Shanghai Lily & Beauty Cosmetics Co., Ltd. continues to face a downturn after years of upheaval. The company reported a loss of nearly 80 million yuan for 2025, marking a loss in each quarter. According to its financial report, revenue remains under pressure due to the ongoing impact of certain partner brands adjusting their operational models or terminating cooperation in 2024. The company attributed its poor performance to the broader market environment.
However, Pan Gulin, a senior researcher at Pangoal Institution, analyzed that the root cause of Lily & Beauty's losses is the structural collapse of its previous business model. The past reliance on a "channel distribution" model that capitalized on platform benefits is no longer sustainable amid rising traffic costs and brands reclaiming operational control. Compounding the issue, the company's strategic transformation has lagged; while its self-owned brands are growing rapidly, their base is too small, they require continuous capital infusion, and have failed to establish a second growth curve, instead exacerbating the losses.
As of the market close on April 3, Lily & Beauty's stock price was 9.66 yuan per share, down 3.01%, with a total market capitalization of 3.868 billion yuan.
**Three Losses in Four Years: Annual Report Sounds Alarm**
In 2021, Lily & Beauty achieved revenue of 4.155 billion yuan and a net profit attributable to shareholders of approximately 400 million yuan. However, over the next four years (2022-2025), it reported losses in three of those years, with only a profit of around 30 million yuan in 2023.
What is the fundamental reason for this pattern of "three losses in four years"? Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance and Chief Economist for China, believes that the challenges faced by Lily & Beauty, amid industry transformation, represent a classic case of the traditional e-commerce agency model encountering a systemic crisis in the new consumer era.
Lily & Beauty's 2025 revenue was approximately 1.692 billion yuan, a decrease of 2.08% year-over-year. The net loss attributable to shareholders was about -79.9912 million yuan, widening significantly by 227.83% compared to the previous year. Net cash flow from operating activities was approximately 126 million yuan, a decrease of 71.29% year-over-year. By quarter, the company reported losses of 18.322 million yuan, 14.4377 million yuan, 3.7324 million yuan, and 43.4991 million yuan in the first through fourth quarters of 2025, respectively. When asked about potential financial pressure, the company stated that its financial situation is acceptable, with funds still on hand, and emphasized that "seeking stability" is the top priority.
Confronted with these difficulties, Lily & Beauty persists in incubating new brands. For instance, it emphasizes "Yurongchu," which focuses on Eastern aesthetics and skincare needs, with its R&D team studying "emotional skincare" and launching product lines such as lotions, masks, and lipsticks. In the fourth quarter of 2025, the company acquired the Hong Kong brand "Beyond Nature" because its products contain high-purity ergothioneine. This acquisition expectation briefly drove the company's stock price to a daily limit increase. However, these investments in effort and capital proved to be fleeting for Lily & Beauty, failing to fundamentally reverse the poor performance in 2025.
In Bai Wenxi's view, the fundamental reason for the "three losses in four years" is not poor management but rather the complete disruption of the underlying logic of its business model. As a leading beauty product agency incubated by the Alibaba ecosystem, Lily & Beauty's core value once lay in being a "traffic intermediary," helping international brands enter Tmall and achieve localized operations. However, as platform traffic peaked and brands matured in their direct operation capabilities, the value chain of agency operations was squeezed from both ends. Upstream brands reclaimed operational control to build their own teams, while downstream platform algorithms weakened the traffic management advantages of agencies. More critically, the beauty industry shifted from being "channel-driven" to "content-driven." Lily & Beauty's expertise in shelf e-commerce operations became a burden due to path dependency in the era of content e-commerce dominated by platforms like Douyin and Xiaohongshu.
Lily & Beauty has also recognized the urgency of the situation. It emphasizes that in brand development, it has abandoned the model of relying on heavy investment for short-term traffic and sales growth. Instead, it opts for a stable and sustainable brand development path, focusing resources on the long-term building of brand equity. Furthermore, for brands that do not meet market demands or align with the company's development strategy, it decisively scales back operations to reduce losses and improve overall brand operational efficiency.
**Core Business Erodes, Transformation Meets Obstacles**
It has been over 2,000 days since Lily & Beauty enjoyed its heyday when its market capitalization once surpassed 20 billion yuan.
