Click the image above for details In recent years, the rise of innovative consumer brands has been evident to many. With capital support, e-commerce hype, user discussions, and cutting-edge innovation, many startup brands have become focal points in the industry. New Distribution has previously reported on dozens of brands, and we firmly believe that as long as there is 'innovation,' it deserves to be reported and seen by more people in the industry. Whether it's learning among peers or facilitating upstream and downstream cooperation, it is of great value and significance. But this does not mean these companies hold absolute superiority. On the contrary, many times these innovative consumer brands, under the spotlight, are not as glamorous in actual operations as they appear. In the internet circle, industry insiders often use a 'three-stage' approach to describe business operations: 0 to 1, 1 to 10, and 10 to 100. In my understanding, the core element of 0 to 1 is innovation, whether it's category innovation, product innovation, or scenario innovation. As long as an entrepreneur can innovate at a certain point, meet new consumer demands, and pinpoint a pain point, completing the 0 to 1 phase is not particularly difficult. Many innovative consumer brands can complete the 0 to 1 phase in as little as one year or as long as three years. With stable supply, mature products, and a fixed group of users, they can achieve a scale of 100 million yuan. But when entering the 1 to 10 phase, that is, between 100 million and 1 billion yuan, many innovative consumer brands basically stagnate here. It's not that the product itself is bad, nor is the marketing poorly done, but in the food sector, the offline market is the real market, and offline is a tough bone to chew. If you only make a single product, online sales of 100 million to 500 million yuan basically make you a top brand in the category, with about 50% of the market space consumed. To go from 500 million to 1 billion, going offline is an inevitable choice. But when truly stepping into the offline world, you realize that online and offline are completely different business ecosystems, and market expansion is frequently hindered. -01- Innovative consumer brands are completely confused once they go offline During this period, while preparing for the China FMCG Conference at the end of August, I invited guest speakers and had exchanges with several friends from innovative brands. During this process, I discovered that many innovative consumer brands are very skilled online, but once they go offline, they are completely confused. Brands with abundant resources can quickly enter chain retail channels like Hema, Yonghui, Walmart, and FamilyMart; brands with fewer resources, or entrepreneurs without any offline experience, may not even know how to cooperate with Hema or Yonghui, cannot find the suppliers behind them, and do not know how to enter the market. For innovative consumer brands that are 'confused' about offline, they recruit sales directors to expand offline, but often they leave within two months. Those who don't understand sales directly poach sales executives from leading brands as partners. But the logic of new brands differs vastly from well-known brands; backgrounds and resources are different, and they often part ways due to incompatibility. In the end, if they can't handle offline, they return to online, and to break through the ceiling of a single category, they start extending product lines and continue to circle online. Although this is also a path, ultimately, they still need to go offline. In the food and beverage sector, entrepreneurship cannot avoid offline. Why does this problem occur? I believe the core is cognitive bias. -02- Lack of reverence for the offline market What is cognitive bias? Recently, New Distribution interviewed Mr. Zhou Weiping, founder of a1 Snack Research Institute, and had an in-depth exchange about internet-famous brands going offline. As someone with 20 years of experience in traditional food, he founded the innovative consumer brand a1 Snack Research Institute in 2016. I think his answers and understanding can provide some inspiration. Mr. Zhou said, 'We can see that many entrepreneurs of these innovative consumer brands come from internet backgrounds, and compared to traditional business, they often feel 'superior' at heart. I am more advanced, I am revolutionizing and disrupting you. With this mindset, in their eyes, many traditional offline distributors are very low-level, doing the work of moving goods.' Arrogant, thinking that being top 1 on the online list means success, and naturally, they can do well offline. But in reality, offline is a completely different business ecosystem with many rules. For example, pricing, specifications, and packaging. Also, they fail to fully consider the gross margin space for channel partners, so distributors are unwilling to cooperate, and so on. This is essentially a lack of reverence for the offline market; that's the first problem. The second problem is not truly going to the frontline to feel the market's temperature. Their understanding of the market and demand is limited to their immediate circle. If friends around them use iPhones, they think all Chinese people use iPhones; if friends around them eat healthy meals, they think all Chinese people are on diets. We have been talking about consumption upgrading, and later proposed consumption stratification. Indeed, today your product sells well in Hema, but when placed in a neighboring traditional supermarket, it barely moves. The market we face is not a single market but a diverse, stratified one. Behind each channel is a consumption ecosystem, and behind each city is also a consumption ecosystem. Consumption in first- and second-tier cities is completely different from that in third- and fourth-tier cities. Never use our personal cognition to understand the entire market. The third problem is organizational matching. Mr. Zhou frankly stated that there are many people with internet genes, but few with offline capabilities. If such people are not present early on, the company lacks offline genes, and later recruits often change frequently and cannot stay. Because the entire company's resources are given to online, offline finds it hard to get resources. Without resources, there are no guns and ammunition, naturally no good performance, and they gradually become marginalized. Not understanding the offline market, lacking reverence, and recruiting people without resources—this is the current predicament for many innovative consumer brands entering offline. -03- Be a 'honest person' and return to the 4Ps themselves As someone from a traditional FMCG background, from the beginning of my career, I was instilled with product, price, channel, and promotion—whenever discussing the market, 4Ps are mentioned. In contrast, current innovative consumer brands, in the internet survival soil, talk about operations, traffic, users, conversion, and so on. There's nothing wrong with that; talking about these online is natural. But to gain more business, when a brand wants to go offline, please follow the offline rules. Offline physical business is not on the internet; it's not that high-end. Be a 'honest person,' cultivate every market, cultivate every channel, and treat every distributor partner well. 1. 