Yin Kuo, the founder of Semi: Don't just see the profits in offline business. In fact, it's more brutal than Douyin | Exclusive Interview by Houxue

"Even though the consumer venture capital investment is currently on the decline, do we still have high hopes for emerging consumer brands?

The answer is beyond doubt.

Consumer goods represent a long - term and lucrative market. Building a brand is not an overnight feat. Once established, a brand is unlikely to fade away easily. We've witnessed that after a period of rapid growth and the associated challenges, some new brand companies have gained a loyal customer base, achieved considerable scale, and even turned a profit, entering a new phase of stable growth. Most of these brands were founded after 2014 and rode the wave of investment enthusiasm that swept through in 2019, emerging victorious in the fierce competition.

Based on this, 36Kr Future Consumption has decided to select 36 new consumer brand companies. Through exclusive interviews, case studies, and other means, we will continuously track their development and present the findings in the column 'Exclusive Interviews with 36 Emerging Brands'."

Author | Li Xiaoxia

Interviewers | Li Xiaoxia, Yang Xuan

Editor | Qiao Qian

Inside the company, few people get to see Yin Kuo. Out of the 365 days a year, he spends over 200 days traveling across the country, visiting counties, townships, and even rural grocery stores.

Drinking with distributors and chatting with consumers in supermarkets are things that Yin Kuo enjoys and believes are essential for the founder of Semi - Permanent.

This year marks the seventh anniversary of Semi - Permanent's establishment. Starting as a brand focused on mouthwash, it has since expanded its product range, and toothpaste has become a key product for the company.

In the domestic toothpaste market, brands like Yunnan Baiyao, Colgate, and Crest have long dominated. Yunnan Baiyao, which holds a 25% market share, is at the top. In 2023, its health products business group (including oral care products like Yunnan Baiyao toothpaste) had a revenue of 6.4 billion yuan.

In this highly competitive market filled with established brands and requiring time to build a presence, Semi - Permanent managed to carve out a niche for itself. In 2024, its overall online and offline sales exceeded 2 billion yuan, and it became the top brand in terms of online toothpaste sales.

However, this is far from enough.

The offline market is a vast and challenging frontier. The difficulties are obvious. "Although the offline market seems profitable, improper operations can lead to heavy losses. If you want to enter 500 stores, you may need to invest 5 million yuan in entry fees. If your work is not up to par, all that money could be gone. Today's offline market is even more brutal than the Douyin platform."

Despite the harshness, there's no turning back. Yin Kuo has been expanding store by store, city by city. Two years ago, his offline efforts went largely unnoticed, but now Semi - Permanent has established over 500,000 sales terminals in more than 1,000 cities across the country. Yin Kuo revealed that if calculated based on the offline terminal POS amount, Semi - Permanent's offline business has now surpassed its online business.

In his words, there's no complex logic in the consumer goods business; it's simply about selling products. "If you want to target the rural market, you need to visit those rural areas ten or eight times. Otherwise, how can you get your products on the shelves?"

It's worth mentioning that in addition to working hard in the domestic market, Semi - Permanent has also extended its reach overseas. It first captured a share of the Southeast Asian market, which was dominated by Colgate, and this year, it entered the US market.

How does a company that has attracted capital in the new consumer wave approach the traditional toothpaste business? And in an era when going global is a major trend, how does it, like Pop Mart, offer emotional and cultural value in Southeast Asia? Recently, we had a conversation with Yin Kuo, the founder of Semi - Permanent.

Yin Kuo, the founder of Semi - Permanent, photo provided by the interviewee

The following is the edited conversation:

Entrepreneurs need leverage to enter large - scale markets

36Kr: Semi - Permanent was quite active back in 2021 when it received new financing. After that, there were few updates from you. The consumer market has changed significantly in recent years. What were you doing during this period?

Yin Kuo: The company has indeed undergone significant changes in recent years. The biggest strategic shift was moving from a niche product (mouthwash) in the oral care market to a major product (toothpaste).

Another significant change is in our consumer base. From 2020 to 2021, the main users of Semi - Permanent were urban women aged 18 to 30. Now, our user profile has become more diverse, including children, women, the elderly, and consumers in rural and lower - tier markets. The number of people who have purchased Semi - Permanent products has exceeded 120 million, which means we've taken a big step towards becoming a national - level oral care brand.

