“Who will be the next brand to be swallowed up by Douyin’s traffic?”

Today’s Internet traffic can make some brands successful, but it can also swallow up some brands. Let’s take a look at the brand development driven by traffic.

The rise of each e-commerce platform will give birth to a group of new brands, because the rise of new e-commerce platforms means massive, real and cheap traffic.

The brand that purchases this traffic first will gain communication and channel advantages far greater than its competitors.

The rise of Taobao has given birth to a number of "Taobao brands", such as Yu Nifang, Xiaogou Electrical Appliances, Handu Clothing, etc.

The rise of Tmall has also given birth to a number of "new consumer brands", such as Wang Xiaolu, Xiaoxiandun, Kongke Instant Noodles, etc.

The rise of Xiaohongshu has also given birth to a number of "her economy brands", such as Perfect Diary, Hua Xizi, Zhong Xue Gao, etc.

However, the growing e-commerce platforms will charge traffic fees to the brands that parasitize on the platforms. And this fee will become higher and higher until it reaches the life and death line of the brand. At this time, a large number of brands that rely on platform traffic will be swallowed up.

Taobao and Tmall have already harvested new brands, and Xiaohongshu is about to finish. Douyin has not yet raised the sickle of traffic, it is patiently cultivating the "broilers" on its platform.

There is no doubt that Douyin will repeat the route of Taobao and Tmall, gradually raising traffic fees to the limit and making brands that rely on Douyin's traffic become its workers.

Many brands have been swallowed up by Taobao's traffic, Three Squirrels is one of them. Who will be the next brand to be swallowed up by Douyin's traffic?

1. Internet celebrities are fierce

There is a pair of data comparisons circulating online, showing the time it took for traditional brands and Internet celebrity brands to become the first in the industry:

It took Coca-Cola 134 years, and Yuanqi Forest 5 years;

It took Nestle 153 years, while Sandonban only 5 years;

It took L’Oreal 113 years, while Perfect Diary only took 3 years;

It took Haagen-Dazs 99 years, but it only took Zhong Xue Gao 2 years.
The revolution of the Internet and mobile Internet has provided Internet celebrity brands with traffic opportunities far exceeding those of previous brands. Before traditional brands could react, Internet celebrity brands have grown rapidly.

In fact, every revolution in traffic is a shift in customer attention and will lead to the emergence of a group of new Internet celebrity brands.

The emergence of the Internet created Sina, Sohu, and Baidu; the emergence of mobile Internet gave rise to Toutiao and WeChat; the revolution from text and pictures to videos gave rise to Youku and Tudou; the change from long videos to short videos gave rise to Douyin and Kuaishou.

The rise of Taobao has boosted the development of brands such as Yunifang, Afu Essential Oils, Han Du Clothing, and Xiaogou Electrical Appliances; Tmall has also consciously cultivated brands on its own platform such as Sandunban, Wang Baobao, and Zihaiguo; Xiaohongshu's traffic has assisted the growth of brands such as Perfect Diary and Yuanqi Forest.

Why are Internet celebrity brands so fierce? In addition to the foundation laid by infrastructure construction and a complete industrial chain, from the perspective of information dissemination, the emergence and growth of new traffic platforms means massive, real and cheap traffic.

In 2003, the cost of a single traffic on Taobao was more than 20 yuan, and it rose to 250 yuan in 2012. For ordinary small brands, they simply cannot afford the traffic costs of mature platforms.

However, on new platforms such as Xiaohongshu, Zhihu, and Bilibili, the cost of traffic is affordable for Internet celebrity brands. In 2021, Douyin, Kuaishou, and Zhihu have accelerated the evolution of platform e-commerce. It can be speculated that these platforms will also give birth to the next batch of Internet celebrity brands.

"Perfect Diary" started from Xiaohongshu, and after the model was running smoothly, it entered Douyin and Taobao Live, and at the same time invested a lot of resources to build its own traffic pool. Only 4 years after its establishment, its valuation soared 70 times.

"Perfect Diary" surpassed L'Oreal and Estee Lauder in Tmall's Double Eleven sales very early. In November 2020, Perfect Diary's parent company Yatsen E-Commerce successfully went public with a market value of more than US$13 billion.

"Wang Bao Bao" was launched on Tmall in August 2018. During the 2020 Tmall 618, Wang Bao Bao surpassed foreign brands such as Quaker and Calbee to become the number one online cereal. In 2019, it participated in Tmall Double 11 for the first time, with sales exceeding 10 million yuan in 69 minutes, once again becoming the number one in the category.

"Zhong Xue Gao" was founded in March 2018 and became the brand with the most notes and sales in the food field of Xiaohongshu in the same year. During the 2019 Tmall Double 11, sales exceeded 3 million in 64 minutes, surpassing Haagen-Dazs to become the first in the category.

