A large number of traditional flowers from a variety of regions in China have developed a rich culture of flowers. These include the peony in Luoyang, the plum blossom in the Yangtze River basin, the camellia in Jiangsu and Zhejiang as well as many others. During the Ming and Qing Dynasties, Hua Xiang, a region adjacent to Beijing, became the base for flower production made exclusively for the court. Farmers in Canton, at that time, began to produce ‘Nian Hua’, a flower sold on the streets. These two developments began the commercialization of local flower traditions in the country. After China reformed its import policies, foreign flowers have rushed into the Chinese flower market. This influx of foreign business helped shape the formal flower industry by infusing foreign business concepts and cultivation techniques into the industry.

The Current State of The Flower Market in China

A study conducted by the Chinese Ministry of Agriculture in 2016 shows that there were 79,512 flower companies in China, including 14,108 large and medium-sized companies with a planting area of at least 3 hectares or with an annual turnover of 5 million yuan. The study also reveals that there were 1,639,133 florists, 5,053,523 employees, and 247,616 technical experts in the Chinese flower industry. Although florists do not have the industrial and commercial registration that large companies possess, their production sales and output are not any lower.

Characterized by large-scale flower plantations, industrialized operations, and exports of numerous flower brands, Yunnan Province has transformed from a flower production base to a market-oriented base in China.

By the end of 2017, more than 12,000 households of over 400 florist cooperatives have registered with KIFA (the Kunming International Flora Auction Trading Center), with total flower farmland exceeding 2,600 hectares and an output value of about 450,000 yuan per hectare.

Trade volume of KIFA has maintained double-digit growth, selling 6.53 billion cut flowers worth 5.4 billion yuan in 2017.The Trend of Online Flower Business in China

The flower market in China has developed rapidly since the Chinese consumption upgrade. Multi-channel retailing has emerged in the Chinese flower market, driving the rapid growth of online flower sales. According to incomplete statistics from the China Flower Association, there were 2,980 flower vendors in China in 2017. The sales of fresh flowers reached 10 billion RMB, of which online sales exceeded 50%.

The scale of the online flower business in China

The market size of the Chinese online flower business in 2017 was about 23.5 billion RMB. In 2018, it reached 36.6 billion RMB, of which Taobao’s sales were nearly 15 billion RMB. The number of online merchants and products was about 400,000 and 25 million respectively.

[Data source: iiMedia, “Market size of Chinese flower business”]

With the expansion of consumption scenarios, the demand for flowers will further increase with more categories and service optimization.

Industrial structure of Chinese online flower business

Chinese online flower suppliers have formed into three main echelons according to different target groups according to customer transaction and other variables. High-end brands include roseonly and Beast野兽派, whose per customer transaction is over 500 RMB. Mass brands include Teddy flowers, FlowerPlus, CWZ Flowers(春舞枝花卉), huaji(花集), whose per customer transaction is between 100 to 200 RMB. As for e-commerce platforms including Taobao, Tmall, and JD, their per customer transaction can be even lower.

[Source: daxue consulting, “Industrial structure of online flower business in China”]

Customer willingness to adapt to the online flower business in China　

Based on data from iiMedia, 63% of Chinese netizens have heard of the online flower business and 36.1% of them once purchased flowers through these platforms. The majority of them know about the Chinese online flower business through online and offline promotions, which include experiential and emotional marketing.

[Data source: iiMedia, “Distribution of netizens’ usage and knowing channels of online flower ]

In terms of customers’ preference, B2C platforms such as FlowerPlus, Reflower(花点时间) and AmorFlora(爱尚鲜花) are used more frequently by netizens; while the customers of   Flowerexpresses (鲜花说) has expanded since launching B2C business in 2016. Although the usage of high-end Chinese online flower business platforms such as Roseonly and Beast are relatively lower, their customers are all high net worth users with strong purchasing power.

[Data source: iiMedia, “Customers’ preference of online flower business in China”]

Case Study: How Chinese Flower Brand Beast Succeeded on the Chinese Online Flower Market

Beast is a homegrown brand, which is regarded as the pioneer of the Chinese O2O high-end brand by British Wallpaper Magazine. It has run an online flower business in China since 2011. Currently, it also provides high-frequency products including clothes, cosmetics, furniture, etc. The beast targets high- and mid-end consumers and aims to represent floral and artistic life. Though the Beast is a young brand, it has a good performance and strong competitiveness in the Chinese flower market. Let’s see how it explored an effective online flower business system in China.

How Beast Established its online flower business

Beast started its online flower business in China from the Weibo store, which is an experimental studio and only serves consumers who live in Shanghai. This allowed Beast to successfully create an exclusive brand image by providing unique and customized service to a limited number of customers.

[Source: daxue consulting, “How Beast runs business on Weibo”]

Beast expanded its online flower business by establishing a brand-owned official website in 2012. Three years later, Beast cooperated with the online marketing strategies of Tmall in various ways to stimulate sales. After Beast entering Tmall in 2015, the sales of the brand had seen a ten-fold increase in the period of three years. Tmall also supported the brand to further extend product segments and seek new opportunities.

[Source: daxue consulting, “Beast cooperated with marketplaces to expand business”]

Beast’s successful branding strategy helped the brand to realize dramatic growth in the marketplace and avoid brand dilution at the same time. And then, it continuously established self-owned channels, which include the brand app in 2016 and the WeChat store in 2017.

[Source: daxue consulting, “Sales channels of The Beast”]

The Beast began the business using brand-owned channels and entered the marketplace relatively late, which enabled it to leverage e-commerce platforms to drive public traffic into its private traffic pool to improve customers’ retention and repurchase rate. Based on accumulated users’ data and feedback, it can optimize services and products before establishing new sales channels.