In September 2020, Lily & Beauty successfully listed on the Shanghai Stock Exchange, crowned as the "first stock of A-share beauty e-commerce agency operations," and enjoyed immense popularity. Just five years later, the company's market capitalization has evaporated by over 80%.
According to Pan Gulin, Lily & Beauty's past glory was built on platform红利 (benefits), not its own core competitiveness. As the traffic红利 of traditional e-commerce diminished and new channels like live-streaming e-commerce rose, its excessive reliance on a single platform's vulnerability was fully exposed. Additionally, the agency operation industry has low barriers to entry and intense competition, with brands gaining stronger bargaining power. Lily & Beauty failed to build an irreplaceable moat, such as proprietary technology or strong brand assets.
Years ago, after experiencing terminated collaborations with brands like L'Oréal, Maybelline, Biotherm, and shu uemura, Lily & Beauty faced another wave in 2024 with the termination of partnerships with high-end Korean brands such as Sulwhasoo and Who. The collective departure of numerous well-known brands is the core reason for the rapid decline in Lily & Beauty's revenue in recent years.
Pan Gulin analyzes that after years in the Chinese market, international major brands have developed independent operational capabilities. Reclaiming operational control allows them to directly manage user data, improve profit margins, and reduce reliance on agents. Lily & Beauty's operational value has diminished. In an era of fragmented traffic, its traditional e-commerce operational capabilities struggle to meet brands' new demands for content marketing and private domain operations, reducing its cost-effectiveness. Moreover, this is an industry trend: the agency model is shifting from "full-service agency" to "specialized services." Major brands prefer building in-house teams or choosing more flexible partners, making Lily & Beauty's "large and comprehensive" model a burden instead.
After losing its core business, Lily & Beauty attempted several cross-border ventures. While operating its own beauty brands, as mentioned, deviates from pure agency work, it isn't entirely cross-border. Other understandable new businesses include acting as an agent for overseas niche brands and engaging in content/live-streaming/digital marketing. According to Bai Wenxi, the continuous losses of Lily & Beauty's self-owned brands stem from a mismatch between its competency circle and brand building. Agency operators excel at traffic operations and promotional planning, but brand building requires product definition, supply chain control, and long-term investment in brand equity. Lily & Beauty applied a "channel operation" mindset to "brand building"—emphasizing marketing over R&D, traffic over brand mindshare—leading its self-owned brands into a vicious cycle of "burning money for growth, which plummets once investment stops."
Most notably, Lily & Beauty ventured into the pre-made meal sector, launching "Xunwei Dangan," featuring regional specialty pre-made/instant foods like Yunnan Cross-Bridge Rice Noodles, Gansu Lamb Paomo, and Xinjiang Big Plate Chicken. In June 2023, it partnered with Shaxian Delicacies Group for in-depth cooperation on ambient pre-made product development, regional food industry promotion, and digital marketing. These operations, poorly understood by outsiders, unsurprisingly failed to become growth drivers or salvage the core business.
Bai Wenxi suggests that Lily & Beauty should streamline loss-making business lines, decisively cutting persistently loss-making self-owned brands and pre-made meal ventures. It should transform into a service provider, upgrading from agency operations to brand digital consulting, leveraging data assets for strategic output rather than mere execution. It must embrace content e-commerce and rebuild operational capabilities for new channels like Douyin and Video Accounts, though this requires a fundamental overhaul of the organizational DNA.
Currently, Lily & Beauty is indeed seeking a way out. The aforementioned emphasis on "seeking stability" is its stated attitude. The company revealed it is also trying some general agent businesses, though some brands might not grant full general agency, sticking instead to previous arrangements like "perhaps just online," such as Tmall authorization, which differs from the broader scope of general agency.
Meanwhile, Lily & Beauty's 2023 annual report first mentioned "pre-made meals." By the 2024 and 2025 reports, not only were pre-made meals not mentioned again, but "Xunwei Dangan" was also absent. Has it decisively abandoned the pre-made meal business? The company stated that pre-made meals still exist but constitute a very small part of its current business.
Pan Gulin believes Lily & Beauty's diversification attempts have failed. Its self-owned brands lack core technological barriers, and cross-border ventures like pre-made meals merely "chase trends," failing to create synergies and instead dispersing resources, reflecting strategic confusion. The collective abandonment by major brands is an inevitable result of industry cycle iteration. As beauty brands mature, they tend to reclaim operational control to maximize profits, diluting the value of agents like Lily & Beauty.
