My American magical life
Chapter 542 - 542 89 15 Billion She's Worth It!_3

542: Chapter 89: 1.5 Billion, She’s Worth It!_3 542: Chapter 89: 1.5 Billion, She’s Worth It!_3 “The expansion and diversification of upstream and downstream industries can actually be considered similar, but in specific operations, we will always face various problems, as each industry has its own uniqueness, which I believe everyone might have experienced.”

The black-haired wealthy woman swiftly sketched a quadrant graph.

“But for OC, the expansion of upstream and downstream and diversification is actually a matter of cost and benefit expectation.”

In broad terms, cosmetics belong to the consumer goods industry, where the market size of specific products and services depends on brand strength and marketing level.

Other factors are also important, but these two are core.

If the product is OK, then brand strength will naturally increase, and the market will buy in.

If the brand strength is average but the marketing level is high enough to cover the costs of marketing investment, then there can still be a market.”

OC’s diversification will focus on the cosmetics field, our cross-sector moves are not extensive, and our marketing models and product quality are also OK.

Under these premises, our rate of success in diversification will be quite substantial.

This is a general analysis from a broad perspective.

On specific dimensions, there are four points I need to make clear to everyone.”

Having finished the quadrant graph, Temir continued.

“The first point is that upstream in the perfume industry are essential oil and fragrance companies, like cosmetics raw material suppliers, as well as manufacturers like OEM factories.

Their profit margins are between five and fifteen percent, which might sound low, but are actually viable.

It’s a good business, yes, a good business.

The problem is, the global concentration in the fragrance and essential oil industry is too high, with a CR5 ratio of over sixty percent.

From 1999 to 2017, the global CR10 sales ratio in the industry increased from 64.6% to 77.2%.” (CR is the abbreviation for concentration rate, meaning “degree of concentration”)

At this point, the black-haired wealthy woman looked at Giorgio and said.

“OC could engage in the upstream, but the profit expectations of the upstream aren’t that great, just like what’s shown in the graph.

The concentration of brands in the raw material and production end is high, and even if OC invests a lot of money, it may just earn a small amount.

Now let’s continue with the downstream situation of the perfume industry, which is the second point.”

Just as Temir was about to continue, Sandi raised her hand.

It was apparent she was there to shore up her best friend.

Mi’er felt gratified, as if gifting that necklace hadn’t been a loss after all.

“Mi’er, going back to what you mentioned about OC’s expectations for diversification, you said OC’s marketing is quite impressive.

Do you have any specific examples?”

Achilles realized something was amiss.

Alexandra’s manner of questioning, wasn’t it just like a straight man setting up a joke?

In fact, this was normal.

Everyone here was a top-tier member of leading families, rolled out of intense competition; none were too dumb, with a solid level of foundational knowledge.

“OC has less than a hundred offline stores, but we generated three hundred million in sales.

The key lies in two aspects, one is successful online marketing, and the other is differentiated marketing.

However, Sandi, and everyone else, this marketing success isn’t actually due to a particular form of success, but my success.

Yes, I am the founder of OC.

I understand perfumes, the cosmetics industry, and the market.

I know how to run a business, and now I also know how to make products.

This is my success.

Under my personal management as the founder, OC has more advantages in all aspects than many of our competitors.”

Ladies and gentlemen, I am Temir.

Nice to meet you, my OC is very successful!

“A founder-led company and a professional manager-led company are two different models, which I am sure everyone understands.

In the past, OC’s achievements have been proven by the market.

In the future, I will continue to grasp marketing, product, channel and all other key elements.

OC can continue to succeed.”

Watching his spirited sister, a shadow crept into Achilles’s eyes.

Ha, your success is the most laughable joke I’ve heard this year!

Seeing that Sandi had no intention of continuing to inquire, Mi’er returned to her original pace and kept talking.

“The downstream of the perfume industry is the specific channels, which are a very challenging problem to solve.

Most of the small startup perfume companies die at the step of opening physical stores—the profitability of individual perfume shops is too problematic.

The changeover of perfume market channels highly aligns with the cosmetics market.

In the last century and the beginning of this one, department stores and KA (major supermarkets) were the primary channels.

Then it transitioned to the CS channel from 2007 to now, namely cosmetics specialty stores like Jolan Woman, etc.

OC initially expanded through leveraging the CS channel.

One key reason we made it this far is because I didn’t blindly expand into branded physical stores; we mostly spread offline through counters and small shops.

OC’s strongest channel is actually e-commerce.

We achieved explosive revenue by leveraging comprehensive e-commerce platforms like Amazon and beauty-specific online platforms.

The logic here is, many major beauty and luxury brands only sell their perfume categories on their own platforms—to some extent, I have to thank them for their arrogance.

Overall, speaking solely of the perfume industry, downstream expansion is a trap with no good solutions, which is why I must diversify—after all, there’s a ceiling to online platforms, and marketing costs aren’t low.”

Giorgio fell silent.

Mi’er’s understanding of the perfume industry was undeniably profound, and most people might never realize the things she talked about in their lifetimes.