---
title: "Reasons for the Rise of New Consumer Brands and Opportunities in the Offline Market"
description: "In recent years, a batch of new consumer brands in China have risen rapidly, attracting high attention. They are characterized by originating online, deeply cultivating e-commerce operations and social media, with rapid sales growth. However, as online traffic becomes increasingly expensive, many new consumer brands are re-evaluating offline channels. For these brands, achieving structural breakthroughs in offline channels amidst traditional channels dominated by giants is the core issue for their success. On December 23, New Distribution, in collaboration with Zhoupu Data, organized a salon for emerging brands..."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-01-06"
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# Reasons for the Rise of New Consumer Brands and Opportunities in the Offline Market

> In recent years, a batch of new consumer brands in China have risen rapidly, attracting high attention. They are characterized by originating online, deeply cultivating e-commerce operations and social media, with rapid sales growth. However, as online traffic becomes increasingly expensive, many new consumer brands are re-evaluating offline channels. For these brands, achieving structural breakthroughs in offline channels amidst traditional channels dominated by giants is the core issue for their success. On December 23, New Distribution, in collaboration with Zhoupu Data, organized a salon for emerging brands...

In recent years, a batch of new consumer brands in China have risen rapidly, attracting high attention. They are characterized by originating online, deeply cultivating e-commerce operations and social media, with rapid sales growth.

However, as online traffic becomes increasingly expensive, many new consumer brands are re-evaluating offline channels. For these brands, achieving structural breakthroughs in offline channels amidst traditional channels dominated by giants is the core issue for their success.

On December 23, New Distribution, in collaboration with Zhoupu Data, organized a salon for emerging brands titled "Offline Alley Warfare." The event invited executives from Unification, Tsingtao Beer, Jiangxiaobai, and other brands, as well as founders and channel heads of over 20 emerging brands, to discuss methodologies for winning the "alley warfare" in the offline market.

The following is the keynote speech by Zhao Bo, founder of New Distribution, titled "Reasons for the Rise of New Consumer Brands and Opportunities in the Offline Market."

******How Big Brands Succeed******

How do big brands succeed? In summary, there are four dimensions:

Big demand, big single product, big communication, and big distribution.

Based on these four dimensions, a conclusion can be drawn: **Big brands are the inevitable result formed under specific historical conditions.**

Why say this? Let's first look at the first dimension—big demand.

**I. Big Demand**

Let's first define what market demand is. It is not just what consumers want, but what they need and can afford. Only then can it be called market demand.

What is big demand?

The "big" here does not refer to a large and broad quantity, but **to a demand of a certain magnitude on a single level.**

For example, in the early 1990s, after solving the problem of food and clothing, people gradually had disposable income. From a survival perspective, the first need was drinking water. Many companies saw this huge market demand and launched purified water.

At that time, there were many purified water brands on the market, with severe homogenization. Most purified water manufacturers hoped to differentiate themselves by leveraging their unique advantages to survive.

Robust was the first in the industry to introduce the concept of "27-layer purification." This gave consumers the impression of being "very pure and trustworthy."

But in fact, what is "27-layer purification"? Is it a process that other purified water manufacturers cannot achieve? Certainly not; it is just a marketing communication concept.

This marketing slogan happened to align with Maslow's most basic physiological needs. In Maslow's hierarchy of needs, from the bottom up, the first basic need is physiological needs, which is a very important foundational need.

Why? In that era, people drank raw or cold water when going out, carrying cups. But when away from home, without boiled water, they had to drink raw water, leading to diarrhea and discomfort.

Robust used a very explicit keyword—"27-layer purification"—meaning "every drop of Robust water undergoes 27 layers of purification, making it truly pure water." This selling point gave consumers the impression of "very pure and trustworthy," providing a strong support point for the purity of Robust purified water.

Through this keyword, they told consumers that their needs could be met, but what was met? It was the need of 1.4 billion people for clean and safe water, a very fundamental need.

Robust and Wahaha, one based on channels and the other on brand advertising, quickly captured the Chinese people's need for clean water at that time. But for later entrants, it was already difficult to surpass these two brands with the concept of purified water. So many brands began to explore higher-level needs of consumers.

What is the next level of consumer demand for water? For example, those with relatively better material conditions want to drink better and healthier water. At this point, the market immediately introduced a second category: mineral water.

Purified water is clean and safe, but it is soft water, while mineral water has added minerals. Obviously, mineral water can supplement the body's minerals.

Kangshifu, Binglu, Jinmailang, and a host of mineral water brands seized this concept and carved out a big piece of the cake in the already saturated water market.

When purified water upgraded to mineral water, how did new entrants cut into the market?

Let's see how Nongfu Spring did it.

