Ladies and gentlemen, good day and welcome to the Yatsen first quarter 2021 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Irene Lyu, Head of Strategic Investments and Capital Markets. Please go ahead.
Thank you, operator. Please note that discussions today will contain forward-looking statements relating to the company's future performance and are intended to qualify for the safe harbor from liability, as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of the future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect Yatsen's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only.
For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. Joining us today on the call from Yatsen senior management are Mr. Jinfeng Huang, our Founder, Chairman, and CEO, and Mr. Donghao Yang, our CFO and Director. Management will begin with prepared remarks, and the call will conclude with a Q&A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yatsen's Investor Relations website at ir.yatsenglobal.com. I will now turn the call over to Mr. Jinfeng Huang. Please go ahead, sir.
Thank you, Irene, and thank you everyone for participating in Yatsen's first quarter 2021 earnings conference call today. Starting off the year on a solid note, Yatsen achieved 42.7% year-over-year growth in total net revenues in the first quarter, supported by a healthy growth of our Perfect Diary brand and robust performance of Little Ondine, Abby's Choice, and other brands in Yatsen's portfolio. During the quarter, the number of DTC customers increased 11.6% year-over-year to 9.6 million, while revenue per DTC customer also increased by 24.5%, from approximately CNY-- to CNY 133 per customer. We ended the quarter with gross margin of 68.6%, an improvement of approximately 7 percentage points compared to 61.7% in the first quarter last year. We went into the year with a clear execution plan to optimize our brand performance, expand our product portfolio, and enhance our core capabilities.
A key focus has been on the flagship Perfect Diary brand, particularly to upgrade its positioning and price point from mass to higher-end mass market in order to further expand its growth potential. We have set out to achieve this through more disciplined pricing and discount policies, which successfully raised Perfect Diary's average selling price, average order value, and gross profit margin during the quarter. At the same time, we continued to introduce new products that excite and delight our customers, such as the new ReadMe Weightless Velvet Lip Stain, as well as the lipstick gift set, which were designed for the Chinese New Year holiday season and Valentine's Day. These new products, complemented by the launch of a number of Perfect Diary skincare products in our offline stores in early May, represent refinement and premiumization of the Perfect Diary product line this year.
Going forward, we have further plans to launch new products in existing and new categories, including face makeup, color contact lens, and men's skincare in staggered windows throughout the year to capture a higher body share from our customers. Overall, we see further room for ASP and AOV improvement, new product rollout and category expansions to drive operating results of Perfect Diary brand throughout this year. We are also making continued progress towards our multi-brand strategy as we introduce new brands. With the Perfect Diary brand trading up, we see the need to attract and capture new entrants in color cosmetics market, especially Gen Z and Gen Alpha, who are more price sensitive.
We launched the Pink Bear brand in mid-March, designed with a distinct young girl brand persona with an initial focus on providing high value for money products in high volume categories for Gen Z and Gen Alpha consumers. With the introduction of this lip gloss product, Pink Bear has achieved encouraging results during its first month of launch. Our prestige color cosmetic brand, Little Ondine, also experienced robust year-over-year growth in the quarter, powered by several well-received product launches, such as the crossover with Pop Mart and Chinese pop star Huang Zitao, as well as the new Vinyl Record Eyeshadow Palette, which was introduced in late March. Given Little Ondine's unique street fashion brand positioning, its further upside is expected to be lower than that of Perfect Diary, which we aim to develop further as a super brand within the group.
As Little Ondine has already become a top-selling color cosmetic brand in China's online market, for its next stage of growth, we plan to optimize the investment level into this brand with increased focus on sustainable growth going forward. One notable trend we saw was the increasing diversity and balance of our channel mix compared to the first quarter of 2020, which boosted the sales contribution from non-traditional e-commerce channels, such as various short video and 2B platforms, as well as from our experience stores. We have adopted an omni-channel strategy to serve our customers at every touch point. As of end of March 2021, we had a total of 245 experience stores. Already having achieved a significant scale covering key cities and regions, we aim to open approximately 100 stores throughout rest of the year.
