By Chris Reitermann, Chief Executive of Ogilvy Asia and Greater China
‘Learning From the Disruptors’ was published in the spring 2021 edition of the German Chamber Ticker. Editor: Noga Feige, Senior Editor of Ticker Magazine. Visuals: Matter Design
March 2019. A cosmetic brand launches a 12-color eyeshadow palette, selling 70,000 units in 30 minutes. Six months later, it generated RMB 100 million (over EUR 12.7 million) in sales in just 13 minutes during Tmall’s Double 11 festival. Behind this performance, you will not find any large conglomerates. No ads plastered on billboards around the city’s main thoroughfares. No high-profile brand ambassadors. No extensive network of brick-and-mortar stores.
Behind this success is a Guangzhou-born brand named Perfect Diary (完美日记), a dark horse in the world’s 2nd largest market for makeup. Founded in 2016, the digital native beauty brand now boasts an impressive USD 12.7 billion valuation, and has consistently topped best selling charts during major shopping festivals over the past two years.
Some may say that Perfect Diary’s success story is an exception; in reality, it is just one of the many Chinese digital disruptive brands threatening established players, not only in the beauty industry, but across fast-moving consumer goods (FMCG), auto and increasingly in B2B and financial services. What do these brands do differently? What’s the key ingredient to their meteoric rise? How do they build meaningful connections with consumers? These are some of the questions sitting at the top of the agenda of many CMOs of MNC businesses today.
Marketing in China is Changing at 10x Speed
Long gone are the days where large Western brands could somehow effortlessly make waves on the Chinese market, with their intrinsic ‘foreignness’ being a strong enough magnet to attract consumers.
Getting across to today’s Chinese shoppers, particularly in a post- COVID-19 era, is a much more complex endeavor that requires adjusting to new market trends and shifts in the consumer zeitgeist. As we make our way into 2021, we see these three factors as the key driving forces shaping the Chinese market:
- Unique digital ecosystem
With its multitude of ‘all-in-one’ apps, which integrate social sharing, e-commerce and built-in payment solutions, China’s digital ecosystem can sometimes feel like walking in a maze.
The fragmentation of the Chinese digital landscape requires brands to develop a custom approach for each of the key social platforms available on the market in order to captivate their audience’s attention. Having a deep understanding of how these platforms operate, and how to leverage all the functionalities they offer is essential in building meaningful connections with consumers.
- New models for consumer/brand interactions
The COVID-19 crisis has profoundly altered people’s lifestyles and shopping habits. ‘New normal’ consumers in China are different from their pre-pandemic selves, and while the switch to e-commerce has been far less dramatic than in Europe or the U.S., we have seen livestreaming, short videos, private traffic, community group buying and VR/AI-based shopping play an increasingly more prominent role and define a new paradigm for online shopping. The speed at which these trends are accelerating is simply staggering: sales from livestreaming grew a whopping 400% year-on-year during Alibaba’s 2020 Singles Day festival.
- Rise in consumer sophistication
China’s Post-90 and Gen Z consumers are some of the most digitally-savvy on the planet, interacting across as many as eight touchpoints before they buy – twice the amount of Western shoppers.
This does not mean that brands can get away with having a presence on every e-commerce platform and social media apps under the sun. To meet the heightened demand for personalized interactions, custom loyalty rewards and frictionless experiences, marketers need to deploy holistic, data-driven engagement solutions.
What We Can Learn From China’s Digital Disruptors
Perfect Diary, Saturnbird, Genki Forest, NIU, Ubras…unknown a few years ago, these names are now top-of-mind for Chinese shoppers. In The Art of War, Sun Tzu says: “Just as water retains no constant shape, so in warfare there are no constant conditions.” Resistance to change is the biggest threat facing Western businesses in China today: now more than ever, the emergence of this new wave of disruptive brands creates an imperative for established MNC players to reinvent their operations, reframe their mindset and recalibrate their marketing approach, or the gap between them and Chinese competitors will keep widening.
