Entering text into the input field will update the search result below

Yatsen Holdings And The Beauty Rush In China

Mar. 16, 2021 11:05 AM ETYatsen Holding Limited (YSG)1 Comment
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Seeking Alpha Analyst Since 2008

President of Sage Capital Group, Inc., a private investment firm; also Managing Partner of T-Renaissance Inc. (TRL Group), a global Greater China-focused technology solutions provider and consultancy for the retail, telecom, media and healthcare industries.


  • Korean and US beauty brands have retrenched even as new C-Beauty brands are on the rise.
  • There is a surge in venture capital and private equity financings for new Chinese domestic beauty brands.
  • The business window for domestic beauty cosmetics is closing: the biggest beneficiaries are beauty KOLs.

Part 1 A Tier-1 Korean makeup and beauty brand closes: once popular all over the country, quietly closes its Chinese stores

Another tier-1 beauty brand from Korea has called it quits. The public discovered that the offline stores of the well-known beauty brand Etude House from Korea quietly disappeared recently in China.

Source: Etude House Tmall Store

The latest report stated that the Etude House has completed the withdrawal of all offline stores in the mainland. Founded in 1985, Etude House is a brand of Korean cosmetics giant Amore Pacific Group. It entered China in 2013.

At its peak, it opened 85 direct stores in 25 cities including Beijing, Shanghai, Guangzhou, and gained a large groups of younger Chinese customers in the first 5 years of its business. Relying on affordable prices and eyebrow pencil products, it gained a large young following. 

Nowadays, older beauty brands such Etude House, The Face Shop (Korea), and Revlon (USA) have fallen one after another, in the face of the rapid rise of Chinese beauty brands such as Perfect Diary, Huaxizi, and Color Key.

As of the end of 2020, although the official website of the brand still shows that there are 35 stores in the Mainland China, it has fewer than 10 stores in normal operation. At the same time, the Etude House entered THE COLORIST, a beauty collection store that has been highly popular in the past two years. Consumers can purchase products through online channels such as Etude House’s official flagship store on Tmall, WeChat’s official store, and Xiaohongshu’s flagship store. This means that THE COLORIST has become its only channel in mainland China.


The exit of Etude House is not an exception. The once-popular Korean beauty brand Faceshop lost its offline physical stores, completely withdrew its counters, and folded its wings in the Chinese market; Innisfree, which used to sell 4 billion RMB (about USD 615 million) in China, is now unable to sell; the legacy makeup brand Revlon suffered a huge loss of USD 619 million

Part 2 C-Beauty business fundraising: RMB 1.5 billion (about USD 230 million) 

In 2020, the IPO of Yatsen Holdings, the parent company of Perfect Diary, had brought the domestic beauty to a climax. Yatsen, which was established only 5 years ago, successfully went IPO in the United States, with a market value of over RMB 80 billion on the first day (about USD 12.3 billion). In 2020, Chinese beauty brands business from manufacturers to new-generation retailers like THE COLORIST, HARMAY, Wow Color, etc. are experiencing an unprecedented fund raising boom

Source: Perfect Diary Tmall Store

In 2020, at least 24 domestic beauty brands received venture capital financing, covering almost all upstream and downstream companies in the beauty industry chain such as cosmetic contact lenses, skin care, men, women, manufacturing plants, and chain stores.  Approximately 5 billion RMB (about USD 770 million) flowed into the domestic beauty industry.

Among them, PMPM, Liran, Menxlab, MOODY, Meishang, Perfect Diary, KK Group, Xi Muyuan, and Kerala will all received 2-3 rounds of financing in 2020 from well-known investment institutions such as Sequoia China, Hillhouse Capital, IDG Capital, and Matrix China, etc.

This enthusiasm continues in 2021 so far. In the three months of 2021, a number of skin care and cosmetics companies have received large sums of financing.

On March 8th 2021 alone, three start-ups in the beauty track announced that they had obtained venture capital financing, with a cumulative amount of nearly 1.5 billion RMB (about USD 230 million):

  • The international new luxury beauty brand group USHOPAL completed nearly 100 million US dollars Series D fund raising

  • The cutting-edge beauty collection store brand WOW COLOUR received 500 million RMB (about USD 77 million) in Series A fund raising

  • An aromatherapy skin care brand Zhuben has successively completed two rounds of financing of A and B rounds, a total of 50 million USD

A Store of Wow Color

At the same time, there has been a wave of listings in the industry on going. As of March 2021, 18 beauty companies, including Hanshu and Betteni, have started their IPO process in China, and half of them have successfully passed the regulatory approval.  A veteran in the industry commented: "A cosmetics brand that is well known in China can easily get financing. This is something I have never experienced in the past over ten years."

Part 3 The business window for domestic beauty cosmetics is closing: the biggest beneficiaries are beauty KOLs

On March 11, Yatsen Holdings, the parent company of Perfect Diary, released its fourth quarter and full-year financial report for 2020, which was its first financial report after its listing.

Source: Google Finance

The financial report shows that Yatsen E-commerce's operating income in Q4 was 1.96 billion RMB (about USD 300 million), an increase of 71.7% from 1.14 billion RMB (about USD 175 million) in the same period of the previous year. The total revenue for the whole year of 2020 was 5.23 billion RMB (about USD 805 million), a substantial increase of 72.6% year-on-year.

However, while the company's revenue has increased substantially, its profits have increased its losses.  Yatsen lost 2.688 billion RMB (about USD 414 million) for the year. Yatsen commented: The performance loss is mainly due to the impact of the epidemic and the company's expansion strategy.

A store of Perfect Diary

In 2020, Yatsen added three brands: Xiao Aoting, Wanzi Xinxuan, and Galénic. In March 2021, the acquisition of high-end skin care brand Eve Lom was completed. The pandemic in 2020 negatively impacted the company's performance.

A well-known blogger revealed: “After I saw Perfect Diary’s financial report, the start-up business of a new start-up domestic beauty brand was shut down. Actually the whole company worked for KOLs, with 90% of the commissions going to KOLs. Suppliers make some money, and KOLs make a lot of money, leaving only the brand with a paltry amount."

Right now, VC financing is afraid to miss the next Yatsen, and more and more start-ups are squeezing into this hot track.  The Chinese beauty consumer market has entered a period of rapid development.

According to data from the National Bureau of Statistics, the market size of China's beauty industry will exceed 500 billion RMB in 2022 (about USD 77 billion), and it is expected to grow to about 549 billion RMB (about USD 85 billion) in 2023.  The beauty business in China will experience a an industry consolidation in the few years.


Analyst's Disclosure: I am/we are long YSG.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.