Internet celebrity brands in 2020: breaking the circle, becoming popular, and facing challenges

In 2020, from Perfect Diary in the beauty industry, to Yuanqi Forest in the soft drink industry, to Pop Mart in the trendy toy industry, we have witnessed many Internet celebrity brands "breaking the circle". They became popular under the same "explosive product logic" and have undoubtedly become the biggest winners in the new consumption era.

But the glory is only temporary after all. “From zero to one” can only be considered as the first stage. The next stage is the key to determining whether these brands can be “long-lasting”.

1. A hundred schools of thought contended and flourished everywhere

The beginning of 2020 was not good. Under the shadow of the epidemic, many small and medium-sized enterprises went bankrupt and closed down due to embarrassing economic pressure.

But at the same time, the "stay-at-home economy" boom brought about by the epidemic and the rise of live-streaming e-commerce have also allowed a number of Internet celebrity brands to "break the circle" and become popular.

1. Food track

The first to experience a breakthrough was the "fast food track" in the food field.

In May, the self-heating hotpot brands "Zihaiguo" and "Mo Xiaoxian" completed a B round of financing of more than 100 million yuan and a A round of financing of tens of millions of yuan respectively.

Both brands started online and only opened up offline channels after 2018, so the focus after financing will continue to be on offline. According to Wang Zhengqi, the founder of Mo Xiaoxian, this round of financing will be mainly used for offline channel expansion, optimization of the entire industrial chain, brand building and other aspects.

As an Internet brand, the internet celebrity hot and sour noodle "Shizuoren" prioritizes offline as its main channel. In the early days of its establishment, Shizuoren chose to enter more than 80,000 offline channels such as supermarkets, convenience stores, and new retail. The strategy of prioritizing offline efforts has won Shizuoren a channel advantage. On May 9, Shizuoren completed a round A financing of tens of millions of yuan.

"Mantid Finance" concluded that another key word in the food industry is "health".

Among them, there is not only the healthy food brand Wang Baobao that focuses on "low calories, filling and delicious", but also the sugar-free sparkling water brand Yuanqi Forest that promotes "0 sugar, 0 calories, 0 fat".

"Wang Baobao", which chose to enter the food field from the cereal category, has developed rapidly. In addition to covering multiple new media channels such as Bilibili, Xiaohongshu, and Xiachufang, it has also been strongly recommended by many new generation stars such as Zhou Shen and Ouyang Nana. On December 2, Wang Baobao completed a C round of financing worth hundreds of millions of yuan led by Matrix Partners China.

As for Yuanqi Forest, following last year’s sugar-free sparkling water, this year’s new product milk tea has once again become a “net celebrity drink”. After the brand received 150 million yuan in strategic financing in October 2019, the company's valuation reached 3.75 billion yuan. In July this year, it was revealed that Yuanqi Forest was about to complete its latest round of financing, and its post-investment valuation was expected to soar to 14 billion yuan.

In addition, other brands worth paying attention to in the food sector include "Santonban" and "Zhong Xuegao".

On September 2, Santonban, a coffee shop dedicated to providing consumers with more everyday boutique coffee, completed a round B financing of over 100 million yuan. Zhong Xue Gao, which brought ice cream to the new home-warehouse consumption scenario for the first time, has collaborated with brands such as Wahaha, Xiaomi, and Wufangzhai this year. The "Internet celebrity ice cream" is still very powerful. Zhong Xue Gao ranked first on the Tmall Double Eleven ice product sales list this year.

2. In the field of clothing, "size-free/senseless underwear" has become a new Internet celebrity

The representative brands in this field are mainly Ubras and Bananain. Ubras focuses on the "size-free" concept, which reduces consumers' selection costs while also taking into account comfortable and slim-fitting wearing effects. Bananain’s focus is on “no feeling”, focusing mainly on body sensing science to create a sense of the future.

The two brands are actually very similar in design style and main concept, and the price difference is not much. Judging from the attention paid to the Tmall flagship store, the number of fans is around 3 million, which is basically the same.

In terms of financing, in September this year, Ubras completed its B+ round of financing led by Sequoia Capital, with an amount of several hundred million yuan. On November 16, Bananain officially completed its A round of financing worth hundreds of millions of yuan, with a post-investment valuation of 2.5 billion yuan, making it the underwear company with the highest valuation in the past decade.

3. The beauty market remains hot

Data from the National Bureau of Statistics show that China's cosmetics retail sales reached 299.2 billion yuan in 2019, of which the retail growth rate of cosmetics reached 12.6%, the fastest growth among all statistical categories.

On November 19, Perfect Diary, a domestic beauty brand, parent company Yatsen E-Commerce was listed on the New York Stock Exchange, becoming the first domestic beauty group to be listed on the U.S. stock market. On the first trading day, its market value exceeded US$12.2 billion. This brand, founded in 2017, was successfully listed in less than four years and became a true "pride of domestic products."

Another brand that is comparable to Perfect Diary is Hua Xizi, which focuses on the national trend style. During this year's Double 11, Huaxizi's Tmall flagship store achieved sales of 500 million yuan, 259% of the same period last year, ranking second in the overall Tmall beauty category.

