---
title: "Too Many New Brands, Not Enough Consumers"
description: "The number of new consumer brands in China is exploding, leading to intense competition and market saturation. As brands struggle to differentiate, many turn to celebrity endorsements and niche marketing, but the fundamental challenge remains: consumers have limited attention and wallets."
author: "谢康玉"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-07-01"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/too-many-new-brands-not-enough-consumers-a2d40cb4/"
markdown: "https://xinjignxiao.com/en/articles/too-many-new-brands-not-enough-consumers-a2d40cb4.md"
original_source: "https://mp.weixin.qq.com/s/RuxAs5SpGg2YoW731Kf6yQ"
translation: "https://xinjignxiao.com/zh/articles/%E6%96%B0%E5%93%81%E7%89%8C%E5%A4%AA%E5%A4%9A-%E6%B6%88%E8%B4%B9%E8%80%85%E9%83%BD%E8%A6%81%E4%B8%8D%E5%A4%9F%E7%94%A8%E4%BA%86-a2d40cb4.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/too-many-new-brands-not-enough-consumers-a2d40cb4/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Too Many New Brands, Not Enough Consumers

> The number of new consumer brands in China is exploding, leading to intense competition and market saturation. As brands struggle to differentiate, many turn to celebrity endorsements and niche marketing, but the fundamental challenge remains: consumers have limited attention and wallets.

#### **Scan the QR code in the image to register**

"**All consumer goods are worth doing again in China**" – the last time we heard something similar was during the 2017 industrial internet wave, and before that, during the mobile internet startup boom. Two years ago, the subject of this phrase shifted from the internet to consumption.

Existing tracks are too crowded, so companies create their own tracks – this was also the path many companies took during the early mobile internet startup boom. This year's Tmall 618, a major talking point was that 459 new brands surged to the top of their niche categories, compared to 360 during last year's Double 11.

At first glance, the new consumption sector seems more prosperous each year, but upon closer inspection, it's not quite so. As categories become increasingly segmented, do a proportional number of new brands enter the billion-yuan club? At least this year's Tmall 618 did not announce how many new brands exceeded 100 million yuan in transaction value.

Instead, we see some once-hot new brands being replaced.

**New brands flocking to celebrity endorsements**

Wangbaobao, which sat in the top spot for Tmall cereal for two years, was overtaken this 618 by a brand called Ouzake, a brand that had previously focused on offline supermarket channels and wasn't considered very "trendy." This brand debuted a few years earlier than Wangbaobao.

It wasn't until last year that this brand set up an e-commerce team, opened a store on Tmall, and adjusted its product design and marketing strategy accordingly. But these were not enough to turn the tide; the key turning point came in April this year.

On April 9, after the brand officially announced Xiao Zhan as its spokesperson on Weibo, store followers surged by over a million overnight, and sales broke ten million in a short time. After that, both buzz and sales crushed Wangbaobao.

Xiao Zhan's influence certainly played a big role, but some consumers also noted that Ouzake tastes better than Wangbaobao. "I bought Ouzake because of Zhan Ge, but it's really delicious." "Really, really amazing. I was going to buy to boost sales, but I was deceived by Wangbaobao before, thinking cereal wasn't tasty, but wow, it's really fragrant."

In fact, not just Ouzake, many new brands have been flocking to celebrity endorsements recently. According to New Consumption Daily, in the first and second quarters of 2021, 41 new consumer brands collaborated with 33 celebrities on endorsements.

**Behind the rush to find endorsers is the fact that the barrier to entry for new brand startups is indeed very low.**

With the support of mature domestic manufacturing, it's not difficult to imitate a product with high fidelity. Now in the instant coffee sector, there are products with very similar packaging, and the same goes for new-style bagged tea, with extremely similar flavors – peach oolong is a standard for everyone.

Brands also have a tight grip on aesthetics and gameplay, with packaging getting cuter and cuter. Browsing Xiaohongshu notes about these bagged teas, you see phrases like "too cute to take my eyes off" and "initially attracted by the looks."

When everyone is competing in cuteness, giving away cups or eco-friendly bags, and products can't form essential differences, it ultimately comes down to a few brands sharing a consumer's wallet. Moreover, many brands don't even make it to the selection stage, like Ouzake before.

Rather than spending time on product development and social media tactics, it's more direct to just get a celebrity endorsement. And the reality is that the social media dividend period has passed. The few new brands that are well-known all captured the first wave of dividends from various social media platforms.

**The moat built by "first movers" in traffic makes it hard for many to enter the market. When a certain traffic growth method becomes consensus, costs rise accordingly, making it increasingly difficult for new brands to grow.**

So, the "niche" story begins.

**The story of "niche"**

If existing tracks are too crowded, create your own track, reducing competition while holding pricing power. Platforms are also happy to contribute to the "niche" story of new brands.

Looking closely at Tmall 618's niche rankings, you'll find that many niche categories seem almost "tailor-made" for a specific new brand. Plum wine, fruit wine, soda wine – previously they were collectively called "low-alcohol wine."

