Small and Beautiful, Vertical Integration, Category Singularity, Profitability, Sense of Embeddedness, Masterminds, Lifestyle Propositions, and Agri-Food Branding, which are the main points of entry for our continued focus on these areas in the coming year.
Cityscape.png
A previously distinct retail landscape of retail and e-commerce, near-field and far-field, physical and service, and interest and search is evolving into a fully interwoven and highly synergistic "Big Retail Landscape".
The essence of retail is information, transaction and logistics. The reason for the emergence of the "big retail pattern" is that the potential of the Internet to rely on the ability of traffic to aggregate information, summarize transactions, and enhance the efficiency of circulation has been played to the extreme. Next, through the technology integration and synergy of different retail formats, in order to y upstream and downstream transformation of the supply chain, to build a more solid circulation system, it has become to compete with the hard work.
Ali, Pinduoduo, Jingdong, and Meituan's investments in industrial belts, origin warehouses, logistics and warehousing, agriculture, and hardware technology stem from this.
For example, Meituan, which has been making a lot of moves recently, is taking the traffic capacity and instant delivery capacity accumulated in the field of local life services as a base, and attacking the community group purchase (Meituan Preferred), near-field e-commerce (Meituan flash store warehouse, Meituan grocery shopping), and far-field e-commerce (Tuan Good Goods), and the "big retail" will become the second development curve of Meituan in the next ten years. The second development curve.
In this light, the old rivals of Meituan are no longer just "Hungry Mou" such as catering takeaway platforms, but Ali's newly formed Chinese digital business sector (including Taobao, B2C retail, Amoy dishes, Amoy special, etc.), as well as the same belongs to the Yu Yongfu life services sector and the city retail. Pinduoduo in the layout of the network e-commerce and community group purchase, Jingdong in the layout of the community group purchase and the same city retail (synergistic Dada), will become the next giants will fight the front battlefield.
The trend of integrating two sides with the industry is that the giants are becoming more and more clear about the boundary capabilities and sense of synergy, such as trading platforms and grass-roots platforms. Jitterbug is based on recommended e-commerce, complementary search e-commerce, and local life services, plus its cooperation with Daily Fresh, as well as the strategic cooperation between Shutterbug and Meituan, all belong to the typical embodiment of based on the flow capacity, and the joint existing supply chain to complement the delivery fulfillment capacity.
It should be emphasized that the so-called "closed loop" of e-commerce emphasized by the big community in the past two years is not a real closed loop, but a typical embodiment of "a set of supply chain for the whole network", for example, Jitterbug's rapid entry into e-commerce transactions in kind, selling movie tickets and so on. Local life services, equivalent to the already Internet-based suppliers to open a plug-in interface.
Business model.png
So, Ali, Jingdong, Jinduo's long-term investment in the supply chain will also play an increasingly important value. The opening of the domestic commercial B and C systems in Ali's organizational restructuring at the end of 2021 is also intended to fully unleash its supply chain advantages.
Behind the accelerated integration of retail, a new consumption pattern is being formed. The big consumer pattern we are concerned about is a big industry that encompasses everything from crowd demand, supply chain, new brands, to seeding platforms, trading channels, and infrastructure such as logistics and warehousing and digital technology.
This industry is showing several defining trends from online to offline, from traffic to goods, from brand to industry, and from China to overseas.
Sales Chain.png
Over the past few years, in the wave of new consumption driven by e-commerce platforms, new brands are the protagonists, VCs provide ammunition, communities sell traffic, head anchors play gas pedal, and the pattern of each vertical category is being finalized.
In the verified categories, the top one or two are trying to break the category ceiling, and the top three or four are looking for a new way out. In the category that has been falsified, if the sales of one or two declined, the three or four were not well financed.
After the category pattern is first set, vertical integration will become the core trend. Integration is driven by two elements, one is the head of the brand through the self-built capacity, self-control channel to the upstream and downstream, the other is the head of the enterprise to accelerate the transformation of digitalization, intelligence, so as to realize the industry from the supply chain to the brand and then to the delivery of the whole chain of synergies, the final effect is that the vertical integration of the industry synergies will be deepened.
