Competition

Competition: a narrow, late-stage challenger in an arena Proya already won

Yatsen's moat is real but narrow — owned premium skincare brands with decades of heritage (Galénic, DR.WU, Eve Lom) sit inside a digital-marketing playbook that any well-funded Chinese rival can match. The single competitor that matters most is Proya, which runs the same model two years ahead, profitably.

This is not "Yatsen is uncompetitive." Across FY2020-FY2025, Yatsen built three credible advantages: a premium skincare portfolio with origin stories pre-dating most Chinese peers, a 78%-gross-margin P&L that no Chinese-listed peer beats today [1], and an omnichannel digital operating capability that has weathered the Tmall-to-Douyin transition [2]. But none of those three has produced operating-margin daylight against the right peer set: Proya converts a similar mix into a 17.6% operating margin while Yatsen still prints a 4.3% operating loss [3].

Competitive bottom line. Yatsen has a narrow, late-stage competitive position. Two real moats (premium skincare brand equity, digital-channel operating capability), two aspirational ones (R&D, manufacturing scale). The most dangerous competitor is Proya (603605.SS) — same model, same channels, same regulator, two years ahead on operating margin. The most dangerous competitor type is the platform itself: Douyin, Tmall and RedNote took 66%+ of revenue in selling and marketing in FY2025 [4] and have shown they can flip Yatsen's margin in a single quarter when traffic costs rise [5].

How Yatsen describes its own competition — across five years

Yatsen has never named a competitor in any of its five annual reports. The framing has been categorical — "vigorous competition from both domestic and international players in China in the beauty industry, including large multinational consumer products companies that own or operate multiple beauty brands" [6]. The language has barely moved across FY2021 [7], FY2022 [8], FY2023, FY2024 and FY2025: "We compete primarily on the basis of perceived value, including pricing and innovation, product efficacy, service to the customer, promotional activities, advertising, special events, new product introductions, e-commerce initiatives, direct sales, KOL collaborations…" [7]. When the moat list has twelve items, none of them is a moat — and that is exactly the strategic position the company has described, year after year.

Three management call-outs across the multi-year record do, however, identify who and where the competitive pressure is coming from:

The original "domestic beats western" thesis at IPO. The CIC market-share data Yatsen put on the record in 2020 showed domestic brands holding 46.3% of China's mass and mid-end beauty market by 2019 versus 38.3% for western brands, up from 24.4% domestic in 2010 [9]. On color cosmetics, Yatsen was ranked No. 5 among the largest beauty companies in China in 2019 (the only domestic name in the top five), behind four anonymised international players [10].
The COVID-era recognition that the playbook had broken. In FY2022 the company conceded that "the color cosmetics market faced prolonged headwinds" and launched a five-year strategic transformation plan in early 2022 explicitly to shift revenue mix toward skincare and away from Perfect Diary's color-cosmetics-led model [8].
The 2025-26 "foreign high-end brands" call-outs. On the Q3 FY2025 call, CFO Donghao Yang named the threat directly: "we did observe a very big challenge and competition during the past Double Eleven Shopping Festival. Some of the high-end brands are struggling with very big out-of-pocket price promotions" — i.e., L'Oréal/Estée Lauder/Shiseido's prestige units cutting price to defend share, hurting their own long-term growth but raising the cost of impressions [11]. On the Q4 FY2025 call CFO Yang restated the trajectory in margin terms: "with Skincare business, the gross margin, net margin are typically much higher than Color Cosmetics brands. So by doing that, we're going to be able to improve our margin profile" [12].

The trajectory: in 2019 Yatsen described the arena as "domestic vs. western" and the only Chinese name in the top 5. By 2025 it described the arena as "domestic and international, including multinationals with greater financial, technical or marketing resources" [13]. The frame moved from "we are taking share" to "we are defending against better-resourced peers" — the competitive position got harder, not easier.

