Internet giants are willing to risk their reputations by racing to capture the low-cost medical aesthetics market, drinking the leftover soup from upstream manufacturers, and encountering a double crisis of trust.

From "women dress up for those who admire them" to "women dress up for themselves," this shift in traditional beliefs has fueled the booming medical aesthetics market, with the primary target customers gradually expanding from young women to include mature women and men in recent years.

According to the latest "2024 China Daily Beauty and Light Medical Aesthetics Market Research Report" released by iiMedia Research, the market size of China's beauty industry reached 280.4 billion yuan in 2023 and is expected to reach 381.6 billion yuan by 2025.

Over the past decade, offline institutions have sprung up like mushrooms after rain, and the medical aesthetics trend has coincided with the rise of the internet. During the annual Double 11 sales promotion on e-commerce platforms, medical aesthetics products are indispensable to contributing to gross merchandise volume (GMV). On short video platforms, medical aesthetics livestreaming events can generate hundreds of millions of orders in just a few hours. Local life platforms have also capitalized on this opportunity, making medical aesthetics as accessible as ordering takeout through O2O cooperation with physical institutions.

Stimulated by strong demand and high supply, market chaos is inevitable. Xinyang, a leading vertical medical aesthetics platform in China, has faced difficulties even after its successful IPO. Its CEO Jin Xing once publicly stated, "Looking back at 2023, the medical aesthetics industry exhibited a 'high opening, low closing' trend, with low-price competition causing industry pain and fostering a myriad of service irregularities, severely impeding the industry's healthy development."

A bombshell exploded at the beginning of this year. On February 23, CCTV's "Focus Talk" broadcast an episode titled "Medical Aesthetics Livestreaming: Selling or Causing Trouble?" This triggered an industry-wide shock. On the evening of the broadcast, news emerged that medical aesthetics livestreaming content on several leading short video and local life platforms was promptly halted.

While the customer acquisition channels through livestreaming have been cut off, the demand for medical aesthetics institutions to attract traffic remains unabated. On major e-commerce and local life platforms, low-cost medical aesthetics projects modeled after Pinduoduo's "1 yuan starts" and "9.9 yuan deals" are becoming prevalent. However, subsequent issues such as offline verifications that do not match the advertised products and services, and inducement to make additional purchases during the service process, have once again become a persistent annoyance for consumers. What is the allure of low-cost medical aesthetics that compels internet giants to endure negative reviews and rush in?

01 Hidden Concerns Amid the Light Medical Aesthetics Boom

Most traditional medical aesthetics projects introduced into the domestic market from South Korea are plastic surgery procedures, which are classified as medical activities. Advertisements related to medical services are strictly prohibited by national laws from being published in any form that violates regulations on medical, pharmaceutical, and medical device advertisements.

Therefore, livestreaming medical aesthetics products or services on platforms like Douyin and Meituan, without obtaining a "Medical Advertisement Review Certificate," is suspected of illegally publishing medical advertisements.

However, a concept known as light medical aesthetics emerged in Europe around 2014 and quickly gained popularity in China. Unlike traditional plastic surgery, which is characterized by high barriers, long recovery periods, and high risks, light medical aesthetics primarily encompasses four categories: injections, non-invasive rejuvenation, lasers, and thread lifts. These procedures typically require only short-term training for service personnel, take up less time for consumers, produce quicker and more visible results, and pose relatively lower health risks. As a new phenomenon, they remain in a gray area of medical regulation.

Crucially, light medical aesthetics projects are highly affordable, allowing young working women to try them out without financial pressure and even take advantage of promotions on various internet platforms. According to the "2023 Medical Aesthetics Population Insight Report" released by Mob Research Institute, over 60% of medical aesthetics enthusiasts earn less than 5,000 yuan per month.

The maturity and popularization of low-cost medical aesthetics products and services have effectively opened up a new blue ocean in this market. The threshold for businesses has lowered from plastic surgery clinics to street-side beauty salons, while consumers have broadened from middle-class individuals with a certain income level to include recent college graduates, working professionals, and high school and middle school students with some pocket money.

Driven by their inherent platform nature, internet giants naturally cannot miss out on this fresh traffic from both supply and demand sides. With platform subsidies, various 0-yuan experience projects and low-cost traffic-driving services have been introduced.

