Big little brands: The opportunities and challenges for smaller brands in China

By Amanda Lim

- Last updated on GMT

Big little brands: The opportunities and challenges for smaller brands in China
It is no secret that the Chinese consumer’s appetite for beauty has become more sophisticated, creating opportunities in the Chinese market for niched brands with unique positioning.

Speaking at Cosmopack Asia, Louis Houdart, founder and CEO of creative agency, Creative Capital China, observed that the Chinese market today is vastly different from two decades ago.

For one, consumers’ expectations and more demanding that ever. “China used to have a lot of copycats, but this is behind us. Chinese consumers are getting very sophisticated, very often more sophisticated in terms of expectation than Europe or the US,” ​said Houdart.

As such, their perception of brands and quality is no longer as straight-forward as it used to be. “The time of just being a foreign brand is better is gone. In China today, to be successful you have to better. You can be Chinese – or foreign— but you truly need to be bring extra quality to the consumer.”

Old is the new cool

According to Houdart, Chinese consumers are beginning to rediscover their national identity and historical roots. This has given rise to retro-branding and taking back ownership of historical brands and making them relevant for today’s market.

For example, in October, Chinese cosmetics company Maxam cashed in on nostalgia by releasing a lip balm in the flavour of the classic treat, White Rabbit candy. A chewy milk candy encased in edible rice paper, White Rabbit was created in 40s in Shanghai and still remains a beloved childhood icon. When the news got out of this collaboration, it immediately went viral and caused a stir on Chinese social media.

Similarly, Pechoin, a Chinese beauty brand founded in the 1930s, made a comeback recently. The brand highlights it heritage, as evident from its viral WeChat campaign which featured an espionage mystery story set in old Shanghai. The social media campaign attracted millions of views, stirring up interest in the local brand and making it relevant for a modern market.

The same effect is seen in fashion, with old local brands like Feiyue and Lining which are reinventing themselves as “hipster” cool, as well as pop culture. “For the last five years, the Chinese have been watching Korean soap operas, but now they are watching Chinese soap operas about their history.”

Proudly made in China

Houdart believes fashion and beauty are “inspirational” to each other and encourages looking to fashion to understand ongoing trends. The success of contemporary home-grown brands such as Icicle, Comme Moi, Umma Wong and Fiona Chen illustrate that Chinese consumers no longer turn their noses up at “made-in-china” labels.

“Chinese consumers might have to money to buy Louis Vuitton and Gucci, but they are happy to purchase a brand with true meaning, true value, true DNA – which is proudly designed and made in China,” ​he said.

Similarly to the West, Houdart noted, big traditional retailers in China that focus on volume instead of being content-driven are suffering. “This trend pushes the drive of new local brands with unique concept and young new talents.”

Niched not enough

With retailers actively on the lookout for new and unique content brands, Houdart said that many opportunities are being created for small, niched brands. “In a world where niched is big, if you are an interesting brand that’s different from everyone you will have some leverage.”

However, he warned that to succeed, the entry strategy is essential.

“It’s very important to have a precise concept. Chinese consumers are very, very demanding,” ​he stressed. “Your story has to be right, your packaging must be right, your marketing has to be right –and they also want the latest innovations.”

Additionally, having the right partner is equally crucial. “China is a big market. If you are a niched brand going alone is China is difficult so it’s important to pick up the right distributors that will open doors for you.”

“If you are small and new to China, be ready to burn lots of cash,” ​he continued. “China is a big market and distribution costs are very expensive.”

Choosing the online path is not necessarily easier, warned Houdart. He estimated that it would cost $200,000 just to open a shop on Tmall. Even then, visibility is not guaranteed. “To be on Alibaba is like to be on Google. If no one knows your brand, if you don’t have the right partner, you will still be on the last page.”

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