A guide to avoiding pitfalls for new consumer brands in 2022

The "excitement" of new consumption has apparently died down a lot.

Each sub-segment is crowded, capital is returning to rationality, and traffic costs are high...all of these are plaguing new consumer brands. When the time comes to 2022, what pitfalls are waiting for new consumer brands? Looking back at 2021, let’s avoid the pitfalls in advance.

Traffic pit: unexpected "sudden death"

Traffic seems to be a topic that new consumers can never escape. I believe that the traffic pit faced by new consumer brands in 2022 is not simply a problem caused by the increasingly high traffic costs. Perhaps more crises come from "sudden death" caused by uncontrollable third parties or the market.

In December last year, the "No. 1 live-streaming influencer" Wei Ya disappeared from the entire Internet overnight due to tax issues. Before that, Xue Li and Lin Shanshan had been banned for the same issue. What followed was a series of small and medium-sized anchors who were deeply involved in tax issues. The fall of the anchor is bound to have a huge impact on this group of new consumer brands that are extremely dependent on live streaming to sell goods.

About a year ago, I judged that live streaming sales represented by super-head anchors would soon reach its peak, and would be replaced by store live streaming that would gradually form the fundamentals of the brand. Live streaming would exist as a new content form and a new traffic channel, and the facts have proved this. From another perspective, reducing dependence on traffic from top anchors is also a way to avoid pitfalls.

In addition to live streaming sales, Xiaohongshu and Douyin are the two indispensable traffic sources for almost all new consumption. Xiaohongshu’s series of operations in the second half of last year also shocked the industry.

In September last year, Xiaohongshu announced the official launch of the "Woodpecker" plan, which was specifically aimed at combating false promotions. As a result, the first batch of 29 brands were permanently banned by Xiaohongshu. The content of these brands on Xiaohongshu will not be displayed at all. These brands include traditional brands such as Dove, Nivea, RNW, and Daewoo, as well as new consumer brands such as Neresum, Akita Manman, and Wonderlab. In January, Xiaohongshu announced the second batch of banned lists, involving 39 brands. The scope of governance was extended to offline commercial entities, from consumer brands to offline medical beauty institutions and medical beauty products brands.

Once the lifeline of Xiaohongshu, a super-top anchor and grass-selling platform that is highly dependent on traffic, is pinched, it is almost an indirect announcement of "sudden death" for new consumer brands.

How to avoid pitfalls? The first thing is to always pay attention to the ever-changing platform rules, especially for Xiaohongshu. The policies have been changing in recent years. You must be clear about what the official is promoting and what it is cracking down on. Secondly, the degree of dependence on traffic sources must be dispersed. It is best not to concentrate on a certain platform or a few KOLs. Once policy risks are encountered, they are prone to being "cut off with one size fits all".

Internal pit: Beware of "backyard fire"

You have to be careful of pits in the front yard, and you have to be even more careful of fires in the backyard. Since last year, a number of "apparently glamorous" new consumer brands have been reported to have internal crises, with gossips such as store closures and layoffs being heard everywhere.

At the end of every year, there are always news about layoffs and optimizations by major giants. However, the personnel turmoil in the new consumption sector is not much better than that in large companies. After all, talents are only those same talents.

According to the information I know around me, there are no less than six or seven new consumer brands that started layoffs of varying sizes last year, and they are all leading players in their respective fields. If this is the case for the leading players, what about those players who have poor financing and low market share? Even for those new consumption groups that are still holding on, everyone knows tacitly that times are not easy.

Just as 2022 began, Youzan was rumored to have laid off 1,500 employees and wrote "personnel optimization" into its annual OKR. Another company that laid off employees at the beginning of the year was Heytea, which was exposed to have carried out large-scale layoffs, involving 30% of its employees. Although Heytea denied it in a public relations manner, the remarks and voices of "Heytea's former employees" on platforms such as Xiaohongshu and Maimai did cause considerable trouble.