In addition to our color cosmetics portfolio, we are excited about the expansion of our range of skincare brands, which saw the addition of Dr. Wu's Mainland China business and Eve Lom in the first quarter. Along with Galénic and Abby's Choice, we now have four skincare brands with different positionings and consumer bases. As part of our efforts to ensure smooth transition and integrations of the Galénic and Dr. Wu Mainland China business in the first quarter, our team was focused on putting in place the right management team and incentive structure to rejuvenate each brand product and positioning, to accelerate e-commerce, and to optimize supply chains. The team has identified key products that resonate with the new generation of consumers and witnessed some early success for these relaunches, such as Galénic's new VC serum and Dr. Wu's Mandelic Acid series.
Since the Eve Lom transition was completed at the end of the first quarter, we remain in the early stage of integration process, which will span over the second quarter. We believe that over time, we will have significant room to apply our disruptive D2C model and core platform capabilities to our newly acquired brands as we help them to realize their full potential. With four brand acquisitions since mid 2019, our strategy investment and capital market teams have developed core capabilities of sourcing, executing, and integrating new brands through these experiences and have continued to improve and upgrade. We have since 2020 started to see a number of high-quality brands emerge and become available globally, and we are continually seeking to identify potential attractive additions to our portfolio.
We believe our success in acquiring Eve Lom is a testament to our rising reputation as a serious, high-quality consolidator of global beauty assets. We plan to leverage this unique window of opportunity to add to our portfolio in a prudent and cost-effective manner. Aside from operational improvement and M&A, continued investments in our core infrastructure and capabilities are also our central focus. We have increased R&D spending during this quarter to almost 2% of total net revenues, compared to 1.2% in the same period last year. The build-out of our Guangzhou Manufacturing Hub and Research Center in the form of a joint venture with Cosmax is on track, with construction having started in late March. As of end of the first quarter, we held a total of 75 global registered patents, including 36 invention patents.
Our Yatsen Open Lab R&D architecture, which encompass our internal R&D division as well as collaboration with a network of outside OEM and R&D partners such as Sensient Technologies, Pierpaoli, Huazhong University of Science and Technology, et cetera. We enhance our capabilities and abilities to develop unique active ingredient formulations and innovative packaging and application solutions. Finally, we would like to provide an update on our international business, where our progress in certain markets such as Southeast Asia have exceeded our expectations. Even though overseas sales represent a relatively small part of our overall sales in the first quarter of 2021, it is worth noting that we have already become one of the top selling brands in the online cosmetic categories in fast-growing consumer markets such as Vietnam, Malaysia, Singapore, and the Philippines.
We are inspired by the success enjoyed by other Chinese D2C companies such as Shein and Anker in overseas markets. We have already started to learn from these leaders and may accelerate our overseas business in the future. Thank you everyone. With that, I will now turn the call over to our CFO, Donghao Yang, to discuss our financial performance.
Thank you, David, and hello everyone. Before I get started, I would like to clarify that all financial numbers presented today are in RMB amounts and all percentage changes refer to year-over-year changes unless otherwise noted. Total net revenues for the first quarter of 2021 increased by 42.7% to RMB 1.4 billion from RMB 1 billion for the first quarter of 2020. Primarily attributable to the increases in the number of D2C customers as well as revenue per D2C customer during the period. Gross profit for the first quarter of 2021 increased by 58.8% to RMB 991.6 million from RMB 624.4 million for the first quarter of 2020. Gross margin improved by approximately 7 percentage points to 68.6% in the first quarter of 2021 compared to 61.7% in the same period of 2020 on the back of more disciplined pricing and discount policies.
