Langsey Company's Li Zhang is your insider industry guide to all things China. First up, she looks at the role of digital influencers in the market.
Have you noticed the recent rise of internet influencers in the Chinese fashion market?
There’s no doubt that internet influencers are having a significant impact on China’s retail market, transforming the industry and affecting customer bases and supply chains.
The success of these online celebs is only here to stay, as they become an increasingly stronger force in China’s online retail business. So what can we learn from these internet influencers? And how do we adapt to this new industry landscape?
China’s Most Famous Internet Influencer
Let’s take a look at China’s most famous web celeb, Zhang Dayi.
A former fashion model, Zhang Dayi is now a highly successful internet celebrity, with a Sina Weibo following of four million and her own online shop called Wuhuanxide Yichu – in English, "The Wardrobe I Like."
Her videos have been known to hit more than nine million views, as she shows off a selection of outfits to online followers. These followers rush to purchase the outfits, with sales skyrocketing – in fact, China’s largest shopping channel reported 5000 sales within seconds of Zhang uploading a new video.
The popular cyber celebrity now even has her own factory, employing over one hundred people.
The Power of Internet Influencers
Zhang Dayi is not the only internet influencer making waves in China. And her success reveals the rising trend of China’s ‘Internet Celebrity Economy.’
More and more internet influencers (commonly known as wanghong in Chinese) are setting up their own brands, hiring their own designers, and placing their own orders with manufacturing factories.
As you can see, these internet celebrities, based mainly on Weibo and Taobao, have become a significant force in the online retailing business in China.
Changing the Retail Landscape
Internet influencers normally start their online retail business on the Taobao platform, by selling fashion products sourced from wholesalers. However, in recent years, things have changed.
The customer base of most Chinese apparel manufacturers has generally been two types:
- overseas fashion brands (normally through export and import agents)
- local Chinese fashion companies (who have traditional chain stores or counters in department stores).
Now suddenly, we have a third type of customer – the internet influencer.
A New Type of Supply Chain
Internet influencers are also impacting the retail industry’s supply chains.
With their online brands, they have a much simpler value chain: from factory to online store. This is in comparison to overseas brands, who have a very long value chain, from factory, trade agent, international logistic agent, overseas wholesaler, to final overseas retailers.
Internet influencers are also free of many of the traditional retail costs, such as store rents, marketing costs and HR. That is because they are able to use their existing (free) influence to promote sales.
Because of the reasons above, internet influencers are very generous on paying their suppliers. They have much bigger profit margins, which also grants them much higher negotiation power.
The Impact of Influencers on China’s Factories
Internet influencers are also making changes to the way they are doing business with factories.
Internet influencers are ordering much larger orders. For example, in Zhang Dayi’s Taobao store we can see many items have about 5,000 to 8,000 units each item in stock.
What do these quantities mean? Normally even world-famous brands will only manufacture a few thousand units for each item. This shows how confident Zhang is about her selling capability – and yes, she has always sold out.
They are more flexible with production details, as they are the boss and they can decide to accept any technical suggestions from suppliers – making the factory’s job much easier. This is vastly different from the traditional process, where every single small change had to be approved by the designer of the brands company, with communication having to go through several middle parties.
There is no doubt that emerging online-only Chinese brands are much more attractive for factories, with higher willingness to pay, larger order quantities, and higher flexibility.
Learning from Internet Influencers
This is good news to Chinese apparel factories who have been facing fierce competition from other Asian countries – Chinese internet influencers won’t want to put their orders to those countries just for lower cost.
However, it’s bad news for global fashion companies, who still want to keep their manufacturing in China because of premium quality and reliable service.
There are at least two things we can learn from internet influencers. First, that we need to do marketing in the way that internet celebrities do. Secondly, that we would be wise to shorten our value chains and reach Chinese suppliers as directly as possible.
In this way, we can successfully compete with China’s internet influencers, while adapting to ongoing changes in the retail industry.
This is a sponsored post in collaboration between Ragtrader and Langsey.