The State of New Consumer Brands in China

Disruptive brands are redefining the status quo, pushing mature competitors to redefine themselves.

The rapid rise of the so-called “new consumer brands” in China has led many marketers to invest in understanding the secrets to consumer brand success. Based on decades of experience building relentlessly relevant brands, we will take a look at the emergence of this phenomenon and its foreseeable challenges.

On October 20, the 2021 Singles’ Day Shopping Festival was officially launched. The sales from Austin (Jiaqi) Li and Viyaaa’s live broadcasts reached $1.8 billion and $1.3 billion USD, respectively. The emerging domestic cosmetics brand, Bloomage Biotech’s QuadHA, which only gained traction in the last two years, had a single-day sales volume of $52.3 million USD. Amidst this unparalleled growth frenzy, what are the driving forces accelerating the success of new consumer brands?

The rapid rise of new consumer brands is defined by three major drivers – people, goods and channels.

First, the post-95s generation possesses huge buying power and is the main force driving consumption upgrades. As digital natives, this generation is constructed of eager online shoppers who are prone to impulse buying and willing to pay for aesthetics and good design.

“Digitization has redefined the entire shopping experience, enabling multiple business models to exist simultaneously.”

Next, fueled by enormous capital funding, new and evolving brands have continued to energize the consumer market. During 2021’s 618 shopping festival, 459 new brands topped the Tmall industry bestsellers list, whereas 2020’s Double 11 festival only had 357 new brands as top sellers.

Lastly, digitization has redefined the entire shopping experience, enabling multiple business models to exist simultaneously. For example, HeyTea enables seamless online to offline transactions through its WeChat mini-program, helping customers avoid long queuing times. The C2M (consumer to manufacturer) model sends customer feedback directly to manufacturers, empowering them by providing closer linkage to consumers’ needs and wants. Genki Forest leverages both convenience stores and e-commerce channels to test and incubate new products.

Source: Genki Forest

With the gradual saturation of the new consumer market, top brands are becoming more mature. In turn, investors’ strategies have also begun to change. They are no longer casting wide nets and testing multiple routes; instead, they are focusing on developing resilient brands by carefully selecting investment opportunities with disruptive potential.

So, how can emerging brands showcase their potential, and how can mature brands solidify their advantages? In this article, we’ll explore what it takes for consumer brands to win in the market today.

Four Key Aspects of the New Consumer Brands Phenomenon

Today’s new consumer brands have acquired the foundation and engine for the steady rise and explosive growth. This has accelerated the consumption upgrade and innovation trends in the market. While emerging brands are creating new subcategories, mature brands are also actively evolving and transforming. Among the leading brands, many are continuously optimizing their supply chains and leveraging sophisticated social commerce strategies to establish deeper connections with consumers.

With the continuous evolution of the new consumer market, we need to pay attention to four key aspects:

1. Disruptive Brands Redefine the Status Quo

Amid ongoing pressure from mature, traditional brands and ever-rising consumer expectations, many disruptive new brands have broken through and continued to expand by creating new subcategories or capturing existing ones.

Launched in 2018, Zihai Pot disrupted the concept of traditional hot pot by creating a new subcategory – instant hot pot. Different than the conventional hot pot that is eaten in a group setting at restaurants, Zihai Pot can be enjoyed by oneself anywhere and anytime. As “hometainment” became a prominent trend during the Covid-19 pandemic, Zihai Pot saw accelerated growth, surpassing $94 million USD in sales in the first half of 2020. Within four years, “Zihai Pot” is no longer just a brand name; it has become a category name in itself, with consumers associating the brand with all types of self-heating food. This has created a perception in consumers’ minds that the brand is the category, and the category is the brand.

Another interesting example is Cha Yan Yue Se, a highly sought-after Internet-famous milk tea shop. Notably, it did not follow the rapid expansion strategy of competitor brands. Instead, it deeply rooted itself in Changsha, offering limited locations in other cities and creating a sense of scarcity and mystery. This strategy allowed the brand to become an entire cultural phenomenon. Chan Yan Yue Se is now a major landmark in Changsha, attracting tourists from all over China as they embark on “The Pilgrimage” to visit.

Young consumers lining up for Cha Yan Yue Se (Source: CBNWeekly)

2. Mature Brands Reimagine Themselves

Faced with increasing pressure from cutting-edge brands, mature brands are actively undergoing their own renewal and transformation. They have accumulated unique cultural connotations over time and then leveraged technology to maintain their advantages.

One of the most successful examples is the skincare brand, Pechoin. In recent years, Pechoin, recognized as one of China’s time-honored brands, has refreshed its brand image many times. For instance, new product lines, such as “Sansen,” incorporate youthful design elements to target younger consumers while also leveraging a new concept of “herbal technology.” This concept deepens brand heritage by reflecting Chinese culture while also infusing technology to meet the increasingly high standards of product ingenuity and quality that sophisticated consumers demand.

