"After the 'Amputation,' It Earned 1.1 Billion in the Colored Contact Lens Battle - Huxiu#
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Highlights#
Halved marketing expenses; reshaped offline channels; integrated development of research, production, and education. ⤴️ ^0165cea9
Halving marketing expenses is a bold move, but it is also necessary. Without doing so, there would be no funds to deepen the supply chain and research and development; however, this needs to be carefully considered for future actions, as it cannot be done recklessly. This decision was made with the confirmation that offline channels could continue, which actually reflects the reality that the cost of traffic in online channels is extremely high, and customers lack loyalty.
The Chinese domestic brand moody earned 1.1 billion in the colored contact lens market, maintaining the top position in multi-channel colored lens sales for three consecutive years. Moody responded to market changes through measures such as halving marketing expenses, reshaping offline channels, and integrating research, production, and education.
• 💪 Moody has maintained the top position in multi-channel colored lens sales for three consecutive years, earning 1.1 billion annually.
• 🚀 Moody achieved stable growth and responded to market changes by halving marketing expenses and reshaping offline channels.
• 🏭 Moody's founder, Ciran, is determined to establish a contact lens factory, providing greater growth space for the brand.
A 22,000 square meter sterile factory, three production lines, with a monthly capacity of 6 million colored lenses. Although it is still far from the capacity of industry-leading factories, the Iris factory located in Xiamen is already one of the most advanced contact lens factories in Asia. Inside the factory is a rare precision processing machine, of which there are only three in China. Additionally, equipment sourced from the optoelectronic semiconductor industry occupies the spacious factory, resembling a low-hanging dragon rather than a giant beast.
In December 2023, I visited the factory with Ciran, the founder and CEO of moody. We put on shoe covers, wore headsets, and tucked our hair into sterile suits. The machines roared, and the factory manager's voice came through the microphones into everyone's headsets. The 31-year-old Ciran walked through the factory without needing a microphone, clearly and confidently supplementing information to me.
In 2023, moody maintained the top position in multi-channel colored lens sales for three consecutive years. In 2022, moody's revenue first exceeded 1 billion, achieving a year-on-year growth rate of 40% during the pandemic; in 2023, moody's total revenue approached 1.1 billion, showing a slowdown compared to the previous rapid growth.
This is closely related to changes in the market environment. Consumption has cooled, and the global contact lens market took three years to return to its 2019 scale. At the same time, consulting analysts believe that as colored lenses gradually become daily necessities, the usage scenarios for colored lenses are increasing, and consumers prefer more affordable products. The sensitivity of consumers to price has intensified market competition, leading to price wars in the colored lens category. Competitors are fiercely battling, with some new brands emerging on platforms like Pinduoduo, showing impressive growth.
Data source: iiMedia Research
At the same time, the slowdown is also a result of moody's proactive choice.
In 2023, moody drastically halved marketing expenses, set a goal of achieving comprehensive profitability, and invested significant energy into expanding offline channels and integrating research, production, and education. Ciran has a dangerous premonition about the market. He hopes that when dark clouds gather and storms arrive, moody will be fully armed. This year, Ciran is 31 years old.
After meeting Ciran, I often feel he still resembles someone in his late 20s—his age when he founded moody. He still carries a youthful aura, which does not contradict his mature demeanor and firm judgment; a graduate of Cornell University, he clearly appears to be an excellent student, intelligent but rarely arrogant; having worked at JP Morgan and Sequoia Capital, he faces his resources and background directly, without pretense or concealment.
As a Shanghainese, his familiarity and clarity in using the term "brother" surprised me. He naturally refers to his work partners, fellow entrepreneurs, and mentors in this way, displaying a Northern familiarity with social interactions. It is hard to say whether this is a methodology.
Some people start businesses for money, some for the spotlight, and some for the thrill of being above others. Ciran's purpose is not easy to grasp; he seems to want to be a navigator, leading the team forward. In his narrative, challenges and turning points against the odds are always emphasized. Coincidentally, Ciran's nickname in the company is "Luffy," a boy who loves adventure and a man who wants to become the Pirate King.