Another company with even greater negative impact was Cha Yan Yue Se last year. The bizarre incident in which the three founders openly quarreled with tens of thousands of employees in the work group was enough to go down in history. Not only did it top the trending searches, it also gave people inside and outside the circle a good gossip.

In addition to the uncontrollable risks brought about by layoffs, it is equally important for founders or employees to control their external statements. Although Zhong Xuegao’s statement "It's so expensive, take it or not" was later proved to be a deliberate editing and distortion by the media, it also caused Zhong Xuegao and even the entire new consumption to be controversial.

The pitfalls caused by internal personnel are often more difficult to deal with than those caused by external personnel. After all, the people who know the brand best are always inside, and every employee and executive who leaves is an uncontrollable risk to some extent. In order to avoid "fires in the backyard" in 2022, we should be more cautious in making decisions about every reduction in staff and adjustment. Once a decision is made, we must properly handle the aftermath and try to eliminate the remaining risks.

Marketing pitfalls: Use this "double-edged sword" well

The characteristics of new consumption determine that they often reshape consumer categories based on Internet thinking, and Internet thinking is ultimately reflected in various marketing methods. If marketing is used well, a company can become famous overnight, but there are also many new consumer brands that are ruined by marketing.

The pitfalls of marketing methods mainly come from two parts: "marketing content risk" and "spokesperson crisis".

The pitfalls brought about by marketing are certainly not something that new consumer brands will easily fall into. However, new consumer brands that have grown overnight have the temperament of a newborn calf, and are bold and advanced in marketing and creativity. Once their problems are caught, they are more likely to be elevated to another level.

Let’s take a quick look back at last year. First, Genki Forest apologized for its “0 sugar” promotion, and then Three Squirrels was frequently criticized on hot searches due to its controversial advertisements. There have also been incidents where Ubras, Cha Yan Yue Se, and Quanmian Shidai have failed due to inappropriate wording and false advertising.

Issues of women's rights/men's rights, race/skin color, and false advertising are all issues that new consumer brands that are developing roughly must carefully deal with in their future marketing efforts. Last year alone, there were dozens of "overturned advertisements" that were punished by relevant departments and exposed by netizens. Even a mistake in the details of a piece of material may cause irreparable losses. Carefully studying the Advertising Law may be the simplest and first principle to avoid pitfalls.

Let’s talk about the spokesperson crisis. 2021 can be said to be a blowout year for new consumer brands to sign spokespersons. A number of popular stars such as Xiao Zhan, Wang Yibo, Li Luxiu, Gong Jun, and Di Lieba have been sought after by many new consumer brands. In an era of high traffic costs, a good spokesperson has even become a bargaining chip in negotiations and games between new consumer brands and e-commerce platforms.

However, while new consumer brands are competing for spokespersons, the melons in the entertainment industry have always been big and round. Looking back at 2021, do you still remember the melons you have eaten? Zheng Shuang, Wu Yifan, Zhang Zhehan, Huo Zun, Li Yundi, Wang Leehom... Which one of them has not been a traffic star? Which one of them doesn’t have dozens of endorsement brands?

Mainly because of people, there is a risk of making mistakes. Inappropriate remarks, inappropriate words and deeds, political stances, and even inherent labels on people may be put under the magnifying glass one day. At that time, the original spokesperson's light will have to be replaced.

How to use a double-edged sword? In addition to carefully reviewing marketing materials and carefully selecting spokespersons at the front end, brands also need to establish public relations awareness and teams in advance, so that even if they step into a pit, they can remedy it as soon as possible.

Final Thoughts

The reason why a pit is called a pit is because someone has stepped into it. New consumption, which is beginning to show signs of fatigue, will not be able to have smooth sailing in 2022. New brands seem to be popping up like mushrooms after a rain, but only a few of them can really catch the eyes of the general public and be remembered. No matter whether you have achieved some success or are just beginning to show your potential, no matter what stage you are in, the high-speed train of new consumption is still roaring forward. I hope everyone will not be left behind.

Author: Jun Xiaobao

Source: Jun Xiaobao