When Beyoncé blinks her eyes with false eyelashes, the Pingdu factory, thousands of kilometers away, may have been bustling for several days.
Pingdu, a county-level city in the western part of the Jiaodong Peninsula in Shandong. At least 7 out of every 10 pairs of eyelashes in the world come from here, giving this small county the city card of "China's False Eyelash Capital".
Every year, 120 million pairs of false eyelashes are produced from the assembly lines in Pingdu and sold to Europe, America, Japan, South Korea and other parts of the world. Here, the annual output value of the false eyelash industry is about 10 billion yuan.
In the early days, due to the convenient geographical location, South Koreans came to the Jiaodong Peninsula to do business and invested in the construction of eyelash factories. Later, the local villagers gradually introduced the false eyelash technology to Pingdu. Up to now, the false eyelash industry in Pingdu has a development history of more than ten years, and many international female stars such as Beyoncé have worn false eyelashes from Pingdu.
Benefiting from the dividend of foreign trade exports, the beauty enterprises in Pingdu once had a prosperous life by relying on OEM processing. With more and more participants entering the market, the situation of "price war" has increased sharply, and the easy days of the factories have become a thing of the past.
The emergence of new e-commerce platforms such as Pinduoduo has opened another business opportunity for these manufacturers in the troubled industrial belts. In the low-cost and high-traffic depression of the platform, many industrial belt enterprises have started to expand their online business, regain the initiative in sales, and after achieving large-scale growth, they have begun the bottom-up industrial upgrading and own brand building under the "New Quality Merchants" support program of Pinduoduo.
01
A Road of the Past
Back to the 1970s and 1980s, Pingdu was just an extremely ordinary existence among more than 2,000 counties in China. Later, a villager surnamed Cui from Daze Town, Pingdu City, who was engaged in foreign trade work, learned the false eyelash technology in a South Korean enterprise and established a family workshop in the local area, thus opening the curtain of changing fate.
Behind the huge false eyelash industry, there are complex production processes. Taking a pair of false eyelashes about two centimeters long as an example, it needs to go through 9 steps of "pressing hair, combining hair, threading, cutting hair, rolling tube, shaping, stripping tube, loading tray, and packaging" before leaving the factory. Most of these processes require a high degree of reliance on manual labor.
More than 400 kilometers away from Pingdu, Qingxian is also experiencing a similar opportunity.
At about the same time, the local government attracted investment and introduced a batch of South Korean brush-making factories. At that time, many international orders of big European and American brands came from these relatively developed South Korean beauty enterprises. At that time, many people in Qingxian learned the technology of making makeup brushes in South Korean factories.
Later, the story became that the locals began to set up their own factories, and every year, makeup brushes of Hermès, Sephora, and unlisted concealer brushes of MAC are produced here.
Like false eyelashes, the makeup brush industry is also one in which manual work plays an important role. Even now, 70% of the quality of a brush depends on the production level of the workers.
In the early days of reform and opening up, both Pingdu with a population of more than 1 million and Qingxian with a population of only 440,000 had a great advantage in labor cost, making labor-intensive industries such as false eyelashes and makeup brushes gradually take root in the local area.
In the industrial development, local enterprises and South Korean enterprises ushered in price competition. Relying on the cost control of each link of the supply chain, merchants in Pingdu and Qingxian took over global orders from South Koreans and became the supply centers of false eyelashes and makeup brushes in the world.
The false eyelashes in Pingdu and the makeup brushes in Qingxian are far ahead in sales. The large-scale industry has allowed the merchants in the industrial belt to earn a certain profit. After completing the capital accumulation, these merchants began to expand from export to domestic sales, expand production capacity, and supply goods for each supply and marketing link in the domestic market.
Starting from 2012, changes have begun to take place in China's beauty industry, and local beauty brands have gradually become the leading roles. Data shows that the market share of local brands has gradually increased from 15% in 2012 to 28.8% in 2021. Within 10 years, the market share of China's local color cosmetics brands has increased by 13.8%.
In this trend, industrial belt merchants such as makeup brush manufacturers in Qingxian have also got a share and done OEM business for these new and cutting-edge brands.