Beast’s online marketing strategy in China

Leveraging the power of famous IP, successful brands and popular celebrities

[Source: daxue consulting, “Beast’s online marketing strategy in China”]

Beast leverages the power of famous IP, successful brands and popular celebrities to create a series of hot topics which can improve brand awareness in its extension segments like FMCG.

Beast announced its cooperation with Li Xian李现 (popular Chinese actor) in September 2019. The topics reached 190 million views and 127 thousand discussions, successfully raised the public’s attention and improved brand awareness.

Creating emotion connection with consumers through story marketing

[Source: daxue consulting, “Beast builds emotional connection with customers”]

Story marketing is another of Beast’s online marketing strategies in China. The brand shares buyers’ stories anonymously with flower’s photo on Weibo, which brings romance to their products. By telling the story, Beast identifies the voice and tone of the brand. Each story behind the order helps the brand build strong emotional connections with viewers, who would share their thoughts and personal experiences in the comments section. The emotional tie greatly improves brand acceptance and allows premium prices.

Realizing further growth by brand expansion

[Source: daxue consulting, “Beast’s current products category”]

Beast introduced more high-frequency products to improve brand awareness as well as brand loyalty. Thanks to Beast’s strong emotional connection with consumers and its powerful brand image, those related products and new categories can have high acceptance levels in the market.

Through product segments extension, Beast successfully transformed itself from a flower brand to a lifestyle brand.

Three obstacles in Chinese flower industry

However, the flower market in China is less competitive than other international markets such as that of Holland which is famous for flower production. This is due to three main reasons.

Lack of innovation in the development of new species

For flower production companies in most countries, it is important to cultivate new strands of species to differentiate their flowers and increase their sales. China has both the resources and ability to do this, but the lag of protection for new varieties has prevented companies from doing so.

Lack of large-scale production companies

 The majority of the farmers in China only hold small production areas and usually the employees consist of family members. Most families of Chinese flower farmers consist of 2-3 people making an annual revenue only in the tens of thousands of RMB. The number of the farmers is only 20 times that of the number of firms. Furthermore, only 14,108 large and medium-sized companies exist among 79,512 firms, making up only 17.7% of the total. Unlike most large countries, no firm dominates the flower market in China; the production areas are small, and the revenues are even smaller.

Lack of emotional connection with customers

Information transmission channels have changed during the Internet era. The young generations have become the main purchasing power of flower market in China. In this context, utilizing social media to quickly disseminate products’ information and catering to the preferences of young consumers are important for establishing a brand that can meet the emotional needs of consumers.

Brand independence is how Beast captured the hearts of Chinese consumers

Beast is a good example of running an online flower business in China. It started with Brand independence and leverages e-commerce platforms to boost sales and reach new customers. It successfully builds an emotional connection with customers and drives them into its private traffic to improve customers’ retention and repurchase rate. Private traffic is also a strategy of Brand Independence, which is worth learning more about to imitate the Beast’s success. If you want to learn more about how your online business can work with private traffic, you can read our article, email our project team at dx@daxueconsulting.com to start your China market strategy project.

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Distribution channels fully controlled by brands

[Source: daxue consulting, “Different distribution channels for branding in China”]

There are three main kinds of distribution channels for branding in China. Being present on third party e-commerce platforms is the most expensive and least controllable.

With social e-commerce’s popularity, brands can control better, but it is still hard to collect first-hand users’ data. Brand-owned channels have the most highly independent level, which means it can connect directly to Chinese consumers with full control on all processes. It would be the most cost-effective way, as well as the new rising trend for branding in China.

Branding to sell directly to consumers in China

The market environment is friendly for selling directly to Chinese consumers in 2020

In July 2019, the import tariff in China was announced to decrease, covering 1,449 product items. The average tariff rate for clothing, shoes, hats and sports-related products was reduced from 15.9% to 7.1%. The decrease in import tariffs makes brand-owned channels more attractive by enclosing the price gap with the market.

E-commerce platforms becoming crowded

[Source: daxue consulting, “Logic of DTC strategy”]

Many global brands are now trying to connect directly to Chinese consumers instead of only relying on Chinese B2C e-commerce platforms. It is mainly because there isn’t much room on a large marketplace’s website to differentiate itself with a unique proposition for the Chinese consumers. Besides, brands can no longer make huge profits on marketplaces where the competition is  increasingly intensive. However, brands can have a bigger control of branding, customer data, as well as gain higher margins through direct-to-consumer (DTC) channels.

Leveraging the popularity of Chinese social media

[Source: McKinsey, “Social direct-to-consumer (DTC) channel adoption”]

In addition to giving brands a platform to leverage social elements to build consumer awareness and engagement in third-party channels, social media now also offer new Direct-to-Consumer (DTC) channels to influence and engage with consumers. It is the case of WeChat mini-programs, which have grown from nothing to driving one-fourth of the awareness in the digital consumer’s decision journey.

Establishing independent brand image in China should be taken into consideration

Direct-to-Consumer (DTC) channels are the most effective and efficient ways to promote products to Chinese consumers and build company recognition. Brands can definitely get benefits from connecting directly to Chinese consumers as below:

More cost-effective marketing

[Source: daxue consulting, “Increasing cost on marketplace for branding in China”]

With higher platform fees and increasing user acquisition costs on public marketplaces, only 10-20% of brands are making profits on Tmall. Thus, being independent and building brand-owned ecommerce channels may be more worthy of investment.

Build truth before purchase

Cross-border marketplaces in China are often criticized for offering fake goods. Chinese consumers tend to purchase products through brand-owned channels where they can ensure that the brands have full control on the whole retail process.

