Domestic brand building has taken a detour

Recently, Li Jiaqi's speech during the live broadcast has aroused discussion and thinking among the public. How can domestic brands become "brands" and solve the dilemma of sales and profits? How can product sales channels be liberated from the single live broadcast and return to a healthy ecological chain? This article may bring you some new thinking.

Excellent managers use brands everywhere

Li Jiaqi was very popular yesterday, and at one point he was forced to cry and apologize online.

Everyone was discussing the matter. Some said that Li Jiaqi had made enough money and didn't want to go to work anymore and started to be lazy. Some said that Li Jiaqi just said it unintentionally and shouldn't be subjected to cyber violence. Others began to teach Li Jiaqi how to protect his personal IP.

I have a different view: Li Jiaqi is not the focus of this matter. As a live streamer, his personal "fame will be blown away by the wind and rain" sooner or later, if not this slip of the tongue, then some other mishap next time. And the Waterloo he encountered this time is actually the first time that the contradictions presented by the entire live streaming system have been put on the table.

What is this contradiction? It is the contradiction between the ever-increasing product costs (raw materials, profit requirements, anchor commission sharing) and the customer expectation of continued low prices (live streaming should be cheap). Most of these contradictions occur in well-known domestic products.

Li Jiaqi is actually just a small fuse behind this conflict.

1. The Dilemma of Sales and Profits of Well-known Domestic Products

When live streaming sales just started to emerge, I had a question that kept lingering in my mind: Why can top anchors like Li Jiaqi offer such cheap prices? They can even offer the lowest prices on the entire Internet and the entire universe. For this reason, a large number of consumers would not hesitate to wait in the live streaming room just to wait for super low prices. How did they do it?

Later, I found out that their agreement contained the phrase "locking in an exclusive low price." That is, the top anchors get the lowest price, which in turn strengthens the influence of the top anchors with the lowest price, and the goods brought can also create amazing sales performance (clearing inventory), and both parties are happy. No! All three parties are happy, and consumers are also happy, after all, they bought cheap goods.

Of course, the happiest person is the anchor. After all, with the blessing of "slot fee" + "profit sharing" + "exclusive lowest price", the three golden lights make it easy to sell and make money. All you need to do is "work hard" to select goods and shout! No wonder I saw a news report saying that Li Jiaqi earns 5 million yuan a day and his annual net profit exceeds 90% of A-share listed companies. It's amazing! The light of mankind, a miracle of the universe!

If the story ended here, everyone would be happy and it would be a dream-like business ecosystem.

But slowly, domestic brands gradually found that they were becoming addicted to live-streaming e-commerce. In the past few years, traditional distributors and channel merchants have been abandoned and few are left (haven’t they been calling for getting rid of middlemen for several years), and live-streaming e-commerce is becoming more and more popular. Should we cooperate? It’s painful, as the brand side won’t make any money at all. Should we not cooperate? It’s a headache, as what should we do with inventory and sales? Especially for some well-known domestic brands, their dependence in this regard is even more serious than that of white-label products. Why? Because the profits are lower, and they can’t build their own sales channels. Well-known domestic brands are in an awkward situation. On the one hand, they have to invest a lot of marketing budget to build their reputation and packaging, and on the other hand, they have to invest in profit sharing and low prices for live streaming. With two squeezes, where does the profit come from?

Fortunately, capital only looks at sales volume and not profits at the beginning.

However, slowly, investors began to realize that the cycle of revenge would never end. If it continued like this, when would this product really make money for me? Originally, I thought that if sales increased, the popularity would increase, and if the popularity increased, the brand would be established, and if the brand had repeat purchases, there would be profits, and if repeat purchases had profits, there would be profits. But what happened? It was not the case at all! Investors began to realize an important lesson in branding: sales are only part of the brand, not all of it. Profits and premiums are the core!

Capital then begins to demand profits.

At this point, domestic brands are a bit anxious. Should they squeeze the live streaming e-commerce channels to the left? If they do, they will stop playing with us and our sales will be in jeopardy. Should they squeeze consumers to the right and raise prices? Our own consumers are used to buying at low prices and will leave once the price goes up. So domestic brands can only desperately launch new products, change the outer packaging and upgrade. Raise prices quickly in the name of launching new products, or! Take the initiative to reduce production costs and produce a junk product. But this is not a long-term solution. It is so uncomfortable to be caught in the middle. So, the scene of Li Jiaqi mentioned at the beginning appeared. Consumers think it is too expensive, Li Jiaqi despises it, and the brand suffers.

How did we get to where we are today?

2. Are well-known domestic products “domestic brands”?

Some people say that the live broadcast system has played an important role in the rise in sales of domestic products in recent years. I agree.

Some people also say that the live broadcast system has contributed greatly to the emergence of many domestic brands in recent years. I disagree.