2. Platform Harvest

Not all brands can perform so fiercely. The internet celebrity brands we can see are all winners after experiencing fierce competition.

More Internet celebrity brands are just short-lived, such as Huang Taiji Pancakes, Diaoye Beef Brisket, Instant Noodle Canteen, Answer Tea, Ma Jiajia Adult Shop, etc.

There are many reasons for the fleeting popularity of online celebrity brands, but the two main reasons are: product problems and traffic problems. Ignoring products is essentially an overemphasis on traffic. So the problem with online celebrity brands is still traffic problems.

Traffic is the key to success or failure. The most direct reason for the rapid rise of Internet celebrity brands is the rise of new traffic. Traditional brands rely on offline stores and TV and print media advertising to gain traffic, while Internet celebrity brands rise much faster.

It is precisely because of the speed and convenience of the new method that many Internet celebrity brands have become dependent on traffic.

The proportion of Perfect Diary's parent company Yatsen's e-commerce marketing and promotion expenses to net income increased from 41.3% in 2019 to 62.2% in the first three quarters of 2020, and to 70.3% in the fourth quarter.

It remains to be seen when Perfect Diary will be able to get rid of the predicament of being heavily dependent on marketing.

According to the financial report of Perfect Diary, the net revenue of Perfect Diary in 2020 was RMB 5.23 billion, and its marketing expenses were as high as RMB 3.41 billion.

Founded in 2012, achieved 7 billion yuan in revenue in 2018, and went public in 2019. Three Squirrels, the No. 1 online snack brand, is not having an easy time.

Three Squirrels, which is highly dependent on traffic platforms, was adept in its early stages of development.

However, traffic fees are becoming more and more expensive, and Three Squirrels' profits are gradually turning into traffic fees.

From 2018 to 2019, the service fees used by Three Squirrels for marketing and promotion on e-commerce platforms continued to increase. In 2019, Three Squirrels' platform service and promotion fees reached 660 million yuan, a year-on-year increase of 67.9%. However, Three Squirrels' annual net profit after deducting non-operating expenses was only 205 million yuan.

In October 2023, according to Interface News, after experiencing the first wave of dividends, the stock price of Three Squirrels, the first e-commerce snack stock, hit a new low in the first three quarters, and its market value evaporated by nearly 30 billion yuan from its 2020 high.

From another perspective, the traffic dilemma of internet celebrity brands is easy to understand: the profit source of e-commerce platforms is the brand's traffic fees, and the traffic dilemma of internet celebrity brands comes from the growth flywheel of e-commerce platforms.

The faster the growth flywheel of e-commerce platforms turns, the more serious the survival dilemma of Internet celebrity brands will be. When e-commerce platforms are running fast, many brands will be left behind.

3. Traffic but no brand

Internet celebrity brands all have traffic, but they do not necessarily have brands.

The standard of a brand is to be able to create customers by itself, that is, to bring in its own traffic. Drucker believed that the mission of an enterprise is to create customers, but he did not mention how to create customers. We believe that the way for an enterprise to create customers is to create a brand.

For example, when Nongfu Spring is placed on an e-commerce platform, there are still customers searching for it even if it does not participate in bidding rankings. This is the success of brand creation.

Traffic is reach, and brand is conversion. Reach does not mean conversion. Reach can be achieved through traffic and promotion, but conversion depends on trust.

Having traffic does not mean you can create a brand. Compared with Perfect Diary, Yuanqi Forest, and Santonban, Three Squirrels, Ma Jiajia, and Diaoye Beef Brisket all have traffic, but one has a brand and the other does not.

We regard Perfect Diary, which has been making losses, as a party with a brand based on the following judgment: If Perfect Diary’s goal is to become a vertical e-commerce company for domestic beauty products, its current losses are reasonable.

4. There is traffic and brand

We believe that brands such as Yilibao, Red Bull, and Pantene have no traffic because their online traffic performance is poor.

One obvious trend is that the new generation of young people are Internet natives, and they have a natural affinity for online brands. If these brands do not perform well in online marketing, they will soon be regarded as old-fashioned brands and abandoned.

Just like the brands listed at the beginning of this article: Perfect Diary and L'Oreal, Wang Baobao and Calbee, Zhong Xue Gao and Haagen-Dazs, as well as Santonban and Nestlé, Yuanqi Forest and Coca-Cola, Heytea and Starbucks.

Brands that are good at managing online traffic and have strong brand power are more likely to be accepted by the new generation of customers.

The brand we want to talk about is Yuanqi Forest.

Yuanqi Forest first concentrated its advertising on the Xiaohongshu platform. As we mentioned earlier, new platforms like Xiaohongshu have low traffic costs and a focused audience, making them the origin market for incubating new brands.

Especially since Xiaohongshu’s main users are young women, who are naturally hostile to calories, Yuanqi Forest, which focuses on sugar-free products, is particularly popular among them.

