, Yatsen said viewers of Galénic’s Tmall livestreams had already increased by 360% in the first quarter of this year – a positive sign.

Perfect Diary’s Next Challenge: The West

While Perfect Diary’s initial foray into Southeast Asian markets went well, its expansion into Western markets will require a much greater effort. The behaviors and aesthetics of consumers are different, and a greater level of localization will be necessary.

Charlie Gu, founder and CEO of global marketing agency Kollective Influence, has worked with several expanding Chinese brands in the United States: “I think the biggest challenge Chinese DTC brands face in the West is the storytelling of the brand. In China, most brands tend to focus on key product benefits combined with celebrity endorsement when presenting their brand to consumers. In the American and European markets, many consumers are more interested in the history of the brand, i.e. who is the founder, why is the brand created, what is the brand philosophy, how it improves my life. This level of storytelling should remain consistent and integrated into all marketing activities, including advertising, media relations, and collaboration with influencers.

Between the seemingly constant brand launches, acquisitions and new offline store openings, does Yatsen Holding have the bandwidth for the extra effort needed to bring Perfect Diary to the US and Europe? Will the brand’s history and aesthetics resonate with Western consumers?

Or would its energy be better focused on acquiring more international brands and using its expertise in the domestic market to develop those brands in China? Let’s wait and see what Yatsen chooses to focus on.