The peer set — and why these are the comparators

The auto-screened peer set under data/competition/peer_set.json is a six-name list that splits cleanly in two: three Chinese-listed beauty groups that run the same operating model as Yatsen, and three global majors that are useful as the industry's profitability ceiling but are not direct competitors in the same channel-and-customer arena. Yatsen's own filings never name a public-company rival, so this peer set was constructed by combining (a) the three named domestic Chinese-listed cosmetics operators that share Yatsen's regulator, channel stack and customer base, and (b) the three multinationals Yatsen names categorically as "large multinational consumer products companies that own or operate multiple beauty brands" [6]. Each peer's business model is confirmed from its own filing or staged snapshot before benchmarking. The biggest single competitor — Florasis/Hua Xi Zi — is private and not in the corpus; that gap is noted plainly here rather than papered over.

No Results

Peer caution. Proya, Botanee and (less perfectly) Jahwa are Yatsen's direct operating-model peers: same regulator (NMPA), same Tmall/Douyin/RedNote/JD stack, same Gen-Z/Millennial buyer. Estée Lauder, L'Oréal and Shiseido share category — skincare and color cosmetics — but run a fundamentally different model (global manufacturing footprint, prestige-skewed mix, lower S&M intensity per customer because of brand equity built over decades). They are useful as the industry's ceiling; they are not the brands Yatsen wins or loses share to in mainland China day-to-day. The most-named domestic challenger to Perfect Diary in Chinese press — Florasis / Hua Xi Zi (花西子) — is privately held and not in this corpus; it is the most material missing peer.

Proya — the closest, hardest, most-instructive peer

Proya Cosmetics (603605.SS) is the peer that matters. Its own FY2025 annual report describes the business as a "new domestic cosmetics industry platform" engaged in "R&D, production and sale" of cosmetics, with brand portfolio spanning PROYA (mass / mid skincare), TIMAGE (彩棠) (color cosmetics), Off&Relax (haircare), Hapsode (悦芙媞) (entry-tier skincare) and CORRECTORS ("laboratory" pro skincare, RMB 260-600 price band, online-led) [3]. The channel mix matches Yatsen's almost line-for-line: online direct sales on Tmall, Douyin, JD.com, Kuaishou, Pinduoduo plus offline through cosmetics specialty stores and beauty multi-brand stores [3]. On Tmall in 2025 the flagship PROYA brand held #1 rank in face cream and face mask, #2 in facial care sets, #3 in serum, #6 in eye care, and #7 in sun protection — the kind of category leadership Yatsen has not achieved in any single skincare category at scale [14]. On the income statement, Proya runs roughly the same gross margin (73.3% FY2025) but converts it to a 17.6% operating margin and 14.1% net margin — versus Yatsen's -4.3% operating margin and -1.9% net margin in the same year. That gap is the whole bull-vs-bear debate compressed into one comparison.

Shanghai Jahwa — the negative case

Shanghai Jahwa United (600315.SS) is the cautionary peer. Its FY2024 annual report shows a legacy domestic personal-care portfolio — Herborist (佰草集) skincare, Maxam (美加净) personal care, Gough (高夫) men's, Giving (启初) baby care, Doublepretty (雙妹) prestige heritage — that is more diversified than Yatsen's but materially less premium-skincare-tilted, and the result is the lowest gross margin and one of the lowest operating margins in the peer set [15]. Jahwa's MD&A explicitly attributes the FY2024 revenue decline of 13.93% to a "proactive strategic adjustment" in department-store inventory, distributor-to-self-operated conversion and overseas baby-care competition — i.e., a portfolio without a premium-skincare engine to anchor it [16]. Jahwa is what Yatsen looks like if the skincare pivot stalls.

Estée Lauder and L'Oréal — the ceiling, not the floor

Estée Lauder's FY2024 10-K confirms a product mix of Skin Care 51%, Makeup 28%, Fragrance 16%, Hair Care 4% of net sales — the same skincare-spine the Chinese peers are pivoting toward, but built over 80 years of brand equity (Estée Lauder brand since 1946, Clinique since 1968, M·A·C, La Mer, Tom Ford) [17] [18]. EL's own Competition section frames the position as "one of the world's leading manufacturers, marketers and sellers of skin care, makeup, fragrance and hair care products, and… a steward of luxury and prestige brands globally" [19]. L'Oréal's FY2024 chairman letter restates the same status: "world number one in beauty" [20]. These are the rivals Yatsen's CFO described — without naming — as the "foreign high-end brands" running "very big out-of-pocket price promotions" on Double 11 2025 [11]. They are not Yatsen's daily fight; they are the price-discipline ceiling.

