---
title: "In the Era of Channel Convergence and Shrinking Volume, How Can Brand Owners Break Through the Dilemma of Choice?"
description: "In recent years, with the rise of discounting trends, high-quality factories skilled in cost control and efficiency improvement will encounter new market opportunities. What characteristics do such enterprises typically possess? What are their strategic considerations? On August 21, Mr. Xue Wenfa, Assistant to the Chairman and Deputy General Manager of the Marketing Center of Guangdong Yinxue Group, delivered a brilliant sharing session at the 3rd China FMCG Hard Discount Conference, themed 'In the Era of Channel Convergence and Shrinking Volume, How Can Suppliers Break Through the Dilemma of Choice?' The company has an annual turnover of 5 billion yuan and is a veritable factory/brand with manufacturing capabilities."
author: "薛文发"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-09-13"
language: "en"
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# In the Era of Channel Convergence and Shrinking Volume, How Can Brand Owners Break Through the Dilemma of Choice?

> In recent years, with the rise of discounting trends, high-quality factories skilled in cost control and efficiency improvement will encounter new market opportunities. What characteristics do such enterprises typically possess? What are their strategic considerations? On August 21, Mr. Xue Wenfa, Assistant to the Chairman and Deputy General Manager of the Marketing Center of Guangdong Yinxue Group, delivered a brilliant sharing session at the 3rd China FMCG Hard Discount Conference, themed 'In the Era of Channel Convergence and Shrinking Volume, How Can Suppliers Break Through the Dilemma of Choice?' The company has an annual turnover of 5 billion yuan and is a veritable factory/brand with manufacturing capabilities.

In recent years, with the rise of discounting trends, high-quality factories skilled in cost control and efficiency improvement will encounter new market opportunities. What characteristics do such enterprises typically possess? What are their strategic considerations? On August 21, Mr. Xue Wenfa, Assistant to the Chairman and Deputy General Manager of the Marketing Center of Guangdong Yinxue Group, delivered a brilliant sharing session at the 3rd China FMCG Hard Discount Conference, themed 'In the Era of Channel Convergence and Shrinking Volume, How Can Suppliers Break Through the Dilemma of Choice?'
The company has an annual turnover of 5 billion yuan and is a veritable factory/brand with manufacturing capabilities.
'New Distribution' has compiled and shared Mr. Xue's speech (with some excerpts). **The Realistic Dilemmas Facing the Industry** Currently, competition in the consumer market is intensifying. Channel partners are increasingly connected with consumers, and their bargaining power is growing. In contrast, brand owners and suppliers are becoming weaker. As the weaker party, Guangdong Yinxue has been actively seeking development strategies and exploring ways to survive in the fierce market competition. In China's vast market, there are some contradictory phenomena: **On one hand, consumption is becoming more rational, and price plays an increasingly important role; on the other hand, irrational behaviors such as 'fan circle culture' and blind following of trends are still prevalent.** Surveys have found that less than 5% of Chinese people can think independently, and many have problems with logic and judgment. In addition, the transformation speed of products, brands, and categories is accelerating. The construction of new brands is accompanied by suddenness and difficulty, while the influence of old brands is weakening, making it more difficult to maintain a brand over the long term. In the past, a product could remain popular for ten years, but now the product life cycle may be less than one year. Without the support of a diversified product matrix, brand maintenance and survival face great challenges. At the same time, the fragmentation of consumer demand has led to the rapid rise of many internet-famous brands, but the durability of these brands is often limited. Few of the popular brands from three years ago are still remembered today. In the context of market shrinkage, the Matthew effect is becoming more pronounced—the strong become stronger. But at the same time, the market also presents a state of equilibrium, similar to the concept of equilibrium in game theory, where each enterprise or business format can find its own positioning and survival strategy in competition. The strong have their advantages, and the weak also have their survival strategies. Ultimately, in the era of online-offline integration and shrinking volume, market competition presents a situation of mutual growth and decline, where one side's growth is often accompanied by the other's decline. In such an environment, brands and enterprises need to continuously adapt and innovate to maintain competitiveness and market position. No matter how future channel models evolve, market competition ultimately revolves around the battle for traffic, and in this process, user stickiness and scene selection are crucial. Each channel has its own characteristics, advantages, and limitations. Choosing the right scene means accurately targeting target consumers, because scenes themselves are dynamic. If user loyalty is not established, all efforts may be in vain. **The Dilemmas of Choice Faced by Brand Owners** **1. Who should we 'embrace'?** Which channels should suppliers/brand owners favor? Emerging platforms or traditional partners? Or both? **Each channel has its unique aspects, and brand owners also need to consider their own resources and capabilities.** How should resources be allocated? How should timing be controlled? How should conflicts between old and new be handled? These are all issues that brand owners/suppliers need to ponder deeply in the ever-changing market environment.
