The Rise of Chinese Brands
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Western brands that don't understand these young Chinese brands would be really obsolete. They would have a hard time

Copycat, Chinese rip-off, a cheap version of an expensive product. These sentences are top of mind for many when thinking about Chinese brands. But the last few years something has happened. A new generation of domestic brands growing up.

Competitive prices, good quality, and then the X-factor that has been missing among the older generation of companies. A very well-crafted overall brand image, everything from the packaging to the social media campaigns. With Eva Wei, I have a very special guest with me, Emmy Thiel. Hey, Tom. We're going to discuss the rise of domestic brands of China that in many categories even are out-competing the Western equivalents.

Welcome to Digitally China, a podcast about the fascinating Chinese tech industry created together with Radii. I'm Eva. I'm Jacob. And I'm Tom. So according to various studies, China's gaming industry is now in fact the largest in the world. You may know their messaging app called WeChat. Chinese outbound M&A. Chinese corporates are live.

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Before we start talking about domestic brands, maybe you just want to do a quick introduction of who you are. My name is Emi. So I'm actually from Singapore. So I've been in China, specifically Shanghai for two years. So I'm this co-founder and CEO of Fuse.

So basically for Fuse, we help new brands enter the market and we put these brands into different locations. So with these locations, we also deploy new retail technology to help the brands understand their performance offline. So, you know, this gives us clarity and visibility to how the brands perform in a new market, specifically in new cities, in the new regions, or even in new countries. So because of how we work with brands,

the new brands, we also have an assesse of local brands that is trying to enter and trying to present themselves in a different way to our target audience. So, you know, instead of really just being online, now these new local brands also have a need to be showcased offline.

So, you know, we are quite fortunate, you know, because of that, we have actually worked with a number of local brands that's up and rising. And we do see the opportunity of them like being popular.

able to make it big in the global market as well. So the context for today is about domestic brands of China and the rise for them. And that's mainly being fed by the new tier one consumer of China. All these new young consumers have been traveling the world, have access to social media, exposure to all these Western brands, and they've kind of matured over the last few years into wanting more and understanding exactly what they need.

When you moved here and started working with marketing and brands, was that a surprise to you? Yeah, I think for me, it's very much a surprise because, you know, coming from Singapore, you would think that, hey, you know, you're exposed to the Western brands and you thought that you have pretty good taste and you should like know a lot better than the young Chinese consumers over here.

But in fact, I think we're very much wrong. So Chinese consumers have evolved a lot. You know, when I say a lot, it means like literally a lot. So they're looking at brands in three areas. You know, they're looking at the price point, they're looking at the brand story itself, which also includes the packaging, and then also the product itself. So, you know, there's three areas that they look at, price, packaging, and the product.

So it's actually very interesting because when they choose to buy a product, even though they have plenty of choice, they could do a very, very quick assessment of how is the price compared to the packaging, compared to the actual products itself, and they make the best choice. So, you know, in that context, actually, it is even harder to, you know, for new brands to acquire the young Chinese tier one consumers.

Yeah, I think many years ago there was this kind of common understanding that mostly Western brands had good enough brands, good enough star power and definitely good enough products in order to attract kind of the more affluent target customer.

But now lately, we've seen a development that a lot of domestic brands have been developing very rapidly and offering basically the same thing, but at a slightly lower price. Do you think Western brands have understood this yet? I think the Western brands have started to realize that it is not as easy as before, you know, to sell something.

So especially it is at this advantage that any brands that comes into China from overseas market needs to get tax, right? There's a custom tax and there's also a VAT, goods and consumer tax, right? Where you have to pay up front when you're trying to sell to a local consumer. So if this brand is trying to sell in China, their price is going to be more expensive than the local counterparts. So what the...

Western brands, what the Western brand didn't understand that is they have to make up for, you know, this price by providing more values in their products or packaging, you know. So like this is where the Western brands doesn't get it. So they feel like, hey, you know, they should do the same thing and the Chinese consumers would just come.

but it is not what we are seeing today. So today, together with you and me, we're going to talk about mainly two topics. One is about furniture and the second one is about fashion. So let's start with furniture. I think the interesting thing about the furniture category is that it is extremely hard to sell furniture online. So we know that...

the young Chinese consumers buy everything online, right? But we're looking at selling finishes online? Really? Okay. So they don't get to see, they don't get to try, they don't even get to figure out the quality of the product itself, right? So there's a tremendous amount of difficulty selling any finishes online.

