Source: Jun Xiaobao (ID: junxiaobao2016)
New consumer brands come and go, but MCNs are here to stay. The reality is that new consumer brands are springing up like mushrooms, so fast that MCNs can't keep up with signing and nurturing accounts.
The so-called "client as boss" is losing its power. In traditional advertising, clients were usually dominant, but due to the changing supply-demand relationship between brands and KOLs, the dominant position of clients is gradually weakening. KOLs above the mid-tier generally have the ability to pick and choose their clients.
The speed at which a Xiaohongshu blogger can grow is actually much faster than people expect, with mechanical operations. You can randomly open the comment sections of some Xiaohongshu bloggers and almost always see "watered-down" content—similar, meaningless, and ineffective interactions like mutual praise and comments. But even such bloggers are being fought over by various new consumer brands.
Xiaohongshu officials have been using rules to restrict various nutritionless hard-sell content. These frequent changes have made bloggers, MCNs, and brands all complain bitterly, but from a long-term ecological perspective, Xiaohongshu is doing the right thing, just not in the right way.
The rise of more and more new consumer brands is, to some extent, "killing" Xiaohongshu's ecosystem. Once this ecosystem reaches the brink of collapse, the industry will fall faster than anyone else.
I believe all brands should focus on two keywords: premium and repurchase. Premium represents everything each consumer is willing to pay beyond the product itself; that is the brand. Repurchase means the true value of the brand: buying once is the product, buying twice is the brand.
Liu Qiangdong once told a joke that I think is very similar to the current entrepreneurial environment for new consumption. A Jew opened a gas station in the desert and did well. Another Jew came and opened a restaurant next door. A third Jew opened a car wash. Then countless Jews came, and after 30-50 years, it became a small city. But when Chinese do business, if you open a gas station and it does well, immediately one opens on the left, one on the right, one in front, one behind. The final result, everyone knows.
The battle of the first batch of new consumer brands has already spread offline. A few years ago, the spectacle of O2O brands in Beijing's Wangjing is now being replayed on Shanghai's Anfu Road. The density of internet-famous brands on Anfu Road is beyond imagination. Anfu Road, just a few hundred meters long, is like an offline version of Xiaohongshu. Standing at the intersection of Anfu Road and Yongkang Road, the sight of internet celebrities taking selfies is a real-life version of "Along the River During the Qingming Festival."
Among consumer goods, multiple sub-sectors have quickly entered the red ocean, such as domestic beauty, low-alcohol drinks, and perfume/fragrance. This is accompanied by continuously rising traffic costs.
Advertising agencies and brand media are flipping through Xiaohongshu every day. The prices of top bloggers are rising, and they are being snapped up by competitors. This has made accounts with fewer than 5,000 followers the primary targets. If they have good recent data and have produced one or two viral posts, they will be selected immediately, because if you don't grab them today, they might accept a competitor's promotion tomorrow.
For those bloggers, the so-called "seeding" has long been perfunctory. The routines on Xiaohongshu are too homogeneous: they start with "absolutely amazing" and say every brand is "trending." In fact, for the same category, the same fixed promotional phrases can be used for any brand.
A joke that went viral recently: if you want to create a new brand, you only need to post 5,000 notes on Xiaohongshu, 2,000 answers on Zhihu, and get into Li Jiaqi's, Viya's, or Luo Yonghao's live streams, and you're set. It sounds like a joke, but it's so real—in fact, that's exactly what people do.
The root of the decline of these new consumer brands that have grown in the past two years will be "the boss falling behind."
Besides facing more brutal competition, entrepreneurs of this batch of new consumer brands face the even harsher reality of talent attrition within their organizations. As the post-00s generation enters the workforce, they will be more mobile than the post-90s. There are fewer things that can "tie them down," and even money isn't everything. How to retain talent might be a harder problem than starting a business.
When traditional giants finally wake up, that will be the biggest crisis for new brands, not those "imitators" who are good at copying.
Some question that if it's not expensive, it's not new consumption. New brands are expensive because traffic is expensive, repurchase is low, and the greater the advantage of self-built supply chain, the higher the cost.
Are new consumer brands necessarily expensive? Naixue, at 30 yuan a cup, is listed, and Mixue Bingcheng, at 5 yuan a cup, is also about to be listed. What's the logic?
