Who is bullish on Maogeping?

Text by He Zhexin

Edited by Qiao Qian

“It's not that I create a low - end brand today, and when I think the market gets better and I can make more money by creating a high - end brand, I switch to the high - end market.”

On April 1st, Mao Geping answered investors' questions about the brand's positioning at an exchange meeting. At the end of last year, Mao Geping, hailed as “the first high - end domestic brand stock”, went public in Hong Kong. Not long ago, after releasing its first financial report with a significant increase in revenue and profit, its stock finally closed at HK$113, hitting a record high since its listing and surging 117% compared to the first trading day.

However, the continuously rising stock price has also sparked a lot of controversy for this consumer stock star. A senior financial observer told 36Kr that some investors' doubts about Mao Geping include: “The company's high growth is out of touch with the current situation where affordable products dominate the beauty market. Secondly, we question whether Mao Geping's high - end market positioning can hold up.”

Therefore, this article attempts to explore two questions: How should we understand the “high - end” positioning that Mao Geping talks about, and is it important? Also, what exactly is the market paying for behind the crazy stock price increase?

Sticking to Department Stores

In 2024, domestic cosmetics retail sales experienced a second decline after the pandemic, and the high - end market still showed no sign of recovery. The mass market became the last straw.

A person from a well - known American cosmetics company, which has long ranked among the top three in the high - end market share, once told us that due to performance pressure, the global CEO's frequency of visiting the Chinese market “has significantly increased compared to before”. The group's affordable brand, which once tentatively entered the domestic market cautiously, is now very bold in social media marketing.

According to Wind data, after 2019, the ROCI (Return on Capital Invested) in the beauty market declined significantly, especially for mid - and low - tier enterprises. In 2023, as domestic demand recovered, the ROIC of mid - and low - tier enterprises began to rebound, leading to the rapid rise of “concept stocks for consumption downgrade” like Proya.

However, Mao Geping clearly doesn't belong to this category. First, the base makeup products it focuses on are priced high, but compared to skin - care products, the premium space is smaller and the price ceiling is lower. Second, different from Proya, which focuses on online channels, Mao Geping has always focused on department stores, a channel where results are not seen quickly.

Department stores target middle - and high - income groups, who are less sensitive to prices. However, the channels charge relatively high commissions (mostly 25% - 40%), and some high - end shopping malls even charge up to 50%. There are also certain threshold requirements for brands to enter. Although Mao Geping has more than 300 department store counters across the country, its direct - operation layout density in first - and second - tier cities is still lower than that of foreign beauty brands.

According to a rough statistics by 36Kr, the top four provinces in terms of the number of Mao Geping counters are Jiangsu (61), Zhejiang (48), Sichuan (38), and Chongqing (26) in order. Different from the distribution of international luxury brands, which are concentrated in first - tier and super - first - tier cities, take Shanghai, a major high - end beauty market, as an example. Estée Lauder has 50 direct - sales points, covering department stores, shopping centers, and duty - free channels. Mao Geping only has 15, and most of them are department store counters.

The “high - end market position” that Mao Geping often mentions in its promotion is actually mostly on the second or third floor of shopping malls or shopping centers, still having a certain gap compared to foreign beauty brands mainly located on the prime first - floor locations. In 2003, Mao Geping got its first counter in the Orient Shopping Center in Xujiahui, Shanghai. It was under the elevator and only 9 square meters in size. This was actually a favor from the mall manager because it was a domestic brand.

It can be seen that whether in terms of location or store area, Mao Geping's negotiation power with department store channels is not strong. Even so, Mao Geping still adheres to department stores. The prospectus shows that initially, the revenue from department store channels accounted for as high as 70% of Mao Geping's total revenue. After the development of online channels, this figure was still 53% in 2024, while for Lancôme, once known as the “king of department stores”, the proportion of department store revenue dropped to 35% last year.

It should be clear that from the perspective of the overall market environment, sticking to department stores is not the wisest choice. The financial report of Hang Lung, a barometer of high - end commercial real estate, last year showed that the retail sales of its mall tenants decreased by 15%. Swire Properties' retail business in the Chinese mainland even experienced double - digit decline last year. A person from a well - known Japanese high - end beauty company told us that nowadays, department store counters are more like brand display stands. “In cities where the ROI doesn't make sense, the only option is to close the counter.”

From positioning to channel selection, Mao Geping seems to be going against the trend. So, where does its confidence come from?

