---
title: "Why Big Brands Fail Online and Innovative Brands Fail Offline?"
description: "This article explores why established brands struggle with online sales due to price conflicts with offline channels, and why innovative online brands fail offline due to the differences between limited and unlimited shelf space."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-05-20"
language: "en"
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# Why Big Brands Fail Online and Innovative Brands Fail Offline?

> This article explores why established brands struggle with online sales due to price conflicts with offline channels, and why innovative online brands fail offline due to the differences between limited and unlimited shelf space.

****-01-******Why do big brands fail online?**
First, 'failing' here doesn't mean lack of capability or poor performance, but rather that when online offers discounts, offline channels complain and conflict arises, and the company often has to side with offline channels. Sales departments accuse online of disrupting the price system, while online feels wronged: without discounts, who will buy their products? Do you think it's easy to get a slot with Viya or Li Jiaqi? The boss sets growth targets for e-commerce, with all the KPIs, but doesn't allow discounts—how can they achieve them?
I think this is why e-commerce departments in most companies feel particularly aggrieved, and why companies find it so troublesome. **Online is something they must do, but they can't fully commit to it**, resulting in mediocre outcomes, neither good nor bad, or even just a decorative vase to prove existence.
But have you seriously considered why price is so important to big brands, especially those with deep distribution?
**Many seasoned salespeople understand that price is crucial: once the price system is disrupted, the market collapses, and countless brands have died because of it.**
**But the deeper reason is that the Chinese market is simply too vast and complex.** There are over 12 million physical retail outlets in China, unevenly distributed across 9.6 million square kilometers. No brand can possibly distribute its products to all these outlets on its own, let alone entrust its fate to e-commerce platforms.
Some might argue: our company's own salespeople visit stores to take orders, and distributors are just delivery partners!
That's true, but even a delivery partner needs to rent warehouses, manage vehicles, handle business registration, taxes, insurance, and salaries—all of which they must manage. When it comes to stocking up, distributors often borrow money at high interest to hoard inventory; do you think they make much profit?
Also, what about local connections? Without distributors, can you handle it? Would direct operations by the manufacturer really be more efficient than distributors?
Therefore, **brands must, based on their category characteristics and development status, find local agents in each region to handle localized marketing.**
So, the distribution system of big brands relies on distributors and wholesalers forming a united interest alliance with the brand. Brands must control prices to ensure every member of the value chain is profitable; only then will alliance partners be motivated to distribute the product.
**If prices are undermined and value chain members lose profits, the entire chain falls apart.**
It's easy to understand why price is a lifeline for brands with distribution networks.
So, when online offers discounts, offline sales jump to complain because **a single online discount might not sell much, but it can shatter the sales network that salespeople have painstakingly built over years, even destroying it.**
From an innovation perspective, this is what Christensen calls the 'innovator's dilemma':
**When facing disruptive innovation, big brands must either disrupt themselves or be disrupted by innovators.**
Of course, as incumbents, they weigh the pros and cons. For FMCG, especially impulse-buy categories like beverages, instant noodles, beer, and ham sausages, time sensitivity is high, and online delivery times are too long, so offline remains more important.
But for planned categories like shampoo, laundry detergent, and toothpaste, consumers make rational decisions and are highly price-sensitive, so they tend to seek the cheapest price online. Thus, these brands must engage online, even to the point of restructuring their distribution networks based on consumer behavior.
****-02-******Why do innovative brands fail offline?**
Since Taobao's inception, a large number of 'Taobao brands' have emerged online. But in recent years, online traffic has become increasingly expensive, and platform pressure has squeezed brand profits, so countless Taobao brands want to move offline.
But have you noticed that online brands, including Three Squirrels, that didn't start offline, have basically failed to succeed offline?
We saw Three Squirrels go public a couple of years ago, raised funds, and made numerous attempts offline—snack stores, IP collaboration stores, B2B, etc.—but still haven't seen significant improvement.
Other brands without offline DNA have almost universally failed.
Many entrepreneurs pitch to investors: 'I'll build the brand online first, create reputation, experience, and consumer influence, then go offline.'
**Then they burn capital offline, but results are often disappointing.**
Many distributors also think: if it sells well online, it will sell well offline. But **the author has talked with many distributors and received the same feedback: products that sell like hotcakes online are ignored offline.**
Why does logic that seems obvious fail in reality?
There are many reasons, but a core concept is **'limited shelf space' vs. 'unlimited shelf space'** .
This concept has been mentioned in previous articles.
**Limited shelf space:**
**Refers to the shelves in supermarkets, limited by store area, so the number of products a store can carry is finite. A small supermarket typically has 800-1,500 SKUs, while a hypermarket has 100,000-120,000.**
Retailers running physical stores incur various costs—rent, utilities, labor, management—so they focus on 'sales per square foot' (坪效). As salespeople know, this measures how much sales revenue a store's effective operating area can generate in a given time.
Thus, besides consumer demand, merchants care about product margins and popularity. With limited SKUs, each category gets very little shelf space.
Since store location is fixed, shelf space is fixed, and the customer base is limited, store owners must prioritize products that are essential, sell well, and have good margins to maximize profits.
What products meet those criteria? Exactly—those big brands that have been established over many years.
**Unlimited shelf space:**
**Refers to virtual shelves online, not constrained by physical space. These shelves are essentially code, with marginal costs so low they're negligible.**
Additionally, online traffic isn't limited by physical location; consumers can access websites from anywhere with a PC or mobile device. So **online traffic is unlimited, and unlimited traffic generates unlimited demand.**
**For e-commerce platforms, the marginal cost of listing products on unlimited shelves is low, and consumers have unlimited long-tail demand. With unlimited supply on one end and unlimited demand on the other, huge matchmaking opportunities arise.**
These hot online products cater to a small portion of the long-tail demand of online consumers.
Take the very popular luosifen (river snail rice noodles). If sold offline, a supermarket might sell very few per day—perhaps less than a tenth of instant noodle sales. But online, a short video or live stream by Li Ziqi or Viya might sell hundreds of thousands or even millions of orders.
However, note that those hundreds of thousands of orders are based on millions or tens of millions of clicks and views; the number is just a probability of transaction. Although the probability is small, the platform's massive traffic and demand are enough to support many innovative brands.
**This is the characteristic of unlimited shelf space: with unlimited traffic, unlimited products meet unlimited long-tail demand.**
But here's the problem.
These innovative brands born from the long-tail demand of large platforms face offline stores that prioritize sales per square foot, turnover rate, and essential needs for a limited customer base. The probability of transactions drops significantly. It's no wonder they don't sell well.
You might say, 'I can also offer popular mass-market products.'
But you overlook that such products have been monopolized by big brands for 10-20 years. It's not easy to carve out a new niche or price band.
Another issue: online brands' marketing tactics, logic, packaging, presentation, and pricing are all different from offline. So moving offline isn't a false proposition, but it's a completely new game with different rules.
The phenomenon we discuss today is essentially a product of specific historical circumstances and logic. **Limited shelf space competes for the best positions; unlimited shelf space competes to avoid price wars with competitors.**
**Each has its advantages and troubles, but don't blindly try to jump to the other ecological niche. If you want to go online or offline, it's crucial to deeply understand the logic and risks involved.**
| Founder of New Distribution, FMCG channel expert, with over 400,000 words of original research on FMCG industry. For communication, add WeChat. Please indicate company, position, and name when adding.
Tips for news tips: 400-2000 yuan upon publication.


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