The key to the revival of Chinese products

In the second half of 2023, the old domestic products have become popular again, refreshing their perception in the eyes of consumers. What should domestic products do to achieve sustainable development? The author of this article shares some of his own views.

Things are changing.

Consumption is the barometer.

In September this year, as "huge traffic" poured into old domestic brands such as Fenghua, Huoli 28, Braun, Yumeijing, and Jingxin, the curtain was raised on a "great shift" of traffic against the backdrop of the rise of the national trend.

This may seem accidental, but when viewed in the context of the changing times, we will find that "chance has no place in the group of phenomena (to use Belinsky's words)".

As we all know, since the beginning of the "first year of national fashion" in 2018, domestic products have been increasingly sought after in the aesthetic trend of "Chinese fashion is the top fashion" and "I don't like foreign makeup, I like Chinese makeup".

However, in the past few years, those who benefited from this wave of dividends were mainly new domestic products that were “Internet-born brands”.

But now, the situation has changed - new domestic brands represented by Hutouju, Huaxizi and Zhongxuegao have suffered setbacks one after another, while old domestic brands have gained momentum in September and their sales have soared in Double 11, thanks to changes in consumption trends and platform support. Before, the back wave pushed the front wave, but now the front wave is creating another wave.

The change in wind direction is quite obvious: if 2018 was the node when consumer traffic shifted from foreign brands to domestic brands on a large scale, then 2023 will be the node when consumer traffic shifted again within domestic brands.

Considering that most of the domestic products are "old waves", the ones representing the basic market of domestic products are Fenghua, White Elephant, and Hongxing Erke rather than Huaxizi, this may be a new opportunity window for the overall rise and internal differentiation of domestic brands.

Taking a step back means "fading away", taking a step forward means "returning to prominence", but what domestic brands need more is to take a hundred steps forward to complete the triple jump of "fading away-returning to prominence-long-term success". Simply relying on waiting for success will ultimately be unsustainable, and relying solely on wild consumption will obviously not last long. Sustainable and deterministic growth is the key to the revival of domestic brands and breaking through the "flash in the pan" curse.

So, how to achieve sustainable and deterministic growth?

Following the signboard of "Integration of Digital and Reality", the direction has gradually become clear.

01 Find the right channel

The way that national brand Shulai unlocks "certainty of growth" is quite representative.

This Henan sanitary products company, which has been in business for 25 years, was a participant in drafting the national antibacterial sanitary napkin standard and a leader in the sanitary napkin industry. However, due to the traditional distributor model and logistics costs, its sales scope has been mainly within the province for a long time.

This resulted in the fact that although Shulai had the ultimate cost-effectiveness and product quality "moat", it was not well-known outside the province before.

But on this year's Double 11, Shulai became a phenomenal existence in the industry: on Pinduoduo alone, the "breathable" product line of Shulai's derivative brand Tutu cotton could sell 200,000 yuan a day, and was favored by many "student parties" across the country.

Take the convex cotton suspended core sanitary napkin as an example. Its skin-friendly, dry, and non-leakage performance and its price of only a few cents per piece have become the highlight of many bloggers' unboxing and evaluation.

Taking the e-commerce express train is the beginning of Shulai's destiny: after opening an online store, Shulai can directly connect with consumers and listen to product performance feedback and improvement suggestions during the interaction. Previously, Shulai developed a patented vertical suction and anti-leakage technology because it learned about the problem of side leakage during menstruation reported by users. The unique core structure of the four-track longitudinal diversion locks the menstrual blood and prevents reverse osmosis.

In the end, Shulai, which is good at communicating with users about its brand, was given a special title by netizens on Xiaohongshu and Weibo - "the best at listening to advice." Their way of repaying the company for listening to advice is to place orders and stock up.

Shulai relied on e-commerce and national trends to expand from Henan to the whole country. YaYa, which fired the first shot in the domestic down jacket brand, relied on e-commerce and national trends to move from one glory to another.

