Product-on-demand: China’s new DTC brands aren’t just faster, they’re changing the game
A new wave of Chinese direct-to-consumer (DTC) brands, such as Shein and Anker, have gone stratospheric in the last couple of years. For The Drum’s e-commerce deep dive, EPAM Continuum’s Miro Jin tells us what others can learn – and which keys to their success western brands might struggle to emulate.
EPAM Continuum digs into the paradigm-shifting successes of Chinese DTC brands / Mika Baumeister via Unsplash
In the last two years, a new crop of Chinese brands has made a name for themselves overseas, outperforming major foreign players on a direct-to-consumer (DTC) e-commerce model. DTC is a fast-track retail model where brands transact with consumers directly, eliminating intermediaries. Leveraging the pandemic-driven global e-commerce boom, these brands aggressively expanded their virtual presence in international markets; some became leaders in product categories.
Take fast fashion retailer Shein, which identifies social media fashion trends and delivers them to the doorsteps of young consumers, releasing a staggering 2,000 new items every day (factoring in different styles, some put that number at 6,000). The e-fashion retailer is outshining its competitors, surpassing H&M, Zara and Forever 21’s US sales.
Similarly, Anker: the electronics retailer started with battery chargers, then leveraged a ‘shallow sea’ strategy to capture fast-growing niche categories, such as sweeping robots, wireless headphones and smart projectors. The strategy enabled the company to create leading global brands in those niches: Soundcore, Nebula and Eufy.
These DTC disruptors have quickly eroded market share for major international players, outsmarting them in adapting to changing customer preferences and building intimate customer relationships. Their journey offers three key lessons for both young brands and established incumbents looking to emulate their success abroad.
1. Deliver products fast, catered to local tastes
The DTC model gives brands a competitive edge, allowing them control of the entire consumer journey from acquisition to post-sales service. This allows DTC brands to obtain data, gain user insights and drive product innovation tailored to local tastes.
These Chinese businesses have highlighted a distinctive competitive edge: while the conventional DTC model is designed to bring brands and consumers closer, their new DTC model also brings factories closer to consumers.
As the largest e-commerce market globally, China has cultivated many small and medium-sized factories that serve e-commerce brands. This massive network allows Chinese DTC brands to respond faster to consumer needs, providing a variety of products to global consumers in shorter production time spans. And the country has long-established supply chains, creating economies of scale for local brands (even amid global supply chain disruptions).
2. Leverage digital channels
The digital explosion driven by Covid-19 enabled e-commerce companies expanding overseas to move beyond Amazon as their only online touchpoint, building an omnichannel presence through SEO and social media. Leveraging direct channels, these DTC brands enabled an almost instant feedback loop between consumers and manufacturers, allowing them to understand customers’ aspirations and release new products quickly and at scale. This is better known as ‘product-on-demand.’
Familiar with China’s fierce online competition, these Chinese businesses successfully applied tactics of influencer marketing, gamification, content marketing, peer recommendation and group purchases. These are highly effective on social channels such as Facebook, TikTok or Instagram, as with China’s Taobao, Douyin and WeChat.
Shein turns social media feeds into live consumer insights that drive real actions. It saw that youth in Europe and the United States were taking their fashion inspiration from social channels, rather than fashion shows. Once Shein identifies an emerging trend, it immediately requests its internal design team and external suppliers to respond with products.
Many local fashion brands struggle to cater to the diverse tastes of global audiences. Using its massive network of clothing factories in China, experienced with small orders, Shein conducts trial-and-error analysis, compressing the design and production cycle of a new style to as short as a week.
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3. Capture niche categories
Taking a different route to Shein, Anker’s winning strategy is to discover and capture upcoming niche categories faster than its competitors.
Anker started with niche products: power banks and charging cables. Following the ‘shallow sea’ strategy, it quickly moved to identify categories where market demand is rising quickly but is not yet big enough to attract giant players. Thus Anker grabbed market share in fast-growing categories (including smart speakers, smart projectors and sweeping robots) before competitors could react.
An important factor is the advanced supply chain of consumer electronics in Southern China. Even if Anker entered a new category with little domain expertise, it could easily find the right design, technology and manufacturing partners to turn ideas into scalable products in a matter of months.
A new era for Chinese DTC brands
Chinese brands are often regarded as low-end substitutes in the global market. But the latest generation of DTC brands brings a new value proposition to the market: customer-centricity and products-on-demand. They have built an almost instant product lifecycle between emerging consumer trends and physical products.
This new paradigm of ‘product on-demand’ will continue to evolve and impact more industries. More and more companies will try to do the same: turn live feeds of consumer insights into tangible products, build a highly-flexible supply chain, and ultimately reshape into consumer-centric and fast-responding organizations.
For more on the new frontiers in digital commerce, head over to our e-commerce hub.
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