The "top priority" is a major pain point for people who are anxious about appearance, which has given birth to a huge hair business.Among them, the field of hair transplant, which accounts for a large proportion, will also usher in the first listed company in China.

On the evening of June 17, the hair medical complex Yonghe Medical Group Co., Ltd. (hereinafter referred to as "Yonghe hair transplant") submitted its listing application to the main board of the Hong Kong Stock Exchange, with Morgan Stanley and China International Capital Corporation as co-sponsors.

Yonghe hair transplant was founded in 2005 and has been formed.Including hair loss clinic, drug therapy, Swenson Health Center, Harbin developed wig R & D and production center and other businesses of the hair medical complex.

According to the prospectus, the company has operated 51 medical institutions in 50 cities in China and has a medical team of about 1200 people, including 229 registered doctors and 930 nurses. In addition, its total revenue increased from 934 million yuan in 2018 to 1.64 billion yuan in 2020, and gross profit remained at more than 70 percent all the year round.

With such a high gross margin and long-term stable growth, the "temptation" of the hair transplant industry has a panoramic view.So, is it a good business for certainty? What is the unspeakable pain in the industry? What are the hidden opportunities in the hair market?

Good business with certainty?

Before you answer this question, you have to look at the current demand and supply in the Chinese market.

In recent years, the popularity of the "beauty economy" has significantly increased people's expectations and requirements for appearance, and the problem of hair loss has become more and more serious because of the pressure of work and life. According to a survey conducted by the National Health Commission, the number of people with hair loss in China exceeded 250 million in 2020, including about 164 million men and 89 million women. Because the recovery period of treatment is short and the effect is obvious, the demand for hair transplant is also growing rapidly.

However, compared with the actual number of hair loss in China, the number of people receiving hair transplant medical services in China is relatively small. In 2020, about 516000 hair transplants were performed in China, with a penetration rate of 0.21%, and the market demand has not yet been met.

According to Frost Sullivan's judgment, China's hair transplant medical service market will grow from 13.4 billion yuan in 2020 to 37.8 billion yuan in 2025, with a compound annual growth rate of 23%.

However, behind the popularity of the industry, the actual net profit is not high.

Some institutions have estimated that the average unit price of a hair transplant is 30,000 to 70,000-the price of a hair transplant starts at 10 yuan per unit, and the number of hair follicle units that need to be extracted for general hair transplant surgery is mostly in the thousands. The costs behind it include marketing expenses (15% mura 40%), personnel costs (20% muri 40%), rent, electricity and electricity (10%), and the final actual net profit is less than 10%.

Yonghe hair transplant is a typical example. According to the prospectus, the company's gross profit is more than 70%, and after deducting other costs (the cost of marketing alone accounted for 47.6% of total revenue in 2020), the net profit in 2020 was only 10% (5.7% in 2018 and 2.9% in 2019).

Analyze the reasons for the high marketing costs:First, hair transplant and breast augmentation plastic surgery is similar, almost a "one-shot sale", users have no repurchase demand, and have a lower desire to share, it is more difficult to establish brand awareness, institutions need to constantly develop new sources of customers.

Second, the lack of technological change in the industry leads to a low degree of differentiation, which leads to high delivery costs in terms of the source of customers and the effect of treatment.

Third, the industry is a labor-intensive industry, which can only increase the income by increasing the number of doctors and nurses.

From this we can see that although the hair transplant business is "beautiful", it is still suffering and needs to be changed urgently.

In addition, it can not be ignored that there is also a relatively fierce market competition in the industry. According to the prospectus, at present, there are mainly four types of players in the industry: first, the hair transplant departments of public hospitals such as Shanghai long March Hospital and Southwest Hospital; second, the hair transplant departments of private cosmetic institutions represented by Imel and Xido; third, local private non-chain hair transplant institutions represented by Hengbo; fourth, national private chain hair transplant institutions represented by Yonghe hair transplant, Biliansheng, new life hair transplant, barley and so on.

