In recent years, innovative consumer brands have been on the rise, especially between 2017 and 2019, with internet-famous hits appearing frequently and becoming wildly popular. However, an interesting phenomenon has emerged: although these brands are thriving online, they seem to be struggling offline, with almost no presence. Some might argue that these innovative consumer brands are just starting out and still have an online dividend, so there's no rush to enter offline channels. That sounds plausible, but it doesn't quite add up. Take Three Squirrels, for example, one of the earliest internet-famous brands that benefited from the rise of Taobao and has grown into a major player in the snack food sector over a considerable period. Yet, its offline performance has been lukewarm. Not long ago, Three Squirrels released its annual report, showing 2019 revenue exceeding 10 billion yuan, which is definitely a big deal in the FMCG industry. But looking closely at its offline business, the feeding stores and alliance stores brought in only 518 million yuan and 280 million yuan respectively. A 10-billion-yuan FMCG giant born online, after years of offline expansion, still hasn't established a firm foothold offline. Some innovative consumer brands are also heavily investing in offline channels, but the focus is more on national or regional modern convenience store chains and supermarkets, which, with only tens of thousands of stores, are negligible compared to the traditional 6.8 million small retail outlets. We also see many consumer brand entrepreneurs writing in their business plans that they aim to create online hits, complete consumer education, and then expand offline. But is it really that easy for online brands to enter offline channels? -01- Why Online Brands Fail Offline Let's first look at why online brands fail offline. Online business is a trinity of awareness, relationship, and delivery, while offline is more about delivery. The operating logic of online and offline is fundamentally different: 1. Product Logic Differences Online has unlimited shelf space, while offline has limited shelf space. The logic of competing with limited versus unlimited shelf space is fundamentally different. E-commerce's unlimited shelves are not constrained by physical space, and the marginal cost of listing products is almost zero, allowing for unlimited product listings. This leads to a logic where these innovative consumer brands can segment the market to the extreme, list products in infinitely segmented categories, avoid direct competition with big brands, meet consumers' niche and personalized needs, and quickly and accurately find target audiences online. This is the fundamental reason for the rise of internet-famous brands. For example, in recent years, we've seen the trend of pre-packaged local snacks like hot and sour noodles, river snail rice noodles, and hot dry noodles, which are typical niche flavors that have gone viral online. If these niche categories were to be widely distributed like instant noodles, it would be a financial disaster. Traditional retail shelves are limited; store space is finite, and the size and position of shelves are carefully calculated. Because products on shelves are static, and the people entering the store are not a precise target audience, the best approach is to place mass-market products on the limited shelves. For example, Coca-Cola, a benchmark in beverages, just needs to distribute; it sells wherever it's placed. But for online internet-famous brands, entering the market is a hurdle. Aside from entry fees, shelf space is limited. Typically, a traditional channel will only select 2-3 brands per category, and only big brands and big SKUs get a chance. If the position is already taken, you have to "squeeze" others out. Even if you get in, you face the risk of being removed. 2. Operational Logic Differences Beyond the fundamental product logic, the operational approach is also completely different. The operational logic of online business is traffic logic, building relationships with users and converting as much public traffic as possible into private traffic. Through the product's inherent traffic attributes, social media connections, and offline activities for close contact with consumers, you first acquire customers and build a fan base, then deeply engage users to drive repeat purchases, and also encourage referrals to convert new users. In short, go where the traffic is. For example, some online internet-famous brands even abandon the conventional flagship store model in the early stages. The self-heating hotpot brand Mo Xiaoxian directly uses e-commerce distribution to enter other stores and siphon traffic. Offline business, on the other hand, follows a distribution logic: layer by layer, you need to find distributors in each region, who then distribute to stores. The combination of distribution and sell-through is far more complex than online. 3. Supply Chain Logic Differences In terms of supply chain, these online internet brands typically supply nationwide from a single province as a hub. Sometimes, products leave the factory and are shipped directly to consumers via express delivery without entering a warehouse. Offline, traditional companies often have factories in multiple provinces, and some centralize products for nationwide distribution. During this process, products go through multiple transfers, such as from factory warehouse to distributor warehouse to store warehouse, involving logistics and loss issues, making supply chain management extremely complex. 4. Competition Logic Differences Finally, the competition logic differs between online and offline. Online competition is more about traffic harvesting, so small brands can easily find various carriers; as long as they bring traffic, they have a basis for survival. Offline, however, often involves direct competition. For example, AKOKO, an innovative cookie brand, started from WeChat and wanted to enter comprehensive e-commerce platforms. But because it entered late, the platform's natural traffic was almost gone, and in-site traffic costs were high and limited. So AKOKO linked off-site fragmented traffic from Douban, Zhihu, Toutiao, Weibo, etc., to Tmall through a profit-sharing model, completing transactions on its flagship store, and eventually overtook competitors to win the category's top spot in two months. But when internet brands go offline, they first face competitive pressure from channel monopolies. This is especially common in the beer industry, known as "buying stores," where most beer brands use conditions to exchange with corresponding stores to monopolize channels. Without strong products and distribution capabilities, you don't even get a chance to enter stores. -02- How Should Online Brands Approach Offline? Undoubtedly, these internet brands that have grown online are accustomed to quickly "breaking through" and "exploding," always competing with other online internet-famous brands. Suddenly moving to the offline "slow lane" dominated by traditional enterprises naturally causes some discomfort. The reasons include both internal factors within the company and external factors from the market environment. So how should these innovative brands specifically approach offline expansion? First, from the basic 4Ps of marketing, the first step is to reconstruct the product logic. Moving from online to offline requires re-understanding the offline market. Offline business is fundamentally different from online, so products naturally shouldn't be taken offline unchanged. Here, for example, online brands can upgrade products against offline competitors. On one hand, these emerging online internet-famous brands are already positioned as high-quality, aesthetically pleasing, and catering to young people's needs, so upgrading products against offline competitors is not difficult. On the other hand, the original online products are too segmented for consumer goods and consumer groups, making them unsuitable for offline, unable to achieve scale, and unprofitable. Secondly, in terms of channel penetration, these online brands first do B2C, and then, with the strong penetration of Alibaba's Retail Link and JD's Zhenbao, they can use e-commerce B2B platforms to quickly expand to offline physical stores. Then focus on modern channels like CVS and KA, and finally tackle the 6-7 million traditional retail stores. Then, don't casually talk about "dimensional reduction strikes." The fact that these traditional competitors are doing well offline proves that "what exists is reasonable." They've crossed more bridges than you've walked on roads. It's not that you can bring some insignificant impact offline and kill them. Instead, you need to first understand the logic of offline sell-through. Offline awareness costs are low, but customer acquisition costs are high, which is completely different from online sell-through logic. Moreover, offline awareness, relationships, and delivery are completely separated, leading to significant lag in feedback. Finally, it's important to find a good partner. Often, the founder and team's genes can limit these online brands' offline channel reach, and what's needed is a complementary partner. For example, the founder of a certain retail brand is a food blogger with strong internet genes and significant online influence. But when expanding offline, if they can find a partner with a background as a traditional enterprise executive to serve as a co-founder, they can fully promote entry into more offline channels. So, online and offline businesses are fundamentally different. It's inevitable that these internet brands will experience "discomfort" when entering offline. Online brands can make adjustments for offline business, but given the current market scale, achieving the same success offline as online is still a long and arduous journey.