Product price increase has become one of the measures to improve the performance of cosmetics enterprises. Recently, the Beijing Commercial Daily reporter interviewed found that the price of the product of the “Rui Ya”, “Ruby” and “light stripe”, has been raised by hundreds of dollars. Although customer service staff attributed the price increase to product upgrading, in the view of industry insiders, the price increase of products is a move to improve the performance of pereal in the case of slowing performance. However, product price increase can quickly bring profits to the enterprise in the short term, but if the brand influence has not reached the level that can support the sharp price increase, it will not achieve performance growth, but will lose customers and affect sales.
100 yuan price increase
In a year, the price of the ruby light stripe compact essence (30ml) rose up to 100 yuan. The cashier of plywood counters in Longde Plaza, Beijing, told the Beijing Commercial Daily reporter that compared with the price just pushed out of 200 yuan, the ruby light stripe compact essence did rise in price, and now it sells for 320 yuan / bottle.
Similarly, at the Taobao flagship store, the ruby 30ml is priced at 329 yuan / bottle, and the price of the product was 239 yuan when it was launched in February 2020. On the official website of pereal, the price of the product has risen to 350 yuan / bottle.
As for the reasons for the price increase of products, the counter sales staff said, “the price increase is uniformly stipulated by the company, and the specific reasons are not clear.”. The principle given by customer service of pereal is the price adjustment caused by product upgrading. Beijing Business Daily reporter tried to contact pereal to understand the real reason for the price increase of products and related problems, but as of press, no reply has been received.
The price increase of pelea products is not without trace. Cao Liangguo, director and deputy general manager of pereal, said at the investor exchange meeting of pereal’s shareholders’ meeting that he had “intention” to raise the price of products. In Cao Guoliang’s introduction, the purpose of raising the price of products is to create large single products. In addition, it is also to hedge the pressure brought by the rising cost of raw materials“ At present, the category of company’s price increases is mainly cream, cream, eye cream, sunscreen and so on. The main reasons for the price increase are the upgrading of raw materials, packaging materials and brands. “
The strategy of large single product was adjusted by 2020 in order to achieve sustainable development. Star products are mainly based on cream, cream, eye cream and sunscreen. This price tag is one of the star products.
Wu Daiqi, CEO of Shenzhen siqisheng company, said that on the one hand, the price increase of products is a hedge against the impact of rising prices of raw materials; On the other hand, in the case of more and more fierce market competition and increasing marketing costs, it is necessary to keep profits by raising product prices.
In the past two years, many cosmetic enterprises, including pereal, have raised their prices. Since 2021, Shanghai Jiahua has also increased the prices of its skin care products such as baicaoji, Yuze, Diancui, etc. In addition, under the influence of the epidemic, Estee Lauder, Guerlain and other foreign high-end cosmetics brands have also raised the prices of some products this year.
Performance growth slows down
From the development of pereal in the past two years, raising the price of products may be a good way to boost its performance.
Pereal, founded in 2003, landed in the A-share market on November 15, 2017. In more than ten years of development, it once occupied the leading position of A-share cosmetics enterprises. In January 2020, with its own years of development, the market value of pelaya occupies the first place. By the close of October 13, 2020, the total market value of pelea is 32 billion yuan, which is about 3 billion yuan higher than the second place.
If we look at the whole A-share traditional cosmetics enterprises, the growth rate of pereal’s performance is not small, especially in the case of overall decline in 2020, pereal is one of the few cosmetics enterprises with positive growth in the A-share cosmetics market. However, from a vertical perspective, it is obvious that the growth rate of pereal’s performance in recent years has not been as high as the market value, but has declined.
According to the financial report data, from 2018 to 2020, pelea’s revenue was 2.361 billion yuan, 3.124 billion yuan and 3.752 billion yuan respectively, with a year-on-year growth of 32.43%, 32.28% and 20.13%; The attributable net profit was 287 million yuan, 393 million yuan and 476 million yuan respectively, with a year-on-year increase of 43.03%, 36.73% and 21.22%.
While the growth rate of performance slows down, its leading position of A-share cosmetics is not guaranteed. By the close of May 19, 2021, the market value of pelea was 34.63 billion yuan, ranking second with Shanghai Jiahua by 3.9 billion yuan.
Compared with the slowdown of performance growth, the marketing expenses of pelaya are increasing year by year. According to financial report data, in 2018, pereal invested 880 million yuan in sales expenses, accounting for 37% of the total revenue. In 2019, the sales expenses of pelea will reach 1.223 billion yuan, with a year-on-year increase of 38.03%. In 2020, the sales expenses of pelea will be 1.497 billion yuan, with a year-on-year increase of 22.41%. Among them, the investment in corporate image promotion and brand promotion will increase by 387 million yuan, with a year-on-year increase of 46.17%.
Sun Yan, director of formula development department of Asian natural skin care research center, said that with the increasing competition in the industry, it is inevitable that the performance will slow down. In this case, some enterprises can seize market share by increasing marketing expenses. This simple and crude way can indeed improve performance in the short term. However, with the continuous development of the industry and enterprises, price increase is not a long-term solution.
How far can the price raising strategy go
It seems that it is not so easy for pereal to improve its performance through its price raising strategy. With the increasing competition in the cosmetics industry, increasing product R & D and building enterprise brand power are becoming the core competitiveness of enterprises. However, pereal, known as “less R & D and more marketing” in the industry, may need to work harder.
It is understood that pelea’s competitors Shanghai Jiahua and MARUMI are constantly promoting their own transformation, at the same time, they are constantly seizing the market by increasing R & D investment. According to the financial report data, the R & D cost of Shanghai Jiahua in 2018 was 150 million yuan, and that in 2019 was 173 million yuan, with a year-on-year increase of 15.6%. MARUMI’s R & D expenses will increase by 32.66% and 11.78% respectively from 2019 to 2020.
In contrast, in recent years, the R & D investment has not increased significantly. According to the financial data, in 2018, the total revenue was 2.361 billion yuan, the R & D expense was 51 million yuan, and the R & D expense rate was 2.1%; In 2019, the total revenue of pelea is 3.124 billion yuan, the R & D expense is 75 million yuan, and the R & D expense rate is 2.4%; In 2020, the R & D expenditure will be 72 million yuan, down 3.22% compared with the same period of last year.
Xu Xiongjun, a strategic positioning expert and founder of Jiude strategic positioning consulting company, said that cosmetics should ultimately work hard on products, use high-quality products to enhance brand power and attract consumers to buy, so as to improve sales and drive performance. If we raise the price of products under the condition of insufficient investment in product R & D, it will be difficult to support the rising product price for a long time“ The important premise of product price increase is that the customer loyalty should be high and the brand influence is big enough. If these two points are not achieved, the product price increase will not increase the sales volume, but will lose customers and affect the sales volume. ” Xu further added.
Sun Yan also said that if the brand influence has not reached the level that can support the sharp rise in prices, it will not help enterprises achieve performance growth, but will lose customers and affect sales. Only by continuously increasing R & D and making its products have unique advantages can enterprises occupy a place in the market, and the help of price increase to performance growth will not last for a long time.
Photo by Qian Yu and Zhang Junhua from Beijing Business Daily
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