Both Xie Fuchun's revenue and net profit in the first half of the year declined

Abstract: Xie Fuchun’s revenue in the first half of 2022 was 9.5491 million yuan ($1.3934 million), with a net loss of 6.6893 million yuan ($976,100), down 421.49% year-on-year.

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On August 22, Xie Fuchun announced the 2022 interim financial report. In the first half of the year, Xie recorded only 9.5491 million yuan ($1.3934 million) in revenue, down 54.51% year-on-year; gross profit margin was 56.51%, down 12.16% year-on-year.​ The net loss was 6.6893 million yuan ($976,100), down 421.49% year-on-year.

In terms of net profit, the overall decline in the first half of 2022 was more than 400%, even reaching the total loss of last year. For this record, Xie Fuchun said that the main reason is that the tourism market continues to be depressed due to the pandemic, and the operating revenue declines significantly. The operating cost decreases with the decline of the operating revenue. However, due to the influence of promotional activities, the operating cost decreases by 44.53%, which is less than the decline of the operating revenue. At the same time, administrative expenses are mainly fixed expenses of the company, so they did not decrease with the decline of operating revenue but increased over the same period of last year.

Before the outbreak of the pandemic, some century-old strategies used by Xie Fuchun, Kong Fengchun and Dai Chunlin worked well. From 2017 to 2021, Xie Fuchun’s revenue reached 65.04 million yuan ($9.4903 million), 62.98 million yuan ($9.1897 million), 64.77 million yuan ($9.4509 million), and 33.38 million yuan ($4.8706 million), 38.56 million yuan ($5.6265 million). According to the financial report, the revenue of Xie Fuchun in the first half of 2022 declined significantly. The main reason is the pandemic. The offline stores are set up in the main domestic tourist attractions. In the first half of the year, tourism routes in all provinces and cities did not return to normal, resulting in offline physical channel sales decreasing by 8.3841 million yuan ($1.22334 million), a decrease of 67.37%, making the "tourist bonus" supply chain directly missing.

In addition to offline channels, in 2011, Xie Fuchun also kept up with e-commerce, opened an online sales model, and settled in the Tmall flagship store. So far, its flagship store has been open for 11 years and has 1.07 million fans. In online channels, including Xie Fu Chun Tmall flagship store and JD flagship store, its star product Oval-shape powder (in normal packaging and lacquer box), osmanthus head oil and color balm are priced at 198 yuan ($28.89), 38 yuan ($5.54) and 38 yuan ($5.54), the sales can reach more than 500 pieces per month. It can also be seen from the reviews that its consumer loyalty and repurchase rate are guaranteed. Secondly, the sales of its "modern cosmetic peptide series" is not as good as the star products, the monthly sales of a single product are about 100 pieces.

It is worth mentioning that due to the pandemic, the logistics of online platform sales were blocked, resulting in product retention, order loss and customer order conversion decline. Meanwhile, the traffic of Tmall platform was significantly reduced, resulting in a decrease of 2.78 million yuan ($405,600 ) in online sales, down 37.41%.

The reason why Xie Fuchun, who has deep brand culture, fails to shine in the beauty industry may be rooted in the serious lack of investment in research and development. Compared with 163 million yuan ($23.78 million) for Shanghai Jahwa and 76.5836 million yuan ($11.1747 million) for Proya in 2021, Xie's research and development expenses in 2021 were only 1.967,500 million yuan ($287,100).

Insufficient investment in research and development also directly causes Xie Fuchun's lack of product power and innovation. Xie launched six new products in 2017, compared with only three in 2021, including a Soft perfume essential oil hair spray, a Deluxe gift box and Six Gold Powder. Among them, the Deluxe gift box is just a repackaging and upgrading of the original products. The other two products have less than 200 monthly sales on the Tmall flagship store.

In fact, as an old local brand in China, Xie Fuchun has long been famous. In 1915, Xie Fuchun Oval-shape powder, and incense pieces won the silver award at the Panama World Competition in San Francisco, USA. The products were sold overseas, establishing the status of the international brand. In 2006, Xie Fuchun was recognized as one of the first batches of "Chinese Time-honored Brands" by China's Ministry of Commerce. Besides, Xie's incense, powder and oil production skills have been listed as intangible cultural heritage protection projects in Jiangsu Province, and have been applied for national intangible cultural heritage projects.

Even if it has the advantage of a long history, it must "keep up with the internet trend with its classic". To achieve the sustainable development of the brand, it is also necessary to be innovative and expand sales channels to adapt to this transformative digital era.