YaYa, founded in Gongqingcheng, Jiangxi Province in 1972, was once very popular in the 1980s and 1990s, with daily sales of 100,000 pieces and a national market share of 1/3. The grand scene of "100,000 YaYa Drifting Down the West Lake" was a microcosm of its former glory. But in the mid-1990s, under the impact of the market tide, YaYa, an aging brand and slow to respond, began to go downhill. By the beginning of this century, its market share had fallen to 5%. Although YaYa had tried to save itself through state-owned enterprise reform and reorganization with private enterprises more than ten years ago, it was difficult to reverse the decline.

The turning point occurred in 2020. YaYa, which started the second share restructuring and fully embraced e-commerce, increased its GMV from 80 million yuan to 3.5 billion yuan in just one year, and reached 8 billion yuan in 2022, with sales becoming No. 1 in the down jacket industry.

Among them, Pinduoduo has become its main online growth field. Over the past three years, relying on the vast and diverse Chinese consumer market behind Pinduoduo, YaYa's annual growth on Pinduoduo has exceeded 200%, becoming the top 1 of affordable down jackets on the platform, with annual sales exceeding 2 million pieces. YaYa, which has re-opened the "Ren and Du Meridians" of sales volume and brand reputation, has successfully ushered in its "second spring".

02 Choose the right platform

It can be seen that behind the strong rise of Shulai and YaYa, there is Pinduoduo. The emergence of the two is a typical footnote that Pinduoduo has become a fertile ground for domestic products to establish their brands.

Good winds carry good weight, and Pinduoduo has turned the "wind" of national trends into a lifting force: it has become the power compartment for many domestic brands that are in urgent need of expanding the national market to "go from 0.5 to 1", and it has also become a booster for many domestic brands that want to be revitalized to "go from 1 to 0.1 and then to 1".

It is not enough to know the fact, but also the reason. The reason for Pinduoduo is that the close coupling of traffic, channels and products has consolidated the foundation of its brand growth platform.

Not long ago, some domestic down jackets were so expensive that they became a hot topic, and the market was "given" to military coats. This shows that in the current consumer stratification, price power is still an advantage that domestic products need to hold on to. You know, the impression of "it's not that foreign brands are unaffordable, but that domestic products are more cost-effective" is the secret to the resurgence of some old domestic brands.

Pinduoduo's high cost-effectiveness mentality and the preferential policies brought by its 10 billion yuan subsidies are highly consistent with this.

Zang Li, deputy general manager of Shulai Group, analyzed that the company was able to "achieve the results of operating on Pinduoduo for only two or three years, which would be achieved in other e-commerce platforms in five to ten years", in large part because the company's products matched Pinduoduo's philosophy, both pursuing cost-effectiveness. YaYa's counterattack is also related to the price reduction of high-quality down jackets.

Although many domestic brands were once part of the national memory, they have fallen into silence for many years. To achieve revival, they need to "restart" their brands. Decentralized e-commerce platforms such as Pinduoduo, which are driven by distributed architecture, are very suitable for brand revitalization.

Unlike centralized e-commerce platforms that are more suitable for "using brands to promote products", Pinduoduo is more suitable for "using products to promote brands" - users do not need to search for brands first and then find products. The platform's precise matching of "goods finding people" and the introduction of private domain traffic through group buying fission can quickly detonate single products, allowing them to break through the traffic ceiling, bringing about the effect of product and sales integration and single-point explosion, and then supporting domestic brands to adopt a large-order quick response model.

Take YaYa as an example. Down jackets are different from the fast fashion industry. Its heavy asset model and long development cycle often make it face the problem of inventory sales. However, YaYa will choose best-selling models for trial runs in Pinduoduo's 10 billion subsidy channel. After the orders are hot, it will quickly replenish orders through capacity scheduling, and use agile supply chains to replenish online and offline stocks in a timely manner. The "snowball effect" of sales is achieved by detonating single products and quickly returning large orders, and finally achieve a big business explosion.