Rio, Honey Snow Ice City, the core barriers of such companies lies in the value of its supply chain, rather than simply the value of the C-terminal brand. For example, Rio's parent company, Paragon, develops flavors and fragrances that, in addition to its own use, are supplied to PepsiCo, Yuanqi Forest, Nongfusanquan, and a significant number of low-proof alcohol brands, with B-side revenues already accounting for 10% of its total revenues.
This wave of new consumption wave, run out of the head effect of the new brand, platform effect, profitability effect, the effect of the sea, will also become a more clear development trend in the coming year.
Bubble Mart, Perfect Diary, Yuanqi Forest and other head companies have begun to explore from brand to platform attempts, frequent investments and acquisitions, the upstream supply chain, R & D continued investment, is a reflection of this.
Once the head of the company platform, its vertical industrial integration, horizontal boundary expansion, will bring more space for development. The main role of its industrial chain will also become the ultimate capital home of small and beautiful brands.
Relying on the domestic supply chain, channels, especially the spillover effect of traffic operations, the head of the brand is also destined to have the opportunity to become an international brand, especially the platform's large sums of money to add, including Ali transfer general Jiang Fan, byte TIKTOK / Fanno all together, Tencent investment in cross-border e-commerce companies such as Cider, the brand out of the sea to be able to enjoy the channel spillover effect, has been crying out for.
But all this needs to be built on the premise that the category has been verified to have the possibility of branding.
Therefore, "category thinking" will again become an important idea for us to observe the development of the consumer industry, whether it is a single product out of the brand, or the channel that is recognized, which categories have been falsified, which categories are still waiting for the outbreak of the singularity.
It is certain that the simple flow of thinking no longer completely work. We need to review what Simon Peel, Global Media Director at Adidas, said in an interview with MarketingWeek in 2019:
Adidas has over the years over-invested in digital performance advertising, which appears to have a higher ROI, at the expense of brand advertising. This has led to a serious consequence: the seemingly more efficient advertising has led to a significant decline in brand value. Adidas chose between short-term profit and long-term value, and that ended up backfiring on long-term value.
A senior executive of Cotton Times also said similar words: the past ten years, the e-commerce platform is basically consuming the brand effect, because it is just doing transactions to do the flow .
After the tipping point, the content rather than pure traffic, the degree of intervention for the brand will be higher and higher, the path of large communities, large platforms involved in the consumer industry is also changing.
A manifestation of this is that content and advertising are rapidly merging: in the new round of adjustments to Ali's e-commerce, shopping and Taobao live are placed in a first-class position, and the byte system, centered on a giant engine, not only sweeps the advertising, but also tries to redefine the entire content industry and advertising cash through the role of the platform. Xiaohongshu, B station such as the hands of high-value crowd community, also re-focused commercialization to advertising, rather than e-commerce.
Another direct reflection of the deepening involvement of large communities in the consumer industry is that "lifestyle" will become the main axis of the crowd, platforms, and brands, driving brand repurchase and user relationships.
Xiaohongshu has emphasized many times over the past year that it is a "lifestyle platform" and has become increasingly proactive in getting involved in lifestyle campaigns to prove to brands that it is a key influencer in the consumer space, typically in camping and skiing. Jitterbug is trying to list "grass" as a primary entrance to the main site, and has also launched an independent e-commerce app similar to "Xiaohongshu+Get Things", and the channel operation strategy of Taoist e-commerce is also shifting to a lifestyle proposal from a through-train drill show idea.
Implemented into specific brands and commercial bodies, its requirements for content have become increasingly high. This is exactly what Tippi, the founder of Yongpu, emphasized, a consumer brand will go through three stages of "selling goods - lifestyle - cultural output", so a consumer brand has to have both "The reason why a consumer brand has to have media attributes, design attributes and advertising attributes at the same time.
