In House of Cards Tmall flagship store, products have been removed from shelves. Sources even implied that the brand’s operation had stopped because investors were not optimistic about the current makeup market.

Products from House of Cards

House of Cards

Founded in 2019, House of Cards is a new makeup brand focusing on Chinese fashion. Its inspiration is from a traditional Chinese game, Mahjong. In March 2020, it completed Pre-A round financing, securing 20 million yuan. However, only one year later, the brand was given up by founders and investors. Its founders seem focusing on developing another new consumer brand, NYSCPS, a popular oral care brand that gained 400 million yuan in July 2021.

What Happened in the Marketplace?

House of Cards is not the only makeup brand that has been shut down this year. In September 2021, a famous makeup influencer, @Benny董子初, also announced stopping operating his self-founded brand, CROXX. Other niche Chinese makeup brands, such as KACH, Apinkbaby, Dramo, etc., also chose to close their Taobao stores and stop operation recently.

In the meantime, investors also showed less interest in this category than before. There are only three makeup brands that gained one round investment this year. In comparison, about 11 skincare brands were invested during the same period. Some of them even gained several rounds of financing within a short time. For example, Simpcare received tens of millions of dollars Round-B financing and over 300 million yuan Round-C financing in January and August this year. Oral care is another popular category. NYSCPS, another brand from House of Cards’ parent company, completed three rounds of financing in 2021.

Products from NYSCPS

Why?

Triggered by the huge success of Perfect Diary, a makeup brand that successfully launched an IPO in the New York stock market within three years, the Chinese makeup market used to be extremely hot and popular among investors and entrepreneurs in the past few years. Many new brands rose in 2017-2020. However, the enthusiasm for the makeup category didn’t last long because the market changed so quickly.

Many practitioners believe that there is little possibility to build another “Perfect Diary.” Those current successful Chinese makeup brands (including Perfect Diary and Florasis) rose in a period when there were no top-tier Chinese makeup brands. They found the empty market and seized the opportunity. However, these brands have occupied most market share, so it is difficult for other domestic makeup brands to compete for more market share.

Moreover, in the current severe competition, the cost for traffic is getting higher and higher, so many emerging brands have to give up the strategy of launching multiple marketing campaigns and inviting thousands of influencers and live-streamers to promote their products. In addition, some industry insiders believe that consumers are less loyal to color cosmetics brands than skincare brands, which requires makeup brands to continuously introduce new products and launch marketing activities to attract consumers. This situation makes it difficult for investors to get profits in a short term, which can be proved by the fact that Yatsen Global, the parent company of Perfect Diary, still has not gained profits after its IPO. Therefore, no profit, no investors.

Last but not least, the impact of the normalization of the epidemic on the entire cosmetics market is still continuing. It even affected big beauty giants’ business strategies, selling those unpromising brands. For example, BECCA, a makeup brand from the Estée Lauder Group, announced in early February this year that the brand would be closed at the end of September this year; last month, Shiseido announced that it would sell its three makeup brands, Bare Minerals, Laura Mercier and Buxom.

The makeup market in China is undoubtedly cooling down. Whether shifting to another category or looking for another growth point is a question that all brands need to figure out.