The Temporality of Brands In economics, a brand is defined as a customer's certain expectation. Because customers prefer certainty and dislike risk, such certain expectations increase the probability of customer choice, which is the value of a brand. Accordingly, unlike many who believe only high premiums constitute a brand, I believe that as long as a certain consumption expectation can be formed, it is a brand and has value. Brands are products of their era. The creation of a brand is both constrained and benefited by its external environment, including customer demand, production capacity, media, distribution channels, etc. In different eras, the characteristics of these external conditions differ, and the resulting brand characteristics inevitably differ. Take the early 2000s as an example:

1. At that time, China's economy was growing rapidly. Consumers' incomes were rising, and their psychological desire was to pursue a higher quality of life.

2. Production capacity lagged behind consumption power. The production capacity for high-quality goods was insufficient, manifesting as a large number of counterfeit and shoddy products flooding the market. Therefore, customers were more willing to pay a premium for certain high-quality goods.

3. Media concentration was a major feature of the communication environment. At that time, television was the absolute dominant medium.

4. Sales channels were relatively concentrated, with physical retail (chain retail) holding the main market share and growing rapidly. The main characteristics of the external environment at that time can be summarized as "one shortage + two concentrations". In such an external environment, the effective strategy for brand owners was "one high, two occupations", namely: raising premiums, occupying television media with huge advertising expenditures, occupying terminal shelves through deep distribution, while rapidly expanding production capacity. Only high premiums could support advertising expenses and deep distribution investments. At this stage, a low-margin strategy could not achieve rapid development. After 2020, China's retail gradually entered the "hard discount era." Compared with 20 years ago, the main characteristics of the external environment at this stage have undergone significant changes:

  1. Shift in customer aspirations: As economic growth slows, consumer income growth also slows, and most customers' psychological desire is for higher cost-performance consumption.
  2. Relative overcapacity: After more than two decades of development, commodity production capacity has become relatively excessive, and the problem of counterfeit and shoddy products has basically been resolved. In this case, customers' willingness to pay a premium for quality goods is relatively low.
  3. Media fragmentation: In terms of communication channels, mobile phones have become the mainstream terminal, media is highly fragmented, and consumer attention is highly fragmented.
  4. Channel fragmentation: In terms of sales channels, physical retail growth is slow, and new channels such as e-commerce, live streaming, and community group buying have gradually become mainstream, fragmenting customers' shopping scenarios. Under the background of "one overcapacity + two fragmentations," the "one high, two occupations" strategy has lost its usefulness: customers resent high premiums, there is no absolute dominant media, and there is no dominant channel to occupy.
  5. We should also note the changes in the division of labor in the industrial chain. Twenty years ago, media solved the problem of brand publicity (customer awareness), and channel terminals solved the problem of customer acquisition; the two were separate. Now, more and more channels can simultaneously solve the problems of customer awareness and customer acquisition, such as live streaming, community group buying, and hard discount stores. Live streaming e-commerce hosts can deeply introduce products to a large number of customers, so they can complete brand publicity while selling. Community group buying leaders also have the same capability. Hard discount stores offer high cost-performance and low prices, so customers are willing to spend more time understanding the products in the store, and the promotional effect of products is relatively good. In such an environment, brand manufacturers need to reformulate their brand development strategies. Four Types of Brand Strategies We divide brand strategies into four categories based on premium level and audience size:

1. Mass low-premium brands, also known as national brands. 2. Niche high-premium brands, hereinafter referred to as high-niche (high-end niche) brands. 3. Niche low-premium brands, which are the "hard discount brands" we will focus on below. 4. Mass high-premium brands. Let us discuss these four situations separately. 1. National Brands have the following main characteristics:

