Brand is an eternal topic. Last month, Diao Ye's two articles on consumption waves sparked widespread discussion about new brands, but no clear conclusion was reached. Opinions varied on what constitutes a factory brand, what new channels are, and whether brands should focus on cost-effectiveness. When entrepreneurs face variables like traffic, product, channels, and technology, they seem forced to choose: how should new brands really be built?
Recently, in an in-depth interview with Ma Zhantian, founding partner of Xinyi Capital, and Wang Yi, managing partner, we received a different answer. Ma Zhantian previously led consumer and integrated investments at Jiuding, investing in listed companies like Hualing Precision and Huangting International. He founded Jiuyicheng, which managed over 70 shopping malls, gaining extensive experience in consumer business models. This experience enriched his entrepreneurial and management perspective, allowing him to think deeply from an entrepreneur's viewpoint in investment decisions.
Wang Yi was the founder of Jiuding VC Fund, investing in leading consumer tech companies like Shansong and Zhongmeng. Both have rich practical experience in new consumption and applied technology. In a two-hour dialogue, we explored core issues such as how new brands start, the triangular cycle of traffic, product, and channels, and enterprise digitalization. They believe that "First, continuously approach user needs; second, leverage supply chain advantages to create highly cost-effective products. If you grasp these two points, any new brand or service will have the opportunity to grow big." But long-term, in China's consumer goods market, only by balancing traffic, product, and channels can you build a brand with a market value exceeding ten billion yuan.
They also said:
- Startups must learn by doing; early-stage growth solves all problems, rather than focusing on internal strength first. By the time you're ready, consumers have already drifted to other brands.
- Many companies excel at creating hit products but fail to retain users due to insufficient follow-up R&D and product iteration. This is the biggest problem for internet people entering consumer goods: they often neglect supply chain and production, lacking product awareness, leading to high failure rates.
- Recently, everyone talks about channel dividends, rushing to hot channels, but channels are neither good nor bad; the key is matching. If the channel doesn't match the product's attributes and can't reach the target group, it's ineffective.
The current new consumption market is more suitable for product- and technology-driven companies Around 2014, we saw that small pure financial investment institutions would struggle to survive. The institutions that will survive are three types: first, comprehensive brand investment institutions; second, industrial capital; third, vertical investment institutions with deep industry resources and insights in specific fields. So we thought about how to gain industry experience in our advantageous consumer sector, becoming capital with industry resources to find our footing in this competitive market.
Because our previous commercial real estate management projects at Jiuding performed well, the industry's asset supply was increasing, but management capabilities were scarce, leading to issues like difficult tenant recruitment, high operating costs, and low efficiency in many commercial properties. So I (Ma Zhantian) led the team to launch the Jiuyicheng project, using professional teams to operate on behalf of these single shopping malls, reducing tenant recruitment costs and improving operational efficiency. While helping them profit, we also considered how to integrate commercial real estate operations with consumer equity investment.
Through Jiuyicheng's operations, we found we could do two things at the investment level: on one hand, we mastered operational rules and channel resources for offline stores, which can empower consumer entrepreneurs; on the other hand, we are optimistic about the domestic commercial real estate management market, and the first-hand data from operations helps us spot new consumption trends early and discover high-growth early-stage projects.
In terms of specific direction, besides some excellent store chain projects, we focus more on product- and technology-driven companies, and also pay attention to new projects that combine offline and online well.
First Step for Brands: Hit Products Don't Make Money? Meet These Two Points to Build a New Brand Let's talk about product-driven companies. In our view, products come in two types: one is from nothing, like twenty years ago, when we saw German windows that could open inward and tilt, which didn't exist in China then; it became a new category upon entry. Many similar products, once you have them, you can't live without, but introducing such products carries risk due to cultural and lifestyle differences. The other is improving existing products. Take beauty products: foreign cosmetics in China used to be high-end because Chinese people didn't wear makeup widely; with low sales, high margins and prices sustained the market. But today, makeup is a daily habit for many women, the consumer base has expanded, and age ranges have broadened. For example, the 16-24 age group, many are transitioning from novices to experts; for those with low income and improving skills, foreign beauty product systems no longer meet their needs.