We see six key learnings for incumbent businesses looking to replicate the success of these agile homegrown brands and make inroads on the Chinese market:
Product innovation and speed-to-market product development. For Chinese digital disruptors, every new product idea starts with data. Luckily, the amount of data available at marketers’ fingertips is unlike anywhere else; China’s digital ecosystem offers brands access to large sets of consumer data and behavior analytics in real-time, allowing businesses to fast-track the introduction of new products on the market. Fewer layers of management and limited HQ control also mean that Chinese businesses are uniquely positioned to achieve speedy go to market and invest in innovation. By combining data-enabled ideas with best-in-class supply chain and in-house R&D capabilities, Chinese disruptors are able to launch new products in less than six months, against 12 to 18 months for their Western counterparts.
Always-on, startup mindset. What is the biggest differentiator between up-and-coming Chinese brands and well-established MNC players? More than the products themselves, the answer tends to lie in organization design. Sticking to a siloed, linear go-to-market approach, and the traditional insulated, process-driven business architecture that often comes with it, is a formula for stagnancy in today’s fast-moving Chinese market. By contrast, China-born digital disruptors value speed over fixed strategies, adopting an always-on business model that focuses on social listening. In spring 2020, Chinese social media users started to express their frustrations about makeup smudging due to wearing face masks in warmer weather. Perfect Diary, thanks to the connected, data-driven model discussed above, was able to quickly catch this consumer insight to launch in less than 3 months a new face powder solving this issue.
Living and breathing digital. Chinese marketers do not view the digital ecosystem as a cluster of disconnected marketing and media channels; digital is in their DNA, even if their core business is composed of analog products. They are fast at leveraging new functionalities deployed by each of the leading apps and platforms, and extremely fast when it comes to creating connected, cross-channel programs that amplify the impact of their campaigns.
Turning conversations into conversions. Social in China today is probably 5, if not 10 years ahead of what it is in the Western world. Much more than a channel to raise awareness and influence consumers, Chinese marketers use social to generate superior insights, build tight-knit, loyal communities around their brand and drive sales. They organize their marketing communication at scale, feeding the never-ending social-commerce loop through KOCs, private WeChat groups and incentivized sharing. For example, electric smart scooter brand NIU was able to generate 40% of its sales through user-generated content (UGC) based awareness and referrals alone.
Product design for a digital world. Relatively unknown a few years ago, Genki Forest and Saturnbird show how it is possible to outpace incumbent competitors, even in categories as fiercely competitive as FMCG. Packaging has played an instrumental role in their success, not just as a way to stand out on the shelves, but mostly as a social conversation generator. The exponential growth of e-commerce has in fact spurred the emergence of a whole new science in product design for the digital age. Saturnbird’s coffee pods, for instance, not only solve a consumer paint point, differentiating themselves from other instant coffee product lines, they also act as ‘food-for-social.’ Their bright colors make them a share-worthy item on social media, with consumers also eager to showcase how they creatively repurposed the pods as artwork, key chains or even plant pots.
Flexible brand management. One peculiarity of these digital disruptors is that while they take brand-building very seriously, meticulously crafting their positioning and customer experience, they do not restrict themselves to a fixed, set-in-stone strategy; compared to most of the established Western players, up-and-coming Chinese businesses tend to have a looser grip over how their brand evolves over time, and believe the brand/customer relationship should be a two-way conversation. They see user-generated content as a gold mine for consumer feedback and insights, which can in turn be integrated into future products or campaign development.
Coming off the heels of an unpredictable 2020, the last couple of months seem to indicate that the coming year will not be for the faint of heart either. Looking at the recovery trajectory of the Chinese economy, there are many reasons to be bullish on future growth. To maintain their competitive edge in the Chinese market and regain market share, large MNCs will need to quickly adjust their marketing playbook and adopt the mindset of some of their digital-first, nimble Chinese peers. ■
Chris Reitermann is Chief Executive for the Ogilvy Group in Asia, with responsibilities for the strategic development and daily operations of the agency across 14 markets. He is a member of Ogilvy’s Worldwide Executive Leadership Board. Over the last two decades, Chris has held several senior management positions in various offices within the Ogilvy Group, running local offices, regional units such as Ogilvy & Mather Advertising and working with major regional and worldwide clients.
In 2019, under Chris’s leadership, Ogilvy was named Campaign Asia’s Creative and Digital Network of the Year. In 2017, he was named Asia Pacific Agency Head of the Year. Ogilvy was the first agency in China to win a Grand Prix at the Cannes Lions and has been consistently one of the most awarded agencies in Asia.
