New consumption this year: Everyone is cleaning up the "snow in front of their door" during the cold wave

At a time when homogeneous competition among new consumer brands is becoming increasingly fierce, quantitative indicators such as scale and performance can reflect the operating conditions of a company at a certain stage, but they are not representative of the core value of the brand. If a brand wants to be stable and long-term, it must have its own cultural support and cultural identity that can be recognized by the market and the times. The author of the following article introduces the marketing and strategy of new consumer brands.

In the past two years, the new consumption industry has experienced rapid boom and bust. From capital optimism to massive capital injection, the IPOs of companies such as Pop Mart and Perfect Diary instantly ignited the fire of new consumption. However, just one year later, with the cooling of capital and the impact of the objective market environment, the "dream of wealth creation" of new consumption quickly returned to calm, and the development of many new consumption brands ushered in challenges.

(The new consumer brands mentioned in this article refer to brands that are driven by new technologies such as digital technology, new business models such as online and offline integration, and new consumer relationships based on social networks and new media to meet the consumer needs of the new era.)

Typical examples include the IPO failure of Jiaoxia, the stock price of Yixian E-commerce falling below the issue price, and the slowdown in the marketing growth of Pop Mart. The "unicorns" that once dominated the new consumption field have encountered problems such as slow performance growth and stock price performance that is lower than expected. Coupled with the impact of the epidemic, capital has changed its previous style of lavish spending, and the new consumption industry has also fallen into pain.

Image courtesy of Crawley

From rapid growth to development bottlenecks, new competitors emerge in endlessly, consumers' attention shifts rapidly, financing is difficult, and costs continue to rise. After this grand new consumption "carnival", where should new consumption brands go and how should they seek long-term development? This article reviews the development and difficulties of the new consumption field in recent years, hoping to bring inspiration to readers.

1. The “temperature difference” of new consumption has changed suddenly, and advantages have become disadvantages

Looking at the new consumer brands that have emerged in recent years, some have emerged by relying on innovations in products and marketing methods, while others have opened up the market through new demographics and new communication channels. However, with the increasing cost of online traffic and the low "copying threshold" of products, the force that once helped new consumer brands emerge has become the most easily replaced link of the brand.

In November 2020, Perfect Diary's parent company Yatsen E-Commerce rang the bell on the New York Stock Exchange and closed up 75% on the first day, with a market value of over US$12.2 billion. It was once called the "No. 1 Chinese Beauty Stock". However, Yatsen E-Commerce's net profit attributable to the parent company in 2020 and 2021 was -2.688 billion yuan and -1.541 billion yuan, respectively, and it fell into a "vortex" of continuous losses. In April 2022, Yatsen E-Commerce received a letter from the New York Stock Exchange, notifying the company that it must restore its stock price and average stock price to more than US$1 within 6 months. If it fails to comply within the above period, the New York Stock Exchange will initiate the suspension and delisting procedures.

Yixian E-commerce's stock trend since 2021. Source/Internet

From its high-profile listing to its rapid cooling, Yatsen E-Commerce’s development history has become a "microcosm" of the current new consumer brand market.

Looking back at Perfect Diary’s popularity, the brand has made a lot of innovations and layouts in three aspects : communication channels, consumer groups, and supply systems , and has achieved rapid expansion by relying on the Internet dividends. These happen to be the three main reasons for the rapid rise of new consumer brands.

From the perspective of communication channels, in an environment where information is spread "virally", new consumption methods such as online shopping, social platform shopping, and live streaming have rapidly emerged. Mobile Internet, mobile payment technology, and the logistics industry have provided the consumer market with a more convenient consumer experience and efficient and secure transaction methods. The development of new technologies such as artificial intelligence and big data can enable brands to intelligently analyze and understand consumers' personalized needs, and provide the best quality products and marketing content based on consumers' personalized needs to the greatest extent. Various emerging technologies have laid the foundation for channel innovation and provided prerequisites for the development of new consumer fields.

Different from the shaping and maintenance of traditional brand communication channels, new consumer brands often use a variety of new communication channels based on the brand's products at different stages to achieve different marketing effects and ultimately realize the conversion of target groups.

For example, Wugumofang, which focuses on health and wellness, invited spokesperson Guan Xiaotong to the Douyin live broadcast room at the time of the new product launch, and posted relevant information on Weibo, using the celebrity effect to leverage the conversion of target users. In the subsequent product promotion phase, Wugumofang realized that young women who pay attention to health, such as "baby moms", are more likely to learn about health and parenting information on Xiaohongshu. Therefore, the brand magnified the "promotion" advantage of Xiaohongshu and began to publish relevant content on its own.