The peer scorecard — where YSG actually sits

No Results

A note on data sourcing for the table above: market-cap values come from staged data/competition/peer_valuations.json (yfinance snapshot, as-of 2026-06-18) and are reported in each peer's listing currency; YSG market cap is shown as "see note" because the company reports in CNY but trades on NYSE in USD (ADS ratio 1 ADS = 20 ordinary shares), and the staged snapshot lacked a clean local-currency figure — a separate valuation table below carries the public-company sizing. Enterprise value is N/A for every peer because the staged peer snapshots do not include it (see peer_valuations.json enterprise_value_unavailable_reason field), and rather than estimate I have left them blank. Margins and ROE are calculated from each peer's reported ratios.json (FY2025 period). Estée Lauder's net_margin and ROE show null because the FY2025 staged file reports net_income: null (FY2024 EL net margin was -3.1%); growth_revenue_1y is included where the staged data carried it.

Valuation table — every public competitor named in this tab

No Results

Where YSG sits on margin and growth — the picture that matters

Three reads. First, the y-axis is the entire investment debate: Proya and Botanee live in positive territory at 17.6% and 10.7% operating margin on broadly the same gross margin as Yatsen; Jahwa converts even a 62.6% gross margin to a small positive; Yatsen, EL and Shiseido sit below the zero line for very different reasons — Yatsen for transformation-cycle reasons, EL/Shiseido for prestige-destocking-cycle reasons. Second, the x-axis tells a friendlier story: at 78.2% gross margin Yatsen is the highest-gross-margin name in the entire peer set, beating even L'Oréal's 74.3% [1] [20]. Third, bubble size compresses the absolute reality: L'Oréal is roughly 77x YSG by revenue; even Proya is 2.5x. Sub-scale economics is the structural drag — and that is itself a competitive condition, not a temporary one.

Where Yatsen wins

Four concrete advantages, each tied to a cited page of the primary record. None are "industry-leading" claims; each is something where Yatsen can point to evidence and a specific competitor it beats on the comparison.

1. Highest gross margin in the entire peer set

Yatsen's FY2025 gross margin of 78.2% — up from 73.6% in FY2023 — is higher than every peer in the table above [1]. Q1 FY2026 hit an all-time high of 80.2% [5]. The lift came from skincare mix, not pricing: skincare went from 33.5% of revenue in FY2022 to 53.0% in FY2025 [21], with skincare scaling 63.5% YoY in FY2025 [22]. This is the rare metric where Yatsen genuinely beats Proya, Botanee, Jahwa, EL, OR and Shiseido. The catch is the next line down — but the gross-margin point alone is durable, real, and a non-trivial asset.

2. Owned premium skincare brands with decades of credibility — beats the cold-start Chinese rival

Galénic (founded 1978, France, acquired October 2020 from Pierre Fabre), DR.WU mainland China business (founded 2003 by dermatologist Dr. Ying-Chin Wu, acquired January 2021), and Eve Lom (founded 1985 in the UK, acquired March 2021) [23] [24] give Yatsen a brand stack that a cold-start Chinese rival cannot replicate from a Tmall product launch. In Q4 FY2025 these skincare brands drove 51.9% YoY revenue growth and reached 61.1% of total Q4 revenue [25]. The relevant comparison is Botanee, whose Winona brand is itself a credible domestic dermo-cosmetic name but is a single-brand business — Yatsen runs three distinct premium skincare brands, each with a different positioning (clinical, cellular, prestige facial). That said, Galénic and DR.WU are doing the work; Eve Lom has been stress-tested — Yatsen took an aggregate RMB757.1 million of goodwill impairments across FY2023 and FY2024 largely attributable to the Eve Lom reporting unit [26]. The brand-equity advantage is real but unevenly distributed across the portfolio.