In terms of cultural heritage, Li-Ning is undoubtedly one of the leading brands in the country. To shatter its old-school image, the sportswear brand showcases its newest designs in the top fashion weeks three times a year, embracing conspicuous Chinese characters, ink painting patterns and other Chinese elements in its designs. Additionally, Li-Ning has gone above and beyond the product to establish meaning for the brand itself by creating an emotional connection with a new generation of consumers, who have a strong sense of national pride.

Li-Ning at the New York Fashion Week (source: iFeng)

3. “Private Traffic” Connects Users

Another widely recognized trend in new consumption is dubbed “private traffic.” “Private traffic” describes the customer engagement channels used by brands on non-public social platforms, such as WeChat groups or QQ messaging. In this way of personalized communication, brands gain full control over the content, frequency, and most importantly, customer data. On the other hand, for so-called “public traffic,” aggregated customer data is conveniently provided by digital platforms such as Taobao, Weibo or TikTok, but often with significant limitations. While these platforms provide bigger traffic pools, to sustain growth, brands must continually invest to increase their rankings and visibility on the platform and win customers.

An early success story of leveraging “private traffic” is from THE BEAST – a florist that has grown into a successful lifestyle brand. However, its origin story of becoming the legendary flower shop it is today started with customers ordering flowers via the social media platform, Weibo. THE BEAST listened to customer stories, invited them to create together, and then transformed these stories into products in the form of flower bouquets. Since then, this purpose-led branding approach has effectively attracted many loyal customers.

China’s leading electronic vehicle brand NIO is committed to building a user-first brand. Its highly applauded membership program has been a case study for many and contributed to its commercial success and loyal customer base. In 2018, NIO expanded its membership program by launching “NIO Points,” the content of which was a result of NIO members’ discussions and brainstorming. On top of the existing reward system where users exchange points for gifts, this new user credit system allows users to increase their credit level by interacting with and contributing to the community, thereby gaining access to opportunities such as getting to speak at major brand events. Through consistent product iteration and innovation, users continue to grow into the brand community.

NIO House provides community spaces for its members (source: SHL)

4. The Supply Chain is Optimized

China’s supply chain technology and talent have reached a highly mature stage. Many emerging brands have been able to build on this solid foundation to continue developing modern operating concepts and innovative business models through deep optimization of the existing supply chain.

Wangbaobao, an innovative new cereal brand, differentiates its product through low-temperature baking and the unique inclusion of large, dried fruit pieces. To successfully bring the innovative brand to life, Wangbaobao worked to restructure the production line according to new consumer needs, setting new standards for modernization of the manufacturing process. Additionally, in order to maintain the product quality, Wangbaobao invested in building its own factory to bring to fruition this re-engineered production process.

Additionally, new retail players such as Freshippo, Alibaba’s supermarket concept, have converged their online and offline channels to achieve centralized operations and data tracking. By analyzing supply chain and e-commerce data in real-time, they are able to better predict demand, automatically allocate and restock goods, and minimize management costs.

Opportunities and Challenges Facing New Consumers Brands

Although many new consumer brands have taken the lead with outstanding innovation, branding, operations and supply chain management, they still must overcome fierce competition and a rapidly changing market to remain ahead of the pack. For example, in the Top Brands 2021 survey published in Yi Magazine, Genki Forest was classified as an “at-risk brand”. In the bottled tea category, its ranking dropped 31 places from its top five standing last year. We expect that new consumer brands will encounter the following challenges in the next few years:

  • The marketing dividend on seeding influencers has disappeared: The short-term high traffic brought by social media seeding is unsustainable. Consumers are tired of being pushed “tailor-made” content, and their trust in KOLs is also declining.
  • Viral products fail to retain customers: Most of the new consumer brands quickly breakthrough with viral products. However, afterward, due to a lack of both effective product portfolio management and brand purpose, they face the loss of old customers and the inability to develop new ones.
  • Supply and demand lose balance: The new consumption trends make agility a desirable attribute, but the flexible and diverse supply chain makes managing it more complicated, and it can be difficult to balance efficiency and cost.

With the continuous rise of new consumer brands, emerging players must actively optimize their brands and marketing strategies to balance short-term conversion rates and long-term customer loyalty to achieve sustainable growth. Brand building has become the next key area of focus.

For new consumer brands that have been successful, their next step is to establish themselves as the exemplar brand of the entire product category, while also creating emotional value that can resonate deeply with consumers.

At Prophet, we firmly believe in building brand strength through relevance with a customer-centric approach. To learn more about how your brand can improve its relevance and continue to grow in the rapidly changing new consumer market, contact us today.


What makes a brand relentlessly relevant?

Relentlessly relevant brands engage, surprise and connect. They delight, disrupt and deliver. They are restless. They push themselves to earn and re-earn customers’ loyalty — and they define and redefine what’s possible in their categories and in our world. The companies that have built relentlessly relevant brands generally have four common principles: customer-obsessed, ruthlessly pragmatic, distinctively inspired and pervasively innovative.

Click here to read our expert panel to learn more about how to build brand relevance in the Chinese market.