Brand association

Zhang Xinyu endorses Thanmelin

Since its premiere in mid-June, Sisters Who Make Waves, a reality show about women over 30 competing for a spot in an all-female pop group, has been the breakout TV success of the summer (see WiC500).

The series has been so popular that the share price of Mango Excellent Media, the company that produces it, has gone up 30%. It has also made Thanmelin, its title sponsor, a household name almost overnight. Each episode begins with the camera lingering on a selection of Thanmelin’s beauty products, followed by the slogan: “If you want to win, don’t be afraid of age; all the Sisters use Thanmelin.”

Thanmelin is a homegrown beauty brand that wasn’t widely known until its advertising push across a number of TV shows over the past year. Besides sponsoring Sisters Who Make Waves, the brand has been spotted in other popular series including Back to Field and Viva La Romance. More recently it tapped Annie Yi, 52, one of the contestants in Sisters, for her personal endorsement, along with actress Zhang Xinyu, 33.

The domestic skincare brand largely targets older women from smaller cities, albeit with products that bear higher price tags. On Tmall, a tube of its lipstick sells for Rmb220 ($32) and its star product, an anti-wrinkle moisturiser, costs Rmb1,200 for just 40 grams. For comparison, premium cosmetics label La Mer’s Crème de La Mer charges Rmb1,520 for 30 grams.

Founded in 2015, Thanmelin, which is registered in Guangzhou, outsources its production to a contract manufacturer called Bawei, a biotechnology firm also based in the capital city of Guangdong province that makes goods for a number of other domestic beauty giants like Yunifang and Chando.

Despite its higher-priced goods, it is unclear how much Thanmelin invests in product development. ZN Finance, a financial news portal, reckons that the company doesn’t own any patents, for instance. The anti-wrinkle cream is also formulated with ingredients – rosehip oil and collagen – that are found in many moisturisers.

“Its strategy is similar to another famous homegrown beauty label Perfect Diary [see WiC504]: that is, invest heavily in marketing but spend little on research and development,” reckons Beijing Business News.

That makes it different to many of its international competitors: “Companies like Estee Lauder, P&G and L’Oreal all operate their own factories because high-end brands need to have strict quality control,” says ZN Finance. “If Thanmelin wants to compete against these big brands, a company that relies just on one contract manufacturer and puts little into R&D investment, how is it going to succeed?”

Before its expensive TV marketing push this year, Thanmelin was better known for its reliance on so-called ‘micro merchants,’ who contribute over 80% of its total sales. In a model not hugely different from direct selling, thousands of consumers across the country are recruited to market its goods. Each distributor, or ‘micro-merchant’, pays a one-off fee to join the sales programme and purchases a set amount of merchandise. For instance, a ‘gold’ level agent pays Rmb2,000 upfront and is then required to purchase Rmb20,000 worth of goods. In return, the distributor gets a discount on the retail price of the products. The more the distributor buys from Thanmelin, the higher the potential margin on the sales price – reportedly as much as 62% at the top end – they are rewarded with.

The company also provides training to help its salespeople to reach out to new customers. “Becoming an agent for Thanmelin you receive a lot of training on sales and marketing. It teaches you how to leverage your contact list on WeChat [Tencent’s social media and mobile messaging platform] to market to your friends. If you do well, you can upgrade your status and enjoy even more benefits,” the agent added.

While distributors have some leeway to offer price deals to their customers, they risk being fined if headquarters finds out that the discounts are too steep, jeopardising Thanmelin’s image as a premium brand, one agent told Beijing Business News.

However, judging by some of the reviews on Tmall, some consumers aren’t too impressed with the expensive face cream. Some describe it as “oily” and sticky”, while others even describe it as “a waste of money”.

“I bought a set of Thanmelin skincare products but it made my skin really uncomfortable after using it. I tried to contact a customer service representative but nobody offered me a resolution,” another complained.

Sector specialists wonder whether Thanmelin’s sales model is supportive of the longer-term prospects of building a higher-end business. “Charging such a high premium for products but not offering an after-sales services will erode consumer trust in the brand,” Song Qinghui, an industry analyst, told Beijing Business Today.

“Of course, there are a lot of sceptics but Thanmelin doesn’t care. As far as it is concerned, as long as they have a firm grip of wealthier women in small towns, especially those who are not aware of European and American brands, they don’t have to worry about profits. However, if the goal is to be the Huawei in the cosmetics industry, it still has a very long way to go,” ZN Finance reckons.

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