The choice of communication channels is not only based on the characteristics of the product, but also based on the insight into the preferences of the target consumer group. In 2018, Perfect Diary became the only Chinese brand among the brands with sales exceeding 100 million yuan on Tmall Double 11 through a large number of KOL content delivery and promotion on social platforms. In the selection of marketing channels, it pays more attention to the personalized needs of the Z generation. Based on the stronger "dependence" of the Z generation on social media, Perfect Diary has captured the attention of the Z generation and gained a group of main consumers belonging to new consumer brands.

When the problems of innovative marketing channels, people, and goods are solved, the innovation of the supply system fills in the last piece of the puzzle, the "field", for new consumer brands. Under the traditional supply system, consumers first need to understand the characteristics and price range of the product before making a purchase, and the process of understanding is often subject to the information provided by the brand. Consumers obtain information in a single and passive way, and mainly rely on product information released by the brand to make consumption decisions. Under the new supply system, e-commerce platforms, content platforms, supply platforms, and social platforms are integrated and developed with each other, and the boundaries are gradually blurred . Consumers have more diversified channels to obtain information, and the algorithm mechanism will also generate corresponding personalized consumer content recommendations based on consumers' consumption habits.

Under such conditions, new consumer brands can understand consumers' preferences more directly, consumers can also directly express their needs and product experiences, marketing information becomes more transparent, the information barrier between brands and consumers is gradually broken, and the distance becomes closer and closer.

In addition to the beauty track where Yatsen E-Commerce is located, the two major market segments of coffee and beverages represented by Yuanqi Forest, Mixue Ice City, and Heytea have received frequent investment and financing, and are deeply favored by capital; food brands such as Zihaiguo, Zhong Xuegao, and Wang Xiaolu have formed brand recognition online and relied on huge retail terminals offline to jointly develop online + offline channels; new domestic brands such as Bananain have seized the refined categories of clothing and achieved a rapid increase in brand voice... New consumer brands are rapidly rising in various categories with their innovative layout in three aspects: communication channels, consumer groups, and supply systems.

However, a very critical issue is that the threshold of the track these brands are in is not high, and the brands have not formed their own "barriers". Both their products and marketing methods are highly "replicable" . This fundamentally leads to the fact that most new consumer brands find it difficult to maintain long-term revenue growth after the outbreak, and their popularity gradually weakens.

2. The “snow” has fallen, and new consumption has entered a cold winter

According to relevant data, in the first half of 2021, the number of financings in the entire new consumption track reached 595 times, with a transaction amount of nearly 127 billion yuan. Since then, the situation has taken a sharp turn for the worse. In the second half of the year, the number of financings was 483, with an amount of 76.67 billion yuan, which was almost halved. In the first half of 2022, there were only 241 financings in the new consumption track, with a cumulative amount of only over 10 billion yuan. Against this background, capital "darlings" such as Heytea, Nayuki, and Zhong Xuegao began to fall into the predicament of layoffs, price cuts, and stock declines.

Comparison of new consumer financing in the past three years, chart by Clough

At the beginning of 2022, an employee revealed that Heytea's large-scale layoffs involved 30% of its employees, and even some departments were completely laid off. According to Phoenix.com data, as of February 2022, the total market value of four typical listed companies in the new consumption field, Yatsen E-Commerce, Nayuki's Tea, R.I.T., and Pop Mart, has evaporated by more than 450 billion yuan compared with the highest market value since its listing.

In addition to layoffs and public opinion in the capital market, some brands of varying quality have also put on the cloak of new consumption. They use traffic and concepts to "detonate" a product, use stories to attract capital and consumers to enter, and rely on the "traffic-centered theory" to frantically reap the benefits brought by popularity and capital. At the same time, some representative brands have also been exposed to many problems such as false propaganda and food quality and safety. For example, Yuanqi Forest's "0 sugar" is actually "0 sucrose", and the ice cream brand Zhong Xuegao claims to "only use special red grapes from the core grape planting area of ​​the Turpan Basin", but the inspection report shows that the specification grade of the red raisins is "bulk/level 1"... The various problems exposed have gradually made many consumers question new consumer brands.

Not only that, the penetration rate of new consumer brands is increasingly insufficient, and this shortcoming has also caused the capital and consumer markets to begin to re-examine the development space of new consumer brands. Taking scene penetration as an example, continuously expanding market coverage is both a stage need for growing brands and a requirement for capital appreciation. However, under the influence of objective factors in 2022, many new consumer brands' stores are in a state of "not making ends meet" and have to announce closures after operating for a period of time. For example, Cha Yan Yue Se announced this year that it would temporarily close about 70 or 80 stores in Changsha, and this is already its third concentrated temporary store closure this year.

