Sun Huaiqing, Founder of Marubi: Being Surpassed Doesn't Mean "Getting Worse" | Exclusive Interview by 36Kr

As the domestic beauty market undergoes reshuffling amidst channel iterations and the wave of online traffic, how can an established enterprise with a 23 - year history break free from path dependence and regain growth momentum?

If we rewind the clock a few years, this might not have been a problem for Marubi.

Even when the new - consumption trend was at its peak and the online market was booming, Marubi seemed to maintain a certain distance from it. In the words of its founder, Sun Huaiqing, the mindset at that time was: "You guys do your e - commerce, and we'll continue to focus on the offline market."

However, the fundamental changes brought about by the pandemic pushed the story in another direction. Marubi had to face the reality and initiated a strategic transformation from an offline - focused to an online - focused model in 2021. In Sun Huaiqing's view, this transformation injected new vitality into Marubi - "Without the transformation, there wouldn't be the growth we see today."

However, it's never easy for an enterprise accustomed to growth to let go of its attachment to the past. Recently, 36Kr had a chat with Sun Huaiqing, the founder of Marubi.

The following is an edited conversation between 36Kr and Sun Huaiqing, the founder of Marubi:

Successful enterprises from the previous era tend to be nostalgic for the past

36Kr: Marubi set a performance target of 4 billion this year. How is the target progress so far? Why was this figure set in the first place?

Sun Huaiqing: This target wasn't set suddenly. It mainly stems from our transformation.

Previously, offline sales were our main source of revenue. However, the pandemic led to a significant decline in physical retail. Once consumer habits are formed, they're hard to reverse. It's not that things will return to normal after the pandemic ends. So, in 2021, we initiated the transformation from an offline - focused to an online - focused model.

At the end of 2022, we proposed to achieve a year - on - year growth of about 30% in the next 12 quarters. We've met the targets in the past ten quarters. Judging from the progress, it shouldn't be a problem to reach the 4 - billion target this year.

36Kr: What changes have occurred in the channel structure after the transformation?

Sun Huaiqing: Before the pandemic, offline sales accounted for 70% and online sales 30%. Now, the ratio has changed to 80% online and 20% offline, which is a huge change. This transformation has given us new vitality. Without it, we wouldn't have the current growth.

36Kr: Around 2019, during the new - consumption wave, everyone was going online. Why didn't Marubi consider transformation at that time?

Sun Huaiqing: Successful enterprises from the previous era are either slow to adapt to the new era or pretend to be. We belong to the latter group, being nostalgic for the past. At that time, we were the "king" among domestic brands. In 2019, our profit was 500 million. Some brands were larger in scale but only had a profit of 200 million. With both scale and high profitability, we always thought, "You do e - commerce, and we'll focus on the offline channels." We never expected that the pandemic would bring about fundamental changes.

36Kr: Didn't you feel a sense of crisis when seeing the booming online market?

Sun Huaiqing: At first, not really. We even thought, "Can the online market really replace the offline one?"

36Kr: Was the transformation top - down?

Sun Huaiqing: I made the decision, took the lead, and actively participated in it. I also fought side by side with the team. This transformation is revolutionary. Without the determination at the founder level, it simply couldn't be done.

36Kr: How did you let go of your attachment to the past this time?

Sun Huaiqing: When our cognition was upgraded, the attachment disappeared. We realized that we must be with young consumers, and in the future, the main channel for the Chinese beauty market will be online. This is the trend. Additionally, the 30% negative growth in performance was a huge blow. We were used to annual growth, and a sudden decline of nearly 50% forced us to let go of our attachment and face the transformation.

36Kr: Has there been a significant change in the user group before and after the transformation?

Sun Huaiqing: It's not so much a "change" as an "increase". We still retain our offline users, mainly "town ladies" over 40 years old in third - tier and lower - tier cities, who have strong purchasing power. Online, we've added a young group from first, second, and third - tier cities, such as young white - collar workers, refined mothers, and senior middle - class people, with the main force being over 30 years old. The combination of these two user groups almost covers the entire spectrum. For example, the top four provinces in terms of online sales are Guangdong, Jiangsu, Shandong, and Henan. Henan is a big offline market, while the first three were previously weak in the offline market. Naturally, the overall sales volume has increased.

