Summary of Key Points
The Hong Kong IPO of HBN's parent company, Hujia Technology, has been marked as "invalid" (not a complete failure; additional materials can be submitted to restart the process). On the surface, this is due to procedural issues with the application documents (such as details regarding the use of raised funds and equity incentives), but deeper down, it reflects common challenges faced by internet-famous beauty brands: reliance on a single hit product or brand, excessive reliance on online channels, high marketing costs that squeeze profits, and a lack of technological barriers and strong brand recognition. Additionally, the Hong Kong stock market is becoming more discerning of these "traffic-driven" beauty brands, favoring those with substantial capabilities (technology, distribution networks, and a comprehensive brand portfolio).
Two Core Reasons for the IPO Failure
- Procedural Issues: While not fatal, these issues have exposed Hujia Technology's weaknesses:
- Required Supplementary Materials: The Securities Regulatory Commission has requested clarification on details such as the specific amount and percentage of funds to be invested and the external advisors involved in post-listing equity incentives. These are routine requirements, but delays can lead to the IPO being invalidated.
- Operational Weaknesses: These are the real concerns for investors:
- HBN generates nearly all its revenue from a single product, which poses significant risks.
- Online channels account for a large portion of sales; any increase in traffic costs or changes in platform policies could be detrimental.
- Marketing expenses exceed 50% of revenue, with most profits going towards advertising, resulting in thin margins.
- The distribution of a dividend of 100 million yuan before the IPO has raised doubts about the company's financial health.
- Negative publicity regarding claims of "anti-aging" effects has also damaged trust.
How Did HBN Fall from Success to Decline?
HBN's early success was based on leveraging trends and traffic strategies, but it failed to sustain its advantages:
- Lack of Technological Barriers: Although it started early with retinol-based anti-aging products, it relied on marketing rather than genuine technological innovation. For example, while Ludeqing has been producing retinol since 1997, HBN's retinol ingredients are purchased from suppliers.
- Single Hit Product: Its main product line is the "Early C, Late A" set, with other products failing to gain popularity. The highest sales on its Taobao store come from this single product, indicating a lack of diversification.
- Low Average Order Value: Targeting students and new professionals, the set costs around 200 yuan, resulting in low profits. Raising prices could deter customers, while older consumers are less willing to pay higher prices, limiting potential growth.
- Weak Brand Identity: The brand failed to establish a distinct image despite early success with its "early C, late A" messaging. Attempts to collaborate with celebrities (Wang Sulong, Bai Jingting) were routine and did not effectively connect the artist's personality with the brand.
Has the Hong Kong Stock Market's Attitude Towards Internet-Famous Beauty Brands Changed?
Previously, the Hong Kong market was a safe haven for domestic beauty brands (with A-share markets favoring technology-driven companies more), but now it is more selective:
- Successful Listings Require Strength: Companies like Juzi Biology, with its recombinant collagen technology, and Maogoping, with its extensive offline stores, are favored due to their robust capabilities.
- Internet-Famous Brands Face Criticism: Brands like Shangmei Co., Ltd. (parent of Hanshu), which rely on a single product and high marketing costs, have lower net profit margins compared to others.
- Stricter Regulations: Since 2023, IPO applications in Hong Kong must be filed with the Securities Regulatory Commission, and large dividend distributions or sudden share purchases are subject to scrutiny. This is likely the reason why Hujia Technology and Banmu Huatian's IPOs have been delayed.
What Do Internet-Famous Beauty Brands Need to Do to Enter the Hong Kong Market?
Relying on traffic strategies alone is no longer sufficient; investors seek long-term value:
- Build Technological Barriers: Develop proprietary ingredients or obtain patents.
- Establish a Strong Brand Identity: Create a unique brand image that resonates with consumers (e.g., like Guyu's "new Chinese style" or Dongbian Yebao's "natural essence").
- Diversify Channels: Expand into offline stores or multi-format outlets to reduce risk.
- Optimize Profit Structures: Reduce marketing costs and increase product profitability by raising average order values or developing higher-margin products.
In summary, internet-famous beauty brands looking to list in Hong Kong must demonstrate real strength rather than just relying on temporary trends.
Industry Insights
The HBN case is not isolated; Banmu Huatian, Perlaya (with a second attempt at listing), and Wanmei Biology have also encountered setbacks. This indicates that the era of traffic-driven growth is over. Consumers and investors are more discerning, and companies need to offer tangible value.
- Domestic Beauty Brands Must Transform: Move from being internet-famous to building strong brands with both technology and distribution networks.
- The Door to Hong Kong Is Still Open, but the Barriers Are Higher: Only those capable of enduring market changes will gain access to capital.
For consumers, when purchasing skincare products, it's important to consider more than just celebrity recommendations. Brands with genuine technology and a solid reputation are the best choices—after all, even investors are not naive.