From the perspective of products, new consumer brands often quickly increase brand awareness through popular products, which can improve the efficiency of brand expansion, but also lower the production threshold of products. On the one hand, because new consumer brands mainly rely on the OEM model, the threshold is relatively low, and competitors have entered one after another, and it is easy to fall into homogeneous competition. For example, Yuanqi Forest, although the brand continues to develop new products, however, with traditional "national brands" such as Nongfu Spring following up with 0-sugar beverages, relying on its huge dealer system, brand power and other factors, it quickly seized a certain market share of Yuanqi Forest.

On the other hand, how to continuously launch hot products and continuously increase the revenue curve is a longer-term problem faced by new consumer brands. For example, the new products recently launched by Pop Mart have not caused a great response in the market. Whether it can develop a hot IP like the Molly series again is an important challenge facing the brand. For this reason, Pop Mart's recent market performance is declining.

Judging from the challenges faced by various new consumer categories, the fundamental reason why new consumer brands are not popular is that after the brand quickly achieved a buzz, it did not form a relatively long-term popularity continuation. As emerging brands that rely on new market demands and marketing methods to develop, new consumer brands often do not have brand heritage and product advantages. From supply chain to sales channels, to product research and development, they are easily impacted and challenged by traditional brands, thus quickly falling into homogeneous competition.

For brands, the primary issue that needs to be considered is how to quickly adapt to market changes, build their own explosive product matrix, and thus open up new business growth.

3. Bottlenecks emerge, and each brand has to deal with its own problems

Today, most new consumer brands are in the recovery and transformation period after the "pain". The consumer market is gradually recovering, and new consumer brands have ushered in a new round of development opportunities. Mixue Ice City launched Lucky Coffee to enter the coffee market; Santonban emphasized the creative attributes of its products and guided consumers to create special coffee blends; Hutouju and Heytea have successively opened up franchises to cater to trends and share risks... The innovation of products and business methods has become an important direction for new consumer brands to develop in the future.

New concepts are new concepts of consumption, aesthetics and life. As mentioned above, the change of consumer groups is inevitable, and every change of consumer groups is a change of new consumption concepts. People born in the 1960s and 1970s pursued food and clothing, people born in the 1980s and 1990s pursued quality and health, and people born in the 1995s and 2000s pursued aesthetic fun and convenience on the basis of the former two. More and more people born in the 1990s have turned their attention to health and wellness, and hope to improve their health through the scientific use of nutritional supplements. At the same time, the market situation of one size fits all can no longer meet the increasingly prominent personalized needs of consumers. People of different ages, genders, and physical conditions have shown a clear tendency to diversify their demands for product functions.

Therefore, the creation of marketing content for new consumer brands must conform to the aesthetic tastes of young consumer groups such as those born after 1995 and 2000. Take Santonban as an example. In addition to creating the concept of "super instant boutique coffee", the brand also brings new ways of playing in terms of product fun and creativity, changing the traditional routine of single brewing of coffee.

Under the intentional guidance of the brand, many netizens shared the fancy combination of Santonban coffee with sparkling water, ice cream and other products on social platforms. The playability brought a lot of UGC content to Santonban, greatly shortening the brand's marketing chain. Nowadays, consumers' attention is scattered on many different platforms, and the long marketing chain has become a short chain. The motivation for consumers to buy a product is no longer to distinguish and compare, but depends on whether the product can successfully attract consumers' attention at the moment of marketing. This is the challenge faced by new consumer brands, but also an advantage.

If brands win consumers' attention through marketing, it is the gathering of short-term traffic, then the establishment of brand recognition is the driving force for the long-term development of new consumer brands. The establishment of recognition is to occupy the minds of users for a long time, establish an orthodox and unbreakable cultural label in the minds of users, and let users form a psychological cognition of "this brand does this".

At present, new consumer brands often focus on a fixed track. Even brands such as Adopt a Cow and Wang Xiaolu directly point out the niche in which the brand is located in their names, which has a unique advantage for consumers to form a brand awareness. However, new consumer brands are often established for a short time, and their own influence and brand awareness have not yet completely "established a foothold". In this regard, new consumer brands still need time to settle.

Only by grasping the value demands of consumers, leveraging new channels such as social media, and consolidating the brand's position in the minds of consumers through content innovation and brand reinforcement, can we maintain brand vitality in the long term and turn sudden popularity into long-term success.