Nongfu Spring proposed the concept of "natural water," positioning itself as "Nongfu Spring is a little sweet." Today, Nongfu Spring sells 13 million tons a year, and clearly, Nongfu has won.

Later, Nongfu upgraded itself, proposing "We don't produce water; we are just nature's porters."

After that came Unification's Aqua, Ganten, Kunlun Mountain, and 5100, etc. Although with different price points, they introduced higher-end mineral water and rare water source concepts to meet various consumer needs.

China's 1.4 billion people share a common underlying need. Only based on such market demand can a national-level big brand be possible. Later entrants continuously segment the needs of niche markets at the upper levels of Maslow's hierarchy, which become increasingly smaller. Conversely, the more a brand satisfies the underlying needs of Maslow, the larger the market demand.

**II. Big Single Product**

When the market has huge demand, brand owners must meet the second condition for forming real market demand: people must be able to afford it.

But in the early 1990s, the consumer market was characterized by going from nothing to something, and people's disposable income was not high. This required product costs to be low enough.

What kind of product can achieve low enough production costs?

It must be mass-produced products. On one hand, large-scale procurement of raw materials, mass production, and mass distribution can squeeze production costs to the extreme, making costs low enough.

Back then, Snow Beer quickly went from the northeast to the whole country in a very short time. Through large-scale mergers and acquisitions, they transformed acquired factories, turning small brewing equipment into large equipment, and uniformly produced the same type of product nationwide, significantly reducing production costs. With a low-price strategy, they squeezed out small and medium-sized competitors and quickly captured the national market.

Snow's strategy was to produce a sufficiently low-priced product through mass production to meet the needs of 1.4 billion consumers. Based on big demand, they produced a big single product with low enough costs.

**III. Big Communication**

When a company can produce products that meet consumer needs and have low enough costs, the next step is to advertise nationwide.

In that era, the time slot after the News Broadcast and before the weather forecast was a battleground for major brands. Whoever got it became the "bid king" of CCTV, and many national brands jumped to become national consumer brands during that time.

Why? Because the huge reach of centralized media could complete one-time education of consumers.

Although the price of being the bid king was very high, often in the hundreds of millions, when spread across each consumer, the cost was extremely low.

So big single products must rely on big communication, and under big communication, big single products will inevitably appear.

Under the logic of big communication and big single products complementing each other, big distribution will emerge.

**IV. Big Distribution**

In the past, the market only had offline channels: KA channels, catering outlets, convenience stores, mom-and-pop shops, special channels, etc. Different categories had different channel focuses.

For example, planned consumer goods like shampoo and toilet paper are stock-up products, and their main battlefield is hypermarkets. But for instant consumer goods like Coca-Cola, consumers have physiological needs; if thirsty or tired, they need to drink it immediately. For brand owners, they must make it available to consumers at the first moment.

Coca-Cola had an early marketing theory called the 3A strategy: Available, Affordable, Acceptable.

The core action was to make the product available to consumers. Later, Coca-Cola upgraded the 3A strategy to the 3P strategy: **Pervasiveness, Price to value, Preference.**

**But no matter how it changes, whether it's "available" or "pervasive," it all comes down to one action: channel distribution.**

This is under specific historical conditions: big demand, big single product, big communication, and big distribution form a closed nested system. Even if the product is not good enough, if the price is low enough, market monopoly can be achieved; even if the price is not low enough, if the channel is strong enough, such as in the beer category, brand owners can also achieve maximum market occupation by seizing prime shelf space in stores.

In the classic "terminal war" between Slek and P&G, Slek proposed a channel strategy—terminal interception.

P&G's online advertising made it a household name, so Slek invested heavily offline, buying the best sales positions in terminal stores, and formulated a "four-piece set" plan: first, "terminal route," second, "profit expansion," third, "sales and advertising interaction," and fourth, "team building." This plan avoided a head-on collision with P&G.

Within a few years, Slek rose rapidly with its unique terminal channel model. In 2000, with annual sales of 2 billion yuan and a 15% market share, it took the second place in the Chinese shampoo market, creating a tripartite situation of P&G, Slek, and Unilever.

Slek carried the banner of Chinese national brands challenging multinational giants like P&G, leading a revolution of "terminal is king," and thus the alley warfare occurred.

Local shampoo brands like Hedi, Lafang, Caile, Yujie, and a large number of shampoo brands quickly emerged, creating a market situation where local brands and foreign brands competed on equal footing. So P&G, at all costs, launched 9.9 yuan Rejoice shampoo, and finally secured the top market share position in China.

So, under the premise of single model, single product, and single channel type, what is the core of doing offline?

Discover sufficiently large segmented needs, produce sufficiently low-priced products, and by occupying and monopolizing scarce resources like communication and distribution, ultimately form a super-large-scale brand.

Although offline competition is so fierce, big brands can still do well. So why do they always fail to do well online?

