How do new domestic brands conduct offline marketing?

"If you are good at online business, then go offline." As the online battle intensifies, the emerging consumer brands that have emerged based on e-commerce and social platforms have turned their attention to offline business, looking for new traffic and establishing omni-channels.

On the other hand, with the growing prosperity of the domestic fashion market, offline retail stores are also constantly changing their blood and introducing new local brands in an attempt to win the favor of more young consumers.

In the retail industry, online and offline have two completely different logics and strategies. Is it really easy to expand from online to offline?

01. Attacking offline with great force

In the past two years, consumer demand has been changing rapidly. The emergence of new consumer brands has not only won the favor of young people, but also become the hottest "darlings" of the capital market.

According to data released by CBNData, on the first day of Double 11 in 2020, 357 new brands ranked No. 1 in transaction volume in their sub-categories. Behind this, consumers born in the 2000s and 1990s account for half of the market.

According to incomplete statistics from New Consumption Daily, as of mid-December 2020, there were 195 investment and financing events in new consumer brands, most of which were physical consumer brands. Among them, a total of 28 companies, led by the listed Pop Mart and Perfect Diary, received large investments of more than 100 million yuan.

New brands started out on Tmall, Douyin, Kuaishou, Bilibili, and Xiaohongshu, but as the cost of online traffic became increasingly higher, the increasingly fierce competition gradually filled the gap in traffic dividends. As a result, the new consumer war, driven by capital investment, began to spread from online to offline.

First of all, the food brands that have attracted much attention from capital have not only increased new consumption channels and product sales through multi-scenario and diversified offline layout, but also enhanced the stickiness between the brand and customers.

Wang Baobao, a healthy cereal that received two consecutive rounds of investment of hundreds of millions of yuan last year, has begun to focus on offline channels since the epidemic.

According to Wang Baobao, as of the end of last year, the number of offline terminal stores had exceeded 10,000, including supermarket channels such as Hema, Yonghui, and RT-Mart, as well as O2O channels such as Tmall Local Shopping and Dingdong Maicai. The proportion of offline terminal retail sales in a single month has exceeded 40%.

The 2020 epidemic unexpectedly brought an opportunity for the entire convenience food industry to rise against the trend. As the dividends gradually faded away, new convenience food brands such as Kongke Instant Noodles and Ramen Shuo also developed offline channels.

At present, Kongke Instant Noodles has entered Ole' boutique supermarkets, Hema, Jiuguang and other large supermarkets, and has reached a strategic partnership with them. Ramen Says' products cover retail channels such as FamilyMart convenience stores and Hema, and have established forward warehouse cooperation with Ele.me, MissFresh, etc.

Santonban, a boutique instant coffee brand, not only opened its first offline store in Changsha, but also opened a store in collaboration with tea celebrity Cha Yan Yue Se, exploring new consumption scenarios through highly topical marketing events.

Santonban and Chayanyuese joint store, source: Internet

Similar to Santonban, Chali, which targets young consumers, has set up new retail stores in shopping malls in cities such as Wuhan, Changsha, and Guangzhou, creating a closed-loop space from multi-dimensional tea drinking experience to retail.

On the other hand, the company continues to expand its offline presence by deploying supermarkets such as Hema, Ole' boutique supermarkets, and Metro, and conducting combined promotions with Mars Wrigley at convenience store checkout counters.

Another major category that has entered the offline market is beauty products that place great emphasis on experience.

Perfect Diary, which was listed on the U.S. stock market only four years after its establishment, shows in the prospectus of its parent company Yatsen E-Commerce that as of the first three quarters of 2020, Perfect Diary had more than 200 offline stores, while at the end of 2019, this number was only 40.

Within 12 months from the announcement of the prospectus, Perfect Diary plans to invest 300 million yuan in the expansion of offline experience stores and joint venture factory construction, and plans to have a total of more than 600 stores by 2022.

In addition, another domestic beauty brand, Juduo, is also trying to develop offline physical channels through pop-up stores.

In the apparel industry, the underwear segment is growing rapidly, and newly emerging domestic brands are also eager to try offline channels. At the end of December last year, Bananain opened its first offline experience store in Shenzhen Yifangcheng, and achieved revenue of over 1 million yuan in the first month.

In terms of strategy, these brands generally refer to the refined online operation strategies, complete user portraits based on the consumption data accumulated online, and match more suitable differentiated products for different types of offline channels.

02. The only way from internet celebrity to brand

Yao Jing, the founder of Wang Baobao, once said that whether it is the incremental market or brand recognition, entering the offline channels is very important for Internet-native brands.

On the one hand, although the domestic Internet penetration rate is still increasing, the growth rate has slowed down significantly, and the cost of attracting online users has reached 150 to 200 yuan per person. Moreover, for consumer brands, as the supply chain improves and matures, the differentiation between products is also decreasing, which means that product homogeneity is inevitable.

When online traffic reaches its ceiling, similar brands have to invest more resources in order to seize market share. Finding new incremental markets has become a top priority.

Ramen Says, Kongke Instant Noodles and others have created new vertical categories in the cracks between traditional giants. For them, the offline market is still a blue ocean market with huge potential that has yet to be developed. And looking at the entire fast-moving consumer goods category, offline business still accounts for more than 70%.

More importantly, in the eyes of most consumers, brands that started online today do not have a high brand image and recognition. Setting up offline physical stores or supermarkets can not only improve the brand's sales channels, but also go a step further to display the brand image and build the brand.