On the business end, we saw increased sales generated from higher margin brands and through experience stores. We have also creatively premiumized our product offerings, enabling us to achieve higher average order value and better margin outcomes. Total operating expenses for the first quarter of 2021 were RMB 1.3 billion compared to RMB 800.3 million for the first quarter of 2020. As a percentage of total net revenues, total operating expenses increased to 92.4% from 79.1% for the first quarter of 2020. Fulfillment expenses for the first quarter of 2021 were RMB 92.7 million compared to RMB 107.1 million for the first quarter of 2020. As a percentage of net revenues, fulfillment expenses decreased from 10.6% in the first quarter of 2020 to 6.4% in the first quarter of 2021.
The decrease in percentage was primarily due to the normalization of logistics expenses compared to the first quarter of 2020, during which logistics expenses were higher due to the impact from COVID-19. Selling and marketing expenses for the first quarter of 2021 were RMB 1 billion compared to RMB 556.9 million for the first quarter of 2020. As a percentage of total net revenues, selling and marketing expenses were 72.1% compared to 55% in the prior year period. The increase was primarily due to investment in promotions and consumer awareness building for the newer brands and testing of the effectiveness of new traffic acquisition channels. General and administrative expenses for the first quarter of 2021 were RMB 172.3 million compared to RMB 124.1 million for the first quarter of 2020.
As a percentage of total net revenues, general and administrative expenses for the first quarter of 2021 decreased to 11.9% from 12.3% for the first quarter of 2020. The decrease in percentage was primarily due to increased economy of scale resulting from a higher level of revenue. Research and development expenses for the first quarter of 2021 were RMB 27.7 million compared to RMB 12.2 million for the first quarter of 2020. As a percentage of total net revenues, research and development expenses for the first quarter of 2021 increased to 1.9% from 1.2% for the first quarter of 2020. The increase was primarily due to an increase in personnel costs and share-based compensation expenses as a reflection of our commitment to enhance our R&D capabilities as a sustainable source of competitive advantage.
Loss from operations for the first quarter of 2021 was RMB 343.3 million, representing operating loss margin of 23.8%, compared to loss from operations of RMB 176 million or operating loss margin of 17.4% in the first quarter of 2020. Non-GAAP loss from operations for the first quarter of 2021 was RMB 258.3 million, representing non-GAAP operating loss margin of 17.9%, compared to non-GAAP loss from operations of RMB 113.7 million or non-GAAP operating loss margin of 11.2% for the first quarter of 2020. Net loss for the first quarter of 2021 was RMB 319 million, representing net loss margin of 22.1%, compared to net loss of RMB 191.7 million or net loss margin of 18.9% for the first quarter of 2020.
Non-GAAP net loss for the first quarter of 2021 was RMB 234.3 million, representing net loss margin of 16.2%. Compared to non-GAAP net loss of RMB 129.4 million or 12.8% of net loss margin in the first quarter of 2020. Net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the first quarter of 2021 was RMB 0.5, compared to net losses attributable to Yatsen's ordinary shareholders per diluted ADS of RMB 4.6 for the first quarter of 2020.
Non-GAAP net loss attributable to Yatsen's ordinary shareholders per diluted ADS for the first quarter of 2021 was RMB 0.37, compared to non-GAAP net loss attributable to Yatsen ordinary shareholders per diluted ADS of RMB 0.92 for the first quarter of 2020. As of March 31st, 2021, the company had cash and cash equivalents and restricted cash of RMB 4.3 billion, compared to RMB 5.7 billion as of December 31st, 2020.
Looking at our business outlook for the second quarter of 2021, we expect our total net revenues to be between RMB 1.49 billion and RMB 1.54 billion, representing a year-over-year growth rate of approximately 50%-55%. This forecast reflects our current and preliminary view on the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A. Operator?
Thank you. We will now begin the question and answer session. To ask the question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. For the benefit of all participants on today's call, if you wish to ask management your question in Chinese, please immediately repeat your question in English. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Dustin Wei with Morgan Stanley. Please go ahead.
