Many brands can learn from the success of Zhang and his trio of squirrels. For starters, its DNA is embedded with three super cute pets, taking advantage of the worship of Chinese consumers of Japanese-inspired Meng culture, and their cute cartoons like Pokemon. Its appeal extends beyond children with many urban professionals hooked to everything that is beautiful.
This can be seen in some of China's most aspirational leading brands, such as Tmall's cat and JD's dog.
However, while many Chinese brands involve cute pets in their packaging and promotions, Three Squirrels has always gone beyond incorporating personalities into everything they do.
The videos, stories, games and prizes show the personality of each squirrel, giving consumers the experience they so often seek and intertwining them in a longer narrative.
Thoughtful extras that add to the experience include a wet wipe, a bag for shells and, often, walnut cookies with purchases. In their customer service line, consumers are directed as 'pet owners' and purchases are called 'adoptions'. Everything Zhang does keeps his clients at the center of his business, so much so that he considers the "fans" to be as part of Three Squirrels as his employees.
China digital channels
The Three Squirrels D2C (Direct to Consumer) model overlooks retailers, but still manages a notable premium over the sea of competitors that make up China's mass snack category. It also takes advantage of other digital channels, such as asking and listening to social media fans about the type of products they want, which has shortened their development cycles of new products to a few months.
While the Three Squirrels brand was created on the basis of Tmall sales, like many online retailers, the reduction of e-commerce margins and high customer acquisition costs have led it to focus on channel diversification.
While Tmall once accounted for 80% of its sales, now only half of its revenue of more than one billion dollars comes from the platform. A good part of this growth comes from the search for offline "experience" stores, where gross margins exceed 40%, compared to less than 30% online.
Unlike what happened in 2012, selling online is no longer new in China. While it remains a vital sales and marketing channel, one of the advantages of physical stores is that it is more difficult to compare products than simple online searches. In online stores, brands tend to use their best-selling products for promotional purposes and, therefore, must discount, resulting in even lower margins.
How long do I want to operate in cross-border e-commerce?It all depends on the goals of your business. Is the goal to become fully established in China? Or to maintain this position of exporter?
If the goal is to enter China in retail, then CBEC can be a good alternative to start and test the market and customer feedback, test your concept before taking more risks. The steps to establish in China require patience and time, it is better to be convinced of your project before launching. The CBEC is a smart first step.
Chinese Customers can see how many ratings and often the amount of purchases, which is likely to further distort sales, as consumers regularly only search for the most sold or most reviewed items. In an offline store, hero products are not so obvious, so sales distribution is less likely to be diverted to a few popular items. This plays best with Three Squirrel's product diversification strategy, which has seen that cakes account for more than 20% of its sales, and nuts a little more than half.
Physical stores also allow consumers to buy very little at a time, much more frequently and without additional shipping costs. Fixed online delivery costs mean that each order must reach a certain dollar amount to be financially viable. Offline purchases do not have that threshold.
importance of e-commerce in China
While no one should underestimate the importance of e-commerce in China, China is increasingly seeing brands focus more on traditional retail as the golden years of high growth and high margin sales through platforms such as Tmall and JD seem to be done. Experience-focused physical stores, such as New Retail, have also given the channel a second boost. Brands are increasingly worried about relying too much on platforms like Tmall for sales and are also aware that e-commerce platforms launch more private brand brands, which are a conflict of interest. Like many things in China, it is important to understand and evaluate sales and marketing channels beyond exaggeration and develop strategies that balance risk with opportunity, as China does. We hope you enjoy the this week.Consumers, Chinese consumers
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