Source: Shenran (ID: shenrancaijing) The once-hot new consumption sector is now experiencing a reshuffle. The most obvious change is that in August 2021, sales of several new consumption brands declined year-on-year, some even halved. The blame is placed on rising traffic costs and declining ROI (return on investment). Brands have to admit that money spent on online marketing can buy temporary buzz and sales, but not brand loyalty or lasting user relationships. In many categories, emerging head players have emerged, but their post-listing performance has been poor, and some once-hot tracks are cooling down. Established category leaders have also woken up and increased their defenses against new entrants. All signs indicate that the traffic-driven playbook and hit-product formula that new consumption brands once replicated at scale no longer works. In the second half of new consumption, if new brands cannot 'break out' and become the top-of-mind choice in their category among the mass consumer base, they risk being trapped in traffic, facing growth bottlenecks and profit crises. There are examples of new consumption brands escaping the traffic trap. At the National Brand Development Forum held in Shanghai on September 25, several emerging domestic brands shared their 'breakout' experiences, such as Bloomage Biotech's润百颜 (BIOHYALUX) and domestic cheese brand妙可蓝多 (Milkground). Some started with online seeding and decisively invested in brand advertising during bottleneck periods, creating hit categories; others used the window when industry giants were indecisive to focus on media channels and capture consumer mindshare. Looking back, their commonality is that they promptly escaped the 'involution' of traffic wars and price wars, pivoted to brand building, and became synonymous with domestic products in their categories. From their brand-building experience, compared to internet marketing, brand advertising media, especially elevator media, can better serve as the tipping point to ignite a brand. Some believe that the combination of offline brand advertising and online traffic advertising may be the optimal solution for brands to 'break out' and achieve leapfrog growth in the second half. Is the mass-replicated hit-product playbook no longer working? Regarding new consumption, a saying once circulated online: 'All brands are worth redoing.' The method was also summarized into a fixed formula: 5,000 Xiaohongshu posts + 2,000 Zhihu answers + Viya and Li Jiaqi livestreams = a new brand. With similar traffic tactics, almost every new consumption category accelerated crazily, producing early head brands: Perfect Diary in beauty, Winona in skincare, Heytea and Nayuki in tea drinks, Ubras and NEIWAI in underwear, and Genki Forest in sugar-free beverages. A senior brand marketing expert told Shenran that the rise of these new brands first benefited from the improvement of upstream supply chains and increased production capacity. Previously, when supply chains were immature and capacity limited, big brands controlled the supply chain. Now, new entrepreneurs can find quality production resources much more easily than before. Additionally, traditional brands' neglect of user pain points gave new brands an 'opportunity'. For example, sugar-free beverages were not a new concept, but beverage giants did not make them a promotional focus. Genki Forest successfully seized this potential opportunity, leading the sugar-free beverage trend and becoming a 'small giant' in the beverage industry. (Genki Forest leading the sugar-free beverage trend Source / Weibo) With the traffic dividend, capital swarmed in, and emerging brands began to follow a standardized playbook to mass-produce hits. As a result, traffic tactics became homogenized, with rising traffic costs and declining ROI and repurchase rates as the most obvious evidence. According to data recently released by the National Bureau of Statistics, in August this year, total retail sales of cosmetics were 29.4 billion yuan, marking the first zero growth in the same period in 10 years. Data from Jiuqian Zhongtai shows that in August this year, sales of several emerging brands in snacks, instant food, and beauty categories declined year-on-year, with one instant food brand's sales dropping as much as 55%. An e-commerce manager at an emerging skincare brand said the direct feeling is that everyone's tactics are becoming more similar, traffic costs are rising, the traffic bought with money is very limited, and converted customers are hard to retain, as competitors steal them with even higher costs. 