---
title: "For a Startup Brand to Succeed, 50% Depends on Market Opportunity, 30% on Product!"
description: "For a startup brand, three things matter most: market opportunity selection (Market), product (Product), and growth (Growth). I have always believed that for a startup brand to successfully complete the journey from 0 to 1, 50% depends on the choice of market opportunity, 30% on the product, and growth, whether marketing or sales, only accounts for 20%. If we set aside growth, the 80% that is market opportunity selection and product has a specific term called 'Product-Market Fit'."
author: "求智集"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-12-25"
categories: "Brand Marketing, Retail Formats"
language: "en"
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citation: "求智集. “For a Startup Brand to Succeed, 50% Depends on Market Opportunity, 30% on Product!.” New Distribution, 2019-12-25. https://xinjignxiao.com/en/articles/for-a-startup-brand-to-succeed-50-depends-on-market-opportunity-30-on-pr-2279d1e8/"
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# For a Startup Brand to Succeed, 50% Depends on Market Opportunity, 30% on Product!

> For a startup brand, three things matter most: market opportunity selection (Market), product (Product), and growth (Growth). I have always believed that for a startup brand to successfully complete the journey from 0 to 1, 50% depends on the choice of market opportunity, 30% on the product, and growth, whether marketing or sales, only accounts for 20%. If we set aside growth, the 80% that is market opportunity selection and product has a specific term called 'Product-Market Fit'.

For a startup brand, three things matter most: **market opportunity selection (Market), product (Product), and growth (Growth).**
I have always believed that for a startup brand to successfully complete the journey from 0 to 1, 50% depends on the choice of market opportunity, 30% on the product, and growth, whether marketing or sales, only accounts for 20%.
If we set aside growth, the 80% that is market opportunity selection and product has a specific term called "Product-Market Fit," the degree of fit between product and market.
Today, we want to share some thoughts on this issue, or to put it in a more common question: What kind of opportunities can give rise to new brands? What kind of products are suitable?
**-01-****Category Opportunities**
Recently, when talking with all online clients (Tmall, JD.com, Pinduoduo, and other channels of various sizes) and offline clients (distributors, Hema, RT-Mart, premium supermarkets, convenience stores, etc.), I have increasingly felt that the most important driving force behind rapidly growing consumer brands is still category opportunities.
This is reflected in two aspects: category opportunities are the easiest for users to perceive and accept, and they are also the easiest to persuade online and offline clients to actively promote and sell the brand's products. For example, when Laxmi Noodles entered these new channels, it was very easy.
My insight is that when we create a new brand, in addition to creating a product that is differentiated and has repeat purchases from the consumer's perspective, we must also be able to easily convince procurement, platform managers, and distributors from the channel's perspective. Because these three types of people are actually the ones with the deepest understanding of the category among all people.
From another angle, if we achieve differentiation and repeat purchases from the consumer's usage perspective, and can convince relevant parties from the channel perspective, then the brand is almost certain to grow rapidly.
**As long as the management team and supply chain keep up, achieving tens of millions or even hundreds of millions in sales within a year is not a problem.**
So specifically, what is a category opportunity?
**-02-****Three Dimensions to Think About Category Opportunities**
**1\. The first dimension to think about this issue is the degree of product differentiation.**
The greater the product differentiation (compared to existing products), while also better meeting needs (what Silicon Valley often calls Product-Market Fit), the more the category resembles a new category, and such a category obviously has a great opportunity to be built into a large brand with a new brand.
Because in such a case, the market is essentially redefined, and the market landscape naturally changes, leaving room for new brands.
**1\. Big opportunities for category revolution.**
The disruption of traditional cigarettes by e-cigarettes (JUUL Labs, an American e-cigarette brand, is already valued at $38 billion; RELX in China), and the delivery of coffee (Luckin Coffee, Lian Coffee). Huge revolutionary changes in categories may give birth to opportunities for companies worth tens of billions of dollars.
Category opportunities like e-cigarettes will benefit many brands rather than a single dominant one. The main reason is that the opportunity is too big, penetration is still very low, and the supply chain is extremely mature. The situation where one or two brands can eat up the entire market will not happen in China.