The offline business is booming in the main caretaker ecosystem, but also the future development trend of large consumption of both sides of the body. When the large-volume shopping centers have been saturated, more into the community of small commercial bodies and neighborhoods, has become the new incremental operation object, and community business, whether in the flow of customers or category preferences, are more suitable for small and beautiful master store, rather than a large chain of efficiency-oriented commercial brands. This is also the reason why commercial bodies such as Genno Regular and TX Huaihai have received attention over the past year.
In the words of Huang Wei, co-founder of The Boxx, consumption used to be about eating and drinking, but nowadays consumption needs to be immersive, interactive, and communal, and commercial spaces need to be upgraded from spatial operation to content operation and user operation, which in a nutshell means injecting content into the assets, and driving consumption with culture.
Based on our focus on the dimensions of big retail, big consumption, and big community, we have listed a few keywords about the business trends in 2022, which will be the main entry point for us to keep focusing on these areas in the coming year.
First, the category singularity
Many of the category dividends in the past two years were generated by the superimposition of the traffic dividend + epidemic factors.
Procter & Gamble and other FMCG manufacturers from the product manager + flow manipulator + foundry, small red book notes + head blogger grass + head of the live broadcast endorsement + infomercial unlimited release, a new brand was born from this, the core business model is the online DTC.
More than one new brand to solve the same consumer demand, they form a so-called wind mouth of the new category.
These valued consumer needs are often related to epidemics. Because of the epidemic home needs to solve the dietary problems, convenient fast food, frozen food, compound seasoning, prepared dishes and other areas continue to influx of new entrepreneurs; because of the awakening of health consciousness and attention, plant-based, sugar-free drinks, functional food, etc. began to accelerate the penetration of mass consumption; because of the long-term wearing masks, pupils, eyeshadows, functional skincare, etc. in the cosmetic sales to experience high-speed growth.
Category Singularity.png
Also benefiting from the most complete industrial chain structure in China, adequate industrial chain capacity, and the reduction of stable orders from factories in the epidemic, it also makes many foundries including high-quality head willing to open up their OEM and ODM capacity to new brands, and even a number of labels changing brands from B-end to C-end have appeared, competing in the same flow field as new brands.
This is the first time that we have seen a new brand in the market.
But the problem is that, by the flow + epidemic, in the two preconditions weakened or even receding, from the VC ammunition to provide more and more cautious, bringing a series of knock-on effects, the category dividend can be maintained for a long time and the degree of stability, and the category's business model whether the business model of online DTC is more and more highlight the relevance of the business model.
The origin of this correlation lies firstly in the C-end market acceptance of the category, for those categories that are difficult to occupy the minds of the public, its capacity and target groups or from the toC to return to the toB; secondly, in the C-end consumer channels to reach the efficiency of either B2C or S2B2C, whether it is to enter the traditional offline distribution channels or to set up a stove to build their own channels, the efficiency of the The best and the worst determines the direction of the circulation.
Finally, the flexible squeeze between different categories always exists, cost-effective and convenient, supply chain efficiency and differentiation, even in the same channel, will also play an important role.
So far, after the ebbing of consumer financing, the development direction of each category that had been highly touted began to diverge, and the confirmed categories may be able to continue to push forward, while the falsified categories will face the natural shrinkage of the market space in the heat, and wait for the emergence of new variables and time conditions in this dynamic process in order to return to the upward sequence, which is the category singularity.
Second, small and beautiful
Over the past year, most brands encountered growth difficulties. Behind this, not only is the VC ebb, grass backlash, flow dividend recession caused by the combination of circling, user *** creation, DTC and other industry trends, most brands to determine the future is likely to be small and beautiful.
Discovering small and beautiful.png
Former Meizu senior vice president Li Nan mentioned on several occasions that one of the ****ing insights he had in 2019 with then Ali CEO Zhang Yong was that most of the GMV of the e-commerce platforms now comes from the world's top 500 companies, but in the future, there may be 5,000 or 50,000 companies. The most valuable brands will increase by ten or a hundred times.