Strengthen personal relationship after purchase

As brands connect directly to Chinese consumers, they achieve stronger growth and become more innovative. Successful brands enjoy benefits impacting their entire value chain: higher value chain margins, satisfied consumers, first-hand consumer insights, and higher entry barriers for competitors.

[Source: daxue consulting, “Benefits of direct-to-consumer (DTC) channel”]

Empower data integration to optimize products and services

[Source: daxue consulting, “Logic of empowering data integration”]

Third-party platforms currently allow users to login with WeChat ID, which means the sharing data could be collected by WeChat ecosystem as well. Integrating WeChat CRM with Enterprise CRM, a single  key identifier can bind a WeChat platform (whether OA, MP or third-party site) with an existing CRM. Then, brands are able to build their own CRM system and connect directly to Chinese consumers. So, it will be easier for brands to collect first-hand customers’ insights and then efficiently optimize their services or products.

Brands that manage to have an independent branding strategy in China

As brands unfold their branding strategies in China, they need to play with a mix of levers in two fundamental axes: Improve brand power and establish a direct distribution model.

Brands need to smartly choose the most relevant initiatives, which have the highest impacts according to their branding strategies and choose suitable strategic objectives.

[Source: Benjamin Maupetit, LinkedIn Pulse, “Initiatives related to different strategic objectives for branding in China”]

To improve brand awareness and foster brand loyalty in China, companies can learn from these successful examples and focus on connecting directly to consumers and offering distinctive value proposition.

Perfect Diary: A strong connection with end consumers

[Source: daxue consulting, “Character image of Xiaowanzi”]

Perfect Diary created a virtual KOC character Xiaowanzi小完子, who has similar characteristic with Perfect Diary’s targeted consumers and plays the role of a customer’s beauty consultant, friend, provider of benefits-related information and real-time customer service. This KOC character can help the brand build closer relationship with consumers. That way, Perfect Diary makes communication more effective. In order to reach more customers, Perfect Diary leveraged group control technologies to create a personal account matrix to provide customized service and connect directly to Chinese consumers.

Beast: Offers a distinctive value proposition

Beast offers a distinctive value proposition through storytelling, which also brings romance and special meanings to their products. Every bunch of flowers is customized for each customer who will then become the story owner. By telling stories, Beast differentiates itself with a unique proposition for the Chinese consumers and drives emotional engagement.

Louis Vuitton: Sell directly to consumers

[Source: daxue consulting, “Louis Vuitton sells directly to Chinese consumers”]

With little presence on China B2C E-commerce platforms, LV’s official website and app have been put in the central position of Louis Vuitton China strategy. Louis Vuitton China ‘s official website has the main function of selling directly to Chinese consumers with more brand values, convictions and brand vision.

Intimate branding through brand owned channels

As a result, Perfect Diary, Beast and Louis Vuitton have connected deeply with their consumers, and developed their direct sales, reducing their exposure on China’s large e-retailers at the same time. Chinese B2C e-commerce giants like Tmall and JD have become the intuitive destinations for most brands. But establishing brand-owned channels can help brands effectively deal with these evermore-serious challenges of soaring consumer acquisition costs, increasingly sophisticated demands and needs, loss of loyalty, and loss of ownership to e-commerce giants.

If you want to learn more about how moving closer to your consumers, email our project team at dx@daxueconsulting.com to start working on your brand strategy for the Chinese market.

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This article Branding in China: Connecting directly to Chinese consumers is the first one to appear on Daxue Consulting - Market Research China.

With the increasingly intense competition in e-commerce in the Chinese B2C market, customer acquisition cost will be higher. So, marketers are exploring new cost-effective methods like private traffic. This article will help you learn about private traffic in China and how to establish your own private traffic pool.

The Recent Development of Private Traffic

Private traffic is frequently discussed in the context of social e-commerce platforms’ popularity. Monetizing of public traffic pools becomes difficult in the competitive e-commerce environment. So, many companies now dig more value from regular customers and target them using private traffic. Also, private traffic is valuable to consumers because it gives them intimacy with the brand.

The trend of Private traffic in China

[Source: daxue consulting, “Searches of private traffic in 2019”]

Based on searches of ‘Private Traffic’ on Baidu, we can see the trend took off in early summer 2019. Four times higher search index on Baidu shows that “private traffic” showed up more in Chinese marketers and consumers daily life. With several successful examples emerging in the market, more people want to learn how they can leverage private traffic.

Consumer willingness to join private traffic pools in China

[Data source: iiMedia, “Acceptance level and distribution of private traffic in China”]

Private traffic depends on consumer willingness to join private traffic pools and interact with brands. The data from iiMedia Research illustrates that 30.8% of the respondents indicate they support private traffic operations, 61.6% of the respondents are relatively neutral and only 7.6% of the respondents express their dislikes. Analysts reckon that the high acceptance of private traffic is due to online marketing in China becoming more common. On the one hand, it is difficult for netizens to avoid being marketed. On the other hand, content marketing solves the pain point of users’ information asymmetry and brings value to them.

Private traffic explained

Private traffic refers to the traffic which can be fully managed by the brand, without relying on any third party or paid channels. It is free from the algorithms of large ecommerce platforms like Tmall and JD, putting the brand in control of how consumers see their products.

Differences between public and private traffic

[Source: daxue consulting, “Differences between public and private traffic”]

Private traffic helps brands contact consumers directly and improve consumer retention rate. Brands can focus purely on target consumer groups while saving money on acquiring traffic.

In contrast, public traffic in China highly relies on platforms and external channels, so it normally requires high cost on getting traffic and makes brands have less control over the traffic. Despite these channels can help the brand reach a wide range of consumers, it’s still hard for brand to achieve customer retention.