However, a cruel fact is that whether it is foreign trade OEM or OEM for brands and channel supply, these models all depend on the orders of the other party. And as the local labor cost continues to rise, the low-price advantage of industrial belt merchants is gradually disappearing. In order to attract customers, they cannot raise the price, and the already weak profit is further compressed. The profit of a false eyelash product is only a few cents.
In addition, each industrial belt is still in the middle depression of the smile curve, and the high premium of the product is obtained by the downstream party. A brush of Sephora can be sold for more than 100 yuan, but the ex-factory price in Qingxian is only more than 20 yuan.
The result is that industrial competition can only stay at the price level. There are thousands of merchants and workshops in an industry, and only those with lower prices have the opportunity to get the orders of distributors. Low-price competition is not the cause of industrial involution, but the result of industrial development.
This has seriously limited the competitiveness and profit space of OEM enterprises. Industrial belt merchants want to turn to e-commerce to find a way out. They have been in the "comfort zone" of foreign trade OEM for a long time, and it is not an easy thing to jump out. Experience, operation, and cost are all challenges in front of these merchants.
They can only continue to do OEM in a vicious circle.
02
Exploring the Road
An Fayi, a young man from Shandong, is one of the early batch of people in the Pingdu eyelash industrial belt who tried e-commerce.
He is not a native of Pingdu. Because his girlfriend got a job in the public sector, he followed her to her hometown. Here, An Fayi came into contact with the false eyelash industry. In order to figure out the ins and outs, he specially spent 8,000 yuan to be an apprentice in an eyelash salon. After accumulating experience in the materials and craftsmanship of false eyelashes, he started his e-commerce entrepreneurship.
An Fayi has tried live streaming and traditional e-commerce, but neither has made a big splash. The reason is not difficult to guess. In live streaming and traditional e-commerce, advertising investment is required to achieve conversion. On the one hand, there is not much capital in hand to do such a thing. On the other hand, too many uncertainties also make people doubt whether the investment will be in vain.
It was not until around 2019 when he started to make attempts on Pinduoduo that the situation reversed, and the daily sales volume quickly rose to more than 1,000 orders. At that time, false eyelashes just became popular on the Internet. Because of the low prices, Pinduoduo attracted many young people to place orders, and the favorable prices also allowed merchants to obtain abundant traffic from the platform, thereby enjoying the dividends.
It is worth mentioning that although the price on Pinduoduo is relatively lower than other platforms, An Fayi can still get considerable profits. According to him, a box of false eyelashes with three rows is sold for 8.5 yuan, and the profit at that time can reach 50%. Moreover, every link in the upstream and downstream is very profitable. Those who sell semi-finished products can earn 50%, and those who sell packaging boxes can also earn 50%. "There is gold everywhere."
In the book "Competitive Advantage: Insights into the Corporate Moat", when it comes to the three competitive advantages of enterprises, it mentions the competitive advantage of economies of scale - enterprises can enjoy a low-cost advantage relative to competitors through large-scale production.
This may explain why it is profitable to do business on Pinduoduo. Assuming that the fixed costs are the same, the large number of orders brought by Pinduoduo is enough to spread all costs, including the price difference, allowing merchants to achieve large-scale profits.
When 36Kr contacts many Pinduoduo merchants, they will be asked a question: Why do you do Pinduoduo? The almost unanimous answer is: Large traffic, high conversion rate, and low cost. Even the paid promotion price is lower than other platforms.
Zhang Mengwei, a cosmetics merchant in Qingxian, started selling makeup brushes online in 2016. At first, opening a store on Pinduoduo was just a casual attempt, but the sudden orders still surprised the team. After realizing the potential of this platform, the company immediately equipped with a full-time operator and devoted itself to doing Pinduoduo.
Because the makeup brushes produced in the past were mostly for the European and American markets, considering the eye distance of foreigners, the eye brushes are relatively large, and the handles are mostly black paint features. After doing e-commerce, Zhang Mengwei began to produce more localized products according to the aesthetic and usage habits of Chinese people, such as making more personalized and differentiated developments in terms of color and brush head shape.
The attempt of e-commerce has also opened up the communication channel between Zhang Mengwei and consumers. According to Zhai Xiaofeng, the person in charge of e-commerce, because Pinduoduo has a large traffic pool, the product testing speed is very fast, and the market popularity of new products can be seen through conversion. "If the sales volume of a product can continuously reach more than 500 per month, we will put it into production."