Thanks for taking my questions. My first question regarding the guidance for the second quarter. It seems like it suggests that 3%-7% quarter-on-quarter growth versus the first quarter. I feel it seems weaker than normal seasonality for cosmetics. Is there adjustment going on with some strategy change or management tends to be conservative? First question regarding the guidance. Second question is that given the competition on color cosmetics seems to become more intense. Is there any strategy change for the management in terms of allocating more marketing resources to skincare rather than color cosmetics? Is that part of the reason that our sales growth slightly lower than previously? The third question is regarding the net losses in the first quarter. That net loss on the ratio is slightly higher than fourth quarter last year.
I think that's mainly because of higher selling and marketing. Is there any further elaboration of that? How should we look at that ratio for the full year? Thank you very much.
For the quarter-over-quarter growth, I think the first thing we want to clarify is right now our brand portfolio has been changing dramatically. We have three brands last year, but now we have seven brands. Skincare, now we have four. You're right. When we are thinking about the resource allocation for the coming quarters, we may allocate more resources into the skincare growth. The skincare growth might not be as dramatic as color cosmetic. However, we think the growth of skincare, especially the luxury sectors of the skincare category is more sustainable, and this might influence the bottom line as well. For the second thing about the competitiveness of the color cosmetic market. If we look at the Euromonitor data. Last year, Yatsen as a company was ranked as the number five.
In 2020, the company was ranking at the number four. If you look at the growth rate, the 2020 over 2019 growth rate based on the same database. Yatsen was growing at over 30%, while the number one, number two was declining, and the number three was just growing at a single digit. If we look at the overall color cosmetic, we think we still have a high growth potential, and we will work.
To continuously expanding our brand in color cosmetics, we will continue to invest to grow our existing brand, including Perfect Diary, until we become the number company in terms of value share in color cosmetic market. Your third question is about the increase in sales and marketing. In the first quarter this year, because we newly acquired a couple of the skincare brands, at the early integration stage, the investment on brand building and also cleaning the inventory for the distributor will be the two core things that we need to do. The investment for our newly acquired brand, for example, we just announced the brand ambassador for Galénic in the first quarter. We believe the investment in strengthening the brand equity and then improving the brand awareness will be reflected in the growth in the coming quarters for our skincare brands.
Yeah. One other thing I want to add is, in Q1, we spent some money testing the effectiveness of new traffic acquisition channels, such as Douyin, Kuaishou and some others, to figure out the best, most efficient, cost-effective way to acquire traffic and market our products. On top of that, we are trying to put in place a more disciplined approach to ROI optimization. Now we're allocating our resources to maximize our ROI, to allocate resources across different brands, and now we have seven of them to make sure that we have the highest return on our investment. Going forward, you just mentioned, in Q1, our non-GAAP net loss was 16%. Going forward, we do expect our net loss to come down, and we are actually more confident about our future prospect of profitability going forward, as now we're building this sizable and sustainable skincare business.
Thanks a lot, Jinfeng Huang and Donghao. If I can just have a follow-up on that. Are we still sort of aiming for breakeven or even better profitability for 2022, given the change of the focus towards more skincare?
Well, now we are actually not in a position to give guidance on profitability one, two years from now. As I said earlier, we're now even more confident about our future prospect of turning this business profitable.
Thank you very much.
The next question comes from Luzi Li with Bank of America. Please go ahead.
Hi, thank you management for taking my question. My first question is also on the guidance for Q2. I recognize that Q2 basically has the easiest base if you look at last year. Is it fair to say, in Q2, maybe it's likely the best quarter in terms of the growth run rate? This is my first question. Second question is, if you look at the DTC channel growth, in the past, we actually see the number of DTC customer grow faster than the output value. In Q1 of this year, we actually see the higher ASP growth than the number of customers. Are we going to see the similar trend in the future or it's just a one-off? If this is the case, how can we achieve the higher ASP in future, particularly for the Perfect Diary?