In contrast, domestic entrepreneurs are closer to target users, so they understand user needs better and faster. When the domestic supply chain system matured after 30 years of development, and entrepreneurs gained deeper user insight, the emergence of Perfect Diary and Judydoll was inevitable. Looking at the entire domestic goods market, the same logic applies. The current "shining domestic goods" are indeed related to GDP growth and the consumption confidence of the post-95s generation.
But returning to our initial point, this wave of domestic brands has indeed grasped those two points: first, closer to user needs; second, leveraging supply chain advantages to lower costs. This exactly matches the mindset and needs of this generation of consumers. So-called brand premium only comes last, because only brand loyalty brings premium, but Chinese consumers' brand loyalty is relatively low. Why is East Asia the most advanced in industrial design? Because people here always love trying new things and experiencing cutting-edge products and services; that's our consumption habit. Our invested projects have tested that with unchanged product ingredients, changing packaging alone can drive repurchase.
In this regard, Chinese consumers are more radical than Europeans and Americans, making brand building difficult. So the biggest challenge for brands in China is how to meet constantly changing needs and improve user loyalty; that's key. But foreign brands' cultural heritage and product stories are also essential for domestic brands, because relying solely on hit products won't make money or capture mindshare. You must use hit products to attract customers, then continuously launch new products to meet core users' evolving needs, gradually capturing mindshare through iteration. Without 3-5 years, it's hard to get users to pay a premium for your brand.
Brand Longevity: How to Build a Brand Worth Over Ten Billion Yuan? Specifically, where is the difficulty for new brands? Your three key ends—product, traffic, channels—sometimes act like a seesaw. Good factories are always doing OEM for European and American brands. A new brand with small order volumes won't get their cooperation. If you order according to factory requirements, startup risks are high; all funds become inventory, possibly insufficient, and cash flow breaks. But if your supply chain is poor, product quality suffers, so how do you leverage traffic and C-end? This is the key point for startups to balance, and the fundamental reason they must always prioritize supply chain.
(1) Traffic: In Early Stages, Data Growth Solves All Problems
How to understand traffic? We believe that for startups, early data growth solves all problems; you can't just work behind closed doors. If you keep developing and perfecting products while ignoring market changes and competitive evolution, when you finally open the door and launch your product, you may find it outdated or your target users have become loyal to competitors. For example, I worked in mobile communications for ten years; Nokia phones were once considered the best, but at some point, we felt they might be overtaken. Why? Because Nokia's product testing was extremely strict; a product took 12 months from concept to launch, but one model took two years due to minor bugs. At the same time, Huawei was developing a similar phone with even bigger bugs, but they launched it directly. After launch, they iterated based on user feedback and internal testing, sending upgrade packages to users. In the following 12 months, while Huawei was testing users, Nokia was still testing in the lab. When Nokia finally launched, they found 80% of users were already with Huawei; how could they get users to switch at low cost?
So startups must learn by doing, rather than waiting until the product is perfect and the best supply chain is secured. By the time you're ready (though you may never be fully ready), consumers have already drifted to other brands. Because enterprise growth hinges on two points: first, quickly acquiring traffic; second, how to operate after traffic comes in. Like the two ends of a pipe: the top is the traffic inlet, as wide as possible; the bottom is user churn, as narrow as possible. We've encountered traditional brands with excellent products, doing 2 billion in sales annually with 200-300 million net profit. But their pain point is limited by traditional sales channels, weak traffic growth, almost no online operations, and inability to acquire new customers. Over time, the top pipe nearly closes while the bottom remains open, leading to a downward spiral. So new customer acquisition is always necessary because not all traffic will be retained; some will churn. Once "new water" stops coming in, no matter how you manage the "old water," it will evaporate, and you'll eventually enter a decline.
(2) Product: How to Get the Best Supply Chain?
Conversely, looking at internet brands, many do well with hit products and capture initial traffic, but fail to retain users because follow-up R&D lags and products can't iterate quickly. This is a common problem for internet people in consumer goods: they're good at traffic acquisition but neglect supply chain barriers and product details. Good supply chain companies are also smart; we can't view today's manufacturers with traditional eyes, thinking they just produce what's ordered. That's not the case. Why did NetEase Yanxuan and Jingzao emerge in China? Because a large number of high-quality supply chains urgently need transformation; they can't see the C-end and lack someone to bring users to them. So today, when we meet excellent professional supply chain companies, they evaluate your team. If they think the team is great and the product concept is good, they'll accept small orders. To get a good supply chain, you must prove your advantages and potential. They're willing to sacrifice capacity for small orders because they believe you can grow into large orders.