**2\. Opportunities for category upgrading.**
Evolutionary changes in categories. The upgrade from laundry powder to laundry liquid made Blueland stand out; the upgrade from soap to body wash allowed Unilever's body wash category to go from one-third of P&G's market share to surpassing P&G; the partial migration from instant noodles and takeout to ready-to-cook noodles enabled Laxmi Noodles to achieve nearly 200 million yuan in business scale in just three years.
Why is Laxmi Noodles' opportunity not type 1? Because Laxmi Noodles' noodles need to be boiled for 3 minutes before eating, rather than just soaking and adding condiments to get a bowl of noodles as good as those from a noodle shop outside.
If they could achieve the latter, that would be a disruption to instant noodles, as well as to noodle shops and takeout. A company with the opportunity to fundamentally disrupt Master Kong and Uni-President, and eat into a portion of the takeout market, would naturally have a much bigger business opportunity.
**3\. Category innovation.**
Continuous innovation in a category is also a sustained driving force for brand growth. From ordinary shampoo to silicone-free shampoo or amino acid shampoo, such "new concepts" or "product innovations" can enable brands like Zhi Guan to achieve 400-500 million yuan in business, but at the same time, P&G and Unilever can also follow up relatively quickly, seize new trends, and achieve business growth.
This kind of category innovation varies greatly across different categories. For example, in underwear, you can have revolutionary changes in materials, but you can also just have changes in design.
Banana In's underwear quickly achieved a business scale of hundreds of millions. Behind its rapid growth is an insight into category opportunities: the market concentration in the underwear market is extremely low (the market share of the top player is far less than 5%), with only high-end options like CK, and traditional players like Langsha to choose from. A large number of consumers are still using unbranded and design-less underwear.
**The design level of the industry cannot keep up with the aesthetics of young people.** So design innovation is also a significant category opportunity.
It is worth mentioning that sometimes this kind of "category innovation" can have relatively small differentiation, or even just be conceptual packaging, without significant improvement in user experience, but it can still grow into a new brand of considerable scale.
For example, Perfect Diary's makeup products are all produced by mature OEM factories of other brands, so the product differences are relatively small. What about men's body wash and women's body wash? How obvious is the effect of silicone-free shampoo? What is the significant difference between a 200-yuan mask and a 10-yuan one?
The above discussion based on product differentiation is the first dimension of thinking about category opportunities.
**2\. I believe the second dimension to think about category opportunities is price.**
**The importance of price in consumer categories is self-evident. Price is the most important basis for judging product quality.**
The emergence of new brands essentially breaks the original market structure. If nothing changes in the market, there is naturally no need to discuss new brands. Price changes and the resulting gaps can sometimes be an important catalyst.
When Yunnan Baiyao's toothpaste appeared, mainstream brands like Colgate, Crest, Darlie, and Zhonghua were still playing in the 5-10 yuan price range. But Yunnan Baiyao came in with a price positioning of over 20 yuan.
Yunnan Baiyao experienced rapid growth for 8 years from 2010 to 2017, continuously gaining market share, growing to 4-5 billion yuan in sales, and becoming the most profitable toothpaste brand in the market.
**In addition to opportunities brought by price changes, the high prices that users can accept are crucial to a brand's success.**
If the mainstream market has a cost of 5 yuan, a 3x markup, and a retail price of 15 yuan, then for high-end products, the cost is generally 8-10 yuan (cost increased by 60%-100%), with a 6x markup, making the selling price 48-60 yuan. This has many benefits.
> **Since online platforms often set free shipping for orders above 30-40 yuan, the average order value per unit increases, the value per kilogram increases, and the proportion of logistics and express costs will significantly decrease.**
> **The gross margin per unit increases from 66.6% to 83.3%, and coupled with the decrease in logistics and express costs, the brand can afford higher customer acquisition costs. The significant increase in marketing expenses is more conducive to early market development for new brands.**
> **The increase in gross margin allows for higher profit sharing to channels, and channels/distributors are more willing to promote your product.**
> **There is ample room to reduce prices from a higher price point to a lower one. However, consumer brands often find it difficult to move from a low price to a high price positioning.**
**3\. Besides price, the third dimension to think about category opportunities is the opportunities brought by rapid channel changes.**
**In the past 10 years, we have experienced dramatic channel changes. Online traditional e-commerce platforms first saw the dominance of Tmall and JD.com, then Pinduoduo rose strongly, and online content e-commerce (Xiaohongshu, Babytree), online social e-commerce (Yunji, Global Scanner, Beidian), fresh food e-commerce, community e-commerce, and community group buying have all flourished.**
**Even traditional offline channels are undergoing many important changes, from traditional hypermarkets led by RT-Mart and Walmart, to new retail channels like Hema and Miss Fresh, and the rise of convenience stores. It can be said that all emerging channels lack products that are truly suitable for them.**
Take the yogurt category as an example. Whether it is rapidly developing convenience stores, emerging premium supermarkets, or new retail channels like Hema, procurement is thinking that they cannot sell products from Mengniu, Yili, or Guangming like other supermarkets.