In terms of our company's channel layout, we used to rely mainly on online channels. Now, our offline business is on par with our online business. Moreover, in the past, our offline presence was mainly concentrated in cities. Since last year, consumers in many counties can also buy Semi - Permanent products, indicating a more in - depth penetration into lower - tier markets.

36Kr: Were these changes driven by the external environment? Or were they part of the initial plan when the company was founded?

Yin Kuo: The planning started in 2021. At that time, I said within the company that Semi - Permanent should focus on products that are accessible to the general public and have a wide distribution. So, it's closely related to this positioning. Serving only a small group of people is not our goal. Any oral care brand aims to become a national brand.

However, there are significant challenges. Building brand influence is an extremely difficult process. Secondly, continuous product innovation is the most crucial and difficult task. Thirdly, building a competitive organization is also very challenging, especially in an era where both online and offline traffic are highly competitive. How to adapt to these changes is a tough question.

Currently, although the total offline retail sales have not declined, the market has become highly fragmented. It has evolved from traditional KA supermarkets to various formats such as warehouse stores, discount stores, and community stores. Adapting to this channel fragmentation process poses a great challenge to the organization. Whether the products can adapt to different markets, their pricing strategies, meeting user preferences, and providing a good user experience are all significant challenges.

36Kr: Previously, Semi - Permanent's flagship product was mouthwash, but now it's toothpaste. Since the ultimate goal was toothpaste, why didn't you enter this category directly at the beginning?

Yin Kuo: Toothpaste has always been part of our plan, but we thought the timing wasn't right. You know, for any startup looking to enter a larger market, some form of leverage is necessary. Mouthwash served as our leverage. Although it's a relatively small category, it's easier to find innovative points.

At that time, Listerine was the leading brand in the mouthwash market. Its taste, packaging design, and user experience were more on the medicinal side. We wondered if we could make it more lifestyle - oriented, increase its usage frequency, and make it more like a fast - moving consumer good. So, we vigorously promoted strip - packed mouthwash, bottled mouthwash, fruit - flavored and floral - scented products. All these were significant changes in the mouthwash industry and made users feel like they were using a revolutionary product.

The success of the mouthwash business attracted investment and talent. With this foundation and some capital leverage, we had the pre - conditions to enter the larger market. If we had directly started with toothpaste, we would have neither the funds nor the talent to compete with established brands.

From online to offline

36Kr: I heard that you've done well on the Douyin platform.

Yin Kuo: I don't view Douyin solely as an e - commerce platform. I think its main function is as an advertising platform. For example, if you use it as an engine to expand your brand and reach a wider audience, you'll be more at ease.

36Kr: How can you effectively handle the influx of customers resulting from this expansion?

Yin Kuo: All aspects of the organization need to keep up, which is a huge test for a company. For example, many people say that the offline market is profitable, but it's actually very difficult to make money there. Do you think the offline market is easy? In essence, you need to be good at brand communication, brand positioning, communicating with the media, going global, running a good e - commerce business, doing distribution, and handling gift sales. If you only focus on the offline market in our category, you could spend over 100 million yuan on entry fees in two years. You might go bankrupt before your offline business takes off.

If you only do business on Douyin and don't have the ability to expand to other channels, you won't be able to make a profit. You have to force yourself to find growth and profitability across the entire industry and all channels. If you don't have this ability, complaining won't help; you'll just be eliminated. It's very harsh.

36Kr: If you consider Douyin as an advertising platform, which group of people do you think it can reach?

Yin Kuo: Douyin is a personalized platform. Everyone's Douyin experience is different. So, if you want to reach a wide audience on Douyin, you need to cover all aspects. We've done well on Douyin because we've reached a very diverse group of people, including college students, stay - at - home moms, the elderly, and rural families. This is also related to our product characteristics. Toothpaste is a daily necessity that everyone needs, so it's suitable for full - scale exposure on Douyin.

36Kr: Will Semi - Permanent's attempt to cover various product categories and target different customer groups weaken its brand positioning?

