Artefact Private Traffic Study- 10 Key Highlights for Brands to Win in China

Private Traffic Study
Perfect Diary
10 Key Highlights for Brands to Win in China
March 2021

Why this document?.
We believe that
“new models” of
1. 2.
Consumer Brands
are being invented
in China.
We may call them:
“Digital native”
consumer brands.
From beauty to drinks
to pet-food or
vitamins, “digital
native” consumer
brands are being
launched in almost
any sector in China
3. 4.
The objective of this
document is to LEARN
from one of these
“digital native”
consumer brands:
Perfect Diary, one of
the disruptors of the
beauty sector in China
2

A UNIQUE CONTEXT
●
●
●
●
Beauty consumers are highly digitalized
Access to these consumers is mostly through a phone, under control of a
monopoly of a handful of companies
Cost of acquisition is rising at 20% each year, for everybody
Loyalty has always been low in China

PERFECT DIARY FACTS
● Established in 2016
● 600M USD revenue by end of
September 2020
● Only digital activation, KOLs/KOCs…
Offline stores in most key cities…
● IPO in November 2020

10 Key highlights, for brands to keep
winning in China.
10
5

Highlight 1
Perfect Diary is
«burning cash», in
an unsustainable
way
Million RMB
Marketing Expense /
Revenue
49% 41% 62%

Highlight 2
Company Valuation Evolution Since A-Round Funding
But there seems to
be an
unprecedented
equity build-up
speed
+10 bn USD
Share price has remained
stable since IPO
12.4*
4.0
0.1
1.0
2.0
USD Bn
May. 2018
Sep. 2019 Apr. 2020 Sep. 2020
Nov. 2020
First A-round funding
Note: market cap. as of IPO date

Highlight 3
So, there is another
story: it is not a
brand, but a «
Platform » for a
constant cycle of
brand launches
Superior Omnichannel
DTC
Operations
Highly Social,
Digitally Native
Sales & Marketing
Consumers
Data-driven
Product
Development
Future
brands
...
World-class Supply
Chain
Comprehensive &
Dedicated
Customer Service
Technology & Data
Advanced Digital Infrastructure
Database of Customer Insights Social Marketing Engines Engaging User Interface Platforms
Source: Yatsen Prospectus

Highlight 4
And it seems it is
working, as the
"time to scale” is
decreasing for
each new brand
they launch
13 months after launch,
became the No. 1 color cosmetics brand
in terms of GMV on Tmall
8 months after relaunch,
achieved the same level of monthly gross
sales as Perfect Diary did in its first year
3 months after launch,
achieved such level of monthly gross
sales
Source: Yatsen Prospectus

Highlight 5
What is under the
hood, it is NOT a
brand building
“engine”, but first a
consumer data and
engagement
platform
#1
#2
Consumer Market Data:
market research data, competitor open information scraping, social listening...
#3
Consumer Transactional Data:
Offline and online; first party and second party transaction with consumer info...
Consumer Behavioural Data:
Wechat behavioural (OA,MP), media tracking, aggregate EC platform
behaviour...
Consumer Data Platform: leveraging a 360° view, leveraging
as much as possible their PRIVATE TRAFFIC ECOSYSTEM
INTEREST
RETENTION
AWARENESS
PURCHASE
ADVOCACY

Zoom on how Perfect Diary is growing this Private Traffic @scale…
Stage Activity Illustration
PRIVATE TRAFFIC
ACQUISITION @scale
● Encourage marketplace (e.g Ali) purchasers to
enter private traffic pool - with promotion card
attached and lucky money
● Show QR code at offline store and incentive
consumers to scan and follow Official Account
PRIVATE TRAFFIC OPS
BUILD-UP @scale
● Create virtual KOC character to build close
relationship with consumers - Xiaowanzi
● Leverage group control technology - can
support hundreds of Xiaowanzi
PRIVATE TRAFFIC OPS
RUN @scale
● Maintain personal connections with consumers
via Xiaowanzi - tailored content and exclusive
service
● Attach link of WeChat store to each post, in
order to maintain retention on owned channel

Private traffic??
Wait a second…
...how does this work in practice?

Team setup | Private traffic is managed by 100 Xiaowanzi (XWZ), full-time
e-commerce beauty advisors (EBA), located and managed centrally
●
●
●
●
●
XWZ are EBA with full-time headcount
The team is centrally located and managed in
Guangzhou, the headquarter of the company
The team is currently structured under the operation
function, with over 100 people (and it's growing fast)
XWZ deliver cross-brand content covering all the
brands Yatsen currently launched
Each XWZ approximately manages 40K customers
(7~10 phones * 5K per phone)

EBA Profile | XWZ require beauty industry understanding, sales and
consumer relationship maintenance experience as a plus
Job description of XWZ
WeChat Moment of XWZ
●
Education: associate degree ( 大 专 )or
above; full-time intern accepted
●
Requirement:
○ Strong communication and consumer
relationship maintenance skills
○ Experience in beauty industry, WeChat
followers operation, sales as a plus
●
Working time: Avg. 5.5 days / week:
Long and short weekends alternately