Tyneham, England: The rolling giant waves are bathed in the golden light of sunset. Image source: Visual China
To paraphrase a line from "The Old Man and the Sea," in the vast battlefield of business, his determination and persistence become his source of strength, allowing him to find his belief in the vast ocean.
The challenges facing this young CEO are how to solidify the brand's position in increasingly fierce competition; how to find more cost-effective methodologies in the new traffic world; and how to seek a second growth curve in products and channels amid slowing growth.
"Amputation"
"If you are a salesperson and the company spends so much on marketing every month, would you be anxious?" Ciran told me that in 2023, when faced with the sudden halving of marketing expenses, the internal support was greater than he expected, "Everyone realized that the company's profitability has become a strategic goal, and the company will not continue to lose money."
For new consumer companies that are used to burning cash, cutting marketing expenses is not a simple task. Looking back at the early days of the pandemic, the entire market was expanding with an ROI of 1:1, with a festive atmosphere and lively interactions, as if it were a celebration.
However, the crisis had already been sown. As the pandemic's impact on the market deepened, ROI suddenly increased, with the overall market ROI in the fourth quarter of 2021 reaching as high as 1.3-1.4.
Therefore, in 2022, Ciran was determined to gradually optimize marketing efficiency. He set a goal of "gradually decreasing the marketing expense ratio each month." The ambiguous term "gradually" stemmed from his concern that a rash one-size-fits-all approach would disrupt ecological balance. He worried it would lead to a significant decline in performance, so he did not set a specific preliminary budget figure.
Under the vague goal, the team struggled to grasp the concept of "gradually" and was somewhat hesitant about reducing marketing expenses. Moreover, during the rapid growth phase, maintaining the inertia of spending to stabilize the growth rate was one of the important means to ensure a sense of security. When faced with the critical issue of "protecting profits" or "protecting revenue," everyone chose "protecting revenue."
Ultimately, in 2022, moody's total sales more than doubled, while marketing expenses increased by more than double compared to 2021—this was contrary to the initial goal of reducing marketing expenses.
Local time January 2, 2024, New Haven, England. Image source: Visual China
Ciran fell into thought: as revenue scales continue to expand, even a slight decrease in the proportion of marketing expenses would lead to a rapid increase in absolute amounts, reaching a terrifying number. "Gradually" is ineffective; decisive action must be taken—"amputation" for survival.
In December 2022, Ciran decided to halve marketing expenses. As the first month of implementing this measure, the entire company was apprehensive about December's performance, defining it in advance as a "disastrous" month, accepting any level of revenue decline. Unexpectedly, December's revenue increased year-on-year, and the upward trend continued into the entire Q1 of 2023 ().
This is understandable, as the effects of advertising have continuity and lag, and it also proves that the previous marketing efficiency was not high enough. Moody had previously engaged in "overflow exposure," with no limits on exposure frequency. The management set a growth target, and the execution team maximized exposure to the entire population until the overall market achieved the growth target.
Of course, as time progressed, the continuity of advertising gradually diminished. In the second half of 2023, moody's growth rate began to slow down, reaching the level of 10%-15%.
Reform actions began to emerge.
In 2023, moody no longer harassed old customers with excessive marketing but instead directly offered discounted bulk purchase packages, such as a combination of 100 pieces. This decision stemmed from the changes in customer unit price during the June 18 shopping festival, where moody observed that the number of customers remained unchanged, the quantity remained unchanged, the conversion rate remained unchanged, and the cost remained unchanged, but the unit price increased by 20%. After analysis, this change was driven by loyal consumers' bulk repurchases.
Local time August 24, 2023, the sun rises from the English Channel. Image source: Visual China
In acquiring new customers, moody also became more cautious and efficient: "No longer blindly trying to attract new users; if you've seen it three times and haven't bought, I won't push it on you anymore."
After the growth rate slowed, employees remained calm and even steadier. The "weightlessness" brought by cutting nearly half the budget was smoothed by slow and stable growth; when everyone realized that the targets could still be achieved, they began to suggest to Ciran: "This budget can be cut, and that can be cut." This formed a positive cycle. By July 2023, Ciran found that the decrease in marketing expenses exceeded expectations by 5 percentage points.
While reforming online strategies, moody also innovated and expanded offline channels.
Breaking Through Offline
In 2024, Ciran set a goal for moody: to enter good channels and improve channel quality.