For instance, when light medical aesthetics first emerged, the most popular project was Korean-style small bubble facials. This service involves deeply cleansing the skin using vacuum suction to combine tiny bubbles and nutrient solutions, removing blackheads and dead skin. Typically priced around 200 yuan per session in offline medical aesthetics institutions, the price on local life platforms is often reduced to a single digit.

This white-label, low-cost traffic-driving strategy, similar to Pinduoduo's, also inherits some of its drawbacks. Some Pinduoduo merchants display accessories or sample products alongside the original product at extremely low prices to attract clicks. When customers enter the product details page, they discover the actual price. Similarly, low-cost projects on various medical aesthetics livestreams and O2O platforms may result in offline verifications that do not match the advertised products, and some consumers have even claimed to have encountered situations where products were substituted during the service process.

On Sina's third-party consumer rights protection platform Heimao Complaints, there are thousands of complaints related to medical aesthetics. Many involve low-cost medical aesthetics services purchased online but unusable in-store, or being subjected to last-minute price increases or upselling during the service experience.

When medical aesthetics becomes as convenient and commonplace as ordering takeout, issues similar to those with gutter oil and pre-cooked meals are bound to arise in this industry as well.

02 Entry of Giants and Market Chaos

The entry of internet giants into the medical aesthetics arena can be traced back to 2014, before light medical aesthetics gained popularity in China.

That year, two medical aesthetics platforms, Xinyang and Gengmei, secured A-round funding of up to several million US dollars, led by prestigious venture capital firms Matrix Partners China and Sequoia China, respectively. Just two years later, the valuations of both platforms doubled to nearly 3 billion yuan. At this point, Tencent chose to participate in both companies' C-round funding, adopting an all-in strategy.

Around the same time in 2015, Meituan launched its Beauty Business Unit, focusing on beauty, hairdressing, and manicures, and began to explore medical aesthetics. After three years of continuous effort, it upgraded to an independent Meituan Medical Aesthetics Business Unit. In 2016, Tmall, in collaboration with AliHealth, ventured into the medical aesthetics business, though it would take some time before experiencing significant growth.

The investment strategies of insiders and outsiders in the internet giants' "medical aesthetics war" have led to contrasting outcomes. In May 2019, Xinyang went public on NASDAQ, with its share price soaring 31% on the first day, valuing the company at nearly 13.5 billion yuan. However, it peaked at its inception and has since struggled, with its current share price below $1 and a market value of approximately $80 million. Since its peak in 2019, the share price has plummeted by over 96%.

According to the latest financial report, as of June 30, 2024, Xinyang's total revenue reached 726 million yuan, a slight increase of 0.48% year-on-year. Despite the slight revenue growth, the company still recorded a net loss of 2.299 million yuan, although the loss margin narrowed significantly by 84.17% compared to the previous year. This data reflects that while Xinyang's revenue has increased, its profitability remains severely challenged. Gengmei, which lost the race to become the "first medical aesthetics stock," was forced to pay 55.24 million yuan in legal disputes in 2021 and had its 1 million yuan worth of shares frozen.

The struggles of vertical platforms serve as a stark contrast to the heated competition among internet giants. During the 618 shopping festival in the first half of 2020, Meituan's online medical aesthetics transactions exceeded 2.17 billion yuan, more than four times Xinyang's revenue of 511 million yuan for the same period. During the Double 11 event in the second half of the year, Tmall's first wave of medical aesthetics and medical orders saw a nearly seven-fold increase in orders compared to the previous period.

The success of Meituan and Ali can be partially attributed to the rise of light medical aesthetics. Since entering the medical aesthetics field, Meituan has regarded light medical aesthetics as an absolutely correct strategic direction. This judgment stems not only from external market trends but also from Meituan's accumulated customer base of women in second- and third-tier cities through its beauty, hairdressing, and manicure businesses.

Xinyang, which started earlier, while acknowledging the irreversible trend of light medical aesthetics, still cannot abandon the traditional medical aesthetics front. Internally, it insists on referring to it as non-surgical medical aesthetics. "So-called light medical aesthetics is really a pseudo-concept, and I think minimally invasive plastic surgery is also a pseudo-concept," Xinyang CEO Jin Xing once publicly stated.