'Even if you get big livestreamers to sell your products, with host commissions and ultra-low discounts, most of the time it's just losing money for publicity.' In fact, for new consumption brands with generally weak brand power, trying to build a brand in a livestream room is itself a paradox. Because the weaker the brand power, the more you need to use deeper discounts in the livestream to drive sales, which actually has a negative effect on brand building. Moreover, in a single livestream, the host promotes many brands, each with only a few minutes, and the weaker the brand, the less attention it gets from viewers. Furthermore, in an era of fragmented media, consumer attention is hard to capture. When most new consumption brands are doing 'micro-innovation' with similar tactics, it's even harder to stand out. For consumers, formulaic hit marketing also leads to aesthetic fatigue. An early-stage investor once told Shenran that too many new consumption brands believe in 'volume', thinking that once GMV rises, consumers will trust and be loyal to the brand, repurchase costs will drop significantly, and after dominating the category, they can convert to private domain traffic. But in reality, this story template is hard to fully realize. As internet traffic is diluted and the track becomes 'involutionary', brands that rely more on traffic are increasingly stuck in growth bottlenecks. Some successfully 'break out', others are trapped in traffic To escape 'involution', new consumption players need to think about how to become a brand that all consumers are willing to choose. The aforementioned brand marketing expert believes that in a time of severe product homogenization, a successful brand is one that becomes the first choice when consumers have a certain need, meaning a brand equals a category or a need. For example, when you want mineral water, you think of Nongfu Spring; when you want cola, you think of Coca-Cola; when you want sparkling water, Genki Forest comes to mind; when you want cheese sticks for your kids, you order Milkground. But to build such a mental 'moat' among hundreds of millions of consumers, traffic tactics have an insurmountable gap. In an interview with Matrix Partners China, Jiang Nanchun, founder of Focus Media, said that traffic advertising can solve the problem of precise distribution, 'telling consumers to buy it, when to buy, and at what price', while brand advertising is to solve the problem of 'why love this brand and how deep that love is'. He believes that brand ads that repeatedly appear in front of consumers create familiarity, and familiarity breeds trust, and trust brings a sense of security, which is difficult to establish in an internet environment where traffic is measured in seconds. A typical case is Milkground, which overtook competitors more than 10 times its size in just 3 years. Cheese is a 'foreign product', and most consumers tend to prefer imported products and international brands when making purchasing decisions. Therefore, in the domestic market, three years ago, the top five cheese brands were all foreign, with French brand Breguet holding a 30% market share. At that time, Milkground was just an emerging cheese brand. In 2015, Milkground targeted the cheese track. At that time, the cheese track had great development potential. Although there were imported products and strong international brands in the industry, there was no clear cheese brand in consumer awareness, which was a huge opportunity for Milkground. Milkground founder Chai Xiu shared at the National Brand Development Forum that Milkground first focused on product strength, putting great effort into improving cheese quality. With good products, how to market them well is also a very important issue. To effectively reach the target consumer group, they chose to cooperate with Focus Media, attracted by its core advantage—rapidly igniting the market. (Milkground's brand ad) In May 2019, an adapted version of 'Two Tigers' with the slogan 'For cheese, choose Milkground' began playing frequently on Focus Media's elevator ads, effectively reaching a wide consumer base. This was the brand's ultimate goal—to seize the blank period in consumer awareness. Through effective strategic tactics in product and brand strength, Milkground's cheese segment revenue in 2019 was 921 million yuan, up 102.2% year-on-year; in 2020, this figure exceeded 2.07 billion yuan, up 125.15% year-on-year, surpassing Breguet to become the No.1 in China's cheese industry. In consumer awareness, Milkground successfully became synonymous with the cheese category. Ulike, a new home hair removal device brand that jumped to the top of the beauty device category on Tmall during the 618 shopping festival, is also one of the 'breakers'. 'We found that internet traffic costs are getting higher and higher, and these ads are all traffic-driving ads. You invest and you get sales; if you don't, you don't. It's always 'goods looking for people',' Ulike CEO Pan Yuping admitted at the forum. Ulike later decided to escape the traffic 'trap' and invest in offline brand advertising. 