36Kr: The "online traffic strategy" of new - consumption brands has been proven ineffective. What's Marubi's strategy?

Sun Huaiqing: Those strategies aren't so much "proven ineffective" as having inherent logical flaws. They aren't targeting B - end or C - end customers but VC investors. They spend 200 million on a 100 - million - yuan business and rely on financing to survive, which disrupts the industry ecosystem. This isn't a real brand. Our logic is that "an enterprise is a profit center". Without profit, it's just a farce. The core of our online strategy is still "product + user experience + brand": good products make influencers willing to promote them, and consumers will make repeat purchases; a strong supply chain ensures product availability; and our brand has 23 years of accumulation, which builds trust.

36Kr: Which online channel has the largest share for Marubi now?

Sun Huaiqing: Douyin has a relatively large scale among online channels. Currently, the profit margins of e - commerce platforms are indeed shrinking. We can earn 2 yuan from selling a product offline, but only 1 yuan on shelf - based e - commerce platforms, and even less on content - based e - commerce platforms like Douyin. Some brands even say they don't make money on Douyin and only use it as an advertising platform. However, we can make a profit. The core is that we don't rely on a "pure - traffic strategy", control costs well, and our products have repeat purchases, not just one - time sales.

36Kr: Marubi is an established brand with a 23 - year history. When transforming online, will there be a problem of lack of brand awareness among young people?

Sun Huaiqing: Why would there be a lack of awareness? Brands like L'Oréal, Estée Lauder, and Shiseido are all century - old or multi - decade brands, and young people recognize them, don't they? Our brand ambassadors have always followed the preferences of young people, from Tony Leung, Zhou Xun, and Eddie Peng to Angelababy, and now Yang Zi, all of whom are in tune with the current young generation.

Our products are fully tailored to the needs of young people. If they have dark circles and puffy eyes, we launch the Little Red Pen eye cream; if they seek cost - effectiveness, we increase the volume of the eye cream from 15 - 20 grams to 30 grams; if they like high - tech, we add a superconducting gilded massage head that vibrates 12,000 times per minute. Moreover, when influencers and bloggers recommend our products, young people can see real feedback, and brand awareness is naturally established.

36Kr: Has Marubi's brand - building methodology evolved over the years?

Sun Huaiqing: Many people say, "Embrace change." But change can be both good and bad. What we should embrace are the "unchanging things". There are three unchanging elements in brand - building: innovative and high - quality products, professional and dedicated services, and eternal brand values that transcend the East - West divide. The way of communication may change, but the core of content creation remains the same; channels may change, but the essence of reaching users remains unchanged. So, in essence, the methodology hasn't changed much, just some details are adjusted according to the times.

Don't just look at the R & D investment amount

36Kr: Now all beauty brands are talking about R & D. What about you?

Sun Huaiqing: When evaluating R & D, we shouldn't just look at the investment amount but at "effective investment" and "sustained investment". We've applied for over 600 invention and national patents, and nearly 100 have been approved. Among them, 50% have been applied to our products, and 15% are for technological reserves, so that we won't be caught off guard if new technologies emerge.

We don't pursue "short - term gimmicks" in R & D but focus on in - depth and continuous efforts. For example, we've invested 70 million yuan annually for 23 years, which is far more accumulated than brands that invest 100 million yuan a year but only for 3 years.

36Kr: In the financial reports, Marubi has a high proportion of sales expenses and a low proportion of R & D expenses, giving the impression of "emphasizing marketing over R & D".