On the one hand, users are younger or more high-end and want to try more new products.
On the other hand, the gross margins of such products are relatively fixed. To make more money, they must establish a product structure different from others and increase the average order value. So yogurt brands like Jane can rise strongly, with prices several times higher than traditional players, while also being able to share more profits with channel partners.
**Essentially, the rise of a brand is a result, the result of a three-way game among the brand, the channel, and the consumer.**
If FamilyMart is very optimistic about you and wants to promote you as a main product, and the shelf space is large enough, as long as you can hold up, users may sometimes passively choose you unintentionally.
This is why Single Grain's potato chips can rise rapidly. Although in terms of product, Single Grain's chips are not necessarily better than Lay's, through higher-end price positioning, they identified the psychology of channels like convenience stores and Hema that want a "second" potato chip brand, gave distributors and channels more profit space, and with good product packaging and IP marketing, they may also achieve a scale of hundreds of millions.
In addition, we can see many other examples, such as the former Three Squirrels (deeply bound to Tmall), Daxidi's steak, and Adopt a Cow's milk (deeply bound to Yunji).
**Channel dividends can create brands, but whether a brand can break free from dependence on a single channel and grow from 1 to 10 tests product capabilities, channel operation capabilities, and marketing capabilities.**
In all retail channels in China today, there are still significant dividends, and there are many opportunities to redefine products according to channels. For example, Pinduoduo today is like Tmall five years ago, with still large channel dividends.
I generally do not like channel-based opportunities because we should not define a brand from the channel at the beginning, but rather define the brand from the people. During channel changes, we will find that the trend of different channels serving certain specific groups of people for certain category needs is becoming more and more obvious.
But I still think channel-based thinking is very meaningful because the channel itself is one of the best ways to segment people.
The era when a product is sold in all channels has passed. In the future, every product must find the most suitable sales channel at its inception.
**Of course, the more universal a product is across channels, the greater the opportunity to build a bigger business.**
My understanding of online business makes me increasingly feel that if a product is only suitable for online sales, then it is better not to do such a business. We must find more universal products to truly obtain long-term excess profits.
**Business is like a battlefield. There are only so many players in the market. Products are varied and must have differences and commonalities. Existing players in the industry often have decision-making inertia, but changes on the consumer side can sometimes be very fast. In a daze, the mainstream consumers have changed, product demands have changed, and coupled with accelerating channel changes, this often leaves many category opportunities.**
From an observer's perspective, look at the real market demand and existing supply. Which segmented demand, which channel, which price band has gaps or mismatches? These may all generate category opportunities.
After thinking about category opportunities from the three aspects of product differentiation, price, and channels, we will have a clearer judgment on whether an opportunity can give rise to a new brand.
But under such opportunities, how big can a brand become?
The size of the category opportunity is important. The type 1, type 2, and type 3 category opportunities mentioned earlier are not necessarily smaller in order. Ultimately, the size of the category opportunity depends on the size of the potential market and the degree of differentiation of the new product.
For the underwear category, even if it is only design innovation, it is no problem to create a brand with over a billion in sales. All other things being equal, it is important to prioritize large markets.
Source: Qiuzhi Collection (ID: roadtowisdom)
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## Citation metadata

- Publisher: New Distribution
- Author: 求智集
- Published: 2019-12-25
- Canonical: https://xinjignxiao.com/en/articles/for-a-startup-brand-to-succeed-50-depends-on-market-opportunity-30-on-pr-2279d1e8/
- Original source: https://mp.weixin.qq.com/s/oqMpvAKqxTieT1GStQHcRg

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