Compensation | XWZ's compensation package is 4 tiered: base salary,
performance bonus, sales bonus and insurances
Compensation package structure
1
BASE
SALARY
3500-4500 RMB /
month
●
There are 2 performance reviews (midyear
and end-year) to assess individual
performance
2
PERFORMANCE
BONUS
5-30% of monthly
salary
●
Career growth path for EBAs is to
become a team leader (of ~20 EBAs)
3
SALES
BONUS
paid out based on
tiered sales
achievements
●
●
Internal and external trainings provided
Benefits: Free product, birthday
celebrations, team building & outing etc.
4 INSURANCES
Based on Guangzhou
Standard

Consumer engagement | Xiaowanzi engage with consumers through
WeChat message, moment and chat group
Private message WeChat moment WeChat group
Provide
personalised
service and product
recommendations
Avg. 3 moments
per day:
● Contents are
mainly posted
during 9-10, 16-
17 and 21-24
● The majority of
the contents are
around
promotion event
In each group,
there are "Steerers"
who show up as a
consumer but help
to promote the
products

Highlight 6
Everything was
thought through, to
be « multiple
brands, one
consumer, one
platform»
Data of 3 brands’ mini-programs is
connected to the same API and
information systems
Wechat data of multiple brands are
collected centrally with potential of
cross brands analysis

Highlight 7
Why this matters?
Because of the
hidden asset of
WeChat Data…
Own Data
WeChat Illustration
External Data
VS
By openID, by date and by time, list of
action performed: click on the menu,
click on the template message, click on
the link within the post,etc,
Record actions of each user in a structured manner:
BRANDS CAN ACCESS THIS GRANULAR RAW
DATA AT INDIVIDUAL LEVEL
NO INDIVIDUAL LEVEL
DATA ACCESSIBLE

Highlight 8
Yatsen's Prospectus Statement
It gives light to new
KPIs for consumer
brands
100%
Sales with
Consumer ID
known
23.5
MM
DTC consumers
41.5%
Repurchase
rate
20%
Proceeds
on data
analytics
technology
Implies Yatsen’s Tracked KPIs
% of sales on
which they
know who is the
consumer
# of consumer
that you have
direct
connection with
Quality of
relationship
with consumer
Investment on
data and tech
Source: Yatsen Prospectus

Highlight 9
It implies a value
for a consumer
asset - here, each
consumer is worth
3,500 RMB (how
can PE firms find
this reasonable,
seriously…?)
Individual consumer lifetime value is estimated at
¥3,500 per consumer
Note:
1. 12.6b USD or 81.9b RMB of market cap. Data collected as of 29.Jan.2021
2. 23.5m DTC consumers

Highlight 10
...with IN-HOUSE
build capability and
knowledge
200+ in-house engineers (“their number”)
Meanwhile growing team of big data analytics
and AI experts
Platform engineer
ROLES & RESPONSIBILITY
• Design, develop and optimize data warehouse
• Real-time data algorithms, real-time data collection
and development
• Optimize big data platform querying and processing
capacity
~20% of headquarter employees
Software Test Engineer
ROLES & RESPONSIBILITY
• Analyze business needs and translate them into
testing use-cases
• Draft test plans with product managers and
developers to ensure high-quality delivery
• Test OA system/order system
• Execute use-case testing, submit test reports
Web Scrap Engineer
ROLES & RESPONSIBILITY
• Design and develop distributed web scraping
applications
• Large-scale text, image, data capture, extraction,
deduplication, classification, garbage filtering, quality
recognition, analysis and storage etc.
• Analyze the structure of static web pages, analyze web
page data, filter, de-duplicate, and structure the data
Android Developer
ROLES & RESPONSIBILITY
• Manage and control multiple social WeChat groups
and mini-programs on Android ecosystem with X
posed framework
• Monitor and extract user interface status transitions
with AccessibilityService and ABD

Zoom into platform and Data team organization structure, led by CTO
Zoom in Data Middle Desk
CTO
Data Middle Desk
Data
Middle
Desk
Data platform Data analytics Data product Web scraping
Platform engineer Data analyst Product owner Specialist
Help to build and maintain
a big data platform
Have modeling skills, and
conduct ML tasks such as
forecast
Design the layout of the
dashboard
Responsible for collecting social
buzz information for better
understanding of market trend &
consumer need

...and using "tech" standards of working
Startup environment
—
Working hours: 996
Young team with an average
age of 25 years old;
supportive peers for learning
and training
Flat organization
structure
—
Very flat structure with one
head in data middle desk, with
no middle layer of
management at the moment,
hence not clear career
progression path
Variable salary setting
for high motivation
—
There is a KPI bonus of 20% -
60% salary every month.
The bonus is decided by the
score given by the supervisor
according to number of usecases
delivered and feedback
from business team
23

To recap…
24
1
2
3
4
5
6
7
8
9
10
Perfect Diary is « burning cash », in an unsustainable way
But there seems to be an unprecedented equity build-up speed
So, there is another story: it is not a brand, but a « Platform » for a constant cycle of brand launches
And it seems it is working, as the "time to scale” is decreasing for each new brand they launch
What is under the hood, it is NOT a brand building “engine”, but first a consumer data and engagement platform
Everything was thought through, to be « multiple brands, one consumer, one platform»
Why this matters? Because of the the hidden asset of Wechat Data…
It gives light to new KPIs for consumer brands
It implies a value for a consumer asset - here, each consumer is worth 3,500
...with IN-HOUSE build capability and knowledge

25
About Artefact

Artefact Mission
Transforming organisations into consumer centric leaders thanks
to digital, data & AI

We offer end-to-end services, from strategy
to digital execution, powered by data.
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28

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30

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31

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32

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