A meal replacement brand called Meixianshuo, launched at the end of March last year, collaborated with Tmall to create the category term "smoothie bowl." Through this exclusive category term, it quickly grew via a full-chain incubation model of "whole-domain seeding – in-site search explosion."

**But while platforms can push brands to consumers through "niche" stories, they cannot keep fierce competition out, nor can they make consumers' wallets bigger.**

**Similarly, although the consumption field has no absolute barriers and allows for small and beautiful businesses, for investors, projects that can't grow to around 2 billion yuan in scale are hard to take public.**

But even so, new brands are striving to make their business scale sound bigger, and capital is happy to accept it because as long as there's a little chance, they can't afford to miss it.

"We originally thought the makeup market wasn't big, just 40 billion yuan. For consumer goods, markets under 100 billion yuan aren't worth betting on. But we found we miscalculated – who knew it would grow so fast in two years? So we quickly corrected our course," said an investor when discussing with 36Kr Future Consumption why they entered the consumer sector.

This institution was not originally a consumer-focused fund, paying more attention to the internet sector. The rapid rise of Perfect Diary, Florasis, and others made this institution realize the prospects of consumer goods and their misjudgment of some category sizes. Not wanting and unable to miss the next Perfect Diary, they began to intensively deploy in the consumer sector.

The reason for saying "can't miss it" is that in the internet sector where the winner takes all, head players have already emerged in various tracks, leaving fewer projects to invest in, and the later stages require more capital, making many institutions feel powerless. In contrast, the consumer sector offers relatively more investment targets.

"Brands inherently mean differentiation among consumers, so brands cannot be highly convergent. Of course, the top brands in the market have premiums, but the consumer sector doesn't block or monopolize. And platforms don't allow for small and beautiful; it's either live or die. But brands can be small and beautiful businesses, just not valuable for investment – without enough multiple space, I won't invest," an investor told 36Kr Future Consumption.

The influx of investment institutions has made the consumer sector more lively, directly pushing up valuations of consumer startups in the primary market. High valuations often come with bubbles, and multiple investors confirmed this when asked by 36Kr Future Consumption.

On the investor side, competition is becoming more intense. "Some PEs used to only invest $50 million or $100 million, but now they start moving forward into early-stage projects. Intense competition is an objective reality," an investor in early-stage projects told 36Kr Future Consumption.

**New brands turning inward**

Competition among new brands is also fierce. On one hand, the business scale corresponding to niche markets remains to be verified. Whether they can quickly extend from a single category to multiple categories, or from a single brand to a brand matrix, also needs answers, especially given such intense external competition.

Manufacturing dividends, exposure channels for new brands, etc., make it easier for new brands to emerge, but also harder for them to stand out. Lower entry barriers mean more intense competition, and homogeneous competition itself is a form of internal attrition.

Previously, buying sports products meant Nike and Adidas; now there are many niche brands. Previously, buying instant coffee meant Nestlé 3-in-1; now there are products with various processes and brewing methods.

Moreover, once a head player emerges in a niche, many similar brands quickly grow, but they all compete for the same consumers' wallets. So, the question arises: with more and more new brands, consumers may not be enough.

"Because China's supply chain is highly developed, others can quickly imitate a hit product. As long as you validate the formula, function, and appearance, a group will soon imitate. It's just a matter of whether the supply chain response cycle is three months, six months, or a year. If you get it right, you only buy yourself a little lead time," an investor said when discussing competition among brands.

Facing competition, new brands have a few methods: occupy consumer perception of a category first, extend the time for others to imitate, or do everything possible to prevent imitation.

The founder of a chocolate company told 36Kr Future Consumption that in today's world where industrial production capacity is accessible to everyone, preventing imitation is indeed unrealistic. What they can do is slow down others' imitation speed, so this company almost all its manpower and resources on product R&D, using continuous iteration to cope with competition.

Another meal replacement company signed an exclusivity agreement with its OEM factory to prevent copying by other brands. "First, we created the category and gained first-mover advantage. Combined with the exclusivity agreement with the factory, the entire product from concept design to every touchpoint with consumers forms a barrier."

"**The core difference for most consumer goods is in the brand, not the product.** " An investor said this when asked by 36Kr Future Consumption about the competitive barrier of new brands versus big brands.

In his view, although big brands can mobilize more resources (R&D, supply chain, capital advantages), they may not be good at using them. Instead, new brands understand the new generation of young Chinese consumers well and are good at reaching them in ways they like, capturing their needs. "The core is mindshare; you need to be remembered by consumers, and that's a very emotional thing."

**However, many hold the opposite view, believing that the core of a brand is still the product.**

"Many brands that have risen online, despite high sales, are not truly brands. Because once they stop marketing investment, they may disappear. A true brand, even without investment, still has relatively stable consumers," the founder of a beauty brand told 36Kr Future Consumption.

In fact, building a brand requires a long time and revolutionary innovation, which many startups lack. Sales are just the first step from trademark to brand. Only when consumers actively search and buy even after marketing stops can it be called a true brand.

 **-END-**

Source: Future Consumption APP (ID:lslb168)


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671