Core Viewpoint - The beauty industry in China is facing a flow dilemma, with increasing commission rates for live streaming influencers, which has led to a significant rise in marketing costs and a decline in profit margins for local brands [3][4][8]. Group 1: Industry Challenges - The commission rate for influencers in live streaming is projected to rise from 40% in 2024 to 60% in 2025, indicating a growing cost burden for beauty brands [8]. - Local beauty brands, such as Proya, have heavily relied on traffic-driven strategies, resulting in high sales expenses. In 2024, Proya's sales expenses reached 5.16 billion yuan, accounting for 47.9% of its revenue of 10.77 billion yuan [8][17]. - The marginal returns on channel expenses are diminishing, as Proya's revenue growth rate fell 8 percentage points behind its sales expense growth rate in 2024 [8]. Group 2: Shift in Marketing Strategies - Many companies are transitioning from influencer-driven sales to self-operated content, as the era of influencer marketing is perceived to be declining [9][10]. - The CEO of Youmai Technology noted that the current trend is moving away from reliance on influencers, with brands needing to develop strong in-house content capabilities to survive [12]. - Proya has established its content department in 2025 to adapt to the changing landscape and improve its marketing effectiveness [12]. Group 3: R&D Investment Concerns - The beauty industry in China has a common issue of under-investing in research and development (R&D). Proya's R&D expenditure was only 210 million yuan in 2024, representing just 1.9% of its revenue [16]. - The lack of R&D capabilities among most beauty companies is a significant concern, especially as the market becomes more competitive and consumers demand higher quality products [16][17]. - The disparity in R&D investment between local brands and multinational companies is stark, with companies like L'Oréal investing approximately 10 billion yuan in R&D in 2024, nearly equivalent to Proya's total revenue [17]. Group 4: Market Dynamics and Future Outlook - The beauty market has seen a slowdown in new brand emergence, with the flow of traffic becoming more expensive and less accessible [14][18]. - The competitive landscape is intensifying, with local brands needing to focus on brand building and R&D to avoid being outperformed by more established competitors [16][18]. - The path to becoming a globally recognized brand is challenging for local companies, as they must overcome significant organizational and operational differences compared to multinational firms [17].

Core Insights - The commission rate for influencer live streaming in the beauty industry is expected to rise significantly, from 40% in 2024 to 60% in 2025, indicating increasing costs for brands [1][5] - Domestic beauty brands are facing challenges due to rising traffic costs and a shift in consumer behavior, leading to a need for more sustainable business models [4][16] Group 1: Industry Trends - The rise of influencer live streaming has been crucial for the growth of domestic beauty brands, allowing them to gain market share against established foreign brands [4][15] - In 2024, domestic beauty brands surpassed foreign brands in market share, with Proya achieving over 10.7 billion yuan in revenue, becoming the first Chinese beauty brand to exceed 10 billion yuan [4][15] - The influencer-driven sales model is becoming less effective, with many brands transitioning to self-operated content to reduce dependency on high commission rates [6][8] Group 2: Financial Insights - Proya's sales expenses reached 5.16 billion yuan in 2024, accounting for 47.9% of its revenue, highlighting the high cost of marketing and promotion [5][14] - The growth rate of Proya's revenue in 2024 was 8 percentage points lower than the growth rate of its sales expenses, indicating diminishing returns on marketing investments [5] - Research and development (R&D) spending remains low in comparison to marketing expenses, with Proya's R&D investment at only 2.1 billion yuan, about 1.9% of its revenue [14][15] Group 3: Market Dynamics - The beauty market is experiencing a decline in new brand emergence, with existing brands struggling to maintain growth amid rising costs and competition [13][14] - The CPM (cost per thousand impressions) for advertising on short video platforms has surged from 30-50 yuan in 2020-2021 to 300 yuan during the 2025 Double Eleven shopping festival, reflecting increased advertising costs [13] - The competitive landscape is intensifying, with many brands needing to focus on product development and brand positioning rather than relying solely on traffic-driven sales strategies [14][16]