Question 1: Why are so many innovative brands emerging today? In a sense, it's because consumers, the media environment, and channels in the Chinese market have all changed rapidly. Consumption has shifted from being broad and comprehensive to being small and beautiful. At the same time, the rapid rise of e-commerce channels has given small brands the opportunity to reach consumers directly and promote products quickly. New infrastructure: The infinite shelves of e-commerce, the rapid fission of social networks, and capital-driven entrepreneurship have eliminated traditional barriers to entrepreneurship, making it easier for entrepreneurs to go from 0 to 1. New consumer groups: Generation Z, small-town youth, and the new middle class have stronger purchasing power and more diverse consumption needs, which large brands cannot quickly satisfy, leaving a window of opportunity for consumption.
Question 2: Is the market really that big? Do consumers really have that many needs? Taobao had data in 2020 that if you define people who buy new brands on Taobao more than 12 times a year as "new brand heavy susceptible people," there are about 60 million of them. Their typical profile is female, living in first- and second-tier cities, post-90s, covering six young circles, with distinct consumption characteristics. We see that the core users of a large number of new consumer brands are actually these 60 million consumers. For a new consumer brand, the main strategy is to first capture these 60 million new brand heavy susceptible people, and then find opportunities to move toward mass demand. But we also need to see another piece of data: It is said that a white-collar worker in Beijing, Shanghai, Guangzhou, and Shenzhen sees about 3,000 ads on average per day. So with content overload, getting consumers' attention is actually very difficult.
Question 3: Will new consumption really create new brands? "The new middle class will generate new demands, but they may not necessarily create new brands. Brands not only originate from category differentiation, but more importantly from the evolution of scenarios. The notable characteristics of new consumer groups are segmentation and diversity, and the overall volume is not large, so the growth space for new brands may not be very big. Only by grasping different segmented scenarios can we keep up with China's changing consumption concepts, lifestyles, and the rising young consumer groups. Only by grasping different segmented scenarios can we lock onto the consumption needs of target groups, open up new markets, and build brands with long-term vitality. Insight into and capture of consumption scenarios is what I consider the core capability of contemporary consumer goods companies." This is what Kong Shou elaborated in one of his articles about the relationship between new people, new consumption, and new brands. I think it basically answers the question of the relationship between consumption and brands.
Question 4: Is the strategy of investing in Douyin and Xiaohongshu effective for new consumer brands? Lin Sheng, the founder of Zhong Xue Gao, once shared at a meeting: The three moves for cold-starting a new consumer brand are: first, lay out 5,000 KOC reviews; second, post 2,000 Douyin videos; and finally, get Li Jiaqi and Viya on board, and then take advantage of Douyin's mid-tier influencers to expand channels. This is the famous routine for innovative brands, which was spread widely by Shen Chen from Panda on Douyin. But I think after all this, the investor's money is basically spent. Innovative brands doing traffic is essentially doing momentum. The momentum is not only for consumers to see, but more importantly for channels (other e-commerce channels or influencers) to see, and through this momentum, they gain bargaining power and shelf opportunities. If so, why do investors continue to invest? I asked an investor, and the logic given to me was: They usually invest no more than $5 million in the first round. After the product is made, they let the founder invest in online traffic to see the effect. If the ROI can reach 1, they continue to invest. If it doesn't reach 1, it means the product doesn't even have basic appeal, and they won't consider the next round. But in fact, most innovative brands' traffic investment basically cannot achieve an ROI of 1. Exceeding 1:1.15 is already very high. However, I asked several first-tier brands about their traffic investment effects, and they were basically between 1:5 and 1:7, and in good times they could reach 1:12. So, we see that most new consumer brands use traffic tactics, such as Xiaohongshu grass planting, Douyin investment, and finding KOLs, basically based on the logic of rapid harvesting and verifying whether the category is effective. When this tactic becomes a formula, it doesn't matter which new brand does it. Strictly speaking, this is not called a brand; it can only be called a new consumer category.
