"Online platforms keep asking me to lower prices, while offline stores are urging me to raise them," said Li Jie, co-founder of a high-end consumer goods brand. After much deliberation, at the end of last year, Li Jie decided to withdraw from a leading platform's self-operated mall and began distributing products to offline stores across the country. Within a few months, their products even reached Qinghai, with retail prices in stores tens of yuan higher than those on the official flagship store. Even so, store owners managed to get repeat purchases from loyal customers, and the store submitted restocking requests every month. Despite the good performance of offline stores, leaving the platform's self-operated mall was not an easy decision. As a brand that grew online, Li Jie felt immense pressure not only from high operational and communication costs but also from being coerced into using improper means to meet the platform's sales targets and "pit production" when unable to achieve the tens of millions in sales goals set by the platform. However, Li Jie was not alone in feeling this pressure. At the end of last year, a group of merchants around him fled the platform for similar reasons. They preferred to give up the traffic support from the self-operated mall rather than continue selling at a loss. Li Jie even decided not to participate in traditional promotional events like Double 11 and 618. "If the marketing team wants to do a Double 11 campaign, they have to come to me with a profit and loss statement. No matter how much traffic, if it loses money, it's not allowed." But at the beginning of this year, the wind suddenly changed. One day, Li Jie's operations director mentioned receiving a strange phone call from someone claiming to be a client manager from the aforementioned platform, inviting them to return to the self-operated mall, repeatedly emphasizing that "everything is negotiable." "I hung up immediately. With such a good attitude, it must be a scam," the operations director said, wary of the unusual friendliness. A few hours later, a similar call came to Li Jie. To verify its authenticity, she declined the caller's request to visit the company and instead went to the company's headquarters herself, verifying the caller's employee badge before finally feeling reassured. The client director told Li Jie that in response to the mass exodus of brand owners, their performance metrics had shifted from sales-oriented to measuring how many brands they had retained. After sincere communication with the client director, Li Jie decided to return to the platform's self-operated mall. Although they still had to bear a commission of tens of percentage points on sales, the online channel was not something they could easily abandon. However, the good performance of offline channels gave him new hope. He has already begun personally inspecting stores in various regions, planning to focus on developing the offline channel market.
The Return to Offline Li Jie's experience is a microcosm of many online brands. As online traffic becomes increasingly expensive, competition intensifies, and profits thin, these new consumer brands that grew online are turning their attention to the broader offline channels. From beauty industry stars like Perfect Diary and Florasis, to apparel brands like Banana In, Ubras, and MAIA ACTIVE, to Wang Xiao Lu, which is thriving in supermarket channels, and Babycare, which has opened 100 stores and entered over 30,000 supermarket channels... The pace of new consumer brands returning to offline stores is accelerating. But in this process, clashes in values and operational logic between proud new players and relatively traditional offline channels are inevitable. Some brands, with a strong online reputation, once looked down on well-known offline supermarket channels that came seeking cooperation. But when they saw impressive sales data from those channels, the founders had to lead their executive teams to visit the offline channel partners' headquarters one by one to express gratitude and discuss further cooperation. However, for many emerging brands, offline channels are still a relatively unfamiliar world, and newcomers often can't find their way. This spring, the Chengdu Sugar and Wine Fair, which had been suspended for a year due to the pandemic, was bustling, but many snack industry startup teams didn't know the fair had a tradition of "opening and closing on the same day." They arrived on April 12 as per official notices, only to find that the real industry exchanges had ended before the 11th. Moreover, entering offline channels means dealing with various distributors of different sizes scattered across different regions, which is a significant challenge for new brands unfamiliar with the industry's rules. Yet, this hasn't dampened the enthusiasm of new consumer brands for offline channels. According to Bai Erba, founder of Linhuiba, a retail space traffic operation service provider, this enthusiasm remained strong even during the pandemic. Consumer goods have always been seeking new traffic dividends, from live-streaming e-commerce to social e-commerce, with each trend's dividend quickly discovered and exhausted. "Why do online channel dividends like Douyin disappear so quickly? Because online traffic is often concentrated in the hands of a few oligarchs, and its value is discovered too quickly. The value discovery of offline channels is a slow process. And slowness brings new opportunities." Image source: Visual China
The Shift in Traffic No matter how good online traffic is, there comes a day when it stops growing. In his interactions with many online traffic giants, Bai Erba found that in recent years, they have all become anxious about growth, continuously digging into user numbers, user time, and conversion rates, gradually falling into involution. If platforms are so anxious, the anxiety of brands is even more self-evident. The once highly touted online precision planting strategy has now become a new source of anxiety for brand owners. The goal of brand advertising is to reach a broader audience. But under the current precision traffic strategy, traffic is often pushed within a fixed user pool. Users not yet influenced by the product are increasingly difficult to reach, and efficiency can only decline. The thirst for incremental performance and the exploration of broader markets compel new consumer brands to penetrate more diverse channels. This process of penetrating offline also gives new consumer brands the opportunity to re-understand themselves and the market. Before opening offline stores, Perfect Diary envisioned its target customers as