Yin Kuo: I think the traditional brand positioning theory is losing its effectiveness. In the past, people believed in brand positioning theory because there were powerful marketing tools. For example, the slogan 'Drink Wanglaoji when you have excessive internal heat' was very effective because there were popular TV shows like 'The Voice of China' to spread it. Today, although there are still many excellent advertising slogans, their impact has weakened by at least 80% because there are no longer such powerful mass - communication tools. So, for a low - cost, daily - use product like ours, why do we need to strictly define its brand positioning?

36Kr: What are the key factors that have contributed to Semi - Permanent's success?

Yin Kuo: Firstly, we have good online operation capabilities, especially in understanding traffic. Secondly, our products are well - received in terms of consumer insight, product formula innovation, product packaging innovation, and brand building. Thirdly, in the offline market, we've expanded rapidly across the country in two years. In 2024, our offline sales increased by over 200% compared to the previous year.

36Kr: The offline market is quite challenging.

Yin Kuo: We've succeeded because we're hard - working. There's no complex theory involved. In this industry, those who talk too much about underlying logic often don't achieve good results. This is an industry that requires hard work on the ground, where you have to use your feet to explore the market.

The consumer goods business is all about selling products. If you want to target the rural market, you need to visit those areas multiple times. Otherwise, how can you get your products on the shelves?

Previously, we held events like 'Buy toothpaste and win a car or a tricycle' in the rural market. These are experiences we've gained from the local market. It's not just about brand positioning. Sometimes, even if your product is well - positioned, if your in - store training is poor and the competitors' stock clerks are more aggressive, they may cover your products on the shelves. So, this is a highly operational business, and practical skills are more important than theoretical logic.

Two years ago, when I started exploring the offline market, few people knew about us, and some even thought we were just a trendy brand or didn't have a bright future. In fact, not only have we survived, but we've also thrived.

36Kr: Do people turn to the offline market because online traffic, such as on Douyin, is becoming more expensive?

Yin Kuo: On Douyin, it's hard to calculate the profit every day, but at least for every yuan you invest, you can get back 80 cents. The offline market may seem profitable, but improper operations can lead to heavy losses. If you want to enter 500 stores, you may need to invest 5 million yuan in entry fees. If your work is not good enough, all that money could be wasted, and the risk is very high. Today's offline market is even more brutal than Douyin. It's actually more difficult to succeed in the Chinese offline market. You'll find that many brands can be built on Douyin, but there are few successful cases in the offline market among the new consumer brands from 2018 to 2021.

36Kr: After the decline of the new consumer wave, everyone is reflecting. Have you conducted any reviews?

Yin Kuo: We must focus. Focus not only on strategy but also on actions and financial resources. For example, in the early days of our startup, due to lack of experience, we ventured into the cosmetics business and made many mistakes.

36Kr: As an extrovert, do you rarely feel anxious?

Yin Kuo: I do feel anxious sometimes, but it doesn't last long. I'm good at reconciling with myself. I'm an ESTP who doesn't dwell on negative emotions.

For example, one day I was worried about many things and thought about what would happen if something went wrong. Then I thought, it doesn't matter if it fails. I'll just focus on solving the problems. I'm very goal - oriented.

The content era presents new opportunities for the daily chemical industry to go global

36Kr: Is Semi - Permanent one of the early new consumer brands to go global?

Yin Kuo: Semi - Permanent's global expansion is still in the exploratory stage and not fully mature. The reason we decided to go global is that when I was on a business trip to Southeast Asia, I noticed that the 5G era has brought about more rapid changes there than in China. In China, the transition from the PC internet to the mobile internet was a long - term process.

However, the situation in Southeast Asia is different. When we started working with Shopee and Lazada in 2020 or 2021, the cash - on - delivery rate was over 80%. In just a few years, the online payment rate has reached over 90%, achieving a dominant position.

Moreover, 5G has had a huge impact on young people in Southeast Asia. They are very receptive to new things, and this is an era of changing consumption patterns. I saw an opportunity and decided to expand overseas. In particular, the local market is highly monopolized by Colgate, but young people also need new products and emotional value. So, when we entered the market, our products sold well.

36Kr: The term 'emotional value' has become quite popular recently and is often associated with brands like Pop Mart. Can toothpaste also provide emotional value?

Yin Kuo: Well, for example, if you use a daily - use product for a long time, you may get bored. It's not that the product