'Universal' products If we talk about the product itself, this is the strength of innovative consumer brands, and there's nothing to nitpick. The match between product and consumer demand is fine. But besides demand, 'price' is a key indicator offline. Why? Online, you can precisely reach target consumers through the internet, not only those with demand but also those with purchasing power. However, offline, facing a broader market, you often cannot precisely reach consumers. The most appropriate way to measure purchasing power is the industry average. Take a bottle of sparkling water as an example: the mainstream price is 5 yuan. If your product is better, regardless of brand premium, selling at 6 or 7 yuan is understandable, but if you sell at 10 or 12 yuan, sorry, even if you praise your product to the skies, most consumers will leave you. From another dimension, the core carrier of the offline market is static shelves. Unlike the internet, where you can convey why your product is good through text, images, videos, and other forms, offline static shelves rely only on the product's outer packaging, and your brand is unknown. To gain more business in the offline market, lowering the price is the most critical thing. Of course, returning to the positioning of innovative consumer brands, if your product is meant to satisfy a small group of high-net-worth individuals, it's perfectly fine to rely on online e-commerce or one or two offline scenarios. What you want matters. But if you want to grow from 500 million to 1 billion, relying on a single product to satisfy a small group is difficult. In the words of a1 Snack Research Institute's Mr. Zhou, 'The pyramid of price and scale is always there. Every yuan you increase, your consumer group shrinks; every yuan you decrease, your consumer group expands. You need to be clear about which market you want to fight in!' 2. 'Respect' channels Online, innovative consumer brands can directly connect with consumers, communicate and dialogue with them, and choose matching platforms based on consumer insights. Therefore, online, we talk most about 'operations,' and the object of operations is consumers. But offline, in most cases, except for self-built retail, FMCG brands find it difficult to have direct contact with consumers, let alone two-way communication. Offline, the most important step to place products closest to consumers through channels is 'product distribution.' How to convince retail stores to stock your product? Many entrepreneurs might think, 'I'm an internet-famous brand, so popular that even Hema Fresh didn't charge me a barcode fee. You, a 500-square-meter community supermarket, are asking for display fees and complaining about insufficient gross margin...' Sorry, for a community supermarket owner, even if you are the biggest internet-famous brand, as long as you're not Coca-Cola, the initiative is always with me. Convincing retail stores to stock your product is not as simple as being an internet-famous brand with a good product. Reasonable profit is the basic threshold, and good relationships are also key. Offline, a product goes from distributors to sub-distributors to retail stores and finally to consumers. This chain has been through 30 years of baptism; believe that existence is reasonable. Respect offline business rules, give distributors reasonable profit, describe market operation tactics, and let channel partners sell your products to more places. 3. Understand 'sell-through' Respecting channels solves the problem of distribution and store entry. Understanding sell-through solves the problem of being bought by consumers after entering the store. Why would consumers buy your product instead of others'? You say your quality is better? But how do consumers know? You say you're top 1 online, with planted ads on Xiaohongshu and Douyin. But sorry, according to the funnel model: first, consumers may not remember; second, even if they remember, in an ordinary 150-square-meter community supermarket with four or five shelves and 1,500 SKUs, consumers may not see it; third, even if they see it, your competitors, not just same-category but possibly different-category, are on discount or have small pendants attached, attracting consumers away. We have always said that FMCG attributes are 'homogeneous, low-involvement, and impulse consumption.' Offline, the product is basic but not the only factor. With this mindset, let's look at 'sell-through.' As internet entrepreneurs, you are very focused on ROI and the unity of brand and effect. How much you invest and how much you recoup is immediately visible, which is common online. But offline, if you invest 100,000 yuan today, you might not see a single ripple, and short-term effects are invisible. At this point, do you invest or not? Investing might still yield no ripple, but not investing definitely yields no sales. This tests one's ability to manage the market. For a new product in a regional market, sell-through often requires 'invisible' upfront investments: end-cap displays, cut-case displays, poster postings, tasting experiences, bottle labels... Offline sell-through is essentially not about how good the product's selling points are or how well they match the current consumption scenario, but about how to attract consumers, make them notice you, and make them feel they need you at that moment. The sell-through methods on static shelves offline are completely different from online. Back to the theme: for an innovative consumer brand, when you have completed 0 to 1 and start considering offline, please plan offline with reverence. Go out and look at community convenience stores, wholesale markets, and supermarkets in third- and fourth-tier cities to see what the real market is like!