**2. Provide products with extreme cost-performance ratio.**
Many channel partners require suppliers to provide products with extreme cost-performance, which often means thin or even no profit for suppliers.
Extreme cost-performance should not merely be cost compression, but a comprehensive concept. Only when both product and operational efficiency reach the extreme can consumers experience true cost-performance.
If one simply pursues low cost, it may lead to a decline in product quality, such as the common phenomenon of reducing price and quality in e-commerce, for example, tissue paper going from wood pulp to bamboo-wood blend, from four layers to three layers, or even two layers, with low prices but no guarantee of quality.
While pursuing cost-performance, brand owners must also ensure basic product quality and profit margins to avoid falling into a vicious cycle of low quality and low price.
There are two ways to achieve extreme cost-performance:
**Either rely on uniqueness, by providing unique products that are incomparable in the market, thereby gaining pricing power;**
**Or rely on innovation, building competitive barriers, and improving operational efficiency, that is, by enhancing the level of products or services to surpass competitors.**
'Extreme cost-performance' has a certain subjectivity, and in China's vast market, it represents diverse opportunities. **Understanding the needs of target consumers and adjusting product and operational strategies accordingly is the key to achieving cost-performance advantages.**
**3. Should enterprises innovate?**
In the current fragmented market environment, brand maintenance no longer relies on a single product but is achieved through a product matrix, where the elimination of individual products is the norm. Innovation of new products requires investment costs, which complicates the balance between R&D costs and returns, greatly weakening enterprises' willingness to innovate. In FMCG, explicit innovation is generally concentrated in product taste or flavor, and such innovation is difficult to protect persistently. Once a brand innovates and launches a new flavor, competitors can quickly imitate and launch similar products. This rapid imitation makes it difficult for the original enterprise to gain sustained competitive advantage from innovation, thereby weakening the incentive for innovation. According to a qualitative analysis of a quantitative model of enterprise innovation game, enterprises in Zone C have the highest probability of taking relevant actions, that is, large enterprises innovate and small enterprises imitate, which is consistent with the result of the 'pig game' (a game theory model). In Zone D, due to low innovation returns, enterprises have no incentive to innovate; in Zone A, due to huge innovation returns, relevant enterprises will actively innovate; in Zone B, there will be an abnormal situation where small enterprises innovate and large enterprises imitate. The game theory model is based on three major assumptions and some restrictive conditions, but the reality is much more complex due to its unknowability and uncertainty, which is usually related to factors such as the enterprise's resource capabilities, the founder's personality, and market positioning, which go beyond the scope of traditional game theory. The attractiveness of the market lies in its uncertainty. Different enterprise resources, leadership insight, and decision-making capabilities work together to create diverse market dynamics. **This diversity is the main reason for the variability and opportunities in market operations, and it is also a general rule that enterprises need to consider when formulating innovation strategies.**
**4. Maintenance of the price system under price wars.**
When brand owners/suppliers cooperate with hard discounters, they face the risk of the price system collapsing. Once this happens, the interests of existing customers will be damaged, channel partners will successively sell off products, and products may face price breaking through the bottom under market impact.
If terminal retail profits are not guaranteed, they will also refuse to sell, leading to the premature end of the product life cycle.
From the consumer's perspective, facing the excessive competition among channel partners with lowest-price promotions and product homogenization, they also fall into a dilemma of traffic choice, and price stickiness is greatly reduced. Therefore, channel partners must deeply consider: **How will consumers choose? Why do they choose? What is the basis for their choice?**
**Guangdong Yinxue Group's Response and Attempts** As a soft drink manufacturer, Guangdong Yinxue Group has adopted corresponding strategies and implemented some attempts in response to environmental challenges. **1. Matrix strategy for channels, products, brands, and resources.**
Guangdong Yinxue Group was founded with production and R&D as its core. After 23 years of development, it has 18 production lines, an annual beverage output of 500,000 tons, more than 10 patents, 19 unique processes, and over 50,000 mature formulas.
