Minnie Wang
Jul 8, 2022

Brand Health Check: Why Perfect Diary is hanging in the balance

The iconic C-beauty brand is currently suffering from a domestic sales drop, financial losses, and stock-plummets. But it's attempting to tap into global markets by buying high-end brands and building ecommerce power overseas.


About a year ago, Jing Daily wondered whether Perfect Dairy could take C-beauty global. But a lot has changed since. This year, in April, NYSE considered commencing suspension and delisting procedures of Perfect Diary’s parent company YSG in the coming months.

Complex problems are attributed to the plunge of tha company's stock on the NYSE. However, having lost more than 96% of its market value within 18 months of its historical IPO in November 2020, Perfect Diary and its parent company Yatsen Global are now facing a tougher situation in the capital and consumer markets. 

A 'quick-riser' among C-beauty brands, Perfect Diary and its D2C model helped YSG grow from scratch all the way to being listed on NYSE in three years. Perfect Diary used to be an inspirational role model to many other new Chinese brands, winning consumers on competitive ecommerce platforms. 

Both YSG’s non-GAAP loss from operations and non-GAPP net loss for the full year of 2021 increased sharply (35% and 25%, respectively). According to Chinese media, Perfect Diary’s GMV (gross merchandise volume)  on Tmall fell by 48% year-on-year in November 2021, the month of Tmall’s global shopping festival.

In fact, over the past year, Perfect Diary acquired British premium skincare brand Eve Lom and the French premium skincare brand Galénic. At the same time, YSG is tapping into Southeast Asian markets via ecommerce platforms such as Shopee and Lazada. 

YSG holds three A-list C-beauty brands—Perfect Diary, Little Ondine, and Abby’s Choice—but will it regain momentum in sales and reduce financial losses to save its stock price ? Campaign asks branding and advertising experts to analyse this brand in the mire.  

Ashley Dudarenok
Alarice & Chozan

Perfect Diary is in an awkward position in terms of market position and marketing strategy. The fundamental reason for this is that its new way of outperforming has been imitated by major beauty brands, and there has been no new marketing strategy created for the future.

When these more powerful international beauty companies replicate Perfect Diary’s marketing, it has become difficult for Perfect Diary to fight back with their accumulated brand power from over the years. Large companies have huge brand lines that can compete with brands like Perfect Diary, and their financial resources can fully support them to incubate several small brands targeting the Chinese market for benchmarking, eroding the market for affordable beauty products. At the same time, their market share of high-end line products is hard to shake.

In addition, a number of small beauty brands that focus on affordable prices have emerged in the market recently and have garnered a lot of attention. Their target consumers completely overlap with those of Perfect Diary’s. And although the ability to divide the market is uneven, it becomes clear that Perfect Diary has a lack of new marketing strategies and needs to implement a new one.

What has made Perfect Diary so appealing to Chinese consumers is not exactly unique to them anymore. International big names have started to overshadow new domestic brands in terms of price and marketing methods. Since the Double 11 in 2020, international big brands have concentrated on providing low discounts while providing high quality products at the same time. Consumers have since gotten accustomed to getting quality products for cheap. But the problems Perfect Diary is facing right now are not unique, but common to many new consumer brands. As long as the brand pays enough attention, there is hope for a gradual solution.

From an industry perspective, domestic brands are still niche in the beauty track. According to Xiaohongshu's 2020 Beauty Insights Report, only 7.8% of the beauty content on the Xiaohongshu platform comes from domestic brands. And the pipeline from niche to mainstream has always been a great place for the growth of domestic brands.

Since there is huge potential for the Southeast Asian beauty market, many of Perfect Diary's marketing strategies utilised in China can be almost directly implemented in the Southeast Asian market. For example, Lazada and Shopee, which are shopping channels selected by Perfect Diary, focuses more on marketing and branding when compared to Amazon. Perfect Diary has rich experience in KOL promotion, and many of its celebrity resources can be directly used in the Southeast Asian market.

If the brand can seize the critical moment of cultivating market awareness, Perfect Diary may have the opportunity to compete with big brands in some overseas markets in the future.

Arnold Ma
Dao Insights & Qumin

At the moment, the biggest challenge facing Perfect Diary is the heavy cost put in digital marketing. This is partly due to increasing investment in this aspect from peers such as Florasis, and the brand has been pushed to cash in more in order to maintain its market position. It is reported that 70% of the brand’s revenue has been distributed to marketing, which is far above the industry average.

The biggest issue with Perfect Diary’s marketing is the lack of efficiency, innovation, and diversity in how they are spending their marketing budget. For example, just throwing money at influencers, and celebrities, and expensive ad placement does not work anymore. It gets progressively more expensive, for less ROI. They are not doing enough to focus on creators, and community building. The problem with traditional influencer and social media work is that Perfect Dairy does not receive cumulative upside, each time they need reach, they must spend more. Whereas, if they focused on building owned communities and channels working with creators, they would be able to put all their investment into building assets (or social media shows) that they can leverage many times over in the future. Even better, every time they run a campaign, they would increase the reach/value of their owned media assets.

On the other hand, not enough attention has been paid by Perfect Diary to product research. According to Tianyancha, the brand owns fewer than 50 product patents, the majority of which even focus on packaging instead of product innovation. The beauty industry in China has been through a market trading up and is moving away from being driven by online traffic to a rational growth stage where the development of products is at the core.

Given the brand has now passed the start-up period with a certain amount of online traffic laying the foundation, the impacts of the turbulence from the capital market (the market value of PD’s parent Yatsen Group has plummeted by 96% to $549 million earlier this year compared to its peak of over $16 billion in 2020) or staggered online growth could be less detrimental to the brand.

However, if Perfect Diary wants to defend its leading position in the market, simply focusing on superficial packaging or pouring more to improve its existing products is not enough to appeal to its target audience. More efforts are required to diversify and improve its product lines.” 

Sonja Prokopec
Professor of Marketing
ESSEC Business School Asia-Pacific

The brand has managed to get momentum and very strong sales over the past few years, contributing to its success in the China market. Some of the reasons that have contributed to its success include the general market dynamics - the category itself (makeup) experienced several years of fast growth. This growth has been coupled with the strong appetite and openness from the younger Chinese consumers to buy local brands, and not only some of the well established Western competitors.

In addition, Perfect Diary understood the ecommerce success formula quickly by engaging in an aggressive 360 marketing approach, flooding all the ecommerce channels with ads, promotions and heavy discounting. However this strategy is also what could be contributing to its recent challenges of slowing growth and declining profits. Naturally the market is stabilizing with sustainable low growth rates.

Plus, Perfect Diary has relied heavily on heavy promotional tactics up until now, which have high but also short -lived impact on sales. The challenge with these promotional tactics is that not enough time has been devoted to brand building which is a necessary step that ensures the sustainable growth of the brand. Brand building is a long term strategy which involves marketing activities which are not directly focused on sales (i.e. discounting), but rather focused on creating an emotional connection with the brand. These tactics could involve aspirational marketing, storytelling, establishing of a strong DNA of the brand with strong visual codes, new product launches that are aligned with the strong brand DNA and with recognisable visual codes and accompanying storytelling.

The brand seems to be taking a step in this direction by partnering with Cosmo magazine to create more aspirational content showcasing the dreams and the aspirations of a diverse group of women across different locations and demographics. However in order to really capture the hearts of the Chinese consumers in the long run, it must develop a much richer approach to their branding, one that resembles those of the western luxury brands like Dior and Chanel. 

This article is filed under...
Brand Health Check: We assess and (if necessary) solicit suggested remedies


Campaign Asia

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