Net red products are expensive, behind the tears of the foundry

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The same product, the price difference is 14 times? Recently, the topic of “foundry products being sold at high prices by Internet celebrity brands” has been on the hot search on Weibo. Some people think that the same foundry does not mean that the raw materials and quality of the products are the same, but in recent years, the inflated prices caused by Internet celebrity products have still become the focus of outside attention.

Author | Chen Fashan Editor | Liu Yang

Source: Leopard Change

Are Internet celebrity products just the “porters” of the foundry?

Recently, a Beastist perfume and MINISO “Zhuangshan”: the Beast osmanthus osmanthus oolong perfume (30ML) priced at 420 yuan and the MINISO Peach Oolong perfume (30ML) priced at 29.9 yuan, Both are produced by Huzhou Yufan Cosmetics Technology Co., Ltd., but the price is 14 times different.

The huge price difference made the topic of “the same foundry of Brutalist perfume and MINISO” rushed to the hot search on Weibo, and the number of onlookers exceeded 360 million. Many netizens questioned the high “water content” of the price of the Beast. Through marketing and packaging, Yiwu small commodities were sold at the high prices of international first-line brands; but some people believed that the same foundry did not mean that the raw materials and quality of the products were the same.

In addition to being complained about the price, on social platforms such as Weibo and Xiaohongshu, some buyers complained that the quality of the brutalist did not match the high price: the silk pajamas were taken off the line in less than a month, and the 12 eternal flowers became 11 when they were sold. The color of the Ecuadorian rose priced at 1314 yuan is not evenly sprayed…

In recent years, many Internet celebrity products have quickly become popular on social media, and the resulting inflated prices and product defects have also become the focus of outside attention.

“Leopard Change” found through visits that many Internet celebrity products often choose asset-light operations and are produced through the OEM model in order to meet the fast-paced promotion needs. Behind the popularity of online celebrity brands is the loneliness of the foundry’s own brands. Not only is the brand unknown, but sales are also very bleak.

Why are products with similar product strength sold at high prices after being operated by the brand? Will it be more fragrant to directly buy the self-operated products of the foundry?

Big brands sell at high prices, but few foundries are interested

“Leopard Change” visited Zhejiang Wenzhou Fortune Center, Wuyue Plaza, Mixc City and other shopping malls and found that not only the brutalist perfume is OEM, but also the Internet celebrity products such as Muji and Li Ziqi Hot and Sour Powder.

There are more than a dozen fragrances on sale in the MINISO Perfume Zone of Wenzhou Wuyue Plaza. Compared with the big-name perfumes with exquisite printing, thick paper and larger volume, the outer packaging of these perfumes is softer to the touch, only about the size of a cigarette box. , the front is printed with a small fresh style pattern in pastel colors.

One of the peach oolong perfumes is produced by Huzhou Yufan Cosmetics Technology Co., Ltd. The outer packaging is the same as the perfume mentioned in the above topic, but the capacity is changed from 30ML to 24ML (6ML*4), and the price is also 29.9 yuan. During the same period, the Osmanthus osmanthus oolong perfume on sale in the official flagship store of the Brutalist is a gift box, priced at 420 yuan, containing a bottle of 25ML perfume, plus a sachet.

This is partly different from the content of the topic, that is, the two products are indeed produced by the same foundry, and the fragrance type and net content are similar, but the Brutalist packaging is obviously more exquisite, and there is an extra sachet. From the perspective of product ingredients, both are mainly water, ethanol, and essence.

Liang Xuan, who runs a cosmetics business in Zhejiang, told “Leopard Change” that even if it is the same brand, in order to balance the interests of various channels, manufacturers may adjust product mixes to facilitate pricing in different channels. Fauvism sells perfumes with sachets, and the packaging design is obviously more exquisite, and it is easy to sell for high prices.

In the Muji store of Fortune Center, the Internet celebrity aromatherapy machine was placed in a conspicuous place in the aisle. In the MUJI Tmall flagship store, the total monthly sales of these two aromatherapy machines exceeds 1,400 units, and there are over 9,000 related comments.

Muji's Internet celebrity aromatherapy machine on sale Muji’s Internet celebrity aromatherapy machine on sale

Kegao Electric’s self-operated “asiamist home flagship store” is the top two aroma diffuser, which is made of plastic + PP as the above-mentioned MUJI aroma diffuser. The total monthly sales volume is about 500 units, but the price is only 130 yuan and 99 yuan. , less than one-third of Muji. The highest-end aromatherapy machine in the store uses a solid wood base + glass lampshade, with music playback and touch sensing. The price is 479 yuan, but the monthly sales are 0.