Building a brand is a long-term endeavor, so you must respect traditional industries. Many people come in shouting about disrupting industries, thinking incumbents are incompetent, neglecting production and idealizing channels. They only see cost reductions from supply chain reform or channel shortening, but not the tasks those removed links originally bore. Replacing any part means not just replacing cost but also function. There's no useless node that eats your margin without reason. After you replace it, who takes over its function? Who bears the cost? That's what you really need to consider.
(3) Channels: The Core is Matching; Brands Shouldn't Build Around Channels
In the past two years, there's been much talk about channel dividends, but I feel channels are just carriers; if your product is competitive, there will be a channel for you. For example, yogurt: there are many Chinese yogurt brands, but if you can make a high-quality, high-margin yogurt that meets specific group needs and satisfies channel profit demands, channels will come to you proactively. But brands shouldn't build around channels; when defining products, entrepreneurs should first find their strengths and core advantages to decide what product to make, not make products based on available channels, unless you're an expert in that product. Only by leveraging your core advantages can you make a good product. If you just have a good yogurt sales channel but know nothing about the yogurt industry, you can't succeed. The logical order is important; it can't be reversed. The core of channels is matching. For example, the lower-tier market is fine, but if a makeup brand starts by targeting fourth- and fifth-tier cities, it's hard to succeed because those users' needs haven't been cultivated yet. For instance, Baoma Huanqiugou targets maternal and baby products in lower-tier markets and can grow quickly on that channel. But if an e-cigarette brand uses it, it won't sell, not because the product or channel is bad, but because they don't match. Instead, traditional tobacco and alcohol stores are precise because people who enter are there to buy cigarettes or alcohol, not browsing. So channel selection depends on the category; some categories aren't suitable for online promotion, others aren't for offline; traffic cost is relative. Like the tobacco stores mentioned, offline traffic is precise, with about 50% conversion, much more efficient than random online ads. So when we evaluate companies, we always ask: What's your target audience profile? You must tell us the age, income structure, and location of users, so we can understand their activity range and daily consumption habits—whether they prefer Douyin or Kuaishou—to find appropriate channels for low-cost, high-quality traffic acquisition.
(4) Brand Building Requires a Comprehensive Team
Overall, building a brand requires a very comprehensive team capability; at least in successful cases we've seen, they balance traffic operations, product design, and channel expansion. Even if you have a short board at the angel round, you must fill it before Series A, or you can't succeed. Even if your marketing is excellent, if the supply chain can't keep up and the first batch of products is criticized by users, there's no second chance. You need to be familiar with the supply chain and business, know the latest processes and corresponding products, and how to produce at the lowest cost through which channels. Such entrepreneurs are rare; in China's consumer goods market, without these coordinated efforts, you can't build a brand worth over ten billion yuan. Of course, most teams aren't perfect initially; they build as they go. The key is that founders know their capability boundaries; you may lack something, but you must know what you lack and where to find it.
Consumer Technology: The Underestimated Value of Data
(1) Companies That Ignore Data Will Eventually Die
In consumer entrepreneurship, while balancing traffic operations, product design, and channel expansion, you also need a technology foundation; modern operations must be based on data analysis. At our first CEO summit in July this year, we opened with: "If it's really good, it should show in numbers." If your business model is good enough, it will be reflected in data. Data is something to focus on from day one. Not just consumer companies, but any enterprise needs to pay attention to several levels of data: 1. Cash flow data. Most companies don't die from lack of revenue or profit, but from poor cash flow management; 2. Business data. Your daily new users, user acquisition cost, ARPU, sales, costs, etc., need daily attention. From 0-1, you can rely on marketing; a good salesperson can sell your product. But they can only sell for a while; from 1-10, you need a good product; if your product isn't competitive, users will churn easily, and you can't sustain. From 10-100, you need more; without comprehensive data insight and analysis, the company can't go far. Recently, some founders told me their companies are doing well, and I asked, how do you evaluate "well"? You need quantitative data, like month-over-month and year-over-year sales growth, gross margin, repurchase rate, churn rate, etc. Many companies neglect data analysis early, thinking data is only valuable later, but I believe it can't be postponed; the earlier you focus on data, the better. If you don't structure and analyze data when the company is small, by the time you're big, you'll find all unstructured data in the backend, making it very hard to organize. How to do it early? The simplest is to export to Excel daily and use formulas to analyze, making it structured. In this process, I suggest using tools early; if capable, develop your own; most companies should use existing SaaS tools.