Subjective beliefs cannot withstand the objective reality that the traffic-driven approach of internet giant platforms is the fertile ground for the robust growth of light medical aesthetics. The user trust system built by vertical platforms like Xinyang, based on content communities and primarily driven by advertising, cannot match the speed at which e-commerce and local life platforms are expanding their territories.

However, this aggressive expansion inevitably leaves room for irregularities. As low-cost group buys flood the medical aesthetics market, consumer complaints reach a peak, and even upstream manufacturers become intolerant of the downstream chaos. Last November, Allergan Aesthetics, a leading player in the hyaluronic acid market, sent a notice to Douyin, questioning the reliability of some low-cost products sold on the platform and requesting their removal.

These internet giants have ridden the wave of light medical aesthetics but also encountered a trust crisis among both upstream and downstream industry players.

03 Market Tolerance Driven by Traffic

The tolerance shown by internet platforms towards light medical aesthetics in terms of regulation stems from the fierce competition for traffic among them.

While Meituan surpassed Xinyang through strategic positioning, it still faces competition from latecomers like Douyin and Xiaohongshu. Despite some regulatory constraints on medical livestreaming, short videos remain a powerful tool for medical aesthetics institutions to attract traffic. Through Douyin's built-in social system and comment section, private domain operations can capture significant traffic.

Xiaohongshu's grass-roots nature and female user base make it a natural reservoir of medical aesthetics traffic. According to a report by Mob Research Institute, post-95s are gradually taking the lead among users of China's medical aesthetics apps, accounting for 29.2% of the total user base. Over 70% of post-95s medical aesthetics users were introduced to the field through sharing apps like Xiaohongshu, and over 60% were influenced by friends.

On the other hand, research by the Qianzhan Industry Research Institute shows that, apart from a small number of public hospital dermatology departments and large medical aesthetics chains, over 70% of China's medical aesthetics market is occupied by small or individual beauty institutions. The survival of these small and medium-sized medical aesthetics institutions is inseparable from the efficient traffic acquisition provided by online platforms.

Many individual medical aesthetics operators choose to open shops near university towns in first-tier cities, not only because of cheaper rent in suburban areas but also because students form the main consumer group for low-cost medical aesthetics. According to an operator of this type of medical aesthetics shop, Meituan and Xinyang are indispensable traffic acquisition channels. Updating content on Xinyang can attract experienced medical aesthetics users to visit the store, while various types of activity subsidies on Meituan provide a steady stream of new customers.

Image source: Screenshot from Meituan's medical aesthetics page

Low-cost or even below-cost medical aesthetics is not only a tool for platforms to compete for traffic but also a survival condition for small business owners. While the current penetration rate of China's medical aesthetics market is still below 10%, far lower than South Korea's 20% and the United States's 16%, the chain rate in Europe and the United States has already reached 48%. However, in the current domestic competition, even resorting to desperate measures cannot easily halt the ongoing price war, even if it has turned the midstream and downstream of the industry into a bitter business of merely scraping by.

According to CITIC Securities' analysis, medical aesthetics institutions in China generally face high customer acquisition costs, with marketing channels and sales expenses accounting for up to 50% and 20% of total costs, respectively. Data from Hurun Research Institute also shows that the net profit margin of domestic medical aesthetics institutions is only between 1% and 10%, with many institutions spending heavily on marketing.

In contrast, upstream players in the industry continue to consolidate their discourse power in the entire industrial chain, and their prosperity in the first half of this year continued the momentum of consumption recovery from last year. AIMEI, a leading domestic hyaluronic acid producer, saw revenue and profit growth exceed 47% in 2023. Although Bloomage BioTechnology started as a cosmetics company, its skin care medical products also grew by 60% last year. Relying solely on the category of IPL (Intense Pulsed Light) photorejuvenation, Qizhi Laser paved the way for its IPO.

To transform a struggling business into a thriving one, efforts must be directed towards premiumization. Novice users attracted by light medical aesthetics must progress to continuous consumption and quality-oriented heavy medical aesthetics through excellent service experiences and effective product feedback.

Low-cost medical aesthetics is not inherently problematic. Rather, the challenge for internet platforms and medical aesthetics institutions lies in ensuring quality products and services, even at low prices. Even Pinduoduo has begun addressing issues within its merchant ecosystem, and platforms like Douyin and Meituan cannot solely focus on the immediate battle for traffic while neglecting the longer-term war for reputation.