******Why Big Brands Fail Online******

From the internal underlying logic, many traditional big brands that do deep distribution are not that they can't do well online, but they cannot grow big online.

Coca-Cola is arguably the most widely distributed brand in China, covering at least 6 million sales points. But to this day, Coca-Cola has only about 11,000 sales representatives nationwide.

Let's do the math: if a sales rep visits 30-40 sales points a day, they can visit at most 150-200 a week. With over 11,000 people, they can directly cover at most 1.6 to 2.2 million sales points, not counting repeat visits. That means the total number of sales points Coca-Cola can directly cover is limited. So who helps distribute to the remaining sales points?

China has nearly 22,000 hypermarkets, nearly 200,000 convenience stores, and over 6 million mom-and-pop shops. With so many sales points, it's impossible for brand owners to distribute on their own. They must rely on external distributors and wholesalers to help.

Coca-Cola's distribution model is called the **101 model**. The so-called "101" means: **"1"—"one-body alliance" (treating wholesalers as part of Coca-Cola), "0"—"retail target," and "1"—"one bottle in hand, endless joy."** These 101 customers are mainly transformed from large wholesalers and former regional distribution centers.

After becoming 101 customers, wholesalers don't need to search for customers; they can "reap the benefits." Sales representatives, who are official Coca-Cola employees, take orders directly from terminals and hand them to 101 customers, who then deliver the products to each terminal customer in the shortest time according to the order.

Each Coca-Cola bottling plant has 20-30 offices, each managing dozens of 101 customers, divided by route or region, each facing hundreds of retail terminals. If there are more retail terminals in a certain area, the number of 101 customers increases accordingly.

In densely populated terminal areas, a town or county will have one 101 customer. In this way, the entire Coca-Cola system has tens of thousands of 101 customers.

These 101 customers are essentially Coca-Cola's distributors and delivery partners.

In this process, Coca-Cola sells goods to 101 customers, 101 customers sell to wholesalers and retail stores, and retail stores sell to consumers.

Not only Coca-Cola, but almost all brands have their own distribution mechanisms. Master Kong calls it "channel intensive cultivation," Tsingtao Beer calls it "micro-operation," and Jinmailang calls it the "four-in-one model." But no matter the model, these models **are essentially a value chain. What does this value chain rely on for survival? It relies on layer-by-layer price increases. What does layer-by-layer price increase rely on? It relies on the stability of the price system.**

**So, a stable price system is their lifeline.**

Therefore, offline brands are extremely sensitive to price. If distributors don't make money selling the brand's products, or if profits are unstable, distributors will definitely not be willing to sell the product well.

But selling online is about creating festivals and special promotions to win consumer favor. However, this price fluctuation has a huge impact offline. If the brand's price is unstable and the online price collapses, the interests of offline distributors are not guaranteed due to price fluctuations, and no distributors will sell for these big brands.

So, this is why big brands are so wary of online, and it's also a very important reason why big brands can't do well online: they must maintain the stability of the offline value chain's price system.

******The Logic Behind the Emergence of Innovative Brands******

Regarding the current emergence of innovative brands, I have summarized a few points.

The first is infinite shelves. Infinite shelves refer to e-commerce platforms like Tmall and Taobao. Because the cost of listing products is zero, products can be listed without limit in a sense.

What are finite shelves? They are the physical shelves in offline convenience stores, KA supermarkets, and hypermarkets. The total number of shelf positions is limited, so products cannot be listed without limit. Merchants only choose the best-selling and most profitable products.

The biggest difference between finite shelves and infinite shelves is that to get more traffic, infinite shelves require purchasing, while finite shelves require one-by-one distribution, negotiation, and placing physical products on supermarket shelves.

Infinite shelves have no listing cost issue, and e-commerce platform algorithms also allocate a certain amount of traffic to merchants. So for new brands, listing products online is definitely the first choice: low barriers, fast consumer reach, and data feedback.

Moreover, the huge online traffic also gives new brands the opportunity to touch more segmented consumer needs. These needs were previously unmet by offline retailers, but once aggregated online, they can generate considerable sales. Coupled with increased national disposable income, people begin to pursue higher-level consumption in Maslow's hierarchy: emotional consumption, addictive consumption, social consumption, and health consumption.

This emergence of diverse and intersecting needs naturally leads to a large number of new consumer brands online.

******Limitations of Innovative Brands******

While new consumer brands born online are emerging in large numbers, there are also many limitations.

**First is the issue of over-segmentation of consumer groups for new consumer brands.** We see that because online listing costs are too low, competition is also very fierce, and online categories often have excessive segmentation. These categories, due to over-segmentation, have very small offline application scenarios and small audiences. So when they go offline, they encounter problems like insufficient sales per square meter and retail terminals unwilling to list them.

