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Successful brands do their homework, retail investor says

By Du Xiaoying (China Daily) Updated: 2014-01-07 07:19

Q: What is the trend of China's consumer market? Which industries are on the rise? Which ones are falling?

A: The market is still in a stage of flux. A change in the market among retailers and brands started three years ago. Many department stores and brands have experienced a drop in sales since last year, and I think the situation will continue in 2014.

During this period, companies that lack core competences will either die or shrink. Perhaps some will be downsized or forced to refine their business model. Yet companies that adjust to the market will rise, such as Li-Ning and ANTA.

Department stores and brands are initiating their O2O (online to offline) marketing model. In the future, many more companies will adopt the new model, which also will help them to adjust to the moves of the market.

Companies are searching for new directions, using methods such as reducing size, increasing access to their business and repositioning themselves. During this period, I believe that many good, fast-reacting companies will find new directions and survive, while slow-reacting companies may disappear.

Although several sporting-goods shops have been listed in the past few years, I think many of them will disappear. Core competence is a must. Companies need to catch the right people and focus on retailing and brand-building.

No industry looks particularly good or bad right now because the entire consumer and retail industry suffered a downturn in recent years. But each one has an opportunity, as long as it has standout characteristics in its own subsector. We will consider each business individually rather than focus on the industry as a whole.

Q: In what type of new, emerging brands would you like to invest?

A: Brands that suit the new generation's aesthetic and consumer demands.

Consumers like to shop online nowadays. You wouldn't see many young people in supermarkets. Therefore, companies need to have a sense of innovation in new means of access and discover the best way of communication with new generations - to understand their demands.

For instance, Three Squirrels is an online nut shop in which we have invested, which very much suits post-1985 and post-1990 generations' consumer demands and methods of communication. In fact, the nuts they sell are not that different from the nuts in other shops, but Three Squirrels has cute cartoon packaging and thoughtful ideas such as offering a free nutcracker in the bag. So the brand is very popular with youngsters.

Q: In the marketing field, what characteristics do successful consumer companies have in common?

A: Good companies always know who they are and what their direction is. In marketing, they know what they want and can grasp the key points.

Both Diaoye Niunan (a restaurant chain that has three restaurants in Beijing) and AFU (an essential oil brand, whose products can be used in the bath or in an oil burner) are able to understand what is key and how to attract great attention. They know how to advertise and use Internet thinking for marketing.

Q: What are the mistakes that companies often make?

A: There are two common mistakes that Chinese consumer companies often make, and, sadly, they are still making the same mistake now.

First, they think everything will be fine as long as they hire a star or celebrity. Connectivity is the key. Does the image of that celebrity suit the product? What will it bring to the audience and the brand?

Many companies choose wrong advertising endorsers who are not suited to the image of their brand or products.

Second, the target of their advertising is wrong. Many companies haven't targeted the right audience in their advertising, which has led to bad results. Take Li-Ning's mistake as an example: Li-Ning made some advertisements targeting youths and consequently wasted a lot of money because its core customers are post-1970 and post-1980 generations, not the youngsters who don't even know the brand.

 

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