Among them, local non-chain specialist hair transplant institutions account for about 45.6% of China's hair transplant market because of their huge number; large chain hair transplant institutions account for about 23.9%; hair transplant departments of comprehensive medical and beauty institutions occupy about 15.7% of the market share; hair transplant departments of public hospitals account for about 14.8% of the remaining market share.

The chaos and hidden worries behind prosperity

Behind the prosperity and development of the market, customer complaints and industry chaos are also occurring frequently.

According to data from strawberry pie, in the 2018 survey of dissatisfaction factors among users of hair transplant institutions, 41% of users were not satisfied with additional invisible consumption, 35% were not satisfied with the lack of follow-up services, and 33% were not satisfied with surgical pain. In addition, the unpleasant postoperative effect, low survival rate of hair transplant and abnormal symptoms after operation are also the reasons for consumers' dissatisfaction.

In addition to negative incidents frequently reported in the newspapers, civil disputes caused by failed hair transplants on the Chinese referee documents are also increasing year by year-consumers are often ruled against because of difficulties in identification or proof.

In addition, the current market advertisements of hair transplant institutions are everywhere, the price of hair transplant is often tens of thousands of yuan, the price is not completely transparent.

Specifically, although hair transplant is classified as "first-level surgery" in China-it is less technically difficult and less risky, it does not have a unified "charging system" like the standard surgery for other diseases. At present, the recognized charging formula in the hair transplant industry is:Hair transplant price = number of transplanted hair follicles * unit price of hair follicles.

According to a previous survey conducted by Zhongxin Jingwei in Beijing, the unit price of each unit of hair follicle ranges from 10 yuan to 60 yuan; if you choose "expert", you need to charge an additional operation fee; if you choose "Star Dream team", you also have to add "medical fee". Generally speaking, the "Mediterranean" type of baldness, in order to achieve the amount of hair visible to the naked eye, requires at least 4000 hair follicles, according to the minimum 10 yuan, that is 40, 000 yuan.

36 Krypton survey also found that the same person's hair, different hair transplant institutions have different diagnosis, the market is very deep. And in order to expand the source of customers, "packaging technology" has also become a magic weapon of competition. Nowadays, we can see many "patented technologies" in all kinds of marketing advertisements, including 3D, 4D, 5G, ultra-precision positioning, micro-drill, gemstone knife, microneedle and so on.

Professor Wu Wenyu, director of the hair transplant center of the Department of Dermatology of Huashan Hospital affiliated to Fudan University, pointed out in an interview with the medical community that hair planting is divided into four steps: obtaining, separating, locating and planting hair follicles. At present, hair follicle extraction techniques for hair transplantation at home and abroad are divided into two categories: hair follicle unit scalp extraction (FUT) and hair follicle unit drilling (FUE); hair follicle implantation techniques are mainly tweezers, implant pen, needle plug and play.

The so-called "microneedle" is essentially a FUE+ implant pen, and the caliber of its hair follicle extraction and implant instruments is smaller. However, the caliber of the extraction or implantation equipment is too small, coupled with the limited operating ability of doctors, the fault tolerance rate is very low, and it is very easy to damage hair follicles, such as chopping hair follicles and cutting hair.

FUT should first cut a scalp at the back of the head, remove the excess tissue under the microscope, separate a single hair follicle unit and transplant it to the desired area; FUE is to directly extract a single hair follicle unit from the back of the head, remove the excess tissue and then transplant it to the desired area.

At the same time, with the rapid growth in the number of hair transplant institutions, there is a serious shortage of doctors. The number of doctors who "know" hair transplants across the country is less than 10 percent of those who actually practise, Xinhua quoted data. In some informal organizations, the "doctor in charge" is only named, but the operation is done by a "quick doctor."

Even if the hair transplant is successfully completed, there is no authority to test the survival rate of hair follicles after the operation, which can not prove the failure of the hair transplant operation, and consumers will lose the civil lawsuit with the hair transplant agency.