In offline physical stores, a store has tens of thousands of yuan in annual rent, daily rent, utilities, and labor costs. Every shelf has a cost. Considering daily sales, every product sold must ensure sufficient turnover rate within one square meter; otherwise, it will lose money.

So terminal stores will prioritize selling big brands, best-selling brands, brands consumers recognize, and high-profit brands.

**The second issue is insufficient profit.** Most new consumer brands are OEM-produced, which leads to relatively high costs. And since they were born online, they never considered reserving profits for middlemen from the start. Once they go offline, they find insufficient channel profits. If they leave enough profit, the selling price becomes too high.

In terms of capabilities, new consumer brands follow e-commerce logic, developing e-commerce capabilities. All their marketing activities are wave-based, such as influencer live streams, Double 11, 618, or direct traffic campaigns. These wave-like promotions bring price fluctuations, and fluctuating prices cannot build a stable value chain. Without a value chain, offline cannot be done.

Conversely, if doing offline, prices must be stable, not like dancing up and down. Offline distributors who treat price as their lifeblood really cannot bear it.

******Does Online Grass-planting Work Offline?******

Does online grass-planting really work offline?

The selling logic for all offline brands is the memory model. What is the memory model? Advertise on TV, consumers remember, and then go offline to buy.

Today's shopping behavior has shifted from the memory model to a hybrid model of memory, search, recommendation, and algorithms.

For example, JD.com's search ratio is about 65%; users enter JD and directly click to search for product names. Tmall and Taobao recommend to users based on their preferences, using algorithms to create audience tags and recommend accordingly.

Back to offline, if users haven't remembered the product, it's almost impossible to get them to buy an unfamiliar product.

So for new consumer brands to succeed offline, they must make users remember the product.

The question is: does online grass-planting, like Li Jiaqi's live stream, where consumers order and experience after purchase, work?

Frankly, I am skeptical about this.

Shopping behavior triggered by influencer recommendations is called emotional consumption. For example, when scrolling Douyin and seeing a snack, the host tries it enthusiastically, and users impulsively buy a box, but after eating once or twice, they set it aside until it expires and throw it away. I believe everyone is familiar with this scenario.

Online impulsive purchases do not necessarily lead to consumption behavior. For consumers, they must have a strong need in a specific scenario, and coincidentally our product is there. Consumers use many senses to experience the product, leaving a deep and beautiful impression.

For example, where did we first see Wanglaoji? Wasn't it in hot pot restaurants?

Why hot pot restaurants? **Because the scenario, product, and consumer needs are strongly correlated. Only through such an experience can consumers possibly remember.**

So whether online grass-planting can generate offline consumption value remains to be seen.

******How Should New Consumer Brands Do Offline?******

So how should new consumer brands do offline?

Products must have consumption scenarios, where a group of people consume in a common specific time and space. With this scenario, then find the sales logic.

In that scenario, why would consumers buy our product?

Find the sales logic, then build the value chain system. Don't approach distributors right away. If you find distributors and they don't know how to sell, the product will die quickly.

Today, large-scale media communication education is already difficult. We must create strong consumer experiences and strong word-of-mouth to continuously accumulate users. Don't seek to cover the whole country at once, but focus on accumulation, repurchase, and retention models. Then deepen community operation capabilities. This is the true core capability of operation.

For example, Taishan Beer, Hubang Chili Sauce, Pop Mart, etc., are typical cases.

When Lu Wenjin, founder of Hubang Chili Sauce, was making chili sauce, he suddenly found the market impossible. Laoganma, as the mainstream chili sauce, had already seized the top resources in traditional terminal sales points, achieving 90% market share. Products more expensive than Laoganma didn't sell, and cheaper ones didn't make money. Laoganma's offline barriers were unshakable. As a new entrant, how to enter?

Lu Wenjin thought for a long time and finally found a breakthrough point in the scenario: the "food delivery scenario."

In the food delivery scenario, there is no trace of Laoganma, nor any chili sauce company nationwide. Moreover, many delivery meals need some flavor stimulation. Lu Wenjin strongly associated his product with food delivery, made small packages, and adjusted flavors to match delivery.

Clearly, with product, scenario, and consumer group matching, Hubang smoothly shifted the battlefield from direct competition with Laoganma to the food delivery channel, achieving over 300 million yuan in that channel. Today, Hubang Chili Sauce is an indispensable partner for food delivery merchants, with an unrivaled position.

This is the strong correlation between product, scenario, and consumer group, bringing a strong consumption experience and cognition. Only under such a closed-loop logic can a brand be formed. This is also what new consumer brands need to seriously consider today.

| Founder of New Distribution
Expert in FMCG industry channels, with over 400,000 words of original research articles on the FMCG industry.
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