Tang Benson also mentioned that the future brand pattern should be segmented vertical, niche forest. Because the brand to solve the segmentation of demand, rather than the underlying demand. He used a very graphic analogy is that China fixed the Beijing-Shanghai highway, based on the Beijing-Shanghai highway to build along the street base station, is more valuable thing.
In addition to Yuanqi Forest and Burning Tea, Yuanqi Forest's brand matrix also includes sub-brands such as yogurt brand Beihai Ranch, energy drink brand Alien, juice brand Full of Points, and mineral water brand Yau Mineral, as well as Guanyun White Wine, Rustic Light Food, and Never Coffee, which have been incorporated into the group's brand matrix by means of investment.
Make a friend is also relying on anchor resources and channel capacity to build its own brand matrix, co-founder Huang He believes that the brand that may be truly successful in the future is N more than a small SHEIN, with less inventory, good optimization points, and a strong ability to react quickly, and more importantly, a clear profit model.
A noteworthy conclusion is that if most of the new consumer brands will become small and beautiful niche brands, then most of the brands will not have the short time and high multiplier returns that VCs expect, unless it is the head consumer brands such as Yuanqi Forest, Yixian Electricity, and Xi Tea, which have already had an absolute head brand and the ability to operate a brand matrix.
In this sense, the new consumer brand investment opportunities, indeed, has closed the door to the VC, but the old consumer giants in urgent need of brand refreshment and market value management have found their own opportunities, the head of the new consumer brands to invest in the phenomenon of the new consumer brands, but also still will continue.
Of course, every profitable brand, there will be more opportunities to choose, entrusted to the giants, or small and beautiful, are the way out.
Third, vertical integration
Small and beautiful brands, the head of the brand will be through the "vertical integration" expansion to achieve control of upstream and downstream, to further improve their own competitive barriers.
Vertical integration.png
One aspect of vertical integration is to extend upstream, whereby the brand realizes control over the upstream supply chain (raw materials, processing) through self-build, investment, etc., to avoid the constraints of raw materials and production capacity, and to improve the quality control of products.
For example, in 2021, Honey Snow Ice City, Tea YanYueShi respectively set up an agricultural company because the way to deal with the competition of product homogenization of the new tea drink track is product innovation, but this needs to be backed up by sufficient raw material supply capacity to ensure the stability of the procurement and pricing.
TeaFace.png
The other aspect is to build its own controllable sales network downstream. The purpose of the self-built offline channel is to accelerate the penetration of the husband and wife stores as well as to save some of the channel fees on the one hand, and to establish their own product testing channels on the other.
Brands in the process will also improve the efficiency of upstream and downstream control through digital systems, deepening the degree of integration and synergy. Some manufacturers are also using their own raw materials, production advantages, through incubation, investment and other ways to expand downstream integration, access to high value-added products deep processing.
Fourth, profit, profit, profit
All brand categories next year to face the core problem, can not escape "profit".
Over the past few years, new brands have become the norm with the capital prying explosive growth model, that is, through the short-term flow to drive the rapid growth of user reach and GMV, the loss of 40%, 50% of the brand in a large number.
Profit model.png
But from the second half of 2021 onwards, as the new consumer investment boom declines, the number of VCs is decreasing, and investment will become more and more cautious. The trend of the valuation of the new consumer representative companies, such as Perfect Diary, Nexue's Tea, and Bubble Mart, dropping back after IPOs is also influencing the primary market's investment enthusiasm and valuation considerations. In addition to the flow dividend gradually disappeared, "capital - flow" of the growth model failed, the new brand must have the ability to self-breeding.
After a wave of new brand damage, VC for new consumer brands is very harsh, if the GMV and ROI increase is too high, they will worry that you ignore the brand building, if the early focus on brand building too much, they will question the brand's growth rate, in addition, the brand is best to have the ability of the offline channel, or distribution network system.
For a new brand just starting out, the brand, sales, and channels are simply an impossible triangle, but this may also be a glimpse of the thirst for capital for the certainty of profitability and stability of long-term development of new brands.