  1. The audience is relatively large, basically products with high demand from ordinary people.
  2. The premium is relatively low. Although these brands spend huge promotional expenses, when spread over their enormous sales volume, the brand premium is not very high. Small-capacity brands making the same product, even if they cut the brand publicity budget, find it difficult to gain a price advantage.
  3. It should be noted that national brands basically succeeded in the era of "one shortage and two concentrations" by adopting the "one high, two occupations" strategy! Without the era environment at that time, national brands would basically not have emerged. This also means that once a national brand is formed, its position is relatively stable, and new players find it difficult to shake their status. As I have said: The moat is a gift of history, and the way to consolidate the moat is to actively expand production capacity and reduce premiums, rather than strengthening the price control system. 2. High-Niche Brands. The main characteristics of niche high-premium brands are as follows:
  4. These brands serve high-end niche consumers whose consumption behavior is less affected by changes in the economic environment. Therefore, high-niche brands have relatively strong anti-cyclical capabilities.
  5. The market size is relatively small, so large manufacturers will not enter, and total production capacity will be relatively small. Therefore, such brands can enjoy higher premiums for a longer period.
  6. Due to the need to understand and serve customers more deeply, high-niche brands grow relatively slowly, requiring long-term cultivation and patience from the brand owner.
  7. In terms of communication and sales methods, since these products have relatively high premiums, they can generally afford express delivery fees. E-commerce should be the main channel, with special attention to live streaming e-commerce and private domain e-commerce, because these two channels can simultaneously solve the brand publicity problem. I believe that for small and medium brands, moving in this direction is a very good option. 3. Hard Discount Brands. The main characteristics of niche low-premium brands are as follows:
  8. Low premium, basically shipping at production cost plus production profit, without budgeting for brand publicity expenses, and manufacturers do not spend costs to solve customer awareness problems.
  9. Excellent quality and high cost-performance. From the above two points, it can be seen that the design concept of such products is highly aligned with hard discount retail channels, so I call them hard discount brand products.
  10. Limited distribution/exposure channels, resulting in relatively small sales volume. Hard discount brands face a very good development opportunity for two reasons:
  11. Hard discount channels have entered a stage of rapid development and will remain in this stage for a long period.
  12. Hard discount channels can simultaneously complete brand publicity and sales. 4. High-Premium Mass Brands. Products serving the masses should not have too high a premium. If such brands appear, national brands and hard discount brands will continuously encroach on their market share. Therefore, high-premium mass brands are difficult to sustain in the long term. It is not ruled out that some mass brands have achieved relatively high premiums under conditions of insufficient market competition. In the hard discount era of full competition, these brands should proactively adjust their strategies. Therefore, "mass high-premium" need not be discussed as a separate case. In summary, the hard discount era is not conducive to the emergence of new national brands, does not hinder the development of high-end niche brands, and is conducive to the development of hard discount brands. Key Points for Implementing Hard Discount Brand Strategies In the West, hard discount brands are mainly led by retail enterprises, so they are also called (retail enterprises') private labels. In China, in addition to retail enterprises, manufacturers, distributors, and third-party service organizations also lead the development of "low-premium, high-cost-performance" products. Major brand manufacturers can also participate by utilizing their surplus production capacity. We collectively refer to these products that conform to the hard discount concept as "hard discount brand products." The key points for developing hard discount brand products are as follows:
  13. Product design should emphasize "higher quality and ultimate cost-performance," not pursuing ultimate quality, and not budgeting for brand publicity costs.
  14. Product iteration speed should be fast. Currently, the product iteration speed in China's hard discount channels is significantly faster than in traditional channels, and product parties must adapt to this pace.
  15. The sales system should emphasize the "B2B" principle. Here, B2B refers to Boss To Boss. That is, executives with decision-making power from the brand side go to the front line to develop and serve channels, directly connect with channel executives, and make adjustments at any time based on front-line conditions. The traditional work method of grassroots sales representatives visiting channels and executives listening to reports in the office cannot adapt to the current rapid market development pace. There are some supply-demand matchmaking communities on the market (such as Baodashi's Community Forest) that put a large number of factory owners and retail channel owners in one group, conducting transactions directly in the group, which is highly efficient.
  16. In the selection of retail scenarios, attention should be paid to comprehensively using various favorable means, such as:
  1. Using live streaming e-commerce to acquire interested fans and test the market acceptance of products.
  2. Cooperating with local community group buying companies to cultivate customers in a specific region and convert express delivery into customer self-pickup to reduce logistics costs.
  3. Cooperating with hard discount stores to achieve long-term product display and exposure, continuously influencing customers. Long-term display in physical stores is very important for forming brand awareness. Summary Hard discount brands are a historic opportunity for the vast number of small and medium manufacturers. China has a large number of small and medium manufacturers with qualified production capacity, but the threshold for establishing a sales system and brand publicity system for traditional channels is too high, making it impossible for these small and medium manufacturers to build their own brands, so they can only do OEM. The rise of hard discount retail has lowered the threshold, enabling small and medium manufacturers to build their own brands with long-term value. I recently wrote a case about Yineng packaged water, which falls into this situation. Hard discount retail is a long-term trend and a historic opportunity worth seizing. Now is the right time to enter the hard discount brand space! On March 15, in Chengdu, the "Second China FMCG Hard Discount Conference" will be held, where discount retail founders, brand executives, distributor owners, traditional retail enterprises, and industry research experts will gather to focus on core hard discount topics and examine new directions, new thinking, and new opportunities in the discount era. We look forward to your arrival! On March 14, a closed-door meeting on hard discount will be held: Hard Discount Models and Operations, with one-on-one dialogues and discussions with expert teachers, sharing experiences, and discussing dividend opportunities in the hard discount era! During the three-day conference, centered on the theme "Supply Chain Revolution," in addition to the Second Hard Discount Conference, there will also be a main forum, a China FMCG Distributor Conference, more than ten sub-forums and closed-door exchange meetings, and the first major debut of the [Ultimate Supply Chain] Brand Factory Direct Sourcing Fair, which will bring together thousands of FMCG brand owners, distributors, retail transformers, and industry service providers from across the country in Chengdu for continuous brainstorming to discuss the challenges and opportunities, changes and solutions in the era of supply chain revolution. In this era of supply chain revolution, a new business era will be born. I hope every participant will still have a place in this wave, and I believe this will be a conference worth attending! For business cooperation, please contact: 🔺Scan code for ticket consultation🔺