But what we are seeing today is two very, very good new Chinese brands that started between 2013 to 2014. So they've been in the market for the last about four or five years. And they've made tremendous amount of growth over the last few years with the tier one Chinese young consumers. And I think it's specifically interesting to share both brands, you know, how they do it and, you know, just a bit about the background.

the background. One is Zhiying, the other one is Zaozuo. If you are a Chinese consumer, these two brands are not going to be extremely foreign to you. We can talk about Zaozuo first. So Zaozuo is a brand, is a Beijing brand started around 2014. So

So when they first started, they really have the same vision with IKEA. You know, they really wanted to be the IKEA of China, but they, you know, they have a twist, you know, they wanted everything to have a bit more design, to be a bit more special.

At the same time, it's very clear they're shouting out to the tier one young consumer. Because, you know, we know the older generation of Chinese, they won't buy anything from IKEA. They're not also IKEA fans. You know, they would buy things from the traditional furnitures market.

Hongxinmei Kailong, specifically, you know, one of the mega malls where they just sell furnitures, right? So for ZaoZuo, they started online and basically they started really with very simple furnitures, very simple design. They were not doing any offline strategies.

With a good price point, with good designs, this is where they reach out straight to us, to the tier one young target audience. Yeah, actually, you know, IKEA is always top of mind for me and I refuse to buy anything but IKEA. But when I was going to buy a new kitchen table, I actually went to Zao Zuo and it was astonishing that they had a really well-designed kitchen table slightly over IKEA's price point.

And it was a domestic local Chinese brand, right? And for me, that was kind of astonishing. Then I actually looked through their designers and actually half of their designers are from Scandinavia, you know, furniture designers. It's kind of interesting. Yeah. So it is very interesting that you mentioned this point because, you know, when we talk about furnitures, I mean, the first resistance you are going to get is price point, right? So, okay, so how do I compare table one versus table two?

So how Zaozhuo did it is basically they look at what IKEA has been selling. So they sort of understood the kind of price point for each specifically SKU. So like a table, it should cost anywhere between a few hundred to about a thousand plus. Maybe the better design one, the bigger one being about two to three thousand RMB.

And then you have different price point that is acceptable, that is deemed acceptable by the young target audience, anywhere between a few hundred kuai to a few thousand kuai, right? So understanding the price point of this SKU, they first make sure they erase that resistance in their young consumer mind. Exactly like what Tom talked about.

is, hey, the price point is about the same, but this table is much better in design. It's cooler, right? It has a nicer design and the whole story, the whole packaging of it, how they display the story on their Taobao shop, on their Timor shop.

is a lot better. You know, they are very sophisticated in terms of online selling where they go in-depth into designing their product details page where they infuse stories and elements of this product

So this way, they just need to work on the product and the packaging because the price is essentially similar to IKEA. So they are like, okay, I'm pretty sure that my target audience is able to accept things of this price because they are buying something similar to IKEA. But hey, I'm going to provide them something better.

And I'm going to provide them something with a more unique design. Yeah, so if we look at Zaozuo as a specific case, I think one thing that's impressive is that both they're able to access supply chain, enabling them to sell at prices just around IKEA. But at the same time, they're building a really good brand story, beautiful products, actually,

And actually, if you go into their retail stores that they've opened lately, you know, it's very well designed stores and very well thought through. And based on the kind of old perception of Chinese domestic brands, you would never think this is a local Chinese brand.

China being able to produce low-priced products, that's been there many, many years. Why do you think, especially in the furniture industry, we're seeing new, very well-built brands now? I mean, you have to look at a simple fact, right? It makes no sense for furniture to ship from overseas. Right.

So the young Chinese consumers are savvy, right? These kids are savvy. So I know no matter how much I'm paying for, this is something that is going to be built in China. And this is something that must be built in China. So there's no use that you tell me this is designed in Sweden. You know, like there is no use at all to tell me this is designed in Italy. I know this is made in China.