In addition, most new consumer brands often cooperate with OEM factories to produce products, and do not have core technologies and techniques themselves, which makes it more difficult for brands to supervise products, resulting in a series of problems such as high OEM costs and difficult quality control. Only by focusing on products and using brand concepts as a means of reaching out can new consumer brands gradually avoid the negative impact of content marketing and public opinion.

For example, before the brand was born, founder Xu Xiaobo imported 6,000 Holstein cows from Australia and invested 460 million yuan to build the company's first modern ranch. So far, Adopt a Cow has successively established 7 large-scale modern dairy farms, forming the brand's own competitiveness and barriers from the source of the product, laying the foundation for the brand's market competition.

New consumption was born in the era of digital economy and has gained the dividends of digital economy. In terms of production, manufacturing, supply chain management, etc., there are still many aspects of new consumption that can be continuously deepened in digitalization. Being able to bring consumers a better experience is the foundation for an enterprise to stand in fierce market competition and the basis for forming differentiated advantages. Products are the soul of enterprises and brands, and the quality determines the life of products. Similar to the overall development logic of the consumer market, the reputation of products affects the sales performance of new consumer brands, and the influence will become stronger and stronger.

Overall, the way for new consumer brands to break through is to make rational use of the advantages in the early stage of new consumption development, work hard on concepts, marketing content and product creation, so as to establish consumers' long-term recognition of the brand.

4. After the snow is cleared, the road becomes clear

The development of new consumer brands conforms to the development law of the consumer market. The future direction of the consumer market plays an important role in guiding the development layout of new consumer brands. In recent years, consumer demand and new technologies in the fields of education, elderly care, culture, and tourism have continuously generated new consumption methods and business models. Knowledge payment, home fitness, e-sports events, smart elderly care, virtual tourism... These emerging service consumption fields have huge growth potential and development space, and products and concepts related to these consumer fields may usher in new development space.

As the concept of green consumption becomes more and more popular, low carbon and environmental protection are gradually becoming a fashionable lifestyle. In this context, a "green craze" may emerge in the new consumer market. Giving products a healthy and green concept will help brands gain consumers' favor.

In addition, young consumers are willing to pay for the appearance and creativity of products. Fashion consumption is becoming more and more popular. Consumers' consumption behavior is no longer just a simple exchange of goods and money, but more about pursuing self-expression and identity of values. In line with the trend of fashion consumption, related businesses and products based on consumer experience, personalized design, flexible manufacturing and other perspectives can stand out in the competition of the same category.

While new consumer brands focus on product and marketing content, they often neglect service and after-sales service. Nowadays, consumers' consumption decisions have gradually shifted from being mainly function- and price-oriented to being centered on quality and service decisions, and "self-pleasing consumption" has gradually emerged. In line with this consumption concept, new consumer brands should focus on providing consumers with high-quality services in addition to products, so as to achieve long-term retention of consumer groups.

The current consumer market relies on e-commerce platforms to present the characteristics of "zero time difference, zero distance, and zero channels", and platformization has become one of the key characteristics of the new consumer market. In the future, this trend may continue to deepen, and the relationship between brands and platforms will become closer. Relying on the "grass planting" of different social platforms, multi-dimensional KOL content co-creation, realizing the linkage of public and private domain traffic on the platform, and completing the new channel layout of online and offline integration will be an important trend in the future development of the new consumer market.

Haier founder Zhang Ruimin once said: "There are no successful companies, only companies of the times. All companies develop in the times." Many new consumer brands have taken advantage of the consumer environment, but they still cannot overestimate the competitiveness of their brands and products. We must correctly view the development law of the new consumer market. New consumption has not changed the essence of corporate operations, but is a new variety of products and new consumer environments. We must still focus on consumer demand and not indulge in marketing. Instead, we must continue to be consumer-centric and increase product research and development efforts and service quality.

5. Final Thoughts

Ultimately, the explosion of new consumer brands is the result of different industries filling their respective existing market gaps based on their insight into the needs of new consumer groups represented by Generation Z. If new consumer brands want to seek long-term development, they must first avoid the model of "focusing on marketing and neglecting products". Product strength is the foundation of new consumer brands. While having good products, they also need to tell their own brand stories and enhance brand value.

At a time when homogeneous competition among new consumer brands is becoming increasingly fierce, quantitative indicators such as scale and performance can reflect the operating conditions of a company at a certain stage, but they are not representative of the core value of the brand. Simply grabbing consumers' immediate attention cannot be a long-term strategy for the success of new consumer brands. If a brand wants to be stable and long-term, it must have its own cultural support and cultural identity that can be recognized by the market and the times. This is also a topic that most new retail brands in China will face in the future.

Author: Dake

Source: TopKlout (ID: TopKlout), a self-media ecological observation account that combines good-looking and informative content