Core Insights - The domestic beauty industry in China, once thriving due to traffic dividends, is showing signs of fatigue as evidenced by the financial reports for the first three quarters of 2025, with major brands experiencing significant declines in revenue and profit [2][3][8] Financial Performance - Proya's revenue for the first three quarters reached 7.098 billion yuan, a year-on-year increase of 1.89%, while net profit was 1.026 billion yuan, up 2.65%. However, in Q3 alone, revenue fell to 1.736 billion yuan, a decrease of 11.63%, and net profit dropped to 227 million yuan, down 23.64% [2][8] - Other domestic brands like Fulejia, Betaini, Huaxi Biological, and Aimeike reported declines in both revenue and net profit, with Fulejia's revenue down 11.54% and net profit plummeting 36.73% [2][8] Market Trends - The beauty market in China has grown from 131.8 billion yuan in 2014 to 420.3 billion yuan in 2024, with domestic brands achieving a compound annual growth rate of 13.18%, surpassing foreign brands for the first time in 2023 [4][5] - The "lipstick effect" is failing as consumer confidence and willingness to spend among young people have significantly decreased, impacting sales in the beauty sector [3][9] Consumer Behavior - Young consumers are increasingly opting not to wear makeup due to busy lifestyles and a shift in priorities, with many expressing a preference for sleep over makeup application [9][10] - The perception of makeup as a necessary tool for professional success is changing, with more women focusing on their professional abilities rather than appearance [10] Industry Challenges - Many domestic beauty brands are facing a "path dependence" issue, relying heavily on established marketing strategies that are becoming less effective as the market matures [11][12] - The over-reliance on social media marketing and influencer partnerships is leading to diminishing returns, with brands struggling to maintain growth in a saturated market [11][12] R&D and Innovation - There is a growing need for product innovation as consumers become more discerning and demand transparency regarding product ingredients and efficacy [15][16] - Proya's R&D expenditure was only 2.1 billion yuan in 2024, significantly lower than its sales expenses, highlighting a trend of prioritizing marketing over innovation [16][17] Strategic Shifts - Proya is shifting its focus towards digitalization and technological innovation, appointing experienced executives to enhance its product development and marketing strategies [17][18] - The company aims to leverage digital tools for better product iteration and to integrate AI into various business functions, indicating a strategic pivot towards long-term sustainability [18][19]