With the cost of customer acquisition remaining relatively high, it is important that brands push themselves to find more innovative ways to drive sales and reach new consumers. Advertising costs remain stable though they struggle to be as effective, and KOC and KOL marketing in particular continues to dominate investment in the Chinese market. After years of growth, consolidation of the media market has led to some troubling outcomes.
SEE ALSO: Canada Goose appoints new China Operations Head
The main one being that the vast majority of KOLs are signed by MCN (Multi-Channel Network) agencies rather than being independent, which has led to price inflation and an increase of fake data purchases. In order to circumnavigate this issue, brands need to choose partners that meticulously cherry-pick KOLs who not only have brand fit, good content and a solid follower base, but equally have strong follower loyalty and are independent of MCN agencies.
An innovative way to reduce the financial burden of KOL and KOC marketing is to offer gift-only incentives to KOLs. Although, this takes time, resilience, and effort, and may depend on the value of the products. In 2022, many brands turned to Douyin for help in propping up their market share. In fact, some of our brands have forecasted that this year they will have 40-50 percent of their annual sales coming solely through this channel.
This change was also seen during the latest 6.18 Shopping Festival, where GMV from traditional E-commerce platforms only grew 0.7 percent compared to the previous year, while GMV from livestreaming E-commerce platforms grew by over 124.1 percent, with Douyin earning the top spot. However, brands need to tread carefully. Despite Douyin becoming an important channel for first time customer acquisition, repeat purchase rates tend to be below 4 percent. The majority of consumers, if they decide to purchase again, will look to one of the major e-commerce platforms such as Tmall.
Platforms aside, looking into the major changes in China – many consumer trends have continued to persist. The ‘she’ economy has continued to be a target for most brands, as women continue to increase their purchasing power and social media presence. Sustainability, as pointed out by The Silk Initiative (TSI), continues to take the backseat of purchasing intent in a market fueled by a lack of understanding around its definition.
The rise of Gen Z and the increasing complexity of Chinese consumers has led to brands needing to create emotional resonance in the market to succeed. Moreover, brands are needing to develop an increasing amount of product functions and launch more product lines than ever before.
This highlights a shift, with brands beginning to invest longer term, focusing on defining who they are and bringing their brand to life in video and photo format. The need to build creative campaigns that consumers can relate to and bring about an emotional response has never been more important. Being headquartered in Shanghai, the last six months have been difficult to say the least with continued lockdowns and dampened consumer sentiment. Although reading some of the above changes may make China seem more difficult than ever, the reality is that China is a market that cannot be ignored.
SEE ALSO: Last Lotte Shopping store to close in China
Despite two months of severe lockdowns in China’s financial center of Shanghai, along with numerous other cities, online sales in June still reached a 14 percent YoY growth. The resilience and bounce back that the market is experiencing is a precursor of what is to come. By 2028, China is forecasted to become the largest economy in the world.
Author: Ryan Molloy for the RedFern Digital