By displaying products to consumers in a “visible and tangible” way, the interaction between the brand and consumers can be enhanced, the consumer experience can be strengthened, emotional resonance can be triggered, and consumers can feel the real existence of the brand.

Perfect Diary believes that in terms of service and experience scenarios, offline stores can complement online experiences and also attract each other. Consumers learn about product information online, go to a nearby offline store to experience the product, place an order on the mini program and pick up the product directly at the store. Conversely, they can also experience the product offline and then return to purchase online.

Perfect Diary store, photo source: Yatsen e-commerce

From a deeper perspective, these new consumer brands that have emerged online mainly target young people. Young people not only have a fresh pursuit of scene experience, but also, compared with the functional attributes of products, they pursue spiritual consumption at the level of cultural and value identification. These emerging brands naturally took advantage of the "national trend" and became the first choice of the younger generation of consumers in terms of national confidence and cultural identity.

Young people's experience needs and consumption decisions are constantly spurring more industries to seek innovation. For new consumer brands, if they want to continuously enhance their core competitiveness, they must continue to provide young consumers with rich and diverse experiences in different scenarios, and rely on innovation and culture to differentiate their brands, enhance user stickiness to the brand, get rid of the "Internet celebrity" label, and build a real brand.

In addition, since last year, the successive listings of Pop Mart and Perfect Diary have led to a listing boom for new consumer brands, and Winona's parent company Beitanni is also striving for an IPO. For these new consumer unicorns seeking to go public, their offline layout is still focused on expanding all channels to prove that their channels are not single, thereby reducing the possibility of listing risks.

Take Winona as an example. According to the prospectus of its parent company Beitanni, as of the first half of 2020, the company's online channel sales revenue accounted for 83.16%, which shows that the development of its online and offline channels is not balanced.

However, in the long run, only having online channels can easily affect consumers' recognition and repurchase rate of the brand. A single marketing channel may lead to low risk resistance of the company. Once the online traffic dividend is no longer available, the company's revenue scale may face the risk of decline.

On the other hand, traditional retail channels such as supermarkets, convenience stores, and shopping malls also have demand for new consumer brands, which can be said to be a perfect match.

Relevant industry insiders said that the choices of the new generation of consumers are no longer limited to international first-line brands. New brands use multi-channel and diversified digital marketing methods to divert traffic from online to offline, and can rely on small stores or shelf areas to attract more young consumers.

03. Offline business may not be easy to do

Although new consumer brands are ambitious, offline business is not easy to do.

As a senior "Taobao brand" among new consumer brands, Three Squirrels began to seek the offline market in 2019 and accelerated its pace in 2020. As of January 30, 2021, the number of Three Squirrels' offline alliance stores exceeded 1,000.

It is understood that currently Three Squirrels' e-commerce products and physical products still share the same channel, but the products in the e-commerce channel have more price discounts. In other words, Three Squirrels' offline competitors are not Laiyifen and Liangpin Puzi, but its own e-commerce channels.

According to its financial report, as of the third quarter of 2020, the sales revenue of all Three Squirrels' offline stores accounted for less than 10% of the total revenue, while store management fees increased by more than 45% year-on-year.

The ability to operate a retail terminal store is not something that can be learned overnight. In the retail scenario, in order to impress consumers to buy, there must be sufficiently attractive SKUs available for selection, and this tests the retailer's product selection capabilities.

In the beauty and cosmetics industry, the high costs of physical stores and the affordable positioning of domestic beauty and cosmetics will make it difficult to make profits in the short term. This is also a problem faced by all offline beauty brands.

A shopping mall investment promotion manager said that domestic beauty brands represented by Perfect Diary did not perform as well as expected after the previous round of rapid store openings. The current store opening speed has dropped a lot, and the growth rate in 2021 depends on the actual situation.

On the other hand, online platforms have unlimited shelves and unlimited stores, so online products can not only meet popular demands, but also provide larger display space for niche and personalized products such as Santonban, Chali, and Ramen Shuo.

However, the limited offline shelves provide more popular and high-frequency products. When online brands prepare to enter the offline market, they should seriously consider whether their products focusing on a certain niche area can serve the general public well, rather than the mass scenarios of a niche group of people.

In addition, when opening offline stores or entering offline channels, brands will inevitably overestimate the effect of diverting traffic from online to offline. This requires a strong brand effect and excellent user operation capabilities to integrate online and offline resources.

In fact, whether online or offline, a very obvious trend is the "dual-line" integration of consumption. While people are shopping online, they are also longing for a 24-hour convenience store downstairs. While they are skilled at ordering takeout on weekdays, they are also going shopping and checking in at popular online stores on weekends.

The boundaries between online and offline are becoming increasingly blurred. It doesn’t matter where the transaction is completed. What is important is that from online to offline, consumers’ requirements for the experience in each link are increasing.

Toshifumi Suzuki, the founder of 7-11 convenience stores, talked about the success story of 7-11 in "The Philosophy of Retail". The key factor he mentioned is that everything is user-value-oriented to form real loyal user assets.

New consumer brands were born on the Internet, are adept at "calculation", and are well versed in understanding user needs. However, if they want to complete the ecological closed loop from online to offline and truly achieve the long-term prosperity of the brand, they also need to lay a solid foundation for offline retail.

Author: New Retail Business Review

Source: New Retail Business Review