The second step for Yuanqi Forest is to enter live broadcasting and cooperate with the top live broadcasting accounts to continue to increase the popularity. After the online rollout, it will continue to move offline, and frequently broadcast brand advertisements in apartment buildings and office buildings where customers must pass by.

Even if we take a step back, brands with offline traffic and brand power can still win in the competition.

Bio-Chem's rival is Bel-Fruits, a French cheese brand that sells more than a dozen series and more than 50 varieties of products in retail, catering, and industrial channels, and has been selling them in China for more than 30 years.

Its parent company is the world's largest specialty cheese manufacturer, with a sixty-year history of cheese making and world-class production technology for various cheeses.

In the 1990s, BelGioioso monopolized the leading positions in various fields through its advanced brand concept and capital strength. However, the Chinese market is changing too fast, and they have disappeared from the vision of the new generation of consumers.

Meiji Landou has invested heavily in elevator advertising. According to media reports:

The direct result of its continued dominance is the rapid surge in its popularity across the entire network. According to the Baidu Index 90-day search index, its main rival Bel was slightly higher than Bio-Tech for a long period of time, but since the end of February 2019, Bio-Tech has risen sharply, with a search index several times that of Bel.

The 90-day WeChat index also shows the same trend as the Baidu search index. The WeChat index of Meiji Landou suddenly jumped at the end of February, and has since maintained a leading level several times that of Bel. Taking the WeChat index on March 11 as an example, Meiji Landou was 27010 and Bel was 9670, the former about three times the latter.

5. What is a brand?

A brand is first and foremost a product, not traffic.

If an online celebrity brand wants to become a long-lasting brand, it must first pay attention to its products. Most online celebrity brands become popular through topic marketing. They are familiar with this path, have received feedback from this path, and will rely on this path.

Then ignore the value of the product.

This is a paradox: the success of Internet celebrity brands is due to topic marketing and traffic dividends, but customers ultimately buy products. Customers are curious about Internet celebrity brands and then try to consume them, but it is ultimately just a trial.

For example, the instant noodle canteen sells ordinary instant noodles for more than 20 yuan per portion, and with some cheese and ham, it sells for 40 yuan per portion. With high-value photos and meticulous decoration, it attracted many people to check in in a short period of time.

But no matter how it is packaged, it still remains to be a bowl of instant noodles. After a short period of popularity, there was a wave of bankruptcies.

A brand is more about recognition, not just traffic.

The core of a brand is to occupy a position in people’s cognition, so that customers can think of you first. For example, Perfect Diary occupies the position of “substitute for big brands”, so price-sensitive customers think of it first.

Yuanqi Forest occupies the position of "sugar-free beverages" and Santonban occupies the position of "cold brew instant coffee".

Three Squirrels, which was in a traffic dilemma, did not occupy a single word. At first it was nut, but later gave up this position.

Between 2017 and 2019, Three Squirrels tried to meet the diverse demands of users through a wide range of product categories. In addition to its main product nuts, Three Squirrels also entered the fields of baking, meat products, and soy products.

Zhang Liaoyuan said: "We have entered all categories by relying on our price war advantage. In the era of high traffic in e-commerce, Three Squirrels' strategy is to harvest all categories."

In contrast, Three Squirrels' competitors, Qia Qia, have clearly defined their position as "daily nuts" (of course, Qia Qia is also making mistakes, as the launch of breakfast oatmeal is a destruction of this position), and Bestore has firmly occupied the position of "high-end snacks".

The best result is that when customers think of nuts, they think of Qia Qia, and when they think of high-end snacks, they think of Bestore. In this way, the brand can bring its own traffic and get rid of the harvesting of traffic platforms.

Three Squirrels originally owned the word "nut", but later deviated from the direction due to the wrong brand concept.

Three Squirrels can learn from Xiaomi. Although Xiaomi also has many products, and the number of product categories is no less than that of Three Squirrels, all of Xiaomi’s communications are focused on smartphones.

After Xiaomi occupied the position of "direct selling mobile phones", customers who wanted to buy low-priced mobile phones online would think of the Xiaomi brand. Xiaomi could bring its own traffic and create customers.

If you carefully observe Yuanqi Forest’s brand strategy, you will find that all its actions will not deviate from the core of "sugar-free beverages".

In comparison, Perfect Diary is a little worse. Although it is a domestic beauty brand that is a substitute for big brands, it has not refined this word and implanted it into customers' cognition.

The success of a brand is inseparable from internal management and the improvement of the supply chain, but from the perspective of communication strategy, the most important thing is to occupy a position in customer cognition so that customers will think of you first when they have relevant needs.

As long as customers think of you, they will actively search for you, and the brand can get rid of the traffic dilemma.

Author: Zhang Zhiyu WeChat public account: Zhang Zhiyu