Table of Content
- Key insights
- Re-examine "Social media testing Strategy” from a different angle
- Using a "Limited Brand exposure" strategy to enhance your brand
- Make sure the pipes aren’t clogged before turning on the faucet
- "Created Differentiation" helps SMEs resolving cost issues
Cross-border small to medium-sized enterprises are facing rising costs and risks in the process of exploring and expanding new businesses, new talents, and new platforms in the process of business transitions. To this end, seizing the opportunity of DTC, implementing ‘social media testing strategy’, ‘limited branding exposure’ and controllable sized capital investment, an achievable path is clear by "brand optimization" for the existing business while reducing potential risks.
- DTC is an evolved concept of an enterprise's sales related tools and scenarios rather than a result of branding. It can be an opportunity for cross-border SMEs to establish themselves as market leaders and overcome the difficulties they are having with their brand transitions.
- In the early phases of transition into an individual online store, established e-commerce merchants can intentionally forgo major media traffic and rely on organic traffic overflow provided by its own platform to fulfill the traffic conversion test in the private domain.
- A smart method is to test on "Social media" first. If it is proven throughout the testing that your goods, abilities, and websites are not appealing enough to convert even the most insignificant traffic, you will need to carefully assess your business direction in order to reduce business risks.
- SMEs often lack the resources and expenditures to refine product differentiation, although differentiation does not always imply new functions or molds. The variation in the look or positioning of products developed in response to market demand has the potential to propel the brand to tremendous success.
The DTC trend has penetrated China with the rise of the expertise of many successful international brands, and branded e-commerce appears to be the greatest answer for China's cross-border e-commerce to attain high value. While we're on the subject of brand reinvention, some organizations have been intentionally neglected. SME sellers are the backbone of the cross-border circle and the driving force behind market activity.
Perhaps these SMEs may lack strong capital, mature operations, or smooth product line planning, but they have the most genuine pioneering spirit. When discussing their branding transformation, we must first ask the correct questions in order to create a new way of playing to assist SMEs in dealing with increasing competition.
Three challenges for SMEs:
- Enterprises are struggling to survive and are unable to adapt. At a time when traffic expenses and market saturation are rising, many businesses are struggling for survival. They are more concerned with survivorship.
- The assessment of the risks and sunk costs associated with change. The Chinese have the insight to "Seek failure before triumph." Traffic testing and increased brand packaging expenses are frequently encountered in the early stages of the DTC business. Learning expenses imposed by new firms, skills, and platforms are all deadly swords hanging over SMEs. Before this account is clear, many companies are difficult to let go.
- With the existing supply chain, meeting "differentiated" demand is difficult. "Difference" is the cornerstone of branding, and in many cases, it is the brand itself. SMEs usually rely heavily on upstream suppliers, lack the power to address product specifications, and lack a fully distinct creation approach, losing crucial trial and error opportunities.
Re-examine "Direct to Consumer" Strategy from a different angle
"One can never make money beyond his knowledge." To address any difficulties, it's best to start with cognition. What exactly are we talking about when we talk about DTC? In other words, what value can it bring to businesses and consumers?
DTC is not a new concept; it is just a business model and a choice of sales strategy. When leather factories in South China set up booths in front of their own door to sell leather shoes, this is also a DTC business. Except for direct interaction with consumers, all other DTC aspects are adaptable to the changing circumstances depending on companies in different times. More firms have been able to eliminate barriers and communicate directly with customers because of the increased efficiency of Internet technologies. The improvement of the company's sales tools and scenarios is at the heart of DTC. It is a technological triumph, not a product of branding.
However, in the past, brand stories were frequently associated with expenses and legends that were out of reach for the ordinary individual. Internet technology allows small and medium-sized businesses to ride the technological wave of the future. For example, the DTC brand we frequently discuss - WarbyParker, is a Wharton Business School entrepreneurial project. DTC was developed by SMEs and is widely used by SMEs. It is not a strategy exclusively for large corporations; in fact, it may be an unique opportunity for SMEs to establish themselves as market leaders.
Using a "Limited Brand Exposure" strategy to enhance your brand
When the fog lifts, the answer to the problem becomes clear, and we can refer to it as a "Limited Brand" strategy. The firm's investment in the brand should be restricted and controllable, just as the shareholders of a "limited liability corporation" have limited responsibility.