So one of the advantage that Chinese brand has is definitely supply chain, you know, like what you've mentioned. So I think the supply chain is really a game of quantity, right? So at the start, when a brand is just growing, right, they wouldn't be able to manufacture in bao.

So their price point is not going to be super, super competitive. They're going to make sure their price is about the same with IKEA, but they're not earning a lot. So that implicates their various strategies, right? Because I'm not earning a lot, okay, so I have to cut on my marketing budget. I have to cut on every other stuff. So as they grow and as they reach that critical mass, right?

what happened is they have a decrease in their costs in terms of production. It's just simple. So with that decrease of the costs in production, they are able to reinvest the same amount back to, you know, we're talking about story, we're talking about design, right? So this really helps them to speed up their growth. And now if you, it's a great thing that you talk about their retail stores because right now, Zaozhuo, I think they have 13 retail outlets.

And if you really visit the 13 retail outlets, you realize that actually a lot of the products are priced even cheaper than IKEA. And this is something that I didn't realize. You know, I walk in and I saw like, okay, I didn't realize they're selling this cheap.

So 造作 to me, I thought they are still selling a bit more expensive than IKEA. But being able to have access to that critical mass in terms of production really helps them to lower their costs and increase their margin for every single product sold.

So is that a normal company journey? You begin with products at slightly higher prices, you build critical mass, and then you can lower your cost and you can reinvest the money into kind of your brand and all that. So you don't begin with the great, awesome brand.

Is that what's happening in China? It is actually what is happening. So if you look at the normal journey, it is like every single company would roughly go through the same thing. But we are talking about specifically good company that reinvest their investments, reinvest their revenue into brand building. So it's very different with the previous set of traditional Chinese companies that

where they probably would reinvest into something else, right? They would reinvest into maybe supply chain. They would most likely also reinvest into products. But for the new companies that we are seeing, the new brands, actually they reinvest a lot of their revenue into brands building. Basically, if we want to simplify what they are doing, they are reinvesting revenue back to where the customers are able to see, feel, touch them.

So they're reinvesting into making sure they have better photo quality. They're making sure they have better product photos. They are reinvesting into better shop fronts, better e-commerce layouts, better WeChat management. Basically, these are things where it increases the brand perception of these brands in the consumer's hearts.

And that is something that is very different from, you know, the previous set of the more old school traditional Chinese brands that we're seeing. You know, these guys might reinvest into R&D where the new brands are very, very focused on like, okay, I know I have to focus on producing a good product.

But what is important is allowing the story to be heard by the young target audience and making sure that these stories get continuously more sophisticated as they grow. Yeah, when looking at Zao Zuo, one thing hits you, right? Which is that if they're able to do products at the same price as IKEA, but they're more localized, i.e. just culturally, it's easier for them to attract the core target group. The new young people of China, they're going to get a new apartment.

Are we seeing this trend overall right now that there are a lot of new furniture brands growing up?

Yes. So other than ZaoZuo, so ZaoZuo has... The interesting thing about ZaoZuo is they have about 200K of fans on Taobao. So when we talk about Taobao fans, it's very interesting. It is not the same with your Weibo fans or WeChat fans. So these are fans that follows you intentionally to buy. So they have 200K fans and...

They've recently raised about 20 million US dollars in the Series B round. So, with 20 million US dollars, we are expecting their valuation to be at least about 100 million. Mm-hmm.

That would mean they are doing maybe a yearly sales about $10 million to $20 million in China. So I'm just giving you some stats about Zao Zhuo. Another brand that we felt like has got a lot of potential is called Zhi Ying. So Zhi Ying is an interesting brand where we see Zao Zhuo from Beijing and then Zhi Ying is from Shanghai.

So the difference of Zhiying is that Zhiying is actually more online than offline. So Zaozhuo has ventured into offline really quickly. So because I think they also modded themselves after IKEA. So IKEA has got this super big, you know, stores where you can walk in, you can experience different things, right? So Zaozhuo is modded after that. So Zhiying is still very much online. They have offline experiential stores online.