'Facts have proven that offline ads make more consumers remember Ulike hair removal devices. Even if they don't buy today, when they remember and next time they need a hair removal device, they will think of Ulike.' In his view, this is the growth in brand power brought by advertising. However, many companies are still hesitant about brand advertising. Because the investment cost is relatively higher, and it focuses on brand information with weaker or no promotional elements, and the results are not as fast as online traffic investment. Some brands try it briefly and then return to the old path of chasing traffic, price wars, and sales, trapped in the cycle of traffic 'involution'. How to build a brand in the second half of new consumption? In fact, the breakout of the first wave of new consumption brands has also accumulated some effective methodologies for the industry. For example, Jiang Nanchun once summarized the 'three-stage' brand marketing: social seeding, traffic harvesting, and brand advertising. He believes that when an emerging brand's annual revenue is below 300 million yuan, it should continue to focus limited resources on social seeding, because traffic ads are still cheap at that time. When revenue reaches 500 million to 1 billion yuan, it should start gradually allocating to brand ads, with a ratio of 70% traffic ads and 30% brand ads. When revenue exceeds 1 billion yuan, it needs to split traffic ads and brand ads 50-50, because the marginal benefit of traffic ads diminishes, while brand ads can build brand power that brings its own traffic in the long run. When revenue exceeds 2 billion yuan, brand ads can account for 70%, with the remaining 30% for traffic ads, to strengthen brand awareness. For new consumption brands, exceeding 100 million yuan online is equivalent to completing initial product testing, content testing, and operational testing. And during bottleneck periods, investing in elevator ads and other means to achieve 'breakout' brand building seems to be a tacit understanding in new consumption. Bloomage Biotech's skincare brand润百颜 (BIOHYALUX), which went from online seeding to offline advertising to build brand awareness, is a typical example. A few years ago,润百颜 (BIOHYALUX) sold a hit with the new concept of 'hyaluronic acid disposable essence', enjoying a traffic dividend and being recommended by many celebrities. But at that time, skincare was still dominated by international brands, and润百颜 (BIOHYALUX) was not strong in consumer awareness. Its 'seeding' content was easily drowned out, and conversion was not good. After a while, consumers noticed that润百颜 (BIOHYALUX) began to rotate ads on elevator screens in office buildings. The strategy behind this was that the brand's research found its consumers were mostly white-collar women with certain economic strength. Based on their high-frequency scenarios and media habits, they chose to cooperate with Focus Media to conduct explosive advertising on elevator media in first- and second-tier cities' office buildings. (Bloomage Biotech Chairman and General Manager Zhao Yan shares润百颜 (BIOHYALUX)'s brand development experience) '润百颜 (BIOHYALUX) is backed by Bloomage Biotech, so it has full persuasion in product quality. Focus Media ads can effectively convey润百颜 (BIOHYALUX)'s quality information and amplify its popularity, thus enhancing consumers' brand awareness and trust in润百颜 (BIOHYALUX).' Zhao Yan shared that the offline communication also drove attention and conversion on online platforms. A new consumption brand manager told Shenran that the logic behind this is not complicated. For example, Focus Media covers over 400 million urban consumers daily, and basically reaches white-collar workers in office buildings and residents of high-rise residential buildings, who have relatively higher consumption levels. At the same time, this reach is high-frequency. For instance, you see it at least twice when going out and coming home, and possibly four times when commuting to and from the office plus lunch. This aligns with the positioning and marketing goals of most new consumption brands. In contrast, internet traffic ads' biggest apparent advantage—'precision'—is a double-edged sword. When the track becomes crowded and brands are 'involuting', all brands are competing for the traffic of precise target groups, driving prices up, and eventually making it unprofitable for everyone. Also because of 'precision', the audience reached is narrow and cannot form broad awareness consensus like brand ads. More critically, to achieve better immediate conversion from traffic, companies often match with heavy promotional activities, so the consumers reached do not form positive brand awareness. This is actually a 'selling goods mindset' under the guise of branding. In the final analysis, new consumption brands need to escape the traffic trap not by finding better traffic ads, but by building a brand that resonates deeply with consumers. In the first half of the new consumption brand war, traffic ads were the basic configuration. But in the second half, the winner will be determined by the competition in brand-building capability. The time left for new consumption brands still trapped in traffic to break out is running out. Are you 'watching' me?