Some of the former star segments of the track, due to the head of the company's growth rate can not meet the requirements of the capital market, non-top three companies are difficult to get financing, and even the entire track no one asked. Consumer goods naturally there is no zero-sum game, as long as it is a brand that meets the real needs of users and serves the target users well, it will have its own business, and after three to five years will also be optimized by the capital, but the premise is that the new brand should have the ability to be self-sustaining.
All in all, whether active or passive, capital and new brands themselves will increasingly emphasize profitability, focusing on the repurchase rate, ROI, conversion rate, customer acquisition costs and other data reflecting operational efficiency and operational quality. Some of the brands we came into contact with at the end of 2021 are emphasizing the role of repurchase rate in GMV growth, emphasizing cash flow control, and selling a single to make a single.
Fifth, the sense of embeddedness
Represented by Beijing, Shanghai, Chengdu, etc., the urban construction of China's first-tier and new first-tier cities has ended the overall planning and large-scale construction stage, and entered a more flexible organic renewal.
Compared to the previous generation's mega-commercial complexes that pursued one-stop services, these new projects based on the transformation of stock properties are small in size, scattered, and widely nested in different neighborhoods of the city in the limited urban space.
"Embeddedness" is a natural result of the transformation of old city stock. Shanghai's Yuejie Shaankangli, located at the intersection of North Shaanxi Road and Kangding Road, has a Western-style red-brick building at its core, which has served as a police station, a Sikh church, a repair shop, and a building materials market; and adjacent to the Xinhuali neighborhood, Shangsheng - Xinsho is based on the Colombian Club and Sun Ke's former residence for its architectural renewal.
InventoryRenovation.png
These commercial spaces nested in neighborhoods are often complemented by large shopping centers nearby. For example, Wuyi|MIX320 is adjacent to the Zhongshan Park shopping district; Chengdu's Regular Geno is just one intersection away from Ito-Yokado.
Unlike traditional community businesses, these new spaces should not only provide a kind of neighborhood convenience, but also have the ability to attract a wider range of customers, which requires them to find a new solution to the problem outside the traditional commercial real estate ideas. Beijing's Nanyang-***Hengyi takes theater as its theme and fills the space with rich theater performances; Shangsheng-Shinsho completes its attraction through Niaoya bookstore; and regular Geno becomes a popular landmark in Chengdu through the introduction of the main manager business.
"Embeddedness" will continue to receive attention from a wider range of dimensions, and to a certain extent, it is a tangible manifestation of the overall thinking of the new phase of Chinese urban planning. As the Shanghai 2040 master plan mentions in the chapter "Creating a Diverse and Integrated Urban and Rural Area" - a 15-minute living area is an important way to realize a livable city.
Six, master managerization
As an imported word, the concept of "master manager" was first used in trend brands to distinguish it from the managers of mass apparel brands. In the past few years, with the renewal of the consumer market, the concept of mastermind has been introduced and utilized in more fields in China, and has gained widespread recognition and attention.
At the heart of a master brand is "your own taste", which points to a more stylized and personalized aesthetic and experience. The brand is often self-contained and has a loyal following in their own circles. The new generation of consumers' pursuit of maestro brands demonstrates a change in their consumer needs and habits.
This change has been captured by commercial real estate as a new solution in urban renewal and space operation, of which Chengdu Regular Source Wild is a representative.
In non-Tier 1 cities, master managers have become a new career choice for young people in small towns, and a pathway for the sinking of new lifestyles. Under the trend of stricter and stricter control of the secondary market, and in the changing distribution mechanism, master managers also have the opportunity to become the direction of the future flow of social capital.
At the same time, represented by Jiang Sida, for the content industry, the emergence of a group of celebrity masterminds also provides a new definition of IP and a way to solve the problem.
In the broader consumer and retail space, the trend is for brands to become more "masterminds" of their operations, both in response to consumers' individualized consumption needs and in order to build more viscous user relationships.
The "mastermind" here can be a clearer product style, brand values, or a change in the way consumers are communicated with, as represented by marketing. It does not necessarily require a specific person in the foreground, pointing to a stronger personality attributes, style is also more unified branding approach.