Making Makeup like Skin - care Products

Lin Zhi was sitting in front of the dressing mirror at the Mao Geping counter in Grand Gateway 66. Originally, she was just passing by and was attracted by the lipstick display at the counter entrance. Now, within 15 minutes, the salesgirl at the counter “transformed” her face with a brush and a palette of highlighter paste. Her originally slightly puffy eyelids became more profound, and her jawline became more defined as if being lifted by an invisible hand. Her whole face glowed like porcelain in natural light.

“This is not makeup; it's like 'cheating',” Lin Zhi said with a smile. Then she swiped her card to buy that box of highlighter paste priced at 580 yuan. She told 36Kr that she had never spent so much money on makeup before.

Different from the “decorative” function of eye and lip makeup, base makeup products mainly including highlighters, foundations, and contour powders have a more “face - changing” effect. They are more like “functional makeup” and consumers are less sensitive to their prices. Tmall data shows that in 2022 after the pandemic, the entire makeup market declined, and the decline of facial base makeup was the slowest. Among them, the concealer category even showed a reverse growth, and Mao Geping ranked first in this sub - category.

Lau, an independent beauty retailer, pointed out that consumers are not reluctant to buy high - priced products nowadays. Instead, they have a “disenchantment” attitude towards beauty products driven by a luxurious lifestyle in the past. “Consumers need to see actual results, whether it's skin - care products or makeup products.” In his opinion, Mao Geping is a representative of this trend. “The repurchase rate of base makeup products is usually higher than that of eye and lip makeup. Once consumers develop a good impression of a brand, they are not likely to switch.” He gave an example that international luxury brands often rely on one or two classic foundations as long - term star products, and there are very few changes and version updates. “Consumers won't easily take risks on base makeup products and are reluctant to try new products.”

According to the “Insight Report on the Trends of Facial Base Makeup in the Post - pandemic Era” released by CBNData, only 10% of users will casually try new base makeup products.

Lau believes that the uniqueness of Mao Geping's promotion method is one of the secrets of its high repurchase rate. “The salesgirls at Mao Geping counters will carefully help you change your makeup, leaving consumers with a deep impression that 'if you don't use Mao Geping's products, you can't achieve this effect'.” In contrast, international luxury brands are less effective in this regard.

Industry insiders told us that before 2016, there was no experience at all in luxury brand counters. The salesgirls “made money easily”, and brand image building mainly relied on heavy advertising investment.

After 2016, international luxury brands collectively moved online, and “counter group - buying” began to emerge. That is, products from department stores enter online channels at discounted prices, and the price difference is usually made up by salesgirls or store managers to boost sales volume in exchange for performance. This has turned the department store counters of international luxury brands into mere display windows.

In 2024, both the online and offline repurchase rates of Mao Geping increased, and the increase in the online repurchase rate was particularly significant, rising from 22% to 27.5%.

In addition to using the makeup - changing experience to increase product premiums, Mao Geping also has different SKUs online and offline. From the price distribution of SKUs on the official Tmall flagship store, the prices of the top three best - selling products of Mao Geping are concentrated around 300 yuan. Take the star products, the highlighter powder paste and the caviar mask, as examples. The former is priced at 270 yuan, and the latter is sold at 379 yuan, which is different from the offline customer unit price of over 500 yuan.

This strategy of having “two sets of products” online and offline is usually achieved by international luxury brands through multiple sub - brands with different positioning. However, with a relatively small brand portfolio, Mao Geping still adopts a similar approach for precise online and offline layout, which also shows that Mao Geping's high - end positioning is not just a numbers game.

Therefore, the core of Mao Geping's “high - end” positioning is achieved through a combination of channel control (scarcity of department store channels), product technology barriers (high repurchase rate of base makeup products), and refined operations (different SKUs online and offline), resulting in differentiated competition.

Mao Geping's path to high - end shows that in the highly competitive Chinese beauty market, it is possible to break away from the trap of “trading low prices for market share” and achieve sustainable brand premiums. Its model is more similar to international luxury brands (such as Chanel) rather than brands that rise rapidly through traffic, providing a differentiated reference for the industry. Market investors who recognize this can naturally give corresponding valuations.

Currently, we haven't seen such a clear and consistent positioning and strategy in domestic beauty brands. As for “whether the high - end positioning can be maintained in the long run”, we have reasons to be optimistic. As long as shopping malls still exist and consumers are still willing to pay a premium for a professional makeup experience, Mao Geping's “high - end retail experiment” is far from over.