(2) Data is the Core Value of Consumer Tech Companies
This relates to the second sector Xinyi Capital focuses on: consumer technology, which uses new technologies to empower consumer companies. There are several types: one is technology marketing, which reduces customer acquisition costs; another is refined operations, connecting CRM, ERP, etc., to analyze daily user group changes and costs. Even offline, using technology to analyze how many times each product is picked up and sales conversion data, then linking this data with the supply chain. Conversely, for a consumer tech company, the core asset is also data; if you can integrate data from all served companies, gain industry insights from analysis, and help them with strategic planning and tactical execution, you're a good consumer tech company. The value of data depends on its thickness, not just breadth. Thickness means the number of dimensions describing a person or thing; more dimensions mean clearer positioning. If you only focus on breadth, like having purchase behavior data of 100 million people in one store without other behaviors, it's less valuable than having multi-dimensional data of 5 million people (e.g., age, income, location, purchase frequency of different products). So true big data is usually only fully accessible to large companies. Small companies need to build their databases through third-party platforms and data purchases.
Investment Philosophy: Find the Best Miners + the Best Water Sellers
(1) How to View Opportunities in Product- and Tech-Driven Companies?
For us, we're now focused on two tracks: product-related and technology-changing-consumption-scenarios. For product-driven companies, we prefer standardized, rapidly replicable products, with early promotion relying on the internet. Because pure offline small and medium formats expand slowly, requiring site-by-site selection, store opening and nurturing, and sales are hard to break physical radius; once cross-regional, offline operating costs may grow exponentially. But product-driven companies, as long as they solve traffic acquisition and supply chain issues, have no physical boundaries and can easily expand nationally. So we're more cautious about service and pure offline formats, preferring early-stage online-first products that break geographic boundaries. For tech-driven companies, helping enterprises acquire customers is always more important than saving costs. Brands are more willing to pay for directly quantifiable results; compared to cost-cutting, revenue generation is easier to gain recognition. So in consumer tech, we focus on projects that help companies solve high-cost customer acquisition problems. These two tracks are like one hand finding the best miners, the other finding the best water sellers, with cooperation and empowerment between them. Our team's capability and resource circles can integrate many things in these tracks.
(2) How to Provide Industry Empowerment?
First, offline: most investors haven't actually played in the field, but we operated Jiuyicheng for nearly 5 years, signing and operating over 70 commercial properties. We've crawled out of many pits, and these operational experiences can greatly help companies. Many categories now involve offline store opening; where to open the first store, the pace of future site selection, whether you can enter core venues—these are things we can help with, which is the core capability accumulated from Jiuyicheng over the past 5 years. Second, online: we were previously the head of Jiuding's consumer department and the founder of Jiuding VC Fund, and the core personnel of these departments are still at Jiuyicheng today. They've been doing and investing in companies, thinking about how to acquire traffic online, how to build models, how to operate after traffic comes in, and how to use new technology to empower consumer companies, reduce costs, and improve operational efficiency. So our core capability is precisely having both online and offline. For example, last year we successfully invested in the beauty brand Judydoll; Xinyi Capital was the angel investor. Offline, we helped integrate upstream supply chains, took stakes in excellent OEM factories, and completed business negotiations and due diligence. Online, we helped supplement and improve the operations team, assisting with online traffic acquisition and conversion. In the past, many people only knew we could help with site selection and obtaining offline commercial real estate resources. But shopping malls are just one of our resource platforms, a feature. Our positioning is early-stage consumer investment based on industry background, truly going to the front line to help entrepreneurs with many things. Unlike pure industrial investment, which often requires the invested project's development strategy to synergize with the investor, Xinyi Capital provides industry resources as much as possible but doesn't impose any requirements on the company's development direction; we're resource-level with industry background, management-level with financial investment. Today, in the entire new consumption field, from product improvement to efficiency enhancement, many things remain undone, but for product brands and consumer tech companies, this is actually a great opportunity.
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