Discover more from Following the yuan
Weekly #23: Why Li Jiaqi won't be canceled 🎥 , Xiaohongshu fails at e-commerce again 🏝️, Estée Lauder banks on C-beauty 👄 | Following the yuan
Being a skeptic, I doubt that Li Jiaqi will be canceled. Similarly, I question whether the investment from Estée Lauder Companies into an influencer-led brand will yield sustainable results.
Alright, the dust has settled. I've been diagnosed with pneumonia, an unfortunate escalation from a common cold. cough cough. This isn't the first time an illness has taken a severe turn for me. Two years ago, a flu progressed into myocarditis, and its haunts me until this day. Note to self and to you all, rest properly when you’re ill, you are no superman.
Talking about not being superman…Li Jiaqi, who once hailed as the 'lipstick king' for testing 380 lipsticks in a seven-hour livestream session, has somehow become the public enemy since last week.
1. Why Li Jiaqi won't be canceled 🎥
What happened: Li Jiaqi remains one of the few top livestreamers in the public spotlight after the tax evasion fallout involving Viya, Cherie and Sunny in late 2021. This prominence makes him a magnet for public scrutiny with each remark or action. His latest controversy is a testament to that.
On the evening of September 9, as he showcased a 79-yuan (US$10.85) Florasis eyebrow pencil in a livestream, a viewer commented that the product has become more expensive. Li immediately shot back: "Expensive how? It's been at this price for years. Don't make baseless claims. Domestic brands are having it tough already…how can you think this is expensive?" He then added, "Perhaps we should reflect on ourselves. Has your salary increased over the years? Are you putting in the effort?"
Within a day, this incident, amplified by the live video clip, dominated the public discourse, trending on platforms like Weibo and Douyin. Chinese media outlets were quick to weigh in. Some evaluated Florasis's product cost per gram (which is higher than gold), while others contrasted Li's financial stature with that of average consumers, suggesting an expanding gap. Qingyan, a trade publication noted a shift in his role, recalling a time when he was seen as a champion for consumers, particularly regarding pricing. [All articles are in Chinese]
Dig deeper: Li’s Weibo fans dropped 1.3 million over the last few days to just over 29 million. Despite the trending topics and headlines, I believe that the majority of his followers would stay and he will be fine when this blows over.
Notably, Li weathered a politically charged incident involving a tank-shaped ice cream cake before last year’s Tiananmen anniversary, which had interrupted his livestreams for about three months. And unlike how Chinese celebrities are usually canceled because of tax issues/troubled personal life, Li didn’t cross the official red line this time.
Zoey Sun, a long-time follower of Li, ﬁrst tuned into Li’s livestreaming after Covid-19 hit China in 2020, and liked Li’s professionalism, tempo of delivery and humor. This 35-year-old Shanghai-based entrepreneur's affection for Li remains unshaken by recent events, as she told Following the yuan.
"While occasional lapses in his performance are inevitable, they are something I can overlook. I also understand the broader context.
“Many internet users wonder how can Li say something so manipulative, given that he was once also an employee who puts on makeup for people. I understand where they come from, even if they are ok with the price, anyone who has experienced a disparity between hard work and income/feedback will feel uncomfortable hearing it.
“I think Li’s move may look impulsive, but it is also reflective of the profound changes in his life.
“Li's social status, economic situation, and mindset have undergone a radical transformation, which naturally affect his words and behaviors. Plus, the company MeiOne has put him on the pedestal over the last few years: the livestream cannot function without him, he still has to be present although his own slot keeps shrinking. In comparison, other top livestreamers have all pivoted.”
2. Xiaohongshu shuts Little Oasis, reorgs e-commerce biz again 🏝️
What happened: Xiaohongshu's outdoor e-commerce platform "Little Oasis" has announced its closure. In a farewell letter to users, the platform revealed that, due to operational adjustments, it will cease operations on October 1, 2023, and halt all sales by the end of October.
Born amidst the growing popularity of the glamping trend—a movement that has spawned several Xiaohongshu-native businesses, such as the outdoor experience brand Dare Glamping—Little Oasis was inaugurated last March. It spotlighted brands catering to outdoor enthusiasts, cyclists, skiers, and surfers including names like Snow Peak, Coleman, and Naturehike in its lineup.
Dig deeper: With 200 million MAU (as of the close of 2021), Xiaohongshu has always been perceived as a formidable community builder. However, the platform has grappled with business challenges. Its decision to shelf a U.S. IPO in mid-2021 only intensified concerns about its ability to generate revenue.
It’s widely known in the e-commerce industry and through my own research projects that XHS is no place to shop. Consumers I talked to complained about the customer services, and what comes habitually is that they sift through product reviews on XHS before heading to their familiar e-commerce platforms to spend.
Two weeks ago, XHS once again announced to pivot. This time, to a commission-based buyer mode. Let’s see how this would play out.
3. Estée Lauder Companies banks on C-beauty 👄
What happened: New Incubation Ventures, Estée Lauder China's early investment and incubation arm, has recently invested in two-year old domestic beauty brand Codemint without revealing the investment amount. The brand was founded by influencer Grace Chow in 2021 and is focused on clean beauty and makeup products.
The move is widely seen as an infusion of foreign capital confidence in the Chinese beauty sector.
Dig deeper: C-beauty is having a tough time and it’s uncertain whether this indicates confidence or a discount deal. Just this past week, two C-beauty brands, cosmetics brand Fomomy and perfume brand Scentooze, both announced to shut down.
When looking closer at Codemint’s sales in its Tmall store, the best seller is an “iced americano” facial mask that recorded 20,000 orders over the last 30 days. In comparison, its cosmetics products are far less popular, the only eye shadow palette has 200 orders and the lipstick has 1,000 orders over the same period. Many makeup SKUs are sold out and heavily discounted. For instance, four out of 10 lipstick colors are sold out, with the remaining shades discounted to half price at 69 yuan.
It’s safe to say that the zenith of C-beauty brands came when Perfect Diary and Little Ondine’s owner Yatsen Global went public in 2020. Since then, a central question has emerged: Can these brands sustain their momentum through research & development and win with the so-called 'product power’? Perhaps NIV will lend it a helping hand. 🔚
Thanks for reading Following the yuan! Make a pledge today to support my work.