**Founder's Costly Divorce Impacts Company**
Lily & Beauty's current predicament has been influenced by two significant blows: the exit of the Alibaba-affiliated shareholder and the founder's costly divorce. First, in April 2025, the Alibaba affiliate, through Hangzhou Haoyue Enterprise Management Co., Ltd., transferred its entire holding of 70.377 million shares (approximately 17.66% of total shares) for 486 million yuan, ending a 13-year capital partnership.
The Alibaba affiliate was deeply involved with Lily & Beauty, participating in its Series A and B financing rounds.
Pan Gulin stated that the turmoil in Lily & Beauty's capital structure is a chain reaction of collapsing confidence. These changes essentially represent the capital market's rejection of the company's future growth logic, and unstable equity further exacerbates operational uncertainty. Bai Wenxi believes that the Alibaba affiliate's complete divestment is a vote by capital on the business model's failure—as Alibaba itself faces competition from Pinduoduo and Douyin, Lily & Beauty's reliance on Alibaba channels transformed from an advantage to a risk exposure. Furthermore, the Alibaba affiliate's exit sent a negative signal to the market that "even the shareholder who knew it best is no longer optimistic."
Compared to the end of the honeymoon period with its capital "backer" Alibaba, the divorce case of Lily & Beauty's founder created more buzz and had a greater impact on the listed company. In March 2021, Weng Shuhua publicly appealed to Huang Tao, asking him to fulfill his responsibilities as a husband and father. After their conflict intensified, the court ruled on their divorce on November 21, 2023, in what was termed an "astronomically expensive divorce case." On January 1, 2025, Lily & Beauty announced that controlling shareholder and actual controller Huang Tao, due to post-divorce property disputes, was ordered by the court to transfer 16.75 million company shares (4.18% of total shares) to his ex-wife, Weng Shuhua. Based on Lily & Beauty's closing price on December 31, 2024, Weng Shuhua was estimated to receive shares worth approximately 140 million yuan.
During the divorce proceedings, Huang Tao's shares were subjected to judicial freezing. The back-and-forth of the divorce case impacted both the founder's reputation and the company's capital value. Huang Tao himself stepped down as Chairman and General Manager in April 2025, succeeded by Huang Mei as Chairman and Ye Mao as General Manager.
According to Bai Wenxi, the marital change of the actual controller exposed governance flaws at Lily & Beauty. The costly divorce between Huang Tao and his ex-wife Weng Shuhua not only caused equity instability but also revealed deficiencies in family-owned enterprise governance: the founder's energy was diverted by personal affairs, and the company's strategic decisions lacked a checks-and-balances mechanism. A more profound impact was on management stability; the turmoil in the senior management team triggered by the divorce led to the loss of key talent, further weakening the company's transformation capabilities.
Is there still room for Lily & Beauty to turn around? Bai Wenxi believes the window for transformation is narrowing. It could pivot towards brand digital asset management, utilizing its years of accumulated beauty consumer data to provide market insight services; focus on incubating small and medium-sized brands, using its channel resources to help new brands with cold starts in exchange for equity; or adopt a complete asset-light model, shifting from a heavy-operations agent to a light-asset marketing service provider. However, the structure of the domestic beauty industry has undergone irreversible changes: on the channel front, Douyin's e-commerce GMV has surpassed Alibaba's, making content e-commerce the main battlefield; on the brand front, domestic brand substitution is accelerating, and foreign brands have shifted from "growth engines" to "defensive businesses"; on the service front, the agency operation industry is overall contracting, with peers like Baozun and OneNetOne创 also facing transformation pressures.
Bai Wenxi further analyzed that Lily & Beauty's困境 is a casualty of the transition from the old commercial文明 to the new consumer era. As traffic红利 fade, brands mature in direct operations, and content e-commerce rises, the role of the "middleman" agent is destined to be compressed. Its fate depends not only on its own courage to reform but also on whether it can find a new, irreplaceable position within the beauty industry value chain—which requires breaking the organizational inertia formed over the past 15 years, a challenge akin to starting a second venture. For investors, Lily & Beauty's case serves as a warning: "conduit-type" enterprises that rely on a single platform, lack core assets, and have fragile governance structures face the risk of being zeroed out during industrial transformation.
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