Since 2020, the new consumer investment and financing in the primary market have changed. According to IT Orange statistics, the amount of investment and financing in China's new economy consumer sector is at nearly CNY 19 billion, with as many as 120 investment projects and financing events. New things look strange at first, even if they are not alike. The reality that newly emerging consumer brands must face is the traditional large-market, large-circulation, and large-single-product strategic model is still the mainstream of the market.
At the same time, the new infrastructure in the digital age offers unlimited opportunities for new consumer brands to target their buyers.
1. Understand the market size and its potential
A lot of innovation comes from the edge of creativity. The vision of the investors is to judge the market growth potential - a market that may look small at the moment but can scale up in the near future. This is how the investors evaluate the value of a new business.
Case study: many people believed that Chinese tea drinking was a traditional industry that could not find a breakthrough for many years. However, Hey Tea breakthrough this market and created its own products which mixed cheese and fruits. It far exceeds user expectations. The size of the whole tea market then grows bigger for this blooming demand of people consuming this product category. In the consumer industry, where supply is usually driven by demands, it is not common for the supply side to drive the demand at such a fast speed. Regardless of how big the market is, we must return to the product development itself, realise the user's consumption scene, analyze the potential market and solve the pain points.
2. Innovation and competitive landscape
Innovation with investment at the early stage.
Case study: The biggest innovation of Pop Mart (泡泡玛特) is that it uses the platform model to shape an industry. It is not merely a transactional platform, which can create value at high frequency and continuously produce bilateral effects.
We can split the brand's innovation into three key elements: product, communication and channel. Often the huge success came from one excellent element to support growth opportunities. However, Pop Mart's success told us that if multiple elements are innovated at the same time, the brand can be explosive.
3. Building the barrier and enhance the lifecycle
China is a huge consumer market. The consumer data in China is more comprehensive than the ones in Europe and the United States. In the past, those global brands and traditional brands leverage most of the consumer data in order to increase the product life cycle. Many people think that the life cycle of a new consumer brand is relatively short. In fact, once a new consumer brand takes the lead in understanding the user data insights and product iteration capabilities, the business will be very sustainable. The strategy is to maintain market advantages and occupy the core scarce resources.
Typical consumer brands in China can be divided into three stages of growth.
Stage One: product innovation and model prototype, which takes 1 to 2 years or even longer. Many companies stop operating at this point because they cannot iterate to a business model that really suits them.
Stage Two: Investment. Investment is needed to break through into the second phase for fast product development, testing strategic, marketing and team development. When reaching a certain level of revenue (a few hundred million to 2 billion), many brands have entered the third stage, and some companies have slowed down that normally due to increased competition or slow growth.
Stage Three: some brands have evolved the ability to overturn big brands and break through the bottleneck, from 2 billion to 10 billion users mark. The brand's mindset is very important for entrepreneurship in the new consumer sector. For this type of enterprise, either a network effect or a scale advantage will be formed. Their key to success normally due to the smooth operation and R&D plus extremely strong data capability, or it becomes the platform that generated its own ecosystem, or it became part of the ecosystem of a big brand.
4. Choosing the right talent: strategic thinking, discipline and learning ability
We like founders who have authentic and firm intentions, vision and leadership in hiring the right talents. People must come first, but how to choose the right people for your business?
For any enterprise, the mission is to make the brand more valuable. The principle of choosing partners or employees who are:
- Having the same value
- Cohesion in the leadership
- Dedication to product
- Flexibility in learning
- Put customers at the centre