It is worth noting that although Huaxizi has not yet sought external financing, the emerging new brand has not stopped. In July this year, Hua Zhixiao, another domestic beauty brand, has obtained tens of millions of dollars in Pre-A round of financing.

4. Blind Box Culture

The "blind box culture", which has never been very popular, not only did not decline this year, but its leader Pop Mart actually accelerated its expansion.

In the first half of this year, Pop Mart opened 22 new offline retail stores and 176 robot stores. In terms of IP development, Pop Mart has also won the operation of 9 new IPs this year.

On December 11, Pop Mart was successfully listed on the Hong Kong Stock Exchange. Based on the opening price, Pop Mart’s market value exceeded HK$100 billion.

Overall, the food and beauty sectors have maintained their previous high levels of popularity, and many outstanding companies have emerged in other sectors. In 2020, internet celebrity brands can be said to be flourishing with a hundred schools of thought contending.

2. The production of popular products is similar

"Mantid Finance" found that although the above brands all come from different fields, the logic behind their popularity is basically similar. They almost all did the following things right: selecting a niche track, shaping differentiation, and marketing at any cost.

In terms of marketing strategies, the popularity of internet celebrity brands is inseparable from three key words: grass-roots promotion, live streaming, and endorsement.

Beauty brands represented by Perfect Diary and Huaxizi were mainly active on Xiaohongshu in the early days. They created a small-scale spread through KOLs' pictures and texts, and then began to spread on a large scale across the entire network. The advantage of doing this is that you can accumulate popularity after obtaining market feedback through small-scale attempts, paving the way for subsequent "wide-net expansion."

Live streaming is actually a form of video promotion, but compared to text and picture promotion, it is one step closer to the final purchase. In the live broadcast rooms of top anchors such as Li Jiaqi and Wei Ya, the anchors’ vigorous promotion coupled with the so-called “live broadcast room discount prices” make it easy for consumers to place orders while watching, and this has become the “golden combination” for Internet celebrity brands to quickly increase sales.

In addition, celebrity endorsements also play a "catalytic role" in the growth of Internet celebrity brands. The most representative example is Ubras. Before Ouyang Nana became the brand's spokesperson, this brand was not well-known, but since Ouyang Nana shared this underwear on Xiaohongshu, the brand's popularity has skyrocketed. During this year’s Double Eleven, its Tmall flagship store achieved sales of over 50,000 pieces in just the first 30 minutes.

Although there are commonalities in marketing strategies, there are still certain differences among different brands in selecting niche segments and shaping differentiation.

For example, Yuanqi Forest has chosen the "sugar-free sparkling water" segment. Although sparkling water and sugar-free soft drinks are flooding the market, the "sugar-free + sparkling" field has not yet been squeezed into a red ocean, so Yuanqi Forest has been able to stand out.

Santonban, which also falls under the consumption category of "eating", chooses to differentiate itself in packaging. Brewable instant coffee like Santonban is not uncommon. The "appealing" thing about Santonban is that it packages its products in the shape of mini coffee cups, which not only fulfills the "mission" of packaging, but also takes into account the "high appearance" pursued by young consumers.

When it comes to "wearing", Ubras, Bananain and Neiwai have chosen to stand against traditional underwear, calling for "getting rid of the constraints of underwear" so that female consumers will no longer regard underwear as a "burden".

In fact, the so-called "invisible underwear" is not much different from the "seamless underwear" that has already occupied the market. The popularity of these brands is due, on the one hand, to the "celebrity-style" marketing represented by Ouyang Nana, and on the other hand, to the fact that the concept of "relaxation and freedom" coincides with the ideas of "female independence" and "female freedom" pursued by current female consumers.

In the field of beauty and cosmetics, Perfect Diary mainly relies on "affordable domestic products" to successfully "break through" among a number of domestic brands. Hua Xizi focuses on the creation of "national trend cosmetics", and the packaging of almost all its products has a strong Chinese style.

In comparison, Pop Mart’s differentiated advantages may not be so obvious. However, in the niche track of blind boxes, it has the highest popularity. In addition, Pop Mart has been offline since 2010, so it has accumulated certain channel advantages.

In short, under the wave of new consumption, the growth of these new brands no longer requires a long period of sedimentation and accumulation like the old brands in the past. As long as they accurately capture a "selling point", they can become "explosive" with the support of capital.

3. After “breaking the circle”, where are the challenges?

Of course, this does not mean that Internet celebrity brands can "rest easy" after "breaking the circle", because challenges are also coming one after another.

On the one hand, new players are catching up

Since it is not difficult to replicate the logic of a hit product, a very realistic problem facing these brands is that it is easy for new players to enter the market. This is particularly evident in the beauty and cosmetics industry.

As we mentioned earlier, Perfect Diary and Huaxizi have both become popular due to their respective advantages. But the followers following closely behind seem to be "smarter".

Recently, cosmetics brands represented by hedone and Colorkey have begun to frequently appear on major platforms such as Douyin and Xiaohongshu. They have chosen a more segmented track, "lipstick". In addition, brands represented by Juduo are gradually establishing a dominant position in the "eye shadow" segment, which is obviously unfavorable for Perfect Diary and Huaxizi.