Facing an endless stream of new brands, consumers generally adopt a try-it-out attitude, which leads to a large amount of traffic being a one-off deal. To harvest more "leeks," brands must maintain consumer freshness. Reusing the supply chain and channels is a good move. For example, Zihaiguo has created a brand matrix of "Zihaiguo Products" including quick-boiled noodles "Huamian," river snail rice noodles "Chouchouluo," seasonings "Xiaoqi Kitchen," and braised cans "Guanguan." Similarly, Zhongxuegao launched the dim sum brand Lixiangguo, which also reuses the supply chain and channels built earlier at very low cost.
New consumer brands are becoming more cautious in cross-border collaborations, but partnerships with international big names and luxury brands are increasing. This shows that new brands still have absolute advantages in brand power and buzz, and it's a trend for big brands to condescend to cooperate.
New consumption is in the spotlight but walks on thin ice, while supply chain companies are enjoying a different kind of glory behind the scenes. Genki Forest ignited the spring of erythritol. The largest producer, Sanyuan Biology, saw net profit grow 130% in three years and moved from the NEEQ to IPO last year. Hyaluronic acid products haven't moistened consumers' faces but have enriched the leader Bloomage Biotechnology, which went public at 70 yuan in 2019 and has tripled its stock price at its peak this year.
Alibaba's data insights show that if people who buy new brands on Taobao more than 12 times a year are defined as "heavy susceptible population for new brands," it's about 60 million people. Their typical profile is female, living in first- and second-tier cities, post-90s, covering six young circles, with distinct consumption characteristics.
Alibaba data shows that brands入驻 Tmall saw another surge after the pandemic in 2020, exceeding 220,000 by July 2020.
220,000 brands chasing 60 million consumers—the one-year survival rate of these new brands is less than 30%, meaning on average, one in three brands doesn't survive a year.
Those new brand media buyers won't tell you that they basically can't achieve an ROI above 1. Those who can maintain above 1:1.5 are already masters.
According to some institutions, the five hottest tracks for new consumer brands that investment institutions are most interested in are: new tea drinks, new coffee, low-alcohol drinks, beef noodles, and Chinese-style pastries.
In this wave of new consumer brands, Tmall as a platform has played a key role. Few people know that the public relations definition of the "new instant coffee" track, led by brands like Satuday, was done by Tmall, not the brands. The same thing happened in many other categories. Tmall is like an invisible hand guiding the "renovation" of multiple categories.
Douyin Super Brand Day is becoming the next target for new consumer brands, as there are dividends.
Douyin has 600 million DAU. Most people only know about its interest-based distribution mechanism, but Douyin doesn't promote that its search DAU is also 400 million. There are so many precise search demands that many brands ignore.
In just one year since Douyin e-commerce started, it has converted 1/6 of its traffic into e-commerce transactions. In the next three years, you probably already know what Douyin will do.
By market value, Perfect Diary and L'Oréal are separated by 8 Proya and 10 Shanghai Jahwa. And Genki Forest is only 1/9 of Nongfu Spring and 1/40 of Coca-Cola.
The failure of seeding might be a risk new brands are facing. On one hand, more budgets are being thrown into seeding; on the other, young people are starting to "anti-seed." Some have even summarized the experience: "When many bloggers start recommending the same product, you should be careful."
The polarization of new consumer brands is becoming increasingly serious. The 20% that are willing to invest more energy and budget in brand building will do so, while the 80% still maintain a business logic, putting channel dividends and ROI first over brand building.
Poisonous chicken soup #1: The market is big enough. In fact, the market is indeed big enough, but it's not necessarily yours. Survival of the fittest is normal. The top three in a category take 80% of the market share, leaving extremely limited space for the rest.
Poisonous chicken soup #2: Don't worry about competitors, just do your best. In fact, over-ignoring competition, not seeing trends clearly, and not seeing competitors' moves can also make you lose your way.
At the Future Brand Conference organized by Xiaohongshu last month, Genki Forest founder Tang Binsen described his vision of a "future brand." "I think in the future, there will be a group of companies with only 100 people serving only 1 million people, but they can live for 100 years. I hope China will see many such focused, dedicated, small and beautiful enterprises." Indeed, the best ecosystem for China's new consumer brands is probably a group of small and beautiful brands, not a few giants.
Are you "watching" me?