Now, Zhang Mengwei's factory has an average daily order volume of about 10,000 orders, with an annual output value of about 100 million yuan, and the sales volume of Pinduoduo can already account for about 50% of the total channels.
Six or seven years ago, the volume of the Pingdu false eyelash e-commerce was very small, and almost all of them were OEM for e-commerce merchants in Jiangsu, Zhejiang, Guangdong and other places, and they could only earn the money from the production end. Led by actors like An Fayi, more locals flocked to Pinduoduo, making the false eyelash e-commerce blossom everywhere in Pingdu, and the local industry has also ushered in the fastest 5 years of development.
In the past 5 years, the number of Pingdu false eyelash enterprises has soared. In 2022 alone, more than 800 new ones were added, and now it has reached 3,895. The daily express delivery volume during the peak season can reach 300,000 pieces, with more than 60,000 employees. 120 million pairs of false eyelashes are produced every year, and the industry output value exceeds 10 billion, which has grown into one of the pillar industries in the local area.
Some merchants said that the new e-commerce represented by Pinduoduo has detonated the domestic market of false eyelashes and accelerated the development process of Pingdu false eyelashes. It has completed the road that foreign trade OEM has taken for 40 years in just four or five years.
The merchants in the industrial belt have also crossed the narrow bridge of OEM and held the discourse power in their hands through the direct sales model, dug more profit space in the new industrial opportunities, and further driven employment.
03
Finding the Upward Road
Today, there are more than 1,000 makeup brush factories in this small county of Qingxian, supporting an annual output value of 3 billion yuan. Zhang Mengwei told 36Kr that now 90% of the industrial belt merchants in Qingxian are doing e-commerce. "After the rise of e-commerce, it has filled the production model that we solely rely on overseas export orders and has improved the industrial scale."
After getting on the fast train of e-commerce, the industrial chain has also ushered in changes, and the degree of improvement in the upstream and downstream is getting higher and higher. In Qingxian, industries such as makeup brush painting and color printing have also emerged locally.
But an indisputable fact is also happening. The threshold of the industrial belt is low, and it is relatively easy to do Pinduoduo. When more and more merchants enter, it is easy to fall into homogeneous competition.
"Competitive Advantage: Insights into the Corporate Moat" mentions that price competition is the most common form of interaction. Its core is: Cooperating to set a high price is beneficial for both to obtain higher profits, but each enterprise has a strong motivation to use a lower price to snatch the business of other competitors, thus destroying the possibility of cooperation. This is the well-known "Prisoner's Dilemma".
So when there are multiple competitors in the market, each enterprise may try to attract more customers by lowering the price, thereby increasing its market share. With the industrial development, price competition also occurs among merchants in the industrial belt.
To some extent, price competition is not an obstacle to industrial development, but the driving force of industrial development. Just like in the full price competition, the costs of each link in the supply chain have been reduced, making China the world's factory. Later price competition allowed industrial belt merchants to jump from OEM to e-commerce, opening up the growth ceiling.
Blindly competing on price has no way out. The current price competition is also pushing the industrial belt merchants to explore a broader road upward.
Zhang Mengwei did not have the awareness of building a brand at the beginning. With the intensification of competition, he began to focus on brand building and launched his own brands, Huayang and Shizhu. At the same time, the company has also carried out some industrial chain integration and built its own wooden handle factory and paint spraying factory, which can reduce the cost by 10%. "We will use the reduction of this part of the cost for traffic placement and product upgrading."
The "New Quality Merchants" support program of Pinduoduo is aimed at these merchants with product innovation and supply chain advantages, helping them to take another step and create space for industrial transformation.
In August, Pinduoduo announced the launch of the "10 Billion Subsidy Reduction" plan. In the next year, it will invest 10 billion resource packages to support new quality merchants and new quality industrial belts, and reduce the transaction fees of high-quality merchants by 10 billion. On the other hand, Pinduoduo will also resolutely carry out the ecological governance of the platform and merchants, promote the elimination of the inferior and retention of the superior in the industrial belt, and continuously optimize and upgrade the supply.