It is recommended that you ignore those fancy branding strategies for the time being and focus on "brand optimization" rather than "brand transformation" for the existing business. That is, we conduct branding tests with a minimal budget first in order to reduce business risks. After everything is ready, including the team, experience, products, and technologies, we can launch a large-scale marketing campaign. This aims to reduce the risks associated with new brands and new products.
In this traffic flow chain, the branded independent store can be a powerful supplement to the existing business, supporting each other with the platform while remaining independent.
Shoplazza private traffic flow diagram for eCommerce store
In fact, the keys to private domain traffic acquisition for independent websites are consumers' search actions when making purchase decisions, their actions to seek after-sales services on the official website, their actions to log on to the website when looking for instructions for use, and even their dissatisfaction and complaints about products. Many people disregard these traffic because they are too few, but for a new business that has not yet been validated, these customers can frequently provide guidance for the subsequent development of the new venture.
As seen in the above figure, consumers can choose whether to place an order on the official website or return to the shopping platform to place an order, bringing external traffic to the platform. If appropriate social media contents are available early in the project, the traffic of the social media platform may even be transferred over to independent stores, and orders can be done on the platform, establishing a strong support for it.
AlloyWorks is a very special case among many Chinese enterprises looking to grow abroad that are served by Shoplazza. It has remarkable performance in the field of automotive radiators in North America. However, the firm encountered obstacles throughout the transitional period, such as how to solidify its market position with little risk and high efficiency, as well as how to retain consumers who are excited about radiator modification. These are the primary issues for AlloyWorks as it prepares to expand its product portfolio.
The new AlloyWorks brand site was launched as the brand's global official website as a result of both parties' efforts. The total rate of return of the site has gradually grown and stabilized as the private domain conversion procedure on the site has improved.
Initially, the independent store relied on the platform's "after-sales traffic," "brand traffic," and "consumer recall traffic" to perform the private domain conversion test, and hence increase the conversion of social media, KOL, and affiliate marketing. According to a survey of a few consumers, we determined that competing in the area of auto components is more viable, which merits a larger-scale traffic test. Following that, AlloyWorks decided to begin a large-scale advertising campaign, which resulted in a significant boost in GMV. Following that, AlloyWorks decided to begin a large-scale advertising campaign, which resulted in a significant boost in GMV. Finally, it did pretty well in the third quarter of 2021, which is supposed to be the absolute off-season, indicating a positive signal for the business.
The GMV&ROAS in Q3 2020-2021 in AlloyWorks
Make sure the pipes aren’t clogged before turning on the faucet
The case of AlloyWorks is a good example of the "Limited Brand" strategy. The principle behind is that, in the early phases of transitioning into an independent store, established e-commerce firms can intentionally forego major media traffic and rely on organic traffic overflow provided by its own platform to fulfill the traffic conversion test in the private domain.
It's similar to putting together a water system. The majority of people are concerned about whether the pipeline will pass the test and be able to withstand the tremendous pressure of the water flow. However, we must first go through the proper design and testing to ensure that it is flowing in the correct, unimpeded, and unblocked route. To put it another way, make sure the pipes aren't clogged before turning on the faucet.
Florasis adopts a more stable traffic strategy overseas. In recent years, its marketing has been smooth and effective, and such brands have a similar understanding of going overseas from 0 to 1. As a cosmetic brand, Florasis has invested in almost all social media channels since the beginning of the North American expansion but has been very conservative in terms of conversion.
Unlike AlloyWorks, a medium-sized company that depends on "overflow" of platform traffic to gradually gather private domain traffic, Florasis is a brand primarily targeted at female clients that has selected a consistent strategy to begin with social media early on. This is due to a variety of factors. First, as a women-oriented brand, the active performance of female groups in social media gives it, like all cosmetic brands, a natural advantage in the field of social media communication; second, the influence of KOLs can boost Florasis' trust index in the hearts of consumers; and finally, this is a test for private domain traffic conversion in the middle and late stages.
The success of Florasis on Social media
As of the beginning of 2022, the search keywords on the Florasis site are still dominated by brand names, which is very rare for a new brand with millions of traffic, because in many projects, everyone expects the brand name traffic to grow, which indicates dominating brand power and conversion rates.