Since its establishment in 2001, Guangdong Yinxue Group has been committed to formulating different strategies based on the characteristics of different channels. Through six dimensions—**product characteristics, core categories, quality standards, pricing strategies, brand ownership, and cooperation methods**—it makes targeted and effective strategic responses to meet channel requirements and cope with market changes and challenges.
To support the company's matrix strategy, Guangdong Yinxue Group has continuously built four major support systems:
**In terms of product matrix,** it has reserved more than 200 products covering 6 major categories. By the end of 2024, the company will achieve the capability to produce all categories of soft drinks;
**In terms of R&D and innovation capability,** Guangdong Yinxue relies on the foundation of 50,000+ mature beverage formulas, 10+ patents, and 19 unique production processes. Through more than 20 years of customer cooperation experience and information mechanisms, and using multi-dimensional and multi-channel research and demand collision, it has cross-fertilized and nurtured many innovative reserves;
**In terms of brand matrix support,** Guangdong Yinxue Group has always adopted a 1+1+N independent brand strategy. Each sub-brand operates independently, maintaining its own brand tone to better adapt to the needs of different specific channels. These brands may be Yinxue's own brands, or channel-exclusive brands under Yinxue, or customized products for channel partners, or co-developed new brands.
**In addition, Guangdong Yinxue Group's more than 20 years of cooperation experience and knowledge with numerous brand owners is also indispensable soft support for the matrix strategy, sufficient to adapt to market changes and channel needs.**
**2. Provide products with extreme cost-performance.** **First, continue to innovate; second, build innovation barriers; and finally, cooperate with channel partners to form a certain influence from point to surface.** In terms of own brand development, Guangdong Yinxue Group will reach consensus with partners, conduct effective docking and cost accounting, to ensure the market competitiveness of products. For example, the launched own brand **'Lv Song Mang'** (a mango product) provides extreme cost-performance products in this way, meeting consumers' high-quality requirements. For channel partners, Guangdong Yinxue Group focuses on R&D and production, ensuring product quality and stable supply, and has a rapid feedback mechanism to promptly understand consumer needs and market dynamics. **3. Targeted differentiated empowerment and cooperation to avoid price wars.**
For suppliers, price wars are extremely painful. **The root cause of price wars is product homogenization.**
In the short term, price wars may attract traffic, but if traffic cannot be converted into customer loyalty, it will eventually be lost, leading to a waste of capital.
The ultimate goal of price wars is often market monopoly, but in China, monopolistic operations are unrealistic and not recommended.
The key to avoiding price wars is to achieve product or service differentiation. Although challenging, differentiation is an effective strategy to avoid price wars, and attention should be paid to value differentiation.
It is worth noting that differentiation is not static; it changes over time and with market changes. **Therefore, enterprises need to continuously innovate and adjust to maintain the uniqueness and competitiveness of their products or services.**
If today's differentiation advantage cannot be superimposed and innovated tomorrow, consumers will quickly become tired, leading to the rapid loss of differentiation value. Therefore, to achieve sustained differentiation, enterprises must possess the capability for continuous innovation.
For platform or chain enterprises, own brand development is the only way to achieve differentiation. However, for enterprises with sales scale not exceeding 3 billion yuan, systematically building own brands is relatively difficult.
The development of own brands typically goes through four stages: **the profit-oriented commodity stage, the bestseller stage focusing on stickiness, the differentiation stage of building advantageous or unique categories, and the brand asset stage with brand loyalty.**
True brand building is not just about products and trademarks; it involves having a group of loyal customers who can recognize and support the brand across all channels. Only when a brand can operate across all channels and leverage its influence can we call it a successful own brand.
**Guangdong Yinxue Group is willing and capable of engaging in long-term cooperation with enterprises committed to developing own brands, and can develop targeted products for consumers in different channels. By using 'self-owned' or 'own brand' methods to achieve differentiation, it not only avoids channel price wars but also protects the interests of channel customers.**

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