Question 5: How to determine whether a product truly counts as a new consumer brand If you are not a brand operator and not in it, you can only see the online excitement, but it is difficult to distinguish whether the brand is truly a brand with vitality. Actually, I have a formula that can be used as an evaluation standard: New brand = repurchase rate * premium rate * net promoter rate First, see if the brand has repurchase. If there is no repurchase, all traffic investment is meaningless; it's just non-brand pure traffic tactics. But having repurchase doesn't necessarily mean true repurchase; you also need to look at the premium rate, i.e., at what price the product is placed. If it uses ultra-low discount prices to attract consumers to repurchase, it shows the brand's user stickiness is poor. If both of these are okay, then look at the third indicator: the user's net promoter rate, which refers to what the user recommendation rate is, aside from the brand paying KOLs for referrals.
Question 6: How to build a brand in new consumption? Liang Jiangjun, in his public account, has a wonderful description of old and new brands regarding "hegemony" and "kingly way": "Traditional consumer goods follow this model: find a positioning for the brand, then saturate the market to break through consumer minds and occupy that positioning. I call this kind of brand a 'point brand' because the truly valuable asset of the brand is almost a slogan, and in communication, the brand tries every way to nail this slogan into consumers' hearts. Traditional brands believe in 'hegemony': I don't care if you like me or not, as long as I can occupy your attention, your life can only accommodate me. But this approach is becoming increasingly inefficient because 'centralized media' is dying, and all media is evolving toward 'thousands of people with thousands of faces.' Brands, especially new brands, should not妄想 to occupy consumer minds; there is no such environment or budget. The new generation of brands should no longer believe in 'hegemony' but in the 'kingly way.' Both 'hegemony' and 'kingly way' can establish a country, but the difference is: 'hegemony' can ignore the people's will, while the 'kingly way' relies on the people's will to win the world. Therefore, brand building today is not about occupying user minds, but about creating the possibility of 'being linked.' Only when users genuinely support your brand can you achieve great things. From 'occupying' to 'being linked,' the brand's tactics must change." But nothing is absolute. Earlier, I communicated with Lu Wenjin, the founder of Hubang Chili Sauce, and found that they have four distinct characteristics in brand building that are very worth learning from for other innovative brands: Strategic focus unremitting: Insist on making chili sauce, making chili sauce for takeout, focusing on chili sauce, not doing other categories, not expanding SKUs randomly. Category mind share must be first: Laoganma is the number one chili sauce, but Laoganma is vegetarian chili sauce. Hubang makes meat chili sauce and proposes a meat chili sauce strategy, aiming to be the number one in the meat chili sauce category. Brand momentum value accumulation: Persist for 5 years, do experiential marketing, and through takeout, let hundreds of millions of consumers experience it every year. Core channel completely penetrated: Do takeout, insist on takeout, only do takeout channels, and completely penetrate that channel. Mr. Lu said: Mind share ≈ market share. If your mind share is large and market share is small, then you should do channels well. If your mind share is small and market share is large, then you should do brand building well first. This logical relationship, in a sense, has not changed.
Question 7: Should new consumer brands go offline? China has 333 prefecture-level cities, 2,844 counties, and more than 41,000 townships. China has more than 20,000 KA stores, about 150,000 CVS, 6.8 million mom-and-pop stores, and about 5 million restaurants. Coca-Cola has 870,000 refrigerators and vending machines in China, Nongfu Spring has about 400,000 (2018 data), and Wahaha also has about 500,000. Currently, Master Kong has 42,000 sales representatives (SR) in China and is still expanding. Coca-Cola China's subsidiaries, Swire Coca-Cola and COFCO Coca-Cola, have about 30,000 salespeople combined. Jinmailang indirectly controls 32,000 distributor sales representatives (DSR) through software. Calculating based on each salesperson covering about 150-200 outlets normally, Coca-Cola directly controls about 3-4 million outlets, and the remaining outlets are assisted by nearly 10,000 wholesalers for distribution. P&G China has about 80 distributors. Brands like Mondelez and Pepsi generally have about 400-500 nationwide. Brands that are generally well-known have about 1,500-3,000 distributors. Brands with deep distribution like China Resources and Tsingtao Beer have about 10,000 distributors in China. If you want to go offline, you must consider a systematic issue: channel types, channel regions, which channels are direct-operated, which are distributed, which outlets are distributed, and whether it is deep distribution or collaborative distribution. This is an extremely complex issue. Without sufficient budget and professional preparation, online is still a very good channel.
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