“The company’s mission is to create a new journey of beauty discovery,” said David Huang, founder, chairman and chief executive officer of Yatsen. The Chinese group’s aim is also to build a next-generation beauty platform.
Yatsen — now China’s largest homegrown beauty maker — was founded in 2016 in Guangzhou, after Huang, a Harvard M.B.A. and Procter & Gamble alum, homed in on the country’s burgeoning beauty sector and within it, the opportunity to create a new brand — mostly grounded in color cosmetics.
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At the time, Generation Zers were fueling the drive online and few beauty brands were leveraging the highly influential key opinion leaders, or KOLs.
“The third change we saw was the pent-up demand for homegrown brands,” said Huang, explaining then the Chinese cosmetics market was dominated by global players.
He also noted the opportunity to leverage a highly mature, world-class supply chain. “Those are the fundamental forces to help us [get] where we were when building Perfect Diary,” he said, referring to Yatsen’s flagship makeup brand.
Cut to today, and Yatsen has added seven brands to its portfolio. The company launched Little Ondine and Pink Bear, also in makeup, then starting in 2020, Yatsen ventured into skin care.
“We incubated Abby’s Choice and acquired Galénic, Eve Lom and Eantim,” said Huang, explaining Yatsen never considered having just one brand, since that makes it “pretty hard for us to mitigate the risk of the life cycle and also the fast-changing consumer demand.”
Yatsen’s strategy has included building an omnichannel direct-to-consumer model at a large scale and using highly social, digitally native sales and marketing. Yatsen works with 13,000 to 20,000 KOLs, whose performance is carefully monitored and who have helped build a social media following for the group’s brands that’s more than 67 million people strong.
Yatsen also employs a data-enabled product development method that shortens a cycle and often leads to a high product success rate due to the scientific and quantitative approach culling KOL and consumer behavior.
Among Yatsen’s 1,500 employees, more than 200 are in-house technical engineers that help build the group’s database. The company also partners with e-commerce giants, such as Tencent and Alibaba.
Yatsen was listed on the New York Stock Exchange in November 2020 and raised $616.9 million. Last year, the group posted net revenues of $802 million.
Yatsen also operates around 270 brick-and-mortar stores in approximately 150 tier-one to tier-three Chinese cities. “It’s still a very important channel,” said Huang, calling stores “a place to improve the consumers’ engagement,” particularly when it comes to educating newbies on the basics of makeup application.
As part of “YSG Growth Model 2.0,” Yatsen is homing in on creating iconic brands and enhancing research and development capabilities. “We have been setting up our open-lab architecture,” said Huang, explaining that entails a number of external collaborations. One is for a joint-venture, high-capacity factory in China that will be operational in the first quarter of 2023.
Another focus of attention is on Yatsen’s multibrand strategy, including skin care and high-end cosmetics. Huang highlighted livestreaming as playing an important role in improving e-commerce reach, as well as bolstering the penetration of color cosmetics and beauty regimens for consumers in tier-three and tier-four cities.
“R&D partnerships are very important to help us to grow the brand,” he said. “We are seeing a very fast change of the consumers’ behavior.”
The executive explained that today people are looking for better products that are backed by science. “We believe M&A is also a very important strategy for us to build out the brand component,” he added.
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