[Source: daxue consulting, “Daxue consulting private traffic in China – Different logics of public and private traffic”]

In addition, compared with public traffic in China, private traffic allows brands to reach customers with good continuity. Shopping assistants and Key Opinion Consumers (KOCs) can provide one-on-one service for customers. By offering product-related expertise knowledge and useful information, it is easier for brands to build trust among consumers. After the trust continues to deepen, consumer shopping behavior will extend from individuals to families and friends. Hence, the private traffic will become fission marketing and generate a positive circulation. So, the conversion and repurchase rate on self-owned channels are naturally higher than that on Chinese B2C E-commerce platforms.

Why is Private Traffic So Attractive？

Establishing a private traffic pool can help a brand reach customers easier at a lower cost, as compared with Chinese B2C E-commerce platforms. There are mainly three advantages that a brand can take as below:

More cost-effective

Like owned traffic in the West, private traffic is a direct response to the rising costs of reaching fans and followers.

The customer acquisition cost of Taobao in 2013 was 30 yuan per person, and by 2017 it had risen to 250 RMB. During the 11.11 promotion, some brands ’public traffic procurement costs 20% -30% of total revenue. Merchants have to buy traffic during each event, but the distribution of traffic on the Chinese B2C E-commerce platforms is unbalanced according to the reported that 80% of Taobao’s traffic is given to the top 20 merchants.

[Data source: Analysys, “Customer acquisition cost of Tmall and JD”]

Based on data from Analysys, customer acquisition cost of Tmall increased by 60% from 2015 to 2017 while JD increased by 164% during the same period, both of them exceeded 250 RMB. However, customer acquisition cost of private traffic is much lower. For example, Perfect Diary can attract consumers enter its private traffic pool with only 2-3 yuan for each.

Improving brand image and conversion rate

In the public traffic pool, the brand can hardly rebuild connection with users, who once purchase its products. However, by having its private traffic pool, the brand can develop closer relationship with customers. Also, it can help to improve brand image through the word-of-mouth promotion from regular customers to new ones in customers’ community. This kind of behavior will have a superimposed effect, which is much more effective than common promotion method.

Getting closer to customers

Before introducing new products, companies need to do a wide range of market research to meet market demands. With the private traffic pool, companies can collect needs and feedback from consumers directly. Private traffic can effectively reduce churn rate, especially when the brand interacts with customers in a more human-like and personalized manner. By operating private traffic pool and establishing emotional interaction with users, the products recommendation will not be blocked as annoying advertisings, but accepted easily by consumers.

How Private Traffic Work

Traffic flow in Private Traffic

[Source: daxue consulting, “Daxue consulting-private traffic in China – General logic of private traffic in China”]

Directing traffic to a private traffic pool is based on five steps: acquisition, activation, retention, revenue and referral.

A brand funnels traffic from public pools (like e-commerce marketplace platforms) to private pools through attractive content, QR codes, and consumer benefits. Then it operates its private traffic to awaken silent customers, improve customer stickiness, retention and repurchase rate.

Three models of operating private traffic in China

There are three main models of operating private traffic. First, the shopping assistant model is suitable for new brands. The professional model, or Topic Expert model, is focused on educating consumers. The private partner model is usually suitable for luxury goods or education and fitness industries

[Source: daxue consulting, “Daxue consulting – Models of private traffic in China”]

Model 1：Shopping assistant

The shopping assistant model is suitable for new brands. It is a one-to-many relationship which helps early users understand the brand. Brands leverage social media platforms to share products’ using experience and promotions with consumers in the private traffic pool. This model meets customers’ demands of acquiring rich information conveniently and special benefits. This model can be compared to a retail associate in a department store.

Similar to how Watsons’s shop assistants provide services for consumers in store, such as skin tests and makeup trials. In the shopping assistant private traffic model, customers can add shop assistant’s WeChat account, thus they can have after-sale services, personalized service and information of new arrivals.

Model 2：Topic expert

Topic expert is suitable for targeting consumer groups in the professional or lifestyle categories. A brand with core cohesion, such as Nike, gathers fans to establish an interest community, organizes offline activities like running, yoga and so on. It can attract individuals, who need sense of belonging and relevant knowledge and improve customer’s stickiness. In the case of Nike, the topic expert would be like your fitness-obsessed friend, who can tell you what shoes to buy for running vs. basketball, and what to bring to your first Yoga experience.

Model 3：Private partner

Private partner model is usually suitable for luxury goods or education and fitness industries, whose customers need valuable and personalized services. Many educational institutions adapt this model to manage users hierarchically by one-to-one services. They usually organize offline events instead of pulling customers to their community directly. The private partner is like the digital version of an advisor or consultant, who can provide personal guidance and exclusive advice.

How to establish private traffic ecosystem on WeChat?

[Source: daxue consulting, “WeChat ecosystem of private traffic in China”]

First, create a personal account on a platform like WeChat to interact with customers and provide personalized services. Second, share high quality content on WeChat moments to promote content and gather interest in your brand. Third, drive public traffic for brand-owned sales channels such as mini-program to effectively connect ecommerce and social media marketing. Finally, integrate and correlate the whole ecosystem through public account, which can provide entrance to its mini-program on its homepage and posts to complicate the traffic circulation.

If you want to learn more details from operating private traffic cases in China, you can read our case study about Perfect Diary, a Chinese cosmetics brand that has grown 50-fold through a private traffic strategy. Because platforms like Taobao and JD are becoming more expensive, now is the time for brand to gain independence from these platforms by establishing private traffic in China. If you want to know how to get brand independence in China, email our project team at dx@daxueconsulting.com to start your China market strategy project.