The traditional branding strategy focuses on conversion advertising and PR advertising in the early stage. Once the business does not go well, the initial investment will become a sunk cost, which will bring huge pressure to the company. The “social media first” strategy used by Florasis is a smart testing tactic. Compared with conversion advertising, the building and maintenance of social media has a compound interest effect and may create a ripple effect on the platform and the market, bringing in promising results.
The Traffic of Florasis in the U.S. Platform (Third Party Data)
From the successful case of the Florasis brand, it is not difficult for us to draw the conclusion that "brand store does not equal advertising". If Florasis did not pass the foreshadowing of a large number of social media and KOLs in the early stage, but instead spent huge costs on advertising immediately, the result could be totally different. Even in China, prior to large-scale advertising, Florasis had created enough content online to increase the traffic conversion rates and so to boost the advertising efficiency.
Therefore, if in the preliminary test, we find that our products, talents, and websites are not enough to convert even very weak traffic, please carefully consider "whether to change the business direction" to reduce the risk of business. This is also the solution to "risk and sunk costs" in the "limited brand" strategy.
"Created Differentiation" helps SMEs resolving cost issues
Florasis' success may not be replicated by every startup. People may think that such brands have inherent supply chain advantages and that their products are adequately unique, at least it looks like this. In general, SMEs do not have such resources, and it is more difficult to pay sufficient expenditures to polish product differentiation.
However, this is not always the case. "Created Differentiation" might be a viable option. I've always disagreed with the simplistic equation, saying that "differentiation equals new features or new tools" when it comes to product differentiation. I believe that companies are confronted with a contradiction between "corporate differentiated cognition and market demand," rather than a contradiction between "cost and demand."
In many cases, differentiation can be "created", perhaps in the appearance of the product. For example, the biggest selling point of the UNTUCKit shirts as the US online clothing retailer is that the bottom hem of their shirts is relatively short.
Perhaps it's the packaging of products like the US start-up brand Liquid Death soda, with beer can-like packaging as the main selling feature.
Maybe the product positioning is more innovative. For example, Exway, the world-renowned electric skateboard brand in Shoplazza, is also a brand from China. Its first product abandoned the industry’s dull standards and designed an electric skateboard that is similar to traditional skateboards. As a result, the product earned fantastic reviews as soon as it was launched, laying the foundation for the brand to expand internationally.
Furthermore, even improving the attractiveness of the models in the demo photo might make a difference.
We will examine a case from FIGS in the United States. Let’s explore how it can gain insight into emotional needs beyond data. FIGS is a clothing brand that rose to prominence in the market in 2021. Founded in 2013, it has expanded its business by 100 times in three years and went public in 2021. Its main product is "scrub", which is sanitary clothing worn by physicians, nurses, and other workers involved in patient care in hospitals. FIGS claims to have designed better-looking, colorful clothing for healthcare workers, making them more fashionable and comfortable at work.
It is hard to imagine that there are organizations that can achieve tremendous success by depending on clothing design in the realm of utilitarian apparel with little design room.
Comparison of the FIGS products and the top-selling products of the same kind in China
Searching for comparable items on Chinese e-commerce platforms, we can discover the power of FIGS. Perhaps data will ultimately make brands successful, but in most cases, all we need is a pair of eyes to discover. What FIGS offers is not a specific piece of clothes, but rather the emotional needs of a certain group of people. What these nurses, who have been eclipsed by the light of professional physicians, actually need is a desire to be as popular and respected as sports stars. FIGS use the design to meet this demand. This positioning and slogan will undoubtedly be very popular in the American market.
Compared with the traditional business model of "building a website” plus advertising", the "Limited Brand" strategy, which is more refined and pays more attention to cost and risk assessment, may provide a brand new idea for merchants.
- Consider the independent store as a supplement to the business, rather than the transformation task of the enterprise
- Use a small amount of traffic overflowed by the platform to conduct private domain conversion testing
- After the user conversion process is verified, start the conversion ads test
This can be summarized as the "three critical steps" for the international expansion of new brands. Although it does not produce immediate results, it is a viable option for cross-border SMEs who are seeking brand reinvention.
There is a Chinese proverb saying, "if a tiger is hesitant, it cannot strike humans as effectively as bees and scorpions." We used to say "market maturity", but now all walks of life have far exceeded the word "maturity". If you're looking to take the first step in your branding transformation, hopefully this article will clear that little bit of hurdle for you.
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