In the convenience food section of OLE Supermarket in Vientiane City, Internet celebrity snacks occupy a prominent position on the shelves. Among them, Liziqi Hot and Sour Noodles priced at 12.9 yuan and Xiaolongkan Hot and Sour Noodles are both manufactured by Akuan Foods, but they are not sold on the shelves. Akuan brand convenience food.

Liziqi hot and sour powder, Xiaolongkan hot and sour powder Liziqi hot and sour powder, Xiaolongkan hot and sour powder

In Li Ziqi’s Tmall flagship store, the monthly sales of the same hot and sour noodles exceed 7,000 units, while in the Akuan Foods flagship store, the same weight of hot and sour noodles is priced at 6.6 yuan, and the monthly sales are only 54 units.

Why are you looking for an OEM?

Why did the popular Internet celebrity products unanimously set their sights on the foundry?

A number of industry veterans told “Leopard Change” that the key behind this is that the foundry model is cost-effective and has low trial and error costs. Taking the beauty industry as an example, domestic foundries have formed economies of scale, and their production techniques are relatively mature, which is conducive to cost control by commonly used affordable cosmetic brands. Therefore, most beauty brands are mainly responsible for branding, marketing and channels in China, and most of them use the OEM model in production.

Top 50 cosmetic OEM companies according to the statistics of the Beauty Industry Research Institute Top 50 cosmetic OEM companies according to the statistics of the Beauty Industry Research Institute

In addition to cosmetics, Internet celebrity snacks have also become very popular in recent years. Lin Shuai, who has been engaged in the food and beverage fast-selling industry in Zhejiang for many years, believes that the cost of building a new factory is very high, and it is not necessary to build a factory to find an OEM, as long as the channels are well established. Many Internet celebrity products are sold online. How much is sold, how much is produced, and then sold under OEM, in case of death, the cost is also low.

“Taking Internet celebrity food as an example, a studio is usually established to give priority to brand and UI design, and then find a foundry that meets the food business qualifications for production. During this period, the cost is mainly the operation of the studio. The production is mainly pre-production. Orders are arranged first, and there are as many orders as there are orders, so that the cost can be better controlled.” Lin Shuai said. “If you want to produce it yourself, you have to buy land, buy an assembly line, and pass the national standard certification, which is a huge investment, and not many companies can afford it.”

In Lin Shuai’s view, many first-tier manufacturers have mastered the formula raw materials and have the ability to develop products and change tastes, which is not available to many Internet celebrity brands. “Internet celebrity brands are more about packaging what manufacturers can produce.”

For manufacturers, OEM is a job where others eat meat and drink soup, but they can also earn some extra money to subsidize their households. Usually, after the factory, production line, and employees of the manufacturer are in place, the production capacity is determined. If there is spare capacity, it is logical to undertake orders for Internet celebrity products.

“If the OEM works well, they may become independent, just like Jiaduobao and Wanglaoji split up.” Lin Shuai said.

Akuan Foods, which is the OEM for Li Ziqi Hot and Sour Powder, also provides OEM services for NetEase Yanxuan, Baicaowei, and Three Squirrels. In the IPO prospectus disclosed in May this year, Akuan Foods revealed that the OEM revenue for Internet celebrity brands in 2021 will be 136 million yuan, accounting for 11.56% of the company’s revenue, while this revenue is only 68.3 million yuan in 2019.

In 2021, among the top five customers of Akuan’s food direct sales model, three Internet celebrity brands, namely Three Squirrels, Li Ziqi and Baicaowei, will occupy three seats. However, the profit margin of “working” for the Internet celebrity brand is less than half of that of the self-operated brand: the gross profit margin of customized sales is 17.59%, which is far lower than the 35.51% gross profit margin of direct sales.

In the opinion of some industry insiders, Akuan Food’s life is much more comfortable than that of many foundries. “The beverage industry only recognizes big brands, and it is difficult for the non-brand brands launched by the foundries to survive. Because the big-name manufacturers keep the cost very low, the terminal price is basically around 5 yuan, and it is very dependent on marketing channels, because the quality is heavy, and the distribution system is maintained. The cost is huge, and it is difficult for new entrants to have a chance.” An industry source said.

