With the increasing popularity of the Internet and e-commerce in the Chinese market, numerous brands in China have established online sales channels.
However, as market competition intensifies and consumer behaviors evolve, an emerging trend appears: New brands that initially developed online are shifting their attention toward offline avenues, embarking on an exploration of offline sale channels.
Why Are Chinese Online Brands in the Market Moving Offline?
1. Less Traffic
During the initial phases, Chinese digital media platforms offered ample traffic profits, facilitating the rapid ascent of numerous brands. Nevertheless, with escalating competition, online expenses are also on the rise, posing huge challenges for brands’ customer acquisition and retention.
Reduced online traffic profit compels brands to seek new territories. Online brands aim to expand their market through offline sale channels, reducing dependence on expensive online traffic.
2. Enhanced Trust
Having products available in physical stores can significantly enhance brand trust, allowing consumers to see and touch items. Online shopping prevents consumers from directly interacting with products.
The presence of brand offline stores represents the brand image. By utilizing offline channels, consumers can personally experience the products, which is crucial for boosting purchasing confidence among Chinese consumers.
3. Wide Market
While online channels mainly target young and internet-savvy users, offline channels can cover a broader range of age groups and consumer demographics, especially those who do not frequently purchase online.
In China’s second and third-tier cities and rural areas, offline channels remain the primary shopping method for consumers. By combining online and offline channels, brands can achieve broader market coverage.
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Online-to-Offline Challenges for Brands in the Chinese Market
1. Difficulty in Developing Offline Channels
Many online brands start with an “internet-oriented” philosophy, lacking valid operation experience and sales teams to develop offline channels. This poses significant challenges when expanding into offline markets.
- Lack of salespersons and channel development capabilities: Online brands lack dedicated offline sales teams, making it difficult to expand and maintain offline channels.
- Geographical boundary issues: Chinese offline channels exhibit distinct regional characteristics. Each province, city, district, and county requires a separate client development strategy, increasing the complexity and cost of development.
- High capital investment: Developing offline markets requires substantial capital investment, including establishing physical stores, channel maintenance, and marketing. These are areas where online brands lack.
2. Low Brand Awareness Among Distributors
Although some online brands have a certain level of recognition among consumers, distributors, especially those farther from China’s central cities, have low awareness of these brands. This reluctance of distributors to risk representing these brands hampers the transition offline.
3. Cash Flow Pressure and Pricing Strategy
While online brands can quickly recoup funds through e-commerce platforms, offline channels require significant investment and longer capital circulation duration. This poses a significant challenge for online brands lacking sufficient cash flow support, especially in the initial stages of market development, requiring substantial funding for offline channel construction and maintenance.
Offline channels introduce extra costs and distributor profit margins, driving up overall operational expenses. Balancing pricing between online and offline channels is crucial. Uniform pricing can squeeze brand profits, while higher offline prices might push consumers to favor online shopping.
Strategic Brand Layout in the Chinese Market
1. Integrate Online & Offline Channels
Brands can leverage online traffic for visibility, but establishing an offline presence is essential for longevity. Success hinges on the synergy of brand strength, supply chain capabilities, distributor services, and marketing efforts.
2. Case Study: Yuanqi Senlin (元气森林)
Yuanqi Senlin’s successful transition from an online brand to an offline market is a prime example. They carved out a niche through online promotion, becoming widely recognized. At their online sales peak, they expanded offline, investing heavily in subsidiaries, research teams, and factories. This commitment enabled comprehensive, full-channel operations.
Future Trends in the Chinese Market: Combining Online and Offline
1. Omni-channel Marketing Strategy in the Chinese market
Omni-channel marketing is becoming a major trend in China. By integrating online and offline resources, it provides a smooth consumer experience. This not only includes e-commerce platforms and physical stores but also links various channels like social media and mobile payments.
2. O2O Model (Online to Offline)
The O2O model is set to be an important trend in the Chinese market. It attracts online traffic and directs it to offline consumption.
For example, consumers can browse and select products online, and then visit physical stores to experience and buy them. This improves the shopping experience and increases brand market penetration.
3. Technology-Driven Offline Innovation
As technologies like artificial intelligence develop, offline channels will see more innovations. These advancements will make offline shopping more convenient and enjoyable, attracting more consumers to stores.
Examples include:
– Smart Retail: Intelligent shelves and self-checkout systems are employed to simplify shopping and lower labor expenses.
-Immersive Experience: Leveraging virtual reality and augmented reality to deliver immersive shopping encounters, thereby boosting brand attractiveness.
Conclusion
Can brands operate solely online in the Chinese market? The answer is no. For long-term success and sustainable development, offline channels are essential.
In the Chinese market, relying only on online channels makes it hard to achieve long-term success and growth. As online traffic slows and consumers seek better brand experiences and trust, online brands need to explore offline channels.
For more information on digital marketing strategies in the Chinese market, contact the professional international digital marketing team at STAiiRS.
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