Chinese demand for foreign beauty and cosmetics brands has spawned an entire industry of professional shoppers. Known in China as ‘daigou’, they specialize in buying products overseas to sneak them into China without paying taxes.
While this cross-border gray market was estimated to be worth RMB 43 billion (USD 6.3 billion) in 2016 before a government clampdown, times are changing and trends in the global beauty industry are shifting towards more modern consumption patterns.
Some of the changes in demand for the beauty industry are lead by Gen Z women, or those born from 1995 to 2010, now in their 20s, who are digital natives and have grown up with e-commerce. They represent a new type of consumer who is more open-minded about foreign brands, but also appreciates local firms, as highlighted by the meteoric rise of Guangzhou-based cosmetic giant Perfect Diary.
“The young generation has totally different habits and a totally different decision-making process, not only for what they buy but also what they like,” Hugo Yu, founder of iDS BuyBuyBuy, told KrASIA.
Yu launched iDS BuyBuyBuy after recognizing a gap in the industry for cross-border e-commerce and a desire for more information about the beauty industry.
Identifying and capitalizing on changing trends
Before launching her startup, Yu spent nearly 10 years working for the acclaimed fashion magazine Harper’s Bazaar China. From 2004 to 2015, she gained useful experience during what she calls “the golden age for luxury business in China.” She also built valuable connections with representatives of foreign cosmetics brands like L’oreal, Estee Lauder, and others, during this time.
Doubting the future of print media, Yu began mixing with friends in the technology industry and started considering a potential entrepreneurial path in the e-commerce sector.
After one dinner in Shanghai with executives of US-listed luxury boutique platform Farfetch, and conversations with Qi Chen, a friend and founder of fashion-centric e-commerce platform Mougujie, Yu decided to also start her digital platform, dedicated to the beauty and personal care world. In 2017, she launched iDS BuyBuyBuy, with Chen as the firm’s first angel investor.
In its early days, the Beijing-based company worked on developing an own native app, but to little avail. The firm only started to gain real traction when it decided to leverage Tencent’s WeChat mini program feature to develop its app in September 2017.
“People live in WeChat, they sleep in WeChat, it is their social and family network,” Yu said.
While most apps attract users with a clear goal, whether it’s entertainment or e-shopping, WeChat users have no clear objective when they spend time in the app, according to Yu. As of the third quarter of 2020, super app WeChat had over 1.2 billion monthly active users, as per data by Statista. Launching a mini program on this platform allowed iDS BuyBuyBuy to reach an extensive group of socially-oriented users.
As the platform grew, Yu leveraged her old connections from the fashion and beauty world to partner iDS BuyBuyBuy with more than 50 well-known international brands. Meanwhile, ambitious niche brands like MZ Skin, By Terry, and Chantecaille, were interested in capitalizing on a new digital sales channel that offered them hyper-targeted marketing opportunities, Yu said.
A focus on content over sales
While the company’s main revenue comes from purchasing products from brands and reselling them on its platform, Yu insists that iDS BuyBuyBuy does not prioritize sales, and doesn’t want to be labeled as an e-commerce company.
It is the content that sets iDS BuyBuyBuy apart, she says.
Many of the firm’s 200 million young users across all social channels use the platform to discover new products or know more about them, before executing a final purchase on iDS BuyBuyBuy, or other platforms like Alibaba’s Tmall, Yu explained.
A team of nearly 30 content creators provides a space where product-related content can be trusted and original work can thrive, Yu said. The in-depth product reviews by consumers, as well as discussions among the community, give young Chinese shoppers confidence when comparing brands, helping them in the selection process.
With a community-driven content engine as a foundation, the firm has become a platform where nice brands can be introduced to consumers through the use of organic content produced by key opinion consumers (KOC) and key opinion leaders (KOL). Many little known brands, both Chinese and foreign, have preferred debuting on iDS BuyBuyBuy before setting up official stores on other e-marketplaces, Yu said.
“Alibaba platforms are not friendly for content creators, especially original content that appeals to the younger generation, partly due to the proliferation of misleading content, like when an authentic image accompanies a fraudulent product,” she added.
The firm has even become an incubator of brands, by providing investment capital along with sales and marketing support for early-stage founders. Traditional Chinese medicine wellness brand Yu Sum Tong is one of them.
Building and serving a community
“We want to be the trusted, credible friend who gives users the best solution for what they need,” Yu described.
The company goes out of its way to humanize its users in its community, calling them loyal patrons as opposed to fans or followers. iDS BuyBuyBuy also counts around 100,000 users as part of its VIP program, which allows highly engaged members access to the firm’s one-on-one consultation service which can advise on product and life-related topics.
“We want to be there and share wisdom with our community beyond just products, like dealing with discomfort during pregnancy, or even a complicated relationship with a mother-in-law,” she said.
The company, which employs around 100 people and has already reached profitability, according to Yu, secured USD 40 million in its Series B+ round last November. Investors included Orchid Asia, Lightspeed China Partners, and SIG-China. The fresh found will go towards ramping up operations.
Going forward, Yu believes that her firm is poised to capitalize on the changing trends in the industry. She is also optimistic about the future of China’s own cosmetics and beauty market.
“Right now, there is a historic opportunity in the market for local Chinese brands,” she said.
This article is part of KrASIA’s “Inside China’s Startups” series, where the writers of KrASIA speak with founders of tech companies in the country.