The difference with Zhiying is they have about close to 900k of fans. So that is about four times of Zhao Zhuo online on Taobao. Wow.

And the difference is that if you look at Zhiying, the price is slightly more expensive than Zaozuo. But it's still at a 20 to... It's not more than 20% more expensive than what we call the acceptable product price range. And Zhiying has more emphasis in product storage.

I'm going to give a very simple example. So one of the co-founders of Jing is a Shanghainese. So as he was growing up, so they have to stay in a very small apartment in Shanghai. And there is not much place for him to eat and to work on his own homework.

So how he designed and how he played around with his furniture startup is that he designed a cupboard where you can open up one of the doors and place it flat diagonally so that it becomes a table. It becomes a makeshift table.

So this is one example of what we call interesting design, you know, plus the story. So as a Shanghainese, you know, when you are looking at the cupboard, you're looking at the drawer, it is actually very interesting. So it shouts out to you personally that, hey, you know, there is actually a design twist to a traditional cupboard. And the design twist also has a story to this. You're not just buying the cupboards.

the cupboard itself you're not just buying the product itself you're also buying the story behind it

So almost every single product from Zhiying has a special design twist that we realize it is really selling to the younger target audience. And that is one of the main reasons why, you know, compared to Zaozuo, even though Zaozuo has a bigger appear to mass target audience, Zhiying has 900k fans and Zaozuo has only about 200k fans on Taobao. And on the topic about brand stories,

Actually, fashion is probably one of those categories where that is mostly important to communicate why you're designing a certain clothing in a different way. And there we've also seen a huge growth of domestic brands. Everything from tier

tier 3, 4, such as Peaceburg, to tier 1 and more kind of hipster type of brands. And we're going to focus on that today. Yeah, I think it is particularly interesting because, you know, when we talk about fashion, it is very hard for a new Chinese local fashion brand to break out, right? You know, we have so many other brands from overseas that's coming in strong. You know, we have Off-White where, you know, it has...

basically create a craze, you know, for everybody, you know, for the youngsters to buy off-white. So, you know, I think it is very interesting to talk about fashion and

And for fashion, what we are witnessing is, of course, there are a bunch of old traditional fashion brands trying to make themselves younger, like Peacebird, Fei Yue, and a bunch of other brands like Meteor Bonwi, a lot of initiative by these old brands trying to revitalize themselves. Yeah.

I think it's a lot more easier, even though it is hard to change what people feel about them. But it's a lot easier because they have a lot of budget, right? But what is interesting is that we have a bunch of younger brands, new brands by the young generation that's creating wave of followings.

with very, very small budgets. So there's this brand called Mishan, which is actually very much different from the rest of the brands that we've seen. Their approach is very, very traditionally Chinese.

So the reason why I think Mishan is interesting is because among all the other Chinese brands where a lot of Chinese brands are still focused on functionality and selling across as a necessity, Mishan is very focused on building a brand. In the start, they started with a lot of crossover with Chinese traditional products.

and corporates and associations. So one very good example is them having a crossover with the Forbidden Cities. They release clothings, fashion wares and accessories. And since then, they've started crossover with a lot of different elements of a Chinese culture. But wait, wait. So the Forbidden City, that I do not associate with the new modern kind of look. No.

Yeah, so why they are interesting is because they are able to take a very, very traditional element and make it modern. So a bit about Michan is that it is a brand that's created by two designers that have been living in London.

So basically Kate and George started the brand in 2014. And what they really wanted to do is to start a traditional Chinese brand, you know, that has oriental elements with new designs. So since then, again, very much because of the lack of the budget, they started with online.

They're mainly on Taobao. They're mainly selling on Taobao. And for fashion brands, they have now been able to garner close to a million fans.

on Taobao and it is really really difficult to grow your fans on Taobao we all know and when people follow you on Taobao it is intentional follow so that you know I get updated when you're releasing something so that you know I have the intention to buy so I'll follow you on Taobao

And they've started with different crossovers with the Forbidden Cities, taking elements from the Forbidden Cities to put it onto clothings, apparels, accessories, bags. And, you know, basically they haven't stopped since then, right? So starting from 2014, they did a lot of crossover and collaboration with Chinese-related cultures.