Sun Huaiqing: This is a misunderstanding due to a lack of understanding of the industry. First of all, the R & D proportion of L'Oréal and Shiseido is only about 2%, and our 3% is already higher than that of leading foreign brands in the industry. Secondly, high sales expenses are common in the industry. Beauty brands need to reach consumers through channels and promotion. However, our marketing is "effective marketing", not just burning money. For example, when we invite influencers, we let them test our products truthfully, not just for advertising. Finally, we should look at the "results" of R & D. Our more than 600 patents and the launch of PDRN products are all real outputs of R & D investment. We can't just look at the proportion without considering the effects.

36Kr: Is acquisition a shortcut to expand from skincare to makeup?

Sun Huaiqing: After succeeding in skincare, we wanted to complete our makeup portfolio, so we acquired PL. At that time, when we acquired PL, we thought "buying a brand is easier than creating a new one" and spent 50 million yuan to acquire it. But later, we found that apart from the brand name, there was nothing. We were basically "borrowing a name" and had to rebuild the team, define the direction, and develop products from scratch. Looking back, this acquisition wasn't very successful. The 50 million yuan basically didn't play its value. It would have been better to create a new brand ourselves.

36Kr: But PL is doing quite well now?

Sun Huaiqing: At first, we were not used to doing makeup. For example, it was hard to predict what colors would be popular next year. So, we decided to "not focus on colors but on base makeup". Base makeup only has three color numbers (suitable for dark, fair, and normal skin tones), and the core technology of the paste, spreadability, and makeup effect of base makeup products like liquid foundation, cushion foundation, and powder cream is cream emulsification, which is our strength after 20 years of skincare production. We avoided our weaknesses and played to our strengths.

Additionally, the PL team consists entirely of people born between the 1990s and 2000s. They are the target users themselves and know what their peers like without having to "guess". So, since 2021, after five years of development, PL is expected to exceed 1 billion yuan in sales this year.

Being overtaken doesn't mean "getting worse"

36Kr: Are there any things that make you anxious at present?

Sun Huaiqing: Recently, I'm anxious about the restrictions on the Double Eleven platform. But despite the anxiety, we still need to find long - term solutions to reduce our dependence on a single online channel. We can't afford to lose any of them. Both shelf - based e - commerce and content - based e - commerce are important. However, the current barriers between platforms will make corporate profits thinner and thinner, and some may even fail to make a profit.

36Kr: How do you communicate with young people to understand their preferences?

Sun Huaiqing: I stay humble. I take notes in every meeting and keep learning. I'm curious about new things. For example, when young people shoot short videos, I'll also give it a try. You have to be willing to take risks to be like a young person.

36Kr: What was the most memorable obstacle Marubi encountered during its 23 - year development, and what lessons did you learn from it?

Sun Huaiqing: The biggest obstacle was the transformation that started in 2021. The process was extremely difficult, not as easy as it sounds. This experience taught me to "think further ahead". Previously, I thought "as long as we do well today, there will be a tomorrow". Now, I make plans for five years later. I no longer just focus on short - term performance but value long - term survival and development more.

36Kr: Is there a big gap between the public's perception of Marubi and the actual situation?

Sun Huaiqing: Yes, there is a big gap. We're not very good at promoting ourselves. For example, in 2013, a fund under LVMH invested in Marubi. This was their first investment in a beauty enterprise in China and also in Asia, with a real investment of 50 million US dollars. The media was very surprised at that time because they thought "it should be other brands". However, LVMH hired Tianneng Law Firm, PwC, and Roland Berger for due diligence and finally chose us. This is real recognition, but many people don't know about it.

36Kr: Do you care about Marubi being overtaken by competitors?

Sun Huaiqing: Life has its ups and downs, and so do enterprises. I had good grades in primary school, but after going to a key middle school, I ranked 22nd. In the third year of junior high school, I became the first in the class. In college, I couldn't even get the third - class scholarship at first, but later I became the first in the class in my sophomore year. Being overtaken doesn't mean "getting worse"; it just means falling behind temporarily. As long as the direction is right, we'll definitely catch up.

Moreover, I often ask myself: As the chairman of a listed company, with a happy family and a doctorate degree, these labels already make me a "winner in life". There's no need to worry about being "temporarily overtaken". I should focus more on long - term goals.