Social media influencers help Chinese brands outperform overseas rivals
For Western companies such as Coca-Cola, Maybelline and Nestlé, century-old brands have long offered a tremendous advantage over their local competitors in China.
But these established groups are increasingly threatened by Chinese start-ups whose growth has been fueled by savvy social media marketing and optimized supply chains.
The change was highlighted at this month’s “618” e-commerce festival, China’s second-largest annual business event, as local brand Babycare overtook Procter & Gamble’s Pampers in terms of sales volumes, according to data released by the Internet group Alibaba.
It wasn’t on time: Genki Forest, a Chinese beverage company, topped Coca-Cola and Pepsi in online sales on “Singles Day,” a multibillion-dollar extravaganza that is the biggest party shopping in the country.
A year earlier, Perfect Diary, a local cosmetics brand, edged Maybelline and Estée Lauder to become number one on Singles Day, while in 2019, the Three Squirrels snack brand overtook Nestlé.
“Foreign brands had an advantage in the Chinese market by representing a superior Western lifestyle. But Chinese consumers are now more confident in the ‘Chinese style’, ”said Albus Yu, chief investment officer at China Growth Capital, a venture capital fund that has backed brands such as Maia Active, a Chinese challenger to Lululemon. .
The preeminence of Chinese brands marks a turning point in a country where foreign products are historically viewed as safer and of higher quality. It also presents a great challenge for multinationals which are increasingly looking to China for their growth.
It also aligns with China’s political priorities. President Xi Jinping urged the country to focus on domestic demand for growth.
“This next decade is going to be the decade of Chinese brands,” said Elijah Whaley, vice president of Asia-Pacific marketing at Launchmetrics, an analytics company. “Domestic brands will take a significant share of China’s growing consumer market. “
In the first three quarters of 2020, domestic sales of fast-moving Chinese consumer goods brands grew 2% while those of foreign brands declined 6% year-on-year, according to a report by Kantar Worldpanel and Bain. .
Much of the recent success of local brands comes down to large investments in marketing, especially on social media, analysts said. This was fueled by strong support from venture capital.
“Marketing made Chinese products cool. They don’t have any heirloom brand equity they’re trying to protect, which means they’re willing to take risks and act quickly, ”said Mark Tanner, Managing Director of Skinny China, a marketing firm. .
Marketing can account for up to 60% of spending by Chinese consumer startups, according to Launchmetrics, compared to 15-25% for foreign brands in China.
“Overseas brands are a lot more organic in their marketing approach, they want to grow slowly, and that’s how it works in other markets. But here everything is accelerating because there is so much venture capital involved, ”said Jenny Chen, co-founder of WalkTheChat, a cross-border marketing software agency.
Chinese brands have also shown agility in developing their supply chains. Being close to the manufacturing clusters in China, they have cultivated relationships with suppliers, allowing them to accelerate the development of new products and reduce costs. Often, these suppliers are the same suppliers that high-end foreign brands source from.
“The magic is in ordering in small batches. You can produce thousands of items and see what sticks out, ”said Rui Ma, technical analyst in China at TechBuzz.
Shanghai Chicmax, a cosmetics brand, went from designing to selling a face mask in three days. This process took three years for a foreign shampoo brand, said Tanner of Skinny China.
Variety and speed matter because young Chinese consumers have eclectic tastes and a keener desire to follow trends than their Western counterparts, analysts said. While GlaxoSmithKline offered 400 products for European customers in an oral care category, it had 12,000 for China, Tanner added.
Young Chinese consumers also expect a sophisticated e-commerce experience. When shopping for a lipstick, they can first watch an influencer promote it on Douyin, the Chinese version of TikTok, and then switch to the Xiaohongshu social media platform to get reviews from professional bloggers in the area. beauty before finally buying it on Alibaba’s Taobao after viewing customer reviews and photos.
Some Chinese influencers have amassed huge fanbases, such as “Lipstick King” Li Jiaqi, who has 45 million Douyin followers. An endorsement from Li can lead a product to sell in minutes, and he has criticized foreign brands like Hermès and Chanel in the past.
It was while watching Li’s live broadcasts that Zhang Qiping, a 28-year-old professional from a foreign company in China, discovered domestic brands Florasis and Perfect Diary.
“I thought the lipsticks looked great, then I went to Xiaohongshu and found that there were a lot of people who recommended them, so I went to buy them,” said Zhang, who already had bought lipsticks from Dior and Yves Saint Laurent.
But “micro-influencers,” who have a much smaller reach of less than 10,000 followers, are also an important group for brand marketing. These are often repeat customers that companies have turned into brand advocates, offering them free products or small payments.
“In the influencer industry in China, you can find a price for almost anything: a sponsored campaign that looks like native content or a little post from a micro-influencer,” said Chen of WalkTheChat.
Another effective way for brands to reach customers in China is to use groups on messaging platforms like Tencent’s WeChat, where they are limited to 500 users. This allows brands to interact with consumers in a more intimate environment, but some Western companies see them as offering an uncertain return on their investment.
“Chinese brands are more willing to take the risk,” Whaley said.
Chinese media have documented how Perfect Diary opened thousands of WeChat groups led by “Xiaowanzi” or “Abby,” a virtual beauty influencer backed by a large marketing team.
Over the last weekend of 618 promotions, one of Abby’s WeChat groups of 200 people was inundated with the brand’s promotions, as shoppers posted photos, asked questions and provided comments.
When asked for an interview via WeChat, Abby responded that a dedicated member of staff would respond and sent a photo of the cartoon mouse Jerry holding a flower.
When asked how international brands could win her back, Zhang, the consumer working for a foreign company, replied, “When it comes to rebranding, I usually look at the reviews on Douyin and Xiaohongshu. It all depends on whether brands can get beauty bloggers to promote them. “