You just mentioned that we achieved some brand upgrade for Perfect Diary brand. Are we seeing lower discount rates, or we have a higher ASP for the newly launched products, and then we get a similar level of discount? This is my second question. My third question is also on the margin side. For the Q1, we do see the higher selling and distribution ratio. My question is whether this is more about the newly acquired brands or new brands, or we actually see quite similar ratio for different brands. If we purely look at the Perfect Diary, how is the trend versus last year's same time? Thank you.
Okay. For the first question, let's discuss about the Q2 guidance, about growth. If you look at the brand portfolios we're having right now, we just launched a new skincare brand. This brand, even the price point is lower than Perfect Diary. But this brand has a very young brand equity to attract the new category entrants. The brand is targeting the young and the Gen Z and Gen A consumers who are newly adopting the color cosmetic products. The reason we do that is that we are right now upgrading the Perfect Diary product portfolios with two things. One thing is for existing products, we will have more disciplined discount and promotion. For our newly launched products, we are trying to catch up the upgrade and the premiumization trend of the consumers.
That's why we can see an increase in gross margin in the first quarter. Having said that, Little Ondine in the Q2 last year had a very dramatic growth. This year, we are also thinking about adjusting the investment level for Little Ondine as well. For the second quarter, we believe the growth reflects our change in the resource allocation. With more focus on skincare brands, with more focus on adjusting the investment model for Little Ondine and Abby's Choice, with more focus on price up and also the premiumization of Perfect Diary. That's why we think the growth will have some impact on the bottom line for the second quarter. We believe that the shift of the growth model will be more sustainable and will become more robust in the coming quarters.
That's my answer for the first question about the Q2 guidance. For the second one, the DTC customer growth versus the ARPU growth. You are right. If you look at the absolute percentage, we can see in the Q1 that the average revenue per customer, the growth is higher than the DTC customer growth. If you look at the brand portfolios right now, Galénic and Eve Lom, the price point of both brands are in the premium skincare sectors. Even for Dr. Wu, the brand is a medicated skincare price tier. For Perfect Diary, the brand is moving up to the high end of the mass market.
Having said that, which means the ARPU, the average revenue per customer growth will be continued because of the resource allocated and invested in both mass and the premium skincare brands and also the mass color cosmetic, Little Ondine, and also Perfect Diary. We think it's also very important to capture a significant share of the new entrants in color cosmetics. Right now, based on the monthly run rate of Pink Bear, we are quite happy to see the early stage results, which the Pink Bear is playing a very important strategic role to take the empty space when Perfect Diary is moving up.
Looking forward, we think that both the DTC customer and also the ARPU will continue to grow, but each of the brands will play different roles in driving the growth of these two figures. About the second question about the margin growth. Right now, the gross margin in the first quarter over last year is around 7%. Because right now the gross margin mainly coming from two things. One thing, as I mentioned before, is the increase of the skincare brands. The skincare brands revenue as a percentage of Yatsen's revenue has been increasing. Because of those skincare brands, the gross margin is higher. That's why we see the gross margin incremental here. For Perfect Diary, our flagship brand, in the first quarter, we launched some new products with higher gross margin.
For example, the slim lipsticks is capturing a higher market share in the first quarter, and that product is becoming the top-selling product in lipstick category, but the gross margin of that product is higher than the other products of Perfect Diary. We think the launch is not a direct price up of existing products. It's coming from more disciplined promotion and also new products, new innovation, providing more value to consumers. Another thing I want to add up here, price up, what we call the premiumization strategy for brands, we need to have some reason for consumers. That's why we are consistently improving our R&D expenses. As long as we have better product, better innovation, and the consumers, they have a very high willingness to pay for those better products and the new products.
That we think how we can adjust the risk of the premiumization of the brands.
Thank you. Just one follow-up. You just mentioned that in the rest of the year, maybe we will see a better margin profile given our strategy shift. In this case, are we looking for non-GAAP net profit narrow versus last year, or we're still seeing a similar level? Thank you.
Sorry, as I said earlier, we're not in a position to give guidance on profitability for the rest of the year. I said earlier, as we are trading up of our existing brands and introducing more luxury skincare brands with higher margins, we are more confident on the profitability of our business going forward.