women in their 20s. But after opening, they discovered that the majority of actual in-store buyers were over 30. In this regard, Bai Erba told TMTPost that offline channels should be a form of scenario-targeted marketing, helping brands break through original consumer circles and reach a broader audience. At the same time, through deep interaction and personal experience, it's a process of efficiently arousing interest, building emotional connections, and achieving planting. No matter how many online ads or how famous the brand, if consumers haven't tried the product and built trust, they aren't truly customers. "Hearing about and using are two completely different feelings." This is also a two-way selection between new consumer brands and offline channels. According to Qin Chuan, a commercial project investment manager in a city, on one hand, malls with different tones have already filtered out certain customer groups, and when a brand matches the mall's tone, it often leads to proportional increases in sales and brand power; on the other hand, new consumer brands often don't haggle over rent but conduct repeated and detailed research on site selection, customer profiles, and brand influence. Take the fragrance brand To Summer as an example. Currently, its stores in most parts of the country have queues every weekend. The in-store traffic is high, consumers are willing to wait, and conversion rates are high. It's reported that To Summer's offline stores are set at multiple levels, with S-level stores typically combined with ancient architecture, especially the Beijing Guozijian store, which is very representative. Although the Guozijian location isn't ideal for business, the ancient cultural architecture adds richer storytelling to the brand. Qin Chuan told TMTPost that although offline store sales can't match online, such brands have higher requirements for store tone than for sales and traffic. For this reason, many well-known new consumer brands are often fiercely competed for by local malls when opening their first store in a city. Offline channels are larger and more complex. Even though online channels have developed vigorously for years, mature and efficient, looking at the overall shipment volume of the consumer industry, offline consumption still accounts for the majority. According to the total retail sales of consumer goods data from the National Bureau of Statistics, in 2022, online physical goods sales accounted for 24.9%, the highest ever. But on the other hand, it means 75% of consumption still occurs offline. Today, channels themselves are no longer scarce resources. In this environment of full competition across multiple channels, the real challenge for brands is how to build consumer mindshare. "Consumers no longer have purchase anxiety. The core strategy for brands is to answer why consumers should buy your product," Bai Erba believes. If the past focused on competing for channel partners, then for today's brands, the competition for potential customers and management of repeat purchases are key battlegrounds across categories, with the core being the battle for consumer mindshare.
The Art of Offline New consumer brands are often well-versed in how to make users like a product online. But how to win consumers' favor in offline channels and operate stores and channels well requires starting from scratch. When first entering offline channels, many new consumer brands tend to open large stores. After all, spacious, bright, and strongly branded large stores can greatly boost brand momentum, attract media coverage, and then offer discounts to draw traffic, making the opening lively. However, for many brands with a big single-product strategy, the excitement ends there. Many brands that started online used a breakthrough big single product to tear open the market. But this strategy doesn't work in offline stores. The main reason is that the brand's SKU is not rich enough to sustain continuous product iteration. Consumers see the same product repeatedly each visit, greatly affecting repeat purchases, and the frequency of visits declines over time. However, in Bai Erba's view, the brand's private domain management also exacerbates this issue. After an initial experience or purchase in the store, the brand tries to pull users into the private domain, emphasizing that they don't need to return to the store for repeat purchases and can buy online from home. Under this operational strategy, the effect of repeat customers from the era when stores were the main purchase channel is weakened. In response, the best strategy is to use small stores to achieve lower unit traffic costs and implement more flexible store-opening strategies. "This might be the inevitable trend for offline stores in the omni-channel era," Bai Erba believes. Many internet-famous brands that open offline stores are fleeting, but fundamentally, it's not that the brand is weak or the store operation is problematic. Instead, the fleeting nature should be seen as a proactive strategy, making flexible and diverse 'motorcycle troops' and 'flash expansion' the most important offline expansion strategies in the new era. After dealing with new consumer brands extensively, Qin Chuan found that their high sensitivity to data, traffic, sales conversion rates, and customer composition often becomes an advantage in operating offline stores. He even believes that in the future, most online brands should be content companies. If the sole purpose is to sell goods, then e-commerce's overall efficiency is definitely far greater than offline. But if brands want consumers to experience more fresh content and improve brand awareness, they need good content, venues, and offline environments to accomplish this together. This is a crucial breakthrough for new consumer brands entering offline channels. However, offline stores still face online impact, with consumers possibly comparing prices in stores but making repeat purchases on Tmall, JD.com, and other online channels. Bai Erba suggests that if a store is losing money from the start, it should be adjusted promptly, not waiting to recoup costs. "An important purpose of opening a store is to drive traffic. You should pay as much attention to closing stores as to opening them." Image source: Visual China