Currently, offline revenue accounts for less than 10% of moody's income, and Ciran hopes to increase this number to 30% within three years. There are two reasons:
- Optical shops serve as the brand's front warehouse. The storage standards for medical devices are too costly for brands to bear themselves.
- As a standardized category, colored lenses can only compete on price under centralized traffic distribution online. Offline, however, offers a wide selection of products, and pricing power is in the hands of the brand.
In 2023, moody underwent structural reforms in offline distribution: adjusting cooperation strategies with all traditional optical shop channels and focusing on new retail channels like Sam's Club, Watsons, and Huamei.
Initially, during the process of selling into retail cabinets, moody gradually discovered a counterintuitive conclusion: the correlation between traditional optical shop consumers and colored lens consumers was not as significant as imagined; the former tended to purchase prescription glasses with clear intentions. Optical shops have also been occupying different niche markets in recent years, but they tend to focus on functional products, such as children's myopia prevention and reading glasses.
Many traditional optical shops hoped that moody would bring in more young users in their twenties, but this could not be achieved unilaterally. In the face of unsatisfactory sales, moody decided to redefine its strategy for traditional optical shop channels, seeking clients that better matched moody's user profile and development direction.
Interestingly, orders from Sam's Club and Watsons kept coming in.
January 17, 2024, Shanghai, the Sam's Club is bustling with people. Image source: Visual China
The cooperation with Sam's Club went smoothly. The initial contact with the Sam's channel was in early 2022, during the pandemic, with many collaborations completed online. Sam's consumer profile is family-oriented, with an age demographic over 30, which did not seem to match moody's users very well. Moody had low expectations.
Sam's Club aimed to attract younger members, so they focused on recruiting younger brands. On one hand, Sam's only selects leading brands in each category and only chooses their best-selling products to reduce the selection cost for members; on the other hand, Sam's provides large specifications and packaging products, placing a higher value on member benefits than on their own gross profit, leaving brands with considerable space.
In Q1 2023, Sam's sales far exceeded expectations. Perhaps the overlap between Sam's and moody's users is not that high, but due to the vast user base of Sam's, the final conversion is quite impressive. This inspired moody: in addition to user profiles, the traffic and willingness of the channel itself are also very important.
At the same time, moody opened four offline self-operated stores in 2023, all in Shanghai. In 2024, moody plans to open 30 stores in the East. During the process of opening offline self-operated stores, Ciran also came up with a new insight: do not leave room for adjustments and excuses; directly validate with the most extreme situations.
Moody's first offline self-operated store opened in a small corner of the basement of Shanghai K11, where Ciran set the highest gross profit requirement. A well-known colored lens collection store in Shanghai sells 120,000 units monthly, and selling 150,000 is considered a high standard, while moody's store sold 180,000 in a month, giving the team great confidence.
Shanghai K11 Shopping Center, Image source: Visual China
Ciran believes this validation logic proves that when moody opens stores in areas with higher foot traffic in the future, and the gross profit requirements are not as high, it will achieve greater success.
Moody's steady growth does not fully satisfy Ciran. "The ceiling for a single brand in the market is 20%; if we consider a terminal market size of 25 billion, moody would hit a ceiling at 5 billion." Ciran said. Currently, moody's annual revenue has exceeded 1 billion, and the difference between 1 billion and 5 billion seems to be merely linear. This brand, which has accompanied him since its inception, has not been able to break through his emotional threshold for a long time.
He has set his sights on a larger game—moving upstream to open a contact lens factory.
Factory
Every boy has a dream of driving EVA in his heart. In March 2023, the moment the first production line in the Iris factory turned on all green lights was the pinnacle of Ciran's sense of achievement.
The EBITA rate of contact lens factories is higher than that of electronic product OEMs and cosmetics OEMs, offering enormous potential. This clearly excites Ciran: "The mass production of precision manufacturing has huge gross margins, indicating that there are still solid barriers that have not been broken." In the moody contact lens industry, the mainland market has not occupied the leading position in supply and research and development for many years, thus product supply and self-research capabilities are regarded as barriers in this track.