Maybe I can just add one thing here, is that the change reflects our resource reallocation among the brands, among our portfolios. Our resources will invest in the skincare category and also continuously invest in the new brands of the color cosmetics. That's why we think this will impact our bottom line, sorry about that, we are not going to give any guidance at this point. We come to the next person. Thank you.
Next question comes from Christine Cho with Goldman Sachs. Please go ahead.
Thank you, David and Donghao. Two questions. One, is it possible to give us a rough sense of the sales contributions from your own organic brands versus the newly acquired brands, both in terms of this quarter as well as the implied in your second quarter guidance? Secondly, David, you mentioned in your remarks that non-traditional channel sales contributions have increased this quarter, including the short videos and TV and experience stores. Should we expect this trend to continue going forward? Would it be possible for you to elaborate on your strategy in these new channels? Lastly, a quick one is there any update on the repurchase rate that you can share with us? Thank you.
Okay. First one, about the organic brand. I can clarify here. Even with the brand we acquired, in terms of the growth, we still invest a lot in the new acquired brand. If you're talking about the revenue split between existing brands, no matter if it's incubated or the brands that came from last year or the newly acquired brand, the percentage-wise of the newly acquired brand was still relatively small in the total percentage of the revenue. What we do is we invest in the new brands and then we capture the growth. Until now, I would say that the main growth driver of this company still comes from the organic growth, no matter if it's existing brand, incubated brand, or even the acquired brand. That's about your first question.
We are quite happy about even our flagship brand, like Perfect Diary's growth in the first quarter, because we see the growth of Perfect Diary mainly coming from the newly launched, no matter the lipstick product or the category branching to the color contact lens and also the skincare products as well. The second question is about the non-traditional channels, for example, the TV or the short video. You're right, we see the trend will continue. Because right now, in the first quarter, as mentioned by Donghao before, we spent some resources in testing the new platforms.
For example, as we all know, for some of the short video and also the live broadcasting apps, they are devoting a lot of resources in building up their e-commerce part of the business, which means in terms of GMV, we see a significant growth potential for those apps and the newly emerged platforms. This is something that we spent a lot of time in the first quarter to study to see what will be the impact for brands in the future. In the traditional business model, we have brand-building platforms, social media platforms, and we have the transactional-based e-commerce platforms like many Alibaba, et cetera. Now we see some of the newly emerging players in this market, they capture both parts of it. They can help you to build brands, and they can help you to complete the transaction.
It means a lot for brands. That's why we had some tests in the first quarter by working together with the top-level management of those platforms, and we are very happy to see some early-stage results coming from the test. Looking forward, we think our growth outside of the traditional e-commerce platform will continue to play as the growth driver for Yatsen's revenue. So for your third question about repurchase rate, Irene Lyu, do you want to share?
Yeah. For repurchase rate, we have seen similar levels in the past. Previously, I think in both when we were IPO-ing and also during in the annual report, we mentioned the repurchase rate over a 12-month period has been staying around 40%. Recently in this quarter, we didn't disclose the actual number, but the level has been in a similar level.
Thank you. Next question comes from Zhongchao Xu with CICC. Please go ahead. Zhongchao, your line is open.
Hello, can you hear me?
Hello, Zhongchao.
Yeah, this is Zhongchao Xu from CICC. Thanks for taking my questions. I've got two questions. The first one is what's our specific plan on the skincare business this year, and how will we allocate the resources, say, the marketing and the labor, the team, the talent? The second question is if we testing the new traffic acquisition channels such as Douyin you mentioned, could you further elaborate what we did and how was the performance so far? Thanks.
Well, for the skincare growth, we think the acquisition of Eve Lom is a very important milestone of the company. When we are entering into the skincare category, it takes some time for us to improve our understanding of the category and also to test whether the company's core capability can be applied into the skincare category. Based on the early stage in the result in the past few months, we are very glad and confident that our business model is working in both color cosmetic and skincare. Going back to some of the brands we are investing in, then we see a very clear growth path for those brands. For example, Dr. Wu.