In order to replicate the strategy of "selling hot at the front end and quickly replenishing inventory at the back end" to more items, YaYa has also adopted a store matrix strategy. The products in the YaYa Down Clothing Flagship Store, YaYa Women's Clothing Flagship Store, and YaYa Children's Clothing Flagship Store are different, and they all have popular styles that are more business-oriented, more casual, more heavy, and more light. Currently, YaYa has 2,000-3,000 SKUs on Pinduoduo. It will continuously adjust its supply according to the "one product, one merchant" strategy, and will also launch platform-exclusive products.

In essence, this is domestic brands "redoing it all" by taking advantage of the opportunities brought by new e-commerce.

Many domestic brands have injected themselves with the momentum of certain growth through such "redoing": on the operational side, they used to have only superficial contact with users, but now they have user portraits and hot product databases, and can use big data to analyze new market trends; on the production side, they can use trial run results, consumer feedback and big data predictions to reverse production, to assist in new product development and optimize product design; in the entire chain, they can break through the information barriers between the demand and supply sides, and the information islands between R&D, production and marketing and sales, to make the product system more complete and the supply chain model more flexible.

Products like Shulai's "Floating Core Series" are customized products developed based on the needs of postpartum mothers. Whether it uses a floating core, a widened towel body, or is made into a disinfection grade, they are all tailor-made for specific consumer groups.

When the product system and supply chain model of domestic brands are in sync with market demand, long-term success will naturally become more likely.

03 Capture the right market

In 2008, A.G. Lafley, then global CEO and chairman of Procter & Gamble, a global daily chemical giant, recalled that China 20 years ago "was not a consumer society, but a production society."

This reveals the profound evolution of China over the past 40 years: in the first 20 years, China was the "world factory" but not the "world market". During this period, Chinese manufacturing companies acted more as OEM factories. There were domestic brands but they were few, and some even gave people the impression of being low-end, backward, and counterfeit.

It was not until the last 20 years that, driven by the development situation, especially the Internet, China's domestic demand has ushered in geometric growth, and consumption vitality has been released to a greater extent. China's "world market" attribute has provided a closed-loop supply and demand support for its "world factory" attribute, and the "internal circulation" has a solid foundation. At this time, domestic brands have the strong ability to grow bigger and stronger - the strong domestic demand has brought a lot of opportunities to both domestic and foreign brands. At this stage, the "high outside and low inside" gradient pattern of domestic and foreign brands in terms of grades has taken shape.

As the Chinese people's cultural confidence extends to the consumer field, the new generation's anti-foreign mentality has further strengthened its cognitive isolation model. Many people have begun to adjust the priorities of domestic and foreign brands in consumer options. Domestic brands have therefore had more opportunities to break the "low-end lock-in" and overtake others.

However, the lag on the supply side has become a real constraint on the revival of domestic products: under the continuous potential of consumer Internet in the past 20 years, national consumer demand is constantly generating new trends and new characteristics, but the production and sales of a large number of domestic manufacturers are still in the "pre-Internet" stage, with weak product innovation, slow market response, and product system and supply chain model far from the requirements of advanced productivity.

At this moment, it is imperative that the Internet, on the basis of reshaping consumption, extends its tentacles to the production and supply side to form a "higher level of dynamic balance between supply and demand."

Pinduoduo, which stands with domestic products, continues to make efforts in this regard: At the beginning of 2022, Pinduoduo launched the "Duoduo New National Trend" action, established a special team, and invested a "tens of billions" of resource packages to provide traditional domestic brands with full-link digital services in product structure, design and development, production and manufacturing, brand building and other fields; Since the beginning of this year, Pinduoduo has launched the "National Products Festival" promotion event and CCTV's "National Products Team Building" live broadcast, and has provided multi-faceted support to domestic brands in Double 11 and Double 12.

This is exactly what domestic products need for long-term success: what domestic products want is not the opportunity to fill the gap left by the failure of Hua Xizi, but the massive opportunities in the context of consumer stratification; it is not a flash in the pan inspired by sentiment, but certain growth under the blessing of full-link digitalization.

In the final analysis, for domestic products, if they want to go from being an internet celebrity to being a long-term success, and if they want to move from a temporary victory to a long-term victory, they must compete on price, quality, feelings, and more importantly, full-link digital capabilities - time will prove that only those who love to "fight" can win.

Author: She Zongming