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Perfect Diary’s Market Strategy

Perfect Diary is a young Chinese makeup brand established in 2016 targeting women aged 20-35, who have a relative high spending power. On March 2017, it started online business on Taobao and Tmall. Half a year later, Perfect Diary opened on Xiaohongshu, WeChat store and hosted three Pop-up stores in Shanghai. In 2018, It established Douyin and JD store. On January 19^th 2019, it owned the first offline experience store in Guangzhou. As of June 2019, it has 40 offline stores in China.

During the 11.11 promotion on Tmall in 2018, Perfect Dairy became the top Chinese makeup brand and achieved 100 million RMB turnovers within 13 minutes on Tmall in 2019. It continuously topped the list and even exceeded famous international brand L’Oréal, Maybelline, etc.,

[Source: Tmall, “Perfect Diary tops the list of Chinese makeup brand ”]

[Source: Tmall, “The rank of Chinese makeup brand on Tmall Double 11 promotion”]

In the “Hurun Greater China Unicorn Index 2019 Q3” report published by Hurun Research, Perfect Diary was ranked 6^th on the top new Unicorn list, with valuation at 7 billion RMB.

[Data source: Hurun, “The top new Unicorn list in Hurun Greater China Unicorn Index report ”]

Sales drivers of Perfect Diary

Perfect Diary is regarded as the king of Chinese makeup brands. It has extraordinary performance in China’s cosmetics market. In this case study of Perfect Diary’s market strategy, we have found three main factors that contribute to its success.

Co-branding collaboration with popular IP

Perfect Diary has cooperated with the Discovery Channel, the British Museum and the New York Metropolitan Museum of Art to launch new products in China’s cosmetics market. The eyeshadow palette jointly produced with the British Museum achieved a sales of 1 set every 11.5 seconds during 11.11 promotion in 2018. In addition, Perfect Diary and New York Metropolitan Museum of Art launched co-branding lipsticks achieved both word of mouth and sales during 618 promotion on Tmall 2019. Recently, Perfect Diary also takes advantage of the “national tide” trend and cooperated with National Geography to launch the newest eyeshadow palette. The views on Weibo reached 7.4 million.

[Source: Perfect Diary, ”Eyeshadow launched by Perfect Diary and National Geography”]

Utilizing social media as the main promotion channels

Perfect Diary utilizes social media to reach potential consumers. In spite of promoting on normal social platforms like Weibo and WeChat, it also leverage the community advantages of Xiaohongshu (50% of users are below 30 years old) and Bilibili (80% of users were born in the 90s). Perfect Diary’s official account on Xiaohongshu has 1.793 million followers. We can see more than 110,000 notes when searching for the keyword “Perfect Diary”. Also, when searching it on Bilibili, the number of results reaches the upper limit of 50 pages. And there are many attractive titles like “the most cost-effective products”, high quality domestic cosmetics products” and so on.

[Source: Xiaohongshu, bilibili, “Homepages of Perfect Diary on XHS and bilibili”]

Though intensive promotions on social media, Perfect Diary has accumulated a lot of high-quality users’ reviews boosting the brand reputation and reaching more young users.

Effective KOL strategy

[Data source: 36kr, “the logic of Perfect Diary ‘s promotion strategy”]

We can observe the logic of Perfect Diary’s promotion strategy from 110,000+ notes related to this brand on Xiaohongshu.

Firstly, collaborating with celebrities to lead trends and create momentum. For instance, Perfect Diary maximized the fans ’economy by launching ‘the Little Black Diamond’ series lipstick with Chinese celebrity, ZhuZhengting. The fans’ participation and interaction is intense during this promotion. The limited edition products sold out in only three seconds.

Secondly, cooperating with KOLs who can contribute high-quality content and motivate word-of-mouth marketing. Perfect Diary cooperated with Li Jiaqi, who is a web sensation to recommend Perfect Diary’s products during his live broadcasting. During the 11.11 shopping festival, Perfect Diary teamed up with him to launch the ‘small pink diamond’ lipsticks. Its brands’ visibility reached the peak of all Chinese cosmetics products. Finally, by utilizing the bandwagon effect, Perfect Diary can get more in-person experience shared by common users to reach more consumers.

Converting public traffic (traffic from marketplace) into private traffic (traffic from self-owned channels) at low cost

[Source: daxue consulting, “Acquiring process of Perfect diary’s private traffic in China”]

Perfect Diary attaches promotion card with products sold on marketplace and using lucky money to encourage consumers to enter its private traffic pool. After adding personal account Xiaowanzi, she will give access to customers to get lucky money and send personal invitation to enter private traffic group.

How Perfect Diary Implements Private Traffic Marketing?

Private traffic in China is a trending term among Chinese marketers in recent years. It refers to users that can be reached freely and communicated with repeatedly. Building brand-owned traffic pool and reaching customers would be lower in cost and easier, as compared with paid channels. Perfect Diary is an outstanding example of operating private traffic in China. Let’s see how it implements private traffic marketing.

Creating a virtual KOC character to get closer to customers

Perfect Diary created a virtual KOC character Xiaowanzi小完子, who has similar characteristic with Perfect Diary’s target consumers and plays the role of customer’s beauty consultant, friend, provider of benefits-related information and real-time customer service. This KOC character can help the brand build closer relationship with consumers. Based on close relationship, Perfect Diary makes communication more effective and efficient.

[Source: daxue consulting, “Character image of Xiaowanzi”]

Building personal connections with consumers

[Source: daxue consulting, “Black technology behind Perfect Diary’s personal account matrix”]

Perfect Diary creates a personal account matrix to provide customized service. By leveraging group control technology, Perfect Diary created hundreds personal account with unified character image called “Xiaowanzi”. Normally, each WeChat personal account can have no more than 3000 contacts. So, Perfect Diary has already had millions of followers in its private traffic pool.