Once brands such as Juduo, hedone, and Colorkey also increase their marketing efforts, it is only a matter of time before they become leaders in their respective segments. As the saying goes, "Three cobblers are better than one." By then, the competitive advantages of Perfect Diary and Huaxizi will inevitably be weakened, and retaining users will only become more difficult.

On the other hand, the resurgence of old players is also posing new threats

Wang Baobao’s meal replacement cereal has become extremely popular from Bilibili to Douyin, but its competitors are also rising.

Quaker recently launched a new product called "Five Black Oatmeal", which also focuses on the concept of "sugar-free and healthy". This product has already appeared in the display windows of many Douyin influencers.

Quaker is considered an "old player" in the cereal industry. Although it is not often active online, it is almost always placed in the most conspicuous position on the oatmeal shelves of large and medium-sized supermarkets offline. In terms of brand awareness, it is superior.

Now that Wang Baobao, which has become popular through marketing, is gradually eroding the market, Quaker will naturally not remain indifferent. You know, it is not difficult for these old brands to launch new products and do marketing. Moreover, unlike Wang Baobao’s early period of long-term sedimentation, Quaker does not need to spend time being “educated” by the market because the old brand itself has persuasiveness.

In fact, from the resurgence of domestic skincare brands "Pechoin" and "Chando", we can see that for these old brands, all they need to catch up with new brands may just be time.

In addition, the long-term interests of the brand seem difficult to guarantee due to the high marketing costs.

For example, although Perfect Diary has already gone public, its profitability is not significant. According to its listing prospectus, Perfect Diary's parent company Yatsen E-Commerce suffered a loss of 40.124 million yuan in 2018, a profit of 75.359 million yuan in 2019, and a huge loss of 1.157 billion yuan in the first nine months of 2020.

If Perfect Diary wants to build its brand and realize its "big brand dream" of evolving into "China's L'Oreal", it will definitely need to continue spending money.

Faced with the pursuit of new brands, marketing must not stop, otherwise it will easily be forgotten by consumers. At the same time, the research and development of new products also costs money. Perfect Diary has already established the image of "affordable domestic products". Now that it wants to move towards becoming a big brand, its product research and development must no longer follow the "OEM assembly line" approach. It needs to spend more energy on improving its R&D capabilities.

In order to maintain brand voice, marketing costs are difficult to reduce. It is hard to say whether the money spent on research and development can gain competitiveness among many big brands and impress consumers. These are all challenges for Perfect Diary.

Pop Mart, which has also been listed, also faces many challenges.

On the one hand, the problem of "lack of own IP" on which blind box culture relies for survival has not yet been solved. According to the mid-year report released by Pop Mart, as of June 30, 2020, Pop Mart operated a total of 97 IPs, of which only 12 were its own IPs. On the other hand, the retail newcomer MINISO has also launched a blind box brand "TOPTOY" to share the market.

Overall, although the path of "breaking the circle" for internet celebrity brands is rapid, it is also easy to be replicated. How to maintain competitiveness in the "gap" between new and old players will be the issue that these brands need to focus on in the future.

4. A new battle has begun

What’s more worth mentioning is that today’s consumers are not very loyal to internet celebrity brands. According to the CBNData report, when consuming the same category, young consumers are more willing to try different brands rather than repurchase a single brand multiple times.

Therefore, after experiencing the early "crazy growth", how to retain users for a long time has become an issue that Internet celebrity brands need to focus on in the next stage.

"Jointly branding" is the most common means to enhance brand appeal. For example, Wang Baobao has collaborated with the interest-based interactive community for young people, Klala, the popular dairy brand Adopt a Cow, and the well-known Chinese comic IP Luo Xiaohei. The purpose is to quickly get the brand into the minds of young people while maintaining the brand's popularity.

But in the long run, co-branding is not a good way to increase customer stickiness. After all, this routine is not difficult to learn, and other brands can still do it. For brands, retaining users still depends on "excellent" products. For example, Hua Xizi, which integrates Chinese traditional style into cosmetics, is often criticized by beauty bloggers for "making packaging with heart and making products with feet."

As a result, some brands gradually shifted their focus to strengthening their independent research and development capabilities. A more prominent example is Yuanqi Forest.

According to official statements from Yuanqi Forest, by the end of this year, it will have three self-built factories in operation. In addition to the current flagship sparkling water, new categories such as fruit juice drinks are expected to be put into production in these new factories.

For internet celebrity brands, building their own factories is actually a good way to maintain market competitiveness. Increasing production capacity is one aspect, but more importantly, it can strengthen the brand's control over the entire industrial chain, which is conducive to the research and development of its future product lines, thereby achieving the sustainability of high market demand.

In general, the "explosive logic" that makes internet celebrity brands popular has been "well known" to the market, and Xiaohongshu and Douyin can make more than just "Perfect Diary" popular. For these internet celebrity brands, the “road to breaking the circle” in 2020 has come to an end, and the next keyword is “long-term success”.

So who will give a satisfactory answer next year?

Author: Tulin

Source: Shi Guipeng's Notes