3. Multi-platform omnichannel operating capability — beats the legacy department-store-heavy peer

Yatsen runs concurrently on Tmall, Douyin, RedNote, Weixin (Official Accounts / Mini Programs / Video Channels), Bilibili, Kuaishou, JD.com, Vipshop and Pinduoduo, plus 77 owned offline experience stores and selective premium distribution (Sephora, Sam's Club, The Colorist) [2] [27]. DTC channels generated 84.9% of FY2025 revenue — a structurally higher DTC mix than Shanghai Jahwa, whose own FY2024 MD&A attributes revenue decline partly to department-store inventory reduction and offline sales-department restructuring [16] [28]. On the Q3 FY2025 call CFO Yang acknowledged the competitive pressure on this advantage, but framed it as something Yatsen wins on, not loses on: "as long as we continue to focus on what we have done right, we will see more and more robust product lineup and better innovation… we will see higher brand awareness so that we can get more operational and brand building optimization" [29]. This is the playbook Proya runs too — but Jahwa demonstrably does not.

4. R&D investment intensity — matches L'Oréal, beats Estée Lauder

Yatsen has committed to R&D expenses "consistently exceeding 3.0% of our total net revenues annually since 2022" [21]. FY2025 R&D was 3.2% of revenue (¥137.3 million); Q1 FY2026 stepped up to 3.9% [30]. For comparison Estée Lauder typically runs R&D under 2%; L'Oréal runs around 3-3.5%. The patent portfolio reached 269 patents (10 utility model, 158 design, 72 invention, 29 pending) and 4,453 trademarks across China and outside China by FY2025 [7]. The 66,462 sqm Cosmax JV manufacturing-and-R&D hub in Guangzhou (operational since August 2023) and a Shanghai global innovation R&D center (May 2024) anchor the physical footprint; partnerships with Sun Yat-sen University and presentations at the IFSCC Conference and Asian Dermatological Congress establish the credentialing [31]. This isn't a moat against L'Oréal — but it is real differentiation against most domestic Chinese competitors.

Where competitors are better

Four concrete weaknesses, each named to a specific competitor and tied to a cited page.

1. Operating margin — Proya converts the same gross margin to 17.6% while Yatsen prints -4.3%

The single most damning peer comparison. Proya FY2025: 73.3% gross margin → 17.6% operating margin → 14.1% net margin → 24.4% ROE [3]. Yatsen FY2025: 78.2% gross margin → -4.3% operating margin → -1.9% net margin → -2.7% ROE [1]. Yatsen earns a higher gross margin and converts it to a structural loss; Proya gives up nearly 500 basis points of gross margin and earns nearly 22 points of operating margin on top of it. The Yatsen bull case is "we are Proya two years behind"; the bear case is "Proya's brand-tier mix is hero-product-led and inherently lower S&M per dollar of revenue." Either way, Proya wins this comparison on the line that matters most for a beauty business.

2. Category-leadership on Tmall — Proya's PROYA brand holds rankings Yatsen's brands do not

Proya's FY2025 annual report reports the PROYA brand at #1 in face cream and face mask on Tmall, #2 in facial care sets, #3 in serum, #6 in eye care, and #7 in sun protection for full-year 2025 [14]. Yatsen does not disclose comparable category rankings for any of Galénic, DR.WU, Perfect Diary or Eve Lom in its FY2025 20-F — the closest parallel is the IPO-era statement that Perfect Diary was the "top selling domestic color cosmetics brand on Tmall by sales" during Singles' Day 2021 [32], a claim the company has not repeated for any skincare brand. Category leadership matters because Tmall search and Douyin discovery are algorithmically biased toward best-sellers; a #1-on-Tmall brand earns lower marginal traffic-acquisition cost per impression than a competing brand outside the top three. Proya's category dominance is the structural reason its operating margin works.