“On the other hand, online celebrity products are lighter in weight and can be delivered by express delivery, with high profit margins. For example, 100 grams of dried meat can be sold for ten yuan, and the cost is relatively low. This kind of foundry’s own brand is easier to survive.”

Where is the way out for the foundry?

“Leopard Change” found through visits that foundries lacking brand endorsement generally face the dilemma of “price but no market” or “market without price”.

It can be seen from the sales volume of Kegao Electric that if the foundry’s own brand wants to sell well, it can only change the market at a low price. The price of similar products is generally only a fraction of the big brand; It is one grade higher than the big brands of the same price, but still faces the problem of not being able to sell, and good products cannot bring sales.

From the perspective of division of labor, foundries focus on production, and brand operation and marketing are not their strengths. If they want to upgrade their brand influence and increase product pricing, they face many difficulties. The most intuitive is that a lot of additional investment is required, but without a stable sales system, it is not easy to achieve a breakthrough.

“Many of the foundry’s own brands are sold in the county and city where they are located, but the sales volume is average. Even the local market cannot break through, and it is even more difficult to spread it out in an all-round way.” Lin Shuai said,

However, in recent years, with the emergence of live broadcast products, some white-brand products have quickly become popular with the help of the live broadcast room of the head anchor, providing ideas for the transformation of the foundry.

For example, after becoming popular with Li Jiaqi, Huaxizi has become a frequent guest of many top anchors and variety shows; white-brand cosmetics such as Kelai Ni, Hylando, Betty Bonnie, etc., have received a lot of attention with the advantages of live broadcast platform traffic and price. Female users in lower-tier cities love it, and sales are gradually countering some international first-tier brands; Akuan Foods also frequently appears in the live broadcast rooms of Weiya and Luo Yonghao.

But behind this is the high cost of marketing and promotion.

In 2021, the sales expenses of Akuan Foods will be 164 million yuan, of which the promotion service fee will be 96.83 million yuan, accounting for 59% of the sales expenses. Obviously, such a high cost is not affordable for ordinary foundries.

Even so, if the foundry’s own brands that do not have a dominant offline channel want to break through the circle, relying on online traffic is still the key direction to break through. On this point, some head anchors and foundries seem to have reached a consensus. Previously, the head anchor Simba established a war investment department to incubate new brands. The connection point of the cooperation between the two parties is that in addition to earning pit fees + commission income for bringing goods, the anchor can also obtain a capital premium; the foundry may use the live broadcast room of the head anchor to turn the sparrow into a phoenix overnight.

Of course, the disadvantages of relying too much on online channels are also obvious: competition has intensified, and traffic fees have become more and more expensive; marketing costs are high, and after losing traffic, online celebrity products can easily lose their voice; the price system is difficult to maintain.

“You can’t rely on one or two live broadcast rooms. To achieve a brand breakthrough, you need to expand the coverage. Manufacturers will give profits at the ex-factory price, and middlemen will give profits. A few yuan in the price of a beverage terminal will generate random prices, not to mention the higher profits. High-quality products.” Lin Shuai said. “Every time the price is cut in the live broadcast room, it is a blow to the offline channel. Of course, except for the capitalists, offline casually pay, and make the brand first.”

Compared with the above-mentioned deep-pocketed foundries, some small factories are not so lucky, and can only secretly sell the “shopping mall” on the e-commerce platform.

“Leopard Change” searched “MUJI” on the e-commerce platform, and many shops sold MUJI’s best-selling linen bags and four-piece bed sets. A seller of burlap bags put “MUJI” in the store name and avatar, but the products he sold did not carry the brand LOGO. The customer service explained that they are directly supplied by the factory of Muji, and the quality is the same, but because it is a factory product, the brand logo and tag cannot be placed on the bag.

Another Jiangsu seller who sells bedding also said that his products are sold directly from the factory, sold at wholesale prices, and even given original tags. A four-piece set of 1.5-meter bed is priced at 229.8 yuan, which is about half of the price of Muji’s offline stores.

Or become a coolie for the brand side, or become a vassal of a traffic platform, this is a pit that many foundries inevitably have to step on in the process of transformation and upgrading. Nonetheless, this is a treatment reserved for the top students of a few foundries, and more foundries are at the bottom of the industrial chain, silently playing “edge balls” in a certain corner.

(At the request of the interviewee, Lin Shuai and Liang Xuan are pseudonyms)

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