Seven, lifestyle proposal
"Lifestyle" is a higher-dimensional term that allows the brand to go beyond the specific physical attributes of the product, category, and even the brand itself. It first represented a "taste" and "class" distinction, and when combined with consumer culture, it refers to a marketing concept with aesthetics and values, which naturally leads to higher user stickiness and better interaction.
In 1975, the American scholar Will put forward the concept of lifestyle marketing, which is a marketing approach that allows a group of homogeneous consumers with the same time and money patterns to generate a sense of empathy, mutual integration of knowledge and spontaneous recognition by the consumers through the understanding of the consumers' psychology, values, consumer behavior, and audio-visual contact, and to create a product that really moves the consumers. The first step is to create a new marketing campaign for the company, which is a way of marketing.
Lifestyle marketing.png
The earliest representative of this marketing concept was Ford, which introduced different lifestyle vehicles such as the Thunderbird, Mustang, and Impala around the 1960s, and since then has quickly regained its position as America's automotive leader.
In China, as grassroots, content, and communities play an increasingly important role in the overall consumer chain, "lifestyle" will become the main axis of crowd, platform, and brand engagement, driving brand repurchase and user relationships.
More and more brands are claiming to be "lifestyle brands", such as Beaster, which has expanded from lingerie to apparel, and from hip-hop to home and children's wear, and Modern Sky, which wants to elevate itself from a music company to a lifestyle company, to create a closer connection with the new consumer. Laughing Fruit started by directly defining comedy consumption as a lifestyle.
Some brands can even use the popularity of lifestyle to successfully break the circle. For example, the rise of camping as a lifestyle brought brands like Snowpeak to the forefront, and behind skiing was an opportunity for specialty brands like Burton and Dysanto to reach the masses.
This is of course also related to the overall oversupply of consumption and the increasingly obvious sense of consumer sovereignty. Lifestyle branding also accommodates the objective requirement for advertising to be increasingly content-based; forming a supply around a core demographic across different categories is a cost-effective way of expanding, especially given the extreme maturity of the domestic supply chain.
Eight, branding of agricultural products
The branding of agricultural products has long been constrained by the fragmented and lack of scale of the domestic production system, as well as the demand for discrete consumer markets. This two-pronged decentralized situation determines the lack of agricultural products to build the foundation of the brand.
The opportunity to shake up this powerful structure comes from the changes taking place in the downstream retail channels of the industry chain, as well as in the middle of the distribution chain.
It is also a bottom-up industrial transformation that has accelerated over the past two years.
During the retail industry's self-iterative process, discrete consumer demand for agricultural products has been brought together by e-commerce and new retailers. Based on these demands, the traditional multi-level, decentralized distribution resources, also began to be broken up and recombined.
The concentration of demand and the reduction of circulation links provide a favorable premise for agricultural products to brand from top to bottom. In this process, a part of the agricultural products category gradually showed the trend of branding. For example, mountain products, beef and mutton, aquatic and other processed foods, as well as fruits such as high commercial value of fresh produce. They can be in the circulation of change in the environment, the priority towards branding is the reason that its own production supply chain base is relatively concentrated.
Take nuts as an example, at present the domestic in Guangdong Jieyang, Zhejiang Hangzhou and other places have formed a considerable scale of the nut industry belt. They are not only the place where raw materials converge, but also the place where sales-related packages, logistics, manpower and other resources are concentrated. Under the premise of demand being centralized, the nut suppliers in the industrial belt have also gained the opportunity to be able to respond quickly to market demand. They are no longer just as a supplier role in the industry chain, but also began to have the ability to directly face the consumer market.
Of course, this top-down branding trend of agricultural products has just begun, and there is still a long way to go in front of it, the more to the upper reaches of the industry chain, the more complex the game relationship between the various stakeholders, the greater the resistance to brand building.
However, the ongoing iteration from within the retail system provides new solutions to deal with these complex interests in the upper reaches of the chain. The increased concentration and segmentation of consumer demand that they bring will be an opportunity for upstream agricultural branding in the coming year.