The Shift in Costs At the beginning of e-commerce development, online platforms quickly attracted consumer attention due to price advantages over offline, often attributing this to having no stores and lower costs. However, in recent years, new consumer brands have gained new insights into costs through personal experience. Among them, the costs of offline channels are obviously easier to calculate. He Zhengren, co-founder and COO of a1, made such a comparison: the logic of online channels is to take a cut from every transaction, with each online activity requiring traffic investment; while the logic of offline is heavy and slow in the early stages, but as the brand gradually settles, overall costs will gradually decrease. Secondly, many brands that purely rely on e-commerce channels tend to have a relatively short product lifecycle, with maintaining about two years being a good result. "If you only focus on online channels, the brand's ceiling will be quite obvious," according to He Zhengren's experience, the e-commerce penetration rate for snack foods hasn't even exceeded 20%, meaning nearly 80% of sales still come from offline channels. This is due to the product characteristics of snack foods: on one hand, they have impulsive purchase characteristics. Consumers who want to eat today will make impulsive purchases, seeing is buying; on the other hand, there are five to six million various supermarket stores nationwide, with at least 3 million capable of selling snack foods, a huge market that cannot be ignored. Now, new formats are emerging offline, such as slow flash stores. In office buildings or parks in Hangzhou, the monthly rent for a mobile cart is only about 10,000-20,000 yuan, and the low price doesn't compromise marketing effectiveness, making these flexible stalls called "slow flash stores" a new path for many new consumer brands to explore offline channels. The cost of slow flash stores is also reasonable. Bai Erba once made a comparison: taking Xiaohongshu KOLs as an example, with one interaction counted as a comment, the average interaction unit price on that platform is about 8 yuan; while calculating offline channel costs as rent divided by foot traffic, the per-person experience cost for flash stores is 4.7 yuan, and for slow flash stores, it can be below 3 yuan. "Offline stores are both a sales channel and a form of brand advertising or planting," Bai Erba believes. The fundamental logic of flash stores and slow flash stores is that because brands have strong online channels and private domain capabilities, even if consumers don't buy immediately after experiencing in-store, they've already been pulled into the brand's private domain, and whether online or offline, consumers can easily make purchases. So essentially, flash stores and slow flash stores are offline businesses born from robust online channel capabilities. Many companies have even shifted advertising budgets to invest in slow flash stores. Some brands choose to lay out other channels first, then open stores flexibly; others do the opposite, using flexible store openings for low-cost trials, and after successful testing, open flagship stores. Therefore, if a brand hasn't built strong online channel capabilities, Bai Erba doesn't recommend laying out offline stores. For brands still under 100 million yuan in scale, Bai Erba suggests not being disturbed by external factors, first thoroughly mastering online channels, finishing the battles that need to be fought, and then coming offline. Besides malls, there are many low-lying areas in cities. On one hand, scenarios like office buildings, communities, parks, subways, high-speed rails, airports, cinemas, universities, and pedestrian streets are traffic pools with billion-level UV. These scattered offline traffic flows mean huge connection and acquisition costs; on the other hand, commercial real estate has always charged rent by area, but on the same street, a 100-square-meter store and a 20-square-meter store enjoy the same foot traffic, and from a traffic cost perspective, the 20-square-meter store has lower traffic costs. "This is a systemic opportunity," Bai Erba believes. This also partially explains why today's franchise brands with 10,000 stores are all small stores. Under the area-based pricing model of commercial real estate, small stores have an absolute traffic low-lying advantage, an opportunity to arbitrage with a small-area model. In this process, how to obtain traffic data that supports brand expansion offline becomes key.
Offline Feeding Back to Online When the value of offline is fully recognized, DTC (Direct to Consumer) based on store LBS becomes possible. At a1 Snack Research Institute, when members place orders on its online channel, as long as the delivery distance is within 6 kilometers, delivery can be completed within 1 hour. If there's no nearby store, users can order via the mini-program and have it delivered by courier. According to He Zhengren, the department dedicated to operating and maintaining offline channels at a1 Snack Research Institute accounts for 70% of the company's revenue. In Bai Erba's view, the integration of online and offline channels makes omni-channel customer asset management possible. Each time a channel is touched and a purchase is made, the brand can quickly calculate the value of that channel, truly achieving the situation where online and offline face the same customer group. This is also subtly changing brand operational strategies. Bai Erba believes that as business develops, every brand will pursue the "generalization" of its consumer base, which is key to user growth and brand growth. Through omni-channel marketing, connecting potential consumers, building a huge, wide-ranging user pool, and continuously operating and filtering to identify more target users. This process is both building a DTC ecosystem and establishing brand private domain awareness. Under this guidance, whether entering offline stores, supermarket channels, or investing in Douyin, WeChat ecosystem, Taobao, or Tmall, traffic costs can be calculated, forming a data-driven logic. Based on this, online and offline traffic investments can be made. For China's 40 million offline retail space traffic, a plug-and-play infrastructure is needed to make opening offline stores as simple as opening a Taobao store. In Bai Erba's view, opening a store is a non-standardized important decision that requires end-to-end digitalization of the entire industry chain to achieve calculable store-opening capabilities—on one hand, with a monthly traffic cost of 10 million, it's possible to open 100 stores in 30 cities within a month; on the other hand, based on unit experience cost and effect tracking, it can drive further growth for consumer brands. The return of new consumer brands to offline is also a reshaping of business models. New consumer brands are re-evaluating the value of online and offline channels. Of course, how to truly learn to use offline channels well is also a challenge for emerging consumer brands.