We reposition the brand and focus on very specific benefit category, benefit base for the brand, and then we strengthen the brand equity and then focus on a couple of few SKUs. If we look at the growth of Dr. Wu in Tmall, it's actually a very consistent and remarkable growth. This brand has been selling in various live broadcasting in March and April, and we see the result was quite impressive. This month, we are continuing to invest in the brand in Douyin with the top KOLs at Yatsen Lab. In June, this brand is going to have a big promotion working with the top KOLs and also working on the June 18 promotion event. We will see continuous progress of Dr. Wu sales in that page in the category.
We think marketing wise, our team has been devoting a lot of resources in understanding the market landscape, understanding the heritage of the brand equity, and also reposition the brand to be better communicating to our core customer base. In terms of the team integration, we are also very happy to see that when we acquire those brands, no matter it's Eve Lom or Galénic, and we see the new talents of those teams has been playing an increasing role in Yatsen. They have been knowledgeable and also very experienced in this skincare sector. We are very happy to work with them on R&D, on formula development, and also on some new channels globally. We see the integration is going on quite well, and we think the acquisition of the asset is not the brand, but also the talent we get from the asset.
Going back to your second question about the new traffic acquisition. We are testing in a few of the non-traditional e-commerce platforms. In the first quarter, if you look at the live broadcasting of Douyin, we think there are very interesting models of that. For example, we know for live broadcasting, there are two types. One type is leverage the KOLs. Another type is you will have the live broadcasting in your own flagship stores. We think the growth of your own broadcasting is a very good methodology to communicate with your core consumers, your brand story, your R&D story, your formula superiority, and also the knowledge in skincare and also makeup. So this is the newly emerged channel. We think that the growth of the self-broadcasting in Douyin will play an increasing role in the sales. We also think Kuaishou is a very interesting platform.
With the idea of Kuaishou, we see the GMV growth was quite remarkable and there are a few top KOLs emerging in Kuaishou as well. We are working with basically all of them to explore the growth of the live broadcasting Kuaishou. There are also other interesting changes happened in the first quarter. We are very excited about the change, and we are very happy that we tested in the first quarter. Even with some mistakes in the testing, but somehow we made those mistakes early. Now with the model finalized, we are ready to move on. With the new emerging channels, we think they will take in a bigger share of the total e-commerce landscape.
Thank you.
Next question comes from Ingrid Zhang with UBS. Please go ahead.
Hi. Thanks management for taking my question. I have two questions. The first is, Yatsen has been very strong in terms of faster product launch, leveraging our strong consumer insights. With the new cosmetic regulation coming to effect in May, could you share with us the potential impact on our business? The second question is, we start out as a very strong company in mass-market segment and particularly in color category. Now we acquired two premium, two prestigious skincare brands. Could you share with us our plan to grow these new skincare brands? Many thanks.
Okay. First one about the regulation change in the beauty industry. This is nothing new because we have been discussing this in the past one year. Ever since maybe May or June last year, we were invited by the government to discuss the potential impact of the law. We knew that it's going to happen, and we had a very solid plan together with our external partners. We consistently communicate with the officials in the related government departments. Right now we didn't anticipate challenges from the implement of the new law. Going back to your first question about the speed to the market.
Speed to the market is what we believe is still the core capability of the company, but it doesn't mean we are jumping ahead of any necessary or law reinforced necessary steps of the product launch. We have a very strict quality control, and also we have very strict benefit tests for our products as well. We believe our existing SOP and our existing company, like the standard, is helping us to benefit from the launch of the new laws. We believe the main purpose of the new law is actually to have a better regulated market, but mainly targeting on some, what we call the low end or the niche brands who are not having a strict compliance with the law reinforcement. That's about the first question. Skincare. Premium skincare brands are very interesting.