Colored lenses need to have the ability for rapid iteration to establish an advantage in market competition. The "Yuan Chuan Research Institute" summarized:
"Colored lenses are a business similar to fast fashion, which can only meet the rapidly changing demands of consumers through a flexible and responsive supply chain system."
When local brands rely on external supply chains, this is clearly unachievable. Most brands' steel plates, glue heads, and aluminum foil cups are sourced externally, with 90% of the molds for making lenses sourced externally, and both the public and private membranes are also sourced externally. Brands find it difficult to demand modifications and rapid responses from the supply chain.
This is the significance of building a self-sufficient supply chain.
Ciran's decision to build a factory originated in 2020. In July 2020, moody achieved monthly sales of 7.3 million, becoming the top-ranked brand in the colored lens category on Tmall. Although it was still far from major companies like Johnson & Johnson and Bausch & Lomb, the growth trend was evident. Capital was also very enthusiastic, with institutions chasing after moody for several rounds of investment in a short period, and brands were thriving.
However, the supply chains concentrated in Taiwan, such as Jing Shuo and Jing Hua, had no substantial product differentiation. It was evident that the market would soon fall into price competition, leading to a decline in overall industry profits. Therefore, moving upstream was essential.
In July 2022, Iris began constructing a 12,000 square meter workshop. In August, Iris obtained GMP certification, and by the end of December, it received its first product registration certificate. In March and April 2023, three additional product registration certificates were issued. Currently, Iris holds 55% of daily disposable clear lenses and colored lenses, and 38% of daily disposable colored lenses and semi-annual disposable colored lenses, covering 80% of the current market products.
A corner of the Iris factory. Image source: Provided by moody
However, by July 2023, Iris officially began production and started selling to brands. This was because, in Iris's internal double-blind testing, the first batch of lenses produced in March ranked only eighth among similar products in the market, failing to meet moody's standards. For four months, Iris continuously altered surface technology, optical structure, edge design, water content, and material formulas, including manufacturing processes. Finally, in July's internal testing, Iris's products ranked first.
During those long four months, the factory had no income, but there were millions in salaries to pay each month, leaving Iris with a funding gap of over 10 million, with the account balance nearing zero, precariously close to crisis. By August, only 1.6 million remained... Ciran wanted moody to lend Iris money, but the moody board vetoed it; he offered 30 million of his personal credit to cover the gap. Fortunately, timely orders and funds came in, allowing Iris to get through the most challenging stages.
Iris operates completely independently, avoiding strong associations with moody to alleviate clients' concerns about moody squeezing their orders. At the same time, moody conducts strict audits of the factory, measuring its technical capabilities against the same supply chain standards. An interesting detail is that when I visited the factory, the factory manager wore a new gray-blue colored lens and introduced and "pitched" it to Ciran: "Boss, would you like to place an order for this model?" In the following days, the factory manager also visited several clients to sell this new product from Iris.
Currently, Iris has a monthly production capacity of 6 million lenses, with a future production capacity limit of 800 million lenses, which can meet 50% of the industry's supply chain needs.
Ciran agrees that opening a factory is a long-term and correct decision. While tirelessly working for the factory, Ciran has made many attempts in the operating entity, experiencing ups and downs, but compared to investing 300 million in the factory, these are minor skirmishes.
Interestingly, the institutions that vetoed Ciran's factory financing proposal in 2020 all came back in 2021. Plum Blossom Venture Capital and Yisan Capital supported Ciran from the beginning, each taking a 5% stake in the first round; Hillhouse Capital is a major shareholder with a 17.5% stake; at the end of 2021, Iris conducted its final round of financing, with a valuation exceeding 1 billion, attracting institutions and government-guided funds investing in medical devices.
In Conclusion
In 2023, moody accomplished three important things: ==halved marketing expenses; reshaped offline channels; integrated research, production, and education development.== This is not a mainstream choice in the industry, but Ciran is deeply convinced of it, as he has gained practical insights and inspiration from it. Warfare has its rhythm; one must learn to endure in the storm, and after establishing a leading advantage in the early stages, sufficient potential must be reserved to almost welcome a greater explosion.
In the cold wave and storms of new consumption, moody and Ciran are like a ship raising its sails, navigating the battlefield as steadily as possible. This may indeed be an adventure story. Some people start businesses precisely for such stories.
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