China is becoming the next arena for To C consumer start-ups.
In 2018, footwear brand Rothy's established a five-person team in Shanghai, which began selling on the Chinese network earlier this year. Recently, Rothy's announced a revenue of $140 million in 2018. Everlane is also building a business in China and is beginning to ship to Chinese consumers. Allbird's co-founder Tim Brown said that China is the place where the brand will expand in the future. In addition, some investors have also sniffed business opportunities, such as GGV Capital, which now has a special liking for American consumer brands that have the potential to land in the Chinese market.
“We feel that our shoes are very suitable for Chinese consumers, and we have spent a lot of time observing the Chinese market,” said Kerry Cooper, President and Chief Operating Officer of Rothy's. “This market is very big, and our customers are here in the future. Why don't you hurry up?"
Now in the US, DTC (direct-to-consumer) brand growth and revenue are declining, so it is a good choice to put other eyes on other overseas markets, such as the Chinese market, even though they may have to pass Tmall or WeChat. The network platform entered the Chinese market.
Due to global e-commerce and tariff control, the market's momentum has shifted to direct sales. In the past, selling a product in China was through a series of “joint ventures” such as distribution partners, manufacturing partners and institutions that handled government approval, fulfillment, production, retail strategy and marketing in China. Nowadays, thanks to the promotion of e-commerce companies such as Alibaba and JD.com, it is easier for brands to sell directly to Chinese customers online, and to voluntarily share data such as customer statistics and purchase patterns. American brands sold in China have greater control over the company.
“Today, no matter what your brand is, sales in China are easier than before. Now is a good time to become a direct brand because you have more control.” Humphrey Ho, Managing Director of Hylink Digital Say. Hylink Digital is an organization that advises Chinese brands on the Chinese market.
For cross-category retail brands, with the rise in e-commerce sales, all eyes are on China. According to the Digital Commerce 360 ??data report, in 2018, China's e-commerce sales reached 1.2 trillion US dollars, and it is expected to increase by 22% in 2021 to reach 2.6 trillion US dollars. This is 2.8 times the size of the US market. This shows that now is the best time to enter the Chinese market. And according to KPMG's report, China's millennials have higher spending power at a young age, and they are keen to discover more new brands.
Rothy's chose the WeChat platform, which recently launched a micro store and plans to consider selling it on Tmall in the next six months. The brand actually has a Rothy s.cn website, but there is no direct purchase on the website, because even for big brands, the traffic to the brand website is very small, and the logistics cost of no commercial partners is very expensive, and also Very difficult. For a start-up brand that is used to selling in the US, the infrastructure is different, such as Facebook, Instagram or Google, the environment is completely different from China's Tmall WeChat. Cooper said that if you want to do business in China, you must form a local Chinese team, find a local agency and public relations company, otherwise you will not play.
Cooper said: "This is not like you enter the UK or Canada market, where you can copy your strategy and gameplay in the US, but in China, you either completely localize or quit, you have to own market Think twice about positioning and who you want to be."
Cooper said that Rothy's uses the same marketing materials, but hopes that Chinese public relations companies can make some exposures in magazines such as "Vogue" and "Elle", and also hope to use Chinese KOL to improve. The brand's popularity. Now, this kind of publicity and local advertising on WeChat can attract customers to buy at Rothy's WeChat store. When the brand's sales in the micro store reached a certain amount, with a certain popularity, it will start selling on Tmall. Unlike Amazon, Tmall has its own advertising business, which can provide higher visibility for those brands with financial resources.
“In theory, there is not enough money in the Chinese market,” Humphrey Ho said. “The most popular market in China is actually very, very expensive, especially when you don’t have any sales accumulation and have nothing to do to help you get more. More transactions. Suddenly, in order to maintain your business, you must pay Alibaba more than $1 million a year."