When we launched the VC serum, this product is really very high price with 12 per shade. The label price was RMB 750 . At the very beginning, we were quite concerned about the price point. When we sell this product and now it is basically stock out for maybe in the coming two months or something. We attract a new set of consumers who are not that price sensitive, but more focused on the benefit and instant effect of the skincare products. This give us some confidence when we are targeting into the premium skincare sector. This product, a lot of my friends they use it, and the benefit is amazing. Basically you got a very shiny skin over one night dose usage. This reinforce our belief that we need to consistently and heavily invest in R&D.
As long as we have better technology and superior product. Price point is not something that consumers. For some set of the consumers, their key concern is your benefit instead of the price. If we're going back to the fundamental for us to win in premium or win in skincare, we strongly believe that R&D is the core of the winning formula. On top of that, because of our large consumer base, it's easy for us to get a subset of the consumer base who have the high willingness to pay for premium skincare products. That gives us some leverage when we are expanding, when we are launching new products or new brands at an early stage. That's just for the early stage.
Looking forward, we believe it's the product benefit or the product quality will play a definitive role in whether you can win in this market. That's how we think about the premium skincare brand growth.
Thank you.
The next question comes from Kevin Zhang with 86Research. Please go ahead.
Hi. Thank you for taking my questions. I have two quick questions. The first one is about the offline business. Could you please give us more color on the progress and recovery of our offline experience stores in the first quarter and second quarter? My second question is also about the offline, but it's about the distributor model, because we've noted that Yatsen brands such as Perfect Diary, Little Ondine, and Abby's Choice have collaborated with popular offline cosmetic chain store, H.E.A.T, in Chinese, Xī Rán. How should we think about the role of this offline distributor model in the long run? Thank you.
All right. Okay, thanks for the question. I'll take a shot at your first one. Well, currently we have about 245 offline stores, and we do have a plan to open another 100 stores during the rest of the year.
The stores are doing quite well. From a stand-alone business perspective, it is already profitable. That's about our offline business. Any second question?
To build on the first question, the reason we are trying a higher revenue per square meters for our offline stores. We track this, mainly leveraging our category expansion into skincare and also some foundations. We launched some interesting products purely for offline. For example, the essence and also the pre-makeup lotion and also the moisturizer as well. Then, we also have some sunscreen protectors for our foundations for offline stores as well. We see the very specific set of the product, which is more fit with the needs of our offline consumers. It's playing like it's taking a higher percentage of the revenue in our offline stores.
For those subset of the products, they have higher repeat purchase rate, higher gross margin, and a better net profit. That's why we were very happy to see that our offline stores are making money right now. For the second question, the reason why we as a D2C company, why do we need to work with H.E.A.T? If you look at Perfect Diary, Perfect Diary has still a very strong infrastructure, as we can see, for the offline stores network. If you look at our newly acquired brands, economically, it's not making sense for each of the brands to expand offline stores similar to Perfect Diary. For example, for Little Ondine, we have planned to open one offline store in Tianzifang in Shanghai. It's a place for the fashion people and also very cool people.
When we are thinking that whether Little Ondine should expand another 200 stores- 300 stores in China, we think the economy model might not work. That's why we need to work with one distinctive partner, which can capture some of our brands and list them in the offline stores environment. We chose H.E.A.T because the channel can help brands to enhance the brand equity, and they mainly focus on serving the consumers like a service experience, and they can deliver the brand message to consumer quite well. Also for our brands portfolio expansion based on the retailers model is helping us to reach more consumers with lower cost. That's the reason we are working with one partner right now. Having said that, it's early stage experimental.
We will see what the results come back and then we will have more knowledge to decide whether it should be a good move or not.
Thank you.
That concludes the question and answer session. I would like to turn the conference back over to management for any additional or closing comments.
Thank you once again for joining us today. If you have any further questions, please feel free to contact us at Yatsen directly or TPG Investor Relations. Our contact information for IR in both China and the U.S. can be found on today's press release. Have a great day. Thank you.
This conference has now concluded. Thank you for attending today's presentation.