3. Scale economics — every multinational in the table runs lower S&M intensity per dollar

Yatsen's selling and marketing expense was 66.3% of revenue in FY2025 — ¥2.85 billion absolute — including ¥1.83 billion of advertising and brand promotion and ¥512.6 million of e-commerce platform commissions [4]. L'Oréal converted a 74.3% gross margin to a 20.2% operating margin in FY2025 on €44 billion of revenue [20]. The math is simple: sub-scale Chinese DTC beauty houses pay a higher percentage of revenue for impressions because they cannot amortise creative, KOL contracts and platform commissions across global revenue. As Yatsen's own risk factor concedes, "many domestic and multinational consumer goods companies have greater financial, technical or marketing resources, longer operating histories, greater brand recognition or larger customer bases than we do and may be able to respond more effectively to changing business and economic conditions than we can" [13]. At US$615M of revenue Yatsen is roughly 23x smaller than Estée Lauder and 77x smaller than L'Oréal — the scale gap is not closeable in any plausible timeframe.

4. Prestige skincare brand equity — Estée Lauder and Shiseido's portfolios still own the consumer mind

EL's brand portfolio includes Estée Lauder (1946), Clinique (1968), M·A·C (1984), La Mer, Tom Ford, Aramis (1964), Lab Series, Origins (1990) — most with 30+ years of customer-built brand equity in China [18]. Shiseido's portfolio under SHISEIDO, Clé de Peau Beauté, NARS, IPSA, ANESSA, ELIXIR, MAQuillAGE etc. has comparable depth. Galénic, DR.WU and Eve Lom are credible brands but they are not "Clinique" or "La Mer." The CFO's Q3 FY2025 framing — that "some of the high-end brands are struggling with very big out-of-pocket price promotions" on Double 11 [11] — acknowledges that foreign prestige incumbents can defend share by cutting price, and that Yatsen has to compete on R&D and product credibility rather than meet them on discount. That is not weakness unless the consumer ends up choosing the brand they have known for 30 years; in prestige skincare she frequently does.

No Results

The two High-severity threats deserve emphasis because they are the only competitors that can materially change the FY2026 outlook. Proya is the share-and-mix threat: its FY2025 Tmall category rankings prove it can hold the #1/#2/#3 slots in skincare's biggest categories at a structural cost-per-impression advantage [14]. Platform commission inflation is the margin threat: the Q1 FY2026 release showed in real time that a single quarter of higher Douyin traffic acquisition cost can swing the operating margin from -4.1% to -9.7%, even with skincare scaling at 58.5% [5] [30]. Foreign prestige discounting on Double 11 amplifies both. If you only watch two competitors for Yatsen, watch Proya's quarterly Tmall rankings and Yatsen's own quarterly S&M-as-%-of-revenue line.

Moat watchpoints — the four numbers that would change the call

No Results

The disclosed figures behind the watchpoints: skincare segment loss of RMB 31 million in FY2025 vs RMB 449 million in FY2024 [33]; selling and marketing intensity at 66.3% FY2025 [4], 64.8% Q4 FY2025 [34], 72.2% Q1 FY2026 [5]; skincare share of revenue 53.0% FY2025, 61.1% Q4 FY2025 [25]; color cosmetics growth +1.9% FY2025 and -5.0% Q1 FY2026 [22] [5]. The four watchpoints together cover the two things competition will move: revenue mix and platform-cost-driven margin.

Bottom line

Does Yatsen have a moat that can compound? Not yet. The skincare-mix lever is real and doing what management said it would — gross margin up roughly 1,390 basis points since FY2020 [35] [1]. But the same five-year window produced exactly one non-GAAP profitable year (FY2025, 0.2% non-GAAP net margin) [22], and Q1 FY2026 gave the operating margin back to Douyin traffic costs [5]. Proya runs the same playbook with the same channel stack and earns 17.6% operating margin [3]. The bull case: Yatsen is Proya two years late — same end-game economics, just earlier in the curve. The bear case: Proya already won the share Yatsen needed to amortise its S&M base. The watchpoints above are how the evidence will pick a side.

References

Generated Jun 19, 2026 10:16 UTC