It is undeniable that the superposition of these chaotic phenomena has also brought a lot of "unspeakable pain" to the normal operation of formal hair transplant institutions. The direct consequence is to "throw money" harder.

What are the opportunities in the hair market?

Chaos aside, the purpose of consumers' choice of hair transplant is to solve the problems of hair loss, hair loss and poor hairline, which belongs to "robbing the east wall to make up for the west wall", but after all, hair follicles are non-renewable resources.Preoperative prevention and control treatment and postoperative hair care are extremely important.

It is reported that at present, there are mainly four treatment methods for hair prevention and control: using anti-hair loss shampoo to control oil; taking finasteride and other drugs to inhibit 5 α-reductase; weak laser treatment to relieve scalp inflammation; and finally, through hair transplant, retransplant healthy hair follicles.

Before hair transplant, many people will take drug prevention and treatment, this demand has also cultivated functional hair care products such as Silk Field, Bawang, Kashi, Zhangguang 101 and so on.

As for hair loss drugs, there are mainly two products, minoxidil (for external use) and finasteride (for internal use).However, there are many side effects of existing drug treatment that have not been solved, and the research and development of new drugs has become a definite direction concerned by capital.

• Minoxidil has been proved to promote hair formation, and it has been clinically proved to be effective for male prolapse and alopecia areata. At present, the overall domestic market is no more than 1 billion, with the layout of Mendi, Zhendong, Jingwei, American businessmen and other manufacturers.

• Finasteride, which has an indirect therapeutic effect on hair loss due to inhibitory hormones, was introduced into China in 2003. At present, there are more than 20 generic drug companies. But its side effects are also significant, especially easy to cause male sexual dysfunction problems, female use will have a serious impact on pregnancy.

As for the laser, the laser treatment carried out by the hospital is a systematic project, although the curative effect is clear, but patients have to go in and out of the hospital repeatedly, the treatment cycle is long, and there is a big threshold for most people.In this regard, resorting to raw hair hats is seen as an alternative.. However, there are only 3 domestic enterprises with raw hair cap production qualification, and the industry competition presents a "one factory, multi-brand" situation: the vast majority of products from Chongqing Peninsula are labelled, and the product homogenization is also high.

For hair transplant institutions, postoperative maintenance has also become an important direction of business development. Hair care service is more high frequency than hair transplant service, and users are sticky. Through high frequency band and low frequency, it will help hair transplant institutions to achieve stable and sustainable income.

According to Frost Sullivan's forecast, the medical care market will account for 32.9% and 45.3% of China's total hair medical service market in 2025 and 2030, respectively.In other words, the future medical care service market will become the main driving force for the growth of the hair medical service market.

It is understood that the existing hair care business includes two kinds: 1) hair care at home: after hair transplant surgery, recommend anti-hair loss drugs, shampoo products and massage equipment for consumers to alleviate the continuous loss of primary hair and maintain the effect after hair transplant surgery. 2) hair care in medical institutions: nurses of hair transplant institutions provide medical hair care services for consumers, such as injecting nutrient solution, which is expensive and suitable for users with high consumption level.

At present, Yonghe hair transplant, Biliansheng, barley, Xinsheng hair transplant and other hair transplant chain organizations have begun to involve hair care business, trying to establish a model closed loop.It can be predicted that the dual business model of "hair transplant + hair care" can bring sustainable benefits to hair transplant institutions and enhance the effect of user experience.

In the future, hair transplant institutions will also strengthen the exploration of the "hair care" business model, and provide a variety of "hair care" services for both implanted and unimplanted customers, such as "wig", "hair care", "healthy hair" and other fields. gradually promote the integration of the whole industry chain of the hair industry.

In addition, limited to the high marketing costs of the industry, and this can only achieve short-term growth in the number of customers, which is not conducive to the formation of word-of-mouth of hair transplant institutions. In the future, hair transplant institutions should also shift from marketing to professional services. After all, hair transplant is still a technical job.

Today, Yonghe hair transplant positioning of the hair medical complex has been a useful attempt.