Kylie Jenner’s influencer-centric business model may win her praise here but is de rigueur for bloggers in China. Unlike Instagrammers in the West who rely primarily on the content monetization model, Chinese influencers are light years ahead.
Alibaba’s 2017 Singles Day saw six influencer-run brands rank among the top 30 female apparel stores, with four grossing over RMB 100 million in sales the same day. The year before, influencer Zhang Dayi’s brand pulled in $46 million, just a little more than Kim Kardashian’s $45.5 million in annual earnings.
A Global Trend
A growing number of influencers worldwide are launching their own brands to retain control. “No matter where in the world influencers operate, there will always be tension when they agree to collaborate with established brands,” explains Joel Backaler, author of the book Digital Influence. “The influencer has their own “brand” – the trusted reputation built over many years among their loyal followings – and that personal brand can come into conflict with the values or goals of a large global brand partner.”
Influencers are also more aware of their edge over traditional brands in today’s social media-driven economy. Becky Li, a top Chinese influencer who launched her own label last year, shared her perspective, “The biggest advantage influencers have is the huge number of customers we can bring to the brand. Currently, I have nearly 6 million followers, many of whom relate strongly with my aesthetic and closely follow my brand positioning and product decisions.
Since our followers are our consumers, influencer brands don’t need to budget resources for marketing, allowing us to spend more time, energy and money on optimizing products. I remember this one time, before any items were for sale, we put out a post telling readers that the storefront was up, and even though we weren’t selling anything yet, it received 300,000 visits that day alone.”
Elijah Whaley, CMO of China influencer marketing platform PARKLU and co-founder of top Chinese influencer Melilim Fu explained further. “I believe influencers are taking a smarter approach.The typical business starts by spending all its time designing products, whereas influencers spend theirs engaging future customers,” he said. “After they have followings that can viably support sales, influencers layer-in products that are designed specifically with their followers in mind. The influencer business model is reducing risk by building affinity first and then making products people are requesting. Influencers have an innate sense of what to sell, as they themselves are in essence their target market; they also know what to avoid based on observing their followers or simply asking for their opinions.”
Western influencers have weaker access to the market
Launching and sustaining a brand comes with no playbook for choosing the right partners; influencers not born to reality TV mogul-momagers usually get their start by dropping co-designed collections with recognized brands. When they do go the private label route, it’s through collaborations with big retailers such as Nordstrom or JCPenney.
When it comes to launching their own brands, Chinese influencers have a leg up on western influencers like Huda Kattan and Chiara Ferragni thanks to the plethora of turnkey solution providers such LOOK. Many influencer brands are advanced e-commerce operations run by incubators like Ruhan that support the public face of the influencers with a large team managing logistics, manufacturing, and social media content creation.
Forward-thinking Western influencer agencies are catching on and beginning to capitalize on the trend, creating departments specifically for launching influencer brands. One example is Digital Brand Products, the brand-building arm of influencer agency Digital Brand Architects, who helped U.S. fashion blogger Cashmere and Cupcakes launch her own independent brand last year.
“Another massive advantage is access to manufacturing,” Whaley pointed out. “Many Chinese influencers choose to establish base in Jianggan District in Hangzhou, one of the largest clothing wholesale markets in China. Their proximity to the factories reduces costs because most of the inventory can be shipped out directly from the factories. It also enables them to quickly adapt their products to suit changes in consumer taste. In fact, many of these fast fashion factories in China have an incredibly short clothing manufacturing period of only 7 days.”
Chinese influencers benefit from a supportive digital ecosystem
China’s e-commerce sites and social media platforms are geared for encouraging consumption, and actively support influencer brands through platform integrations and products. Most of China’s social media sites either have partnerships with China’s top e-commerce platforms or, like Tencent’s WeChat, have their own in-built e-commerce functionalities. This gives influencers the choice to launch products on social platforms where they enjoy the strongest level of influence.
Alibaba’s longheld dominant position in Chinese e-commerce had the effect of aggregating the majority of Chinese manufacturers and logistics providers, making it easier for influencers to find partners. The first wave (2014-2017) of Chinese influencer brands emerged from Weibo, all of whom, including OnlyAnna, Zhang Dayi and Cherie, operated Taobao stores.
Weibo, one of China’s largest and most popular social media platforms, has a partnership with Alibaba, allowing users to post direct links to Alibaba’s marketplaces while penalizing posts with links to other e-commerce platforms. A feature called Weibo Window affords a frictionless social commerce experience allowing followers to directly purchase an item shown in a post from the influencer’s Taobao store without ever leaving Weibo.
The second wave of influencer brands began to emerge last year when Tencent launched WeChat Mini Programs, basic versions of regular apps designed to work within the WeChat ecosystem.
Prior to Mini Programs, influencers on WeChat could not include links to external websites within their posts, severely limiting their ability to drive direct sales. Now, e-commerce stores created using Mini Programs can be linked to directly in the body of WeChat articles, thereby dramatically increasing conversion rates and sales for numerous top WeChat influencers like Li.
“Though I enjoy a strong readership on WeChat, the platform doesn’t allow external links, so it never made sense for me to open a store until they launched Mini Programs,” she said.
“The WeChat team is very supportive of influencers doing e-commerce. When we first launched we broke a record, raking in one million RMB in sales in less than seven minutes. WeChat even used us as a case study in Tencent’s official WeChat Open Course. However, we soon ended up breaking our own record, with a later product drop taking less than a minute to reach one million RMB in sales.”
What does all this mean for investors?
The best way for investors to play on China’s lead and growth in influencer marketing strategies and their ability to disrupt traditional retail is by investing in the leaders, the top three being Alibaba, Weibo and Tencent.
- As of June 2018, Alibaba continued its reign as the leader in Chinese retail e-commerce sales with 58.2% market share.
- Weibo is the most important social media platform in China for influencer marketing. Through its strategic collaboration with Alibaba since April 2013, Weibo has become a social commerce platform, directing user traffic to Alibaba’s Taobao and Tmall platforms.
- Tencent is the parent company of China’s most popular app, WeChat. Over the past year, Mini Programs, essentially sub-applications within WeChat, have disrupted a range of Chinese industries, most notably e-commerce
Investors should also keep an eye on social and e-commerce platforms in the West who may be looking to replicate China’s success. A recent report revealed Instagram is working on a new standalone app dedicated to shopping. It stands to reason that this app would hold huge potential for influencer brands, although it’s hard to say as very few details are known at this time.