On the road to building domestic brands, we have always taken the path of "working hard and fast", and sales are everything. Under the enthusiastic promotion of "the light of domestic products", consumers have started the journey of planting grass and pulling grass for domestic products. However, there are many reasons for this, some are because of "selling patriotic feelings", some are because of "very low prices", and some are because of "very large marketing investment". In short, the "goods" have sold very well in recent years, and many "well-known domestic products" have emerged.

However, are well-known domestic products necessarily “domestic brands”?

Before answering this question, I would like to invite you to recall several well-known domestic brands: Qinchi Ancient Wine (the winner of the CCTV Spring Festival Gala), Melatonin (you know it), Huiren Shenbao...

In terms of popularity, they are still as famous as ever, right?

Do you think they are a brand?

There are two test papers to determine whether a product is a brand, one is premium and the other is repeat purchase.

See how people react to your profits and whether they will continue to repurchase. For a good brand, consumers are not afraid of you making money from them, because you still have to run the company and develop more and better products after making money. Who doesn't start a company to make money? Only a profitable business is a long-lasting, controllable and stable business.

Where does the profit come from? Either from innovation, or from lean production management, or both. At present, many domestic products adopt the ODM processing model (the brand is basically only responsible for sales, and the factory is fully responsible for R&D, production, etc.). Most of the products produced are products without barriers. Even electronic products can be copied in about 40-60 days. The replicas are exactly the same, and the price is even lower. What to do? At this time, the sales platform adopts a vigorous horse racing mechanism, which can improve channel efficiency and will not have too much financial risk. New brands shouting "survival is the kingly way" have successively embarked on the road of sacrificing profits to sell goods.

Repeat purchase is a test paper to detect whether a product has competition. A so-called good product must have a good product, a good channel, a good price, and good marketing (the classic 4P theory of marketing: product price channel promotion). It is good only if it is stable for many years. Don't underestimate this silent power, it is the real skill of the enterprise, for example: Qia Qia, Baixiang, Nongfu Spring, and major liquor brands, these are all ordinary little geniuses.

After thousands of trials and tribulations, there are still repeat purchases. The competitiveness in between is within a millimeter. Let me give you an example! I have bought some new domestic products. To be honest, the moment I received the express delivery, my intuition told me that something was wrong: exaggerated and full of gimmicks, expensive fillers, expensive logistics costs, solemn but unnecessary packaging boxes, product performance without obvious advantages...

I can’t say I will never buy it again, but I don’t have much motivation to buy it again. Unless the anchors tell us sincerely next time that this price is a bargain.

Live streaming often promotes “goods” rather than “brands”. The value of live streaming here is actually just “dealers”. Many people say that live streaming also has content value? Doesn’t the anchor count as a medium? You know, the “media” value that live streaming has now was also possessed by traditional dealers and store dealers in the past. Their shopping guides and store promotions were not useless. But in essence! It is still channel value.

The difference is: this channel is too strong. The current "value chain distribution" means that companies do not have much room to do brand accumulation, research, team promotion, and investment. They can only desperately cut costs and produce products of lower quality. If you don't believe it, you can go and see the real R&D investment ratio of new domestic products and compare it with the channel investment ratio.

The "goods" with high sales volume are not "brands". The biggest risk of goods is that once the influence of the channels is removed, sales volume will drop sharply.

3. What is the real route of domestic brands?

Sooner or later, Chinese products will have to create their own brands. This is inevitable. A true brand has a lasting fragrance, sufficient self-sustaining ability, and a healthy and reasonable value chain distribution.

At present, under the radical "sales-only theory and growth-only theory", domestic brands have taken some detours and focused on selling goods rather than brands. Many companies have been caught up in this and cannot move. This process is really a bit complicated. The Internet, which shouts "de-intermediation", has focused on the business of middlemen in recent years.

So, what is the real route for domestic products to truly own a brand?

"Adjust the reasonable value chain."

To put it bluntly, brands need to think clearly about what they are doing and how they make money. The time, money, and team that brands actually invest in R&D and production; the effort, thought, and money that brands put into brand propositions, brand content, and brand standards; and the input and output of brands in supply chain lean management must all be clear and real. You cannot regard the meetings that focus on running GMV every day as the entire value of a brand, and you cannot regard cooperation with channels as the entire capability of a brand. You should really do what you should do, and don't be vague about holding your rice bowl.

Although the overall environment is not good, people who work hard and honestly are actually doing well. Not long ago, I visited the factory of a particularly low-key baking brand. Their production and shipments are in order, their e-commerce and brand are growing steadily, and they live a very solid life. In fact, looking back, the truth is very simple: don't always think about being a weakling, hugging thighs, taking shortcuts, and making a breakthrough. The real strong are all carving out their own skills, steadily moving forward at a snail's pace, and in time, they will eventually become great.

Author: Li Qian

WeChat public account: Li Qian talks about brands (ID: liaotian78)

This article was originally published by @李倩说品牌 on Operation Party. Any reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 agreement