Beauty collection shop fined 700 thousand. How long can the cosmetic sample business go？
HARMAY Huamei, a beauty collection store that announced the completion of nearly $200 million in financing at the beginning of this year, has now encountered an embarrassing thing.
Shanghai Huamei Lexiang Enterprise Development Co., Ltd. (hereinafter referred to as "Shanghai Huamei Lexiang"), an affiliated company of this cutting-edge brand with strong popularity, recently received a fine of more than 700,000 yuan because the label of the cosmetic sample it was selling did not meet the requirements.
Some insiders told reporters that in terms of the amount, the fine is "huge" in the same industry. Under heavy punishment, it can also be seen that the cosmetic sample business that was originally in the "gray zone" has attracted the attention of relevant departments, and the supervision of sales of this category will be gradually tightened.
HARMAY said that Mei was punished this time, which is both a signal and a warning. Can the business of selling cosmetics samples continue to flourish?
The front foot is fined after financing.
According to the relevant punishment documents issued by official website of Shanghai Municipal Market Supervision Bureau, when law enforcement officers conducted an on-site inspection on the "HARMAY Huamei" cosmetics collection store located on Xingye Road in Huangpu District, they found that there were missing items in the Chinese label contents of 24 cosmetics of four brands, including CLARINS Clarins Clarins Beauty Cream (5ml), which were being sold. Some of the products sold had no cosmetic ingredient list, no production batch number and no registration number of imported cosmetics, which violated the Instructions for Use of Consumer Goods.
The relevant departments believe that this violates the provisions of Article 35 of the Regulations on the Supervision and Administration of Cosmetics. Finally, the relevant departments decided to confiscate the illegal income of Shanghai Huameile and impose a fine of 735,057 yuan.
Tianyancha’s equity penetration information shows that the legal representative of Shanghai dialect Merlot is the same as that of Beijing dialect Merlot Technology Co., Ltd. (that is, HARMAY dialect parent company).
HARMAY Plum is a cutting-edge beauty collection store with strong development in recent years. According to public information, the company started Taobao in 2008. In 2016, HARMAY’s plum sales exceeded 100 million yuan, and the first offline store opened in 2017. Since then, HARMAY has been favored by capital and its value has doubled.
At the end of 2019, HARMAY Huamei announced the completion of the A round of financing. Although the specific investment amount was not disclosed, it was said that its post-investment valuation reached 500 million yuan. At that time, it only opened three stores. In January 2022, HARMAY Huamei announced the completion of nearly $200 million in C and D rounds of financing. The C round of financing was led by General Atlantic, followed by Gaochun Capital, Ocean Link Guling Investment, Wuyue Capital, Zhong Ding Capital and Black Ant Capital; Round D financing was led by QY Capital, followed by General Atlantic, Zhong Ding Capital, Wuyue Capital and Ocean Link Guling. According to the statistics of its website, there are currently less than 10 offline stores in HARMAY.
In the eyes of many people in the industry, compared with the "big and complete" traditional beauty collection stores such as Watsons and Sephora, the new players like HARMAY Huamei can successfully break through, and the diversion of cosmetics samples is indispensable.
"From the very beginning, Huamei attracted consumers with small samples, especially the small samples of international brands, and a certain number of them were not for sale or gifts (in the small sample area in the store)." Bai Yunhu, founder of the billion beautiful digital supply chain platform, told the reporter, "From the perspective of regulations, it should be illegal sales, but in the past, with the blessing of capital, such behavior has even become a competitive force, leading to more and more so-called innovative retail."
"In fact, many people in this industry feel very strange: Why can’t it be sold in traditional retail, but this company can? It has also been affirmed by capital. " In his view, "being fined is a matter of time."
Many people in the industry believe that a strict investigation of the sample will be a blow to the beauty collection shop that mainly focuses on sample drainage. These beauty collection stores will definitely be affected later.
Success is a small sample, and failure is a small sample.
Young people will be attracted by the dazzling array of cosmetics samples on the open shelves when they first go to HARMAY. In the little red book, someone searched for notes about HARMAY’s plum. Someone wrote, "When you walk into the store, you can see a whole counter full of samples, and all brands have them. It’s crazy." "Armani’s liquid foundation, the flagship store dresses 30ml to 950 yuan, and the store samples 5ml to 99 yuan. Isn’t it fragrant?"
In the eyes of young consumers, an unused new brand has a higher cost performance ratio and a lower cost of trial and error than spending hundreds of dollars on a formal suit.
So where do these samples come from? The reporter consulted several international brands in this regard.
An international brand marketing person who asked not to be named told reporters, "I don’t know, but I didn’t buy it from us anyway." Usually, the samples of brand companies are not used for sales, and the samples are for consumers to try. " According to her inference, if it is genuine goods, then one channel is to get goods from dealers (brand enterprises will give samples to dealers as gifts, benefits, etc.), and the other is to get goods from abroad, that is, parallel imports as people say, without Chinese labels. If it’s a fake, don’t say it.
As for the source of HARMAY’s plum products, when interviewed by a certain media earlier, its co-founder Ju Chunmao explained that the goods mainly came from counters and traders.
"From the perspective of supply chain, there are certain risks in the source of small and medium samples in the market; From the perspective of supply alone, there have been international big names who have questioned: the amount of market sales exceeds the production of brands; That means that some sources of goods are problematic. " Baiyun Hu told reporters.
It is worth noting that in January 2021, the Regulations on the Supervision and Administration of Cosmetics was implemented, and the samples were included in the supervision. Shortly thereafter, Hangzhou ONLY WRITE was reported by consumers, and the local municipal supervision bureau contacted the customs department to assist in the investigation. The store was suspected of smuggling because it could not provide proof of the legal source of the goods involved, and was placed on file for investigation.
Tmall has previously updated the requirements for the release of sample products, indicating that it has the right to require merchants to provide purchase vouchers for samples for review.
HARMAY Hua Mei also noticed the above trend and began to constantly adjust her business model. At present, the sample sales of the company account for about 50% of the whole company’s business, and the remaining 50% are overseas niche beauty brands. According to HARMAY, it introduced a series of overseas minority brands by means of exclusive agency and capital operation, aiming at enhancing brand differentiation and increasing the repurchase rate of stores.
The reporter noticed that many international brands are also trying to cooperate with this new player in online celebrity, and bring their niche new brands to test the water. For example, BAUM, a niche skin care brand under Shiseido Group, recently chose HARMAY Plum as the first channel in China market. Last year, HARMAY Huamei also reached cooperation with several cutting-edge brands under the L ‘Oré al Group and became one of the officially authorized sales channels.
After getting the financing, HARMAY Hua Mei even began to invest in the layout of beauty brands. At the end of 2021, the company acquired a brand of the same name founded by a professional makeup artist in Hollywood, USA. Previously, it invested in a French natural plant skin care brand and a domestic local skin care brand PMPM.
In addition, HARMAY Huamei was registered in Beijing Forgive Lemon Tea Catering Management Co., Ltd. in September 2020, and now it has opened stores in Beijing, Xi ‘an, Chongqing and Shanghai.
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