Effective communication to inspire re-purchase

Different personal accounts of Perfect Diary not only share high quality contents in WeChat moments to stimulate shop desire but also provide promotion contents in the consumer group they managed.

[Source: daxue consulting, “Effective interactions of Perfect Diary’s personal accounts”]

Perfect Diary has hundreds of private traffic groups, and each is managed by one personal account. The manager Xiaowanzi acts as a reliable friend and provides exclusive service for all consumers in the group.

Maintaining retention on brand-owned sales channels

Perfect Diary has 6 public accounts and each of them are WeChat store entry points.

[Source: daxue consulting, “Entry points to Perfect Diary’s WeChat stores”]

Links in each WeChat post provide entrance to Perfect diary’s flagship store, which is the main shopping channel on WeChat, providing with all products. Links shared by Xiaowanzi in the WeChat group also provide entrance to the branch store called “Abbys choice”, which might relate to each personal account’s KPI.

Establishing new private traffic pool based on offline stores

[Source: daxue consulting, “Perfect Diary established new private traffic pool based on offline stores”]

Perfect Diary has upgraded its market strategy to focus on new retail since 2019. It has opened 40 offline stores in 2019, and plans to open 600 stores in the next 3 years. By establishing offline stores, the brand aims at improving shopping experience and create new private traffic pool. It hopes 65% customers in offline stores are new consumers, who haven’t bought their products online. After purchasing products in offline stores, customers will be given free gifts and motivated to enter Perfect Diary’s new private traffic pool, which is managed by a new KOC character called “Xiaomeizi 小美子”

Best Example of Private Traffic Marketing

Perfect Diary’s market strategy is a perfect example to learn how to gain independence from the marketplace. It leverages KOL strategy and creates brand recognition on social media platforms in order to stimulate purchase desire. Then it converts rich outside resources into its private traffic pool on WeChat, which can be conducive to re-purchasing and realizes consumer retention.

Private traffic costs less while public traffic is becoming more and more expensive. So, it is high time that a brand should gain independence though establishing private traffic in China. If you want to know how to get brand independence in China, email our project team at dx@daxueconsulting.com to start your China market strategy project.

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The King of Luxury Brands

On June 12^th 2019, reports published by Millard Brown revealed the top brands worldwide. In one report, it said the value of as a whole increased by 29 percent last year. Louis Vuitton tops the global luxury brands list for   with a brand value of 47.214 billion USD. Chanel and Hermes ranked second and third respectfully. In recent years, China has become the biggest market for Louis Vuitton. The brand first set its image in Chinese people’s heart by promoting its travel culture. Between 1997 and 1998, LV carefully selected pieces from its museum and hosted its historical design exhibitions in Beijing, Dalian, Chengdu, Shanghai and Guangzhou. The shows attracted much attention and now most people in China become familiar with the brand name.

Louis Vuitton China strategy

On July 24th 2012, LV opened up its biggest exclusive store in mainland China—Louis Vuitton House Shanghai which is considered as an important step to LV’s China strategy. LV’s sales channels include 40 offline stores and three self-operated online stores. These channels contribute about 8 percent of sales during nine months between October 2018 and May 2019. With little presence on B2C E-commerce platforms, LV’s website and app are in the central position of Louis Vuitton China strategy. Three self-owned sales channels are below:

Brand official website in China: louisvuitton.cn

Sells to Chinese consumers directly

Louis Vuitton China established its official website in 2004, with the main functions of selling directly to Chinese consumers. In the 9 months between October 2018 and May 2019, about 8% sales came from LV’s online store.

Delivery

Louis Vuitton China provides free delivery, which is carried by SF Express. Products are normally delivered 1-2 days after payment while Pre-order products are delivered within 1-8 weeks.

Pick-up

LV’s official website provides click & collect service. Click and collect allows Chinese consumers to collect products ordered online in offline stores.

Returns

Additionally, after-sales service can be applicated through official website. Returns are available within 7 days by receiving and then consumers can get free door-to-door collection and delivery service.

Louis Vuitton’s China website has high performance

By allowing online purchases on LV’s brand website, the click-through rate of the site increased by 14% and had become LV’s highest performing retail channel. From 24^th November to 1^st December in 2019, LV’s official website ranked in the top  3 percent in the entertainment and fashion category.

[Data source: similarweb, “Traffic source of Louis Vuitton China website”]

More than half of traffic comes from direct search. Louis Vuitton China market strategy has successfully improved its brand awareness and more Chinese consumers search LV because of the brand itself but not for specific products.

[Data source: Similarweb, “Top destination sites of traffic of LV.cn from referrals”）

With significant traffic growth on excashier.com in October 2019, it seems that Louis Vuitton China market strategy works well and Louis Vuitton in China has successfully built its independent brand image. About of website visitors from referring site complete a transaction.

[Data source: Taosj “Organic exposure rate of Burberry’s flagship store on Tmall”]

By comparing conversion rate at 12.39% with Burberry’s Flag shop on Tmall, traffic monetization capability of LV’s official website is no worse than competitors on the Chinese biggest E-commerce platform.

Louis Vuitton’s APP

Maximizing APP convenience

LV’s brand APP has roughly the same product category, delivery and other services available on official website. Louis Vuitton China is trying to capitalize on digital opportunities by leveraging its APP channel, which cannot be realized by having store on Chinese E-commerce platforms.

For example, Louis Vuitton in China applies artificial intelligence technology on its APP, users can find products by scanning a QR code, which connects to LV’s intelligent products. It provides more convenient shopping process for Chinese consumers.

Continuously updating app to improve user experience

Louis Vuitton China continuously updates its brand App according to feedbacks from users in order to improve their experience. Only in 2019, LV has  critical updates of LV app in APP Store.

WeChat brand store

[Source: daxue consulting, “Structure of LV’s WeChat brand zone”]

Louis Vuitton China opened its WeChat Store in 2019, and its magnificent WeChat brand Zone can roughly divided into two functions for sales and for promotion.

“Homepage” works as the main page of mini-program ecosystem, and provide entrance to other mini-programs. Louis Vuitton totally attaches 4 entry points including WeChat posts, navigation bar in chat-box, brand mini site and WeChat search engine to mini-program, which only has the function of selling products to consumers and conducts flexible traffic control within the mini-program ecosystem as it could be redirected from one to another.

Promotion Strategy of Louis Vuitton China

Louis Vuitton dedicates to establish a noble brand image in the Chinese market. It makes a series of publicity and promotions to let Chinese consumers get better understanding of its brand history. LV sets a complete promotion ecosystem, which includes Chinese social media platforms, searching engines, a WeChat public account, a Weibo account and Newsletter to meet different market demands. In June 2019, Louis Vuitton’s digital marketing innovation in China took another exploratory step, becoming the first luxury brand in mainland China to invite fashion bloggers to take over the official WeChat public account and the first luxury brand to open a Xiaohongshu account. All of LV’s promotion channels are demonstrated as below:

Concentrating on Chinese social media platforms

[Source: daxue consulting, “LV’s promotion channels”]

LV’s XHS account aimed at improving visibility by raising topics and discussion on hot products,and the promotion on XHS are mainly targeting on young netizens in China.

Also, Weibo could be an ideal channel to catch potential consumers by reaching more than 4 million followers.

[Source: daxue consulting, “LV’s advertising on Baidu and Douyin”]

Apart from advertising on the Chinese largest search engine Baidu, Louis Vuitton China also started to do advertisement on Douyin, which owns large volume of traffic and ideal promotion channel for brands.

Although Louis Vuitton China has no presence on Chinese E-commerce market, these advertisements can drive all traffic to its own sales channels.

WeChat gives LV more opportunity to increase sales

[Source: daxue consulting, “Homepage, post content, performance of Louis Vuitton China”]

LV’s WeChat public account is well-connected with other channels. Most article posts are correlated with different marketing campaigns. Since all articles are quite successful, we can know that these posts do drive large volume of traffic to its WeChat stores. In a nutshell, Louis Vuitton in China improves   by establishing and operating its self-owned sales channels.

Creating branded stickers to get closer to consumers

[Source: daxue consulting , “LV iMessage stickers”]

In January 2018, LV embedded LV touch into iMessage and provided branded stickers based on its brand visuals. After downloading LV app, every iPhone user can send the sticker through iMessage. LV leverages iPhone users’ social connection to expand influence and improve brand awareness. Also, it is a good trigger to attract people download LV app.

Utilizing newsletter to realize customer retention

[Source: daxue consulting, “LV utilizes newsletter to realize customer retention”]

LV’s newsletter is designed to drive traffic to brand own website and its major social media accounts. Ensuring direct communicating with potential consumers to stimulate demand and realize retention.

Co-branding Campaign: LV x LOL

From the instruction above we can know that LV carries out promotion strategy in China by coordinating five promotion channels, Louis Vuitton China can cover new groups of consumers. In the next part, we will learn the promotion ecosystem of Louis Vuitton China from a real case. LV reached a fresh audience through a co-branding campaign with League of Legends, a world-leading video game.  

In 2019, Louis Vuitton China collaborated with League of Legends and created a series of co-branding products.

[Source: daxue consulting, ‘LV’s co-branding promotion strategy in China’]

As a luxury brand with a lower consumption frequency, the collaboration helped LV improve brand awareness in China’s luxury market, as well as strengthened its brand.

LV’s promotion ecosystem works well to meet different demands

[Source: daxue consulting, ‘Louis Vuitton China promotion ecosystem’ ]

LVxLOL co-branding topic on Weibo has attracted more than 1 million discussion, it high exposure to public. The purchasing link attached to posts on LV’s App, Newsletter and Weibo drive traffic to LV’s official website. WeChat Account’s navigation bar and articles provide entrances to its mini-program.

Will too much popularity cause the brand to lose distinctiveness?

Since the Chinese middle-class’s per capita income is rising, and also due to a changing lifestyle, as well as more open-minded and educated Chinese regarding brand preferences,  . However, at the same time, China’s upper class is losing interest in luxury brands such as Louis Vuitton. Chinese netizens are saying, Louis Vuitton in China has become so common that even a nanny can own one. “The real rich do not want LV or Gucci anymore because they are just too common. The rich become even richer and want more unique and self-expressive products. They are turning their heads to brands like Chanel and Hermes.”

Luxury lies in the concept of distinct possession, which means not everyone can own it. Although LV is such a shining star in China’s luxury market, it still needs to pay attention to its brand image and position as it further develops in world’s biggest .

Louis Vuitton’s China market strategy puts the brand in charge of consumer traffic

It’s called Brand Independence, and your brand can do it too

Much of China’s e-commerce is done through large platforms like Taobao, Tmall and JD. While there are benefits and negatives to selling through platforms, it can be limiting for aspirational brands like Louis Vuitton. Through this case study, we notice that Louis Vuitton drives traffic to platforms that it owns, its own website and its WeChat Miniprogam. Because LV drives traffic to these sites, it remains in control of consumer data. At the same time, it can create a stronger brand identity and separate itself from competitors and counterfeit products that are listed on online marketplaces. Brand independence may be right for your brand, email our project team at dx@daxueconsulting.com to start your China market strategy project.

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Brand independence refers to a brand not relying on any other third party channels such as online marketplaces to sell products. In this case, the traffic will be driven from independent sales channels such as the brand’s own website. Brands, in turn, can manage their own identity, assets, and digital assets to drive traffic, covert purchase, retain customers and build their own community. In this article we learn about the advantages of brand independence in China.

Why is Brand Independence important in China?

E-commerce and Brand Independence

China is the largest e-retail market in the world with over 610 million digital consumers. However due to the dominance of e-marketplaces in China, it is all too easy to overlook the advantages of independence from marketplaces. Now is the time to reconsider our options and evaluate whether brand independence is the right choice for your brand in China.

At this phase in E-commerce evolution, many global retailers and brands are leaving the marketplace platforms as they are becoming increasingly precarious. Brands are seeking independence once again so they can exert full control and retain full ownership over their e-commerce traffic and consumer data.

Online marketplaces vs Brand.com

Although online marketplaces are easy to set-up and are interlinked with Chinese consumers’ daily life, many potential problems need to be considered. Large marketplaces have tense competition between brands and leave little room for bands to differentiate from one another. This makes it harder for retailers to effectively deliver their unique proposition to target consumers. Most of all, brands cannot make much money on marketplace platforms as administration fee, advertising fee and price wars all cut profits.

On the other hand, brand.com may provide solutions to problems created by online marketplace platforms. The brand, having full control over branding and how their products are displayed online, can decide on how to differentiate itself among competitors. With control over their website, brands can also decide how to deliver their unique proposition to target customers.

E-commerce marketplaces control how much or how little consumer data is shared with brands. When brands sell through self-owned platforms like their own website, they can own and analyze their own consumer data, giving them an advantage in understanding consumer habits.

As many cross-border marketplaces in China are often criticized for offering fake goods. Selling on self-owned platforms eliminates the risk of brand products being perceived as counterfeits. Hence, consumers trust that the brand owned channel is authentic goods.

Brand independence in China is indeed becoming increasingly important for those who wish to master a better business.

Key advantages of brand independence in China

Private traffic

Private traffic in China is a growing phenomena. While online marketplaces generate high traffic, there is no guarantee that the traffic will flow to your brand. Additionally, when traffic does go to your brand’s products, your brand sees only the limited data that the platform is willing to share. However, with self-owned E-commerce platforms, brands do not have to share traffic with competitors in the marketplace. This will allow brands the advantage to create a tailored experience to target existing or potential clients as they are all private traffic that have shown direct interest to a particular brand. Brand website or brand App is where the experience and customer interaction will begin, and in turn, the interactions will likely transfer into future conversions.

Stronger brand image

Brands can more effectively manage their brand image, brand equity, brand value etc., with a brand independence strategy. A successful brand independence strategy in China will allow a brand to create a strong linkage with customers, in which they will prefer to shop from the brand’s platform directly over visiting different online marketplace platforms. Moreover, brands can manage their own community with brand independence. Once community members connect to your brand, it increases customer loyalty and retention, creating a higher barrier to switch brands. Brands will find it easier to deliver a unique value proposition as all features and modules of its self-owned platforms can be directly controlled and modified according to target consumers’ needs.

Cost effective

Brand independence could be potentially more cost-effective than online marketplace platforms. Brands must give around 2%-10% of their sales commission to leading public marketplace platforms, not to mention other types of platform fees and higher commissions required for flash sales. In this case, all sales revenue gained from self-owned E-commerce platforms will flow directly to the brand itself.

Online marketplace platforms offer convenience, while self-owned E-commerce platforms offer control. However, control will eventually become more critical as your E-commerce business continues to grow.

[The costs of selling on the top Chinese e-commerce marketplaces in 2019]

Make your brand independent again!

Join daxue consulting’s one-day training on brand independence to learn how to gain independence from marketplaces, define unique propositions, develop private traffic and build community for your own brands.

Date:  March 5th, 2020 from 9:30 am to 6:30 pm (including breakfast and lunch)

Location: Jiaotong University

Price: 390 RMB for MBA students, 520 RMB for start-ups, 590 RMB for established companies (include breakfast, lunch and all the coffee you need to be full of energy).

Discount: –30% for early bird booked before February 20th. For group prices (more than 3 people), we apply special discounts, ask us!

To register for the event, scan the QR code below! More information about the event location will be emailed to you shortly.

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地点: 上海交通大学

在为期一天的培训中，您将了解到如何：

脱离天猫或京东此类传统电商平台，完成品牌独立化；

定义品牌官网的独特卖点

发展品牌私域流量并建立社群

价格: MBA学生390元，初创企业520元，已成立的公司590 (包含早饭，午饭和应有尽有的能量咖啡)

折扣: 2月20日前订票可享受－30%的优惠；如您的参加人数大于三人，请咨询我们享受特别优惠。

什么是品牌独立？

品牌独立意味着品牌方可以独立管理消费者流量（也称为“私域流量”）。独立的品牌不会通过京东，天猫和考拉这类传统电商平台销售产品，而是通过自己的官方网站(brand.com)完成销售以及流量的获取。品牌的独立渠道主要包括：官方网站(brand.com)，官方应用程序(brand app)，小程序以及品牌线下零售店。

品牌独立的优势是什么？

首先，品牌方可以节省推广活动相关的费用。其次，品牌方通过使用更完善的客户管理(CRM)系统直接与消费者进行互动。此外，品牌知名度的提高会同时带动消费者忠诚度的提升，并且基于对消费者需求的更好理解，消费者的用户体验也会得到改善。最后，消费者的购买决定将更少的受到价格影响，而更多的被忠诚度驱动。

你可以扫描下方的二维码来报名参加我们的活动！完成报名后，我们会在短时间内将本次活动的更多相关信息发送到你的邮箱。

See this article about Brand Independence workshop in English.

This article 通过品牌独立提高品牌知名度 is the first one to appear on Daxue Consulting - Market Research China.