I think they did not less than 20 crossovers with different Chinese associations to talk about the Chinese culture. Recently, we've also seen them making the mark, being able to feature and showcase themselves in New York Fashion Week.

I think this is something that is really, really amazing. So just from a brand perspective and looking at your products, do they act like a fashion brand or is it a necessity type of clothing? So for me, Sean, they're very design focused and definitely a fashion brand. So how we separate a necessity and functionality brand versus a fashion brand is that a necessity and functionality brand would be something like Uniqlo.

So, you know, you buy their heat tag, you buy their T-shirt, you know, this is something that you wear, you know, comfortably. But when we're talking about fashion brands and when you buy fashion brands, you're not paying for the clothes itself. You're paying for the brand, right? You're paying for the brand story. You're paying because you believe you are part of the brand. You agree with the story itself.

So that is where I think Kate and George from Mishan has done it specifically well. They are like, hey, why does the world not know about Chinese culture? I can put Chinese culture onto something that is really fashionable. I can get models from New York Fashion Week wearing something that belongs to Chinese in a way that is presented elegantly.

fashionally and trendy. Yeah, that's very interesting because everything you just said about fashion brand that we recognize, right? Because we got all these western brands, everything from Louis Vuitton, Chanel to, you know, Acne, etc. And also,

Although in theory, we know about it, we actually up until lately haven't seen many Chinese brands being able to execute and actually do this. I mean, the theory everyone knows about how to build a brand. The question is about how to actually do it. And this is the first time actually we're seeing fashion brands being able to do it. Definitely. I mean, if you dissect into the details of brand building...

What we've talked about furniture brands is actually more complicated in a fashion brand's context, right? So, you know, we talk about first the product itself. For furniture, you know, it's going to be a fixed SKU. But for the fashion brand...

One SKU, like one kind of style will have different SKU, right? You can have it in different colors, different print, different size. This is crazy, okay? And you also need to work out what size makes sense for your consumer type, right? If this is an Asian feed, if this is a Western Caucasian feed, so there is complexity. With the complexity, that means that you have to invest more money into manufacturing more products, right?

Then you have the packaging side where you also talk about the packaging where story is concerned. If you go a bit deeper into how a brand view its story, it is mainly from their campaign shot, their lookbook.

It can go down to where they filmed the campaign shot and their choice of models. This all boils down to how much budget you have, right? Can you hire a good photographer? Okay, so first, are you able to tell the difference between what a good photographer and a bad photographer delivers? Okay, are you able to get a good...

director to help you with the shot, you know. Are you able to pay for the model itself? Are you able to pay for the makeup artist? Really, there is an increased complexity for a fashion brand in terms of their products and also packaging. And then finally, you would then look at the price, right? So because it is so competitive, you

the fashion brands would not be able to price it at an expensive price point. So for me, Shan, I think what is really, really amazing about them is they are still able to sell their stuff at...

Thank you.

That's basically Zara's price point. For so many years, we've had these really awesome Western brands coming into the market, educating consumers, but also educating a lot of entrepreneurs. And now these entrepreneurs are thinking, you know what, why don't I do stuff like this with a twist?

that's easier to market to a certain target group of China because apparently this segment of users are growing in a separate direction. And I don't think the big Western brands have identified that yet. And I think another good example of this is particle fever. That's kind of in the new category of healthy clothes, we will call it. Lululemon, Nike type of category, you know, yoga pants and whatnot. But they've kind of

taken it and made a little bit more local Chinese twist, right? Yeah. So Particle Fever is also very special in the sense whereby you're looking at Lululemon. They're about Lululemon's price point. And this is because we know that

the acceptable price point of a good Adelizio ware, this category is not really called sports ware. It is Adelizio ware, right? So we know the price point for Adelizio ware is actually about Lululemon's price point. And that is proven by the market because Lululemon is growing in China, right? So with that price point, it is actually easier for them to maneuver to earn it

from per SKU sales and then reinvest the money back to, you know, their production. So how they do it different with Lululemon is Lululemon because it shouts out

from a very Western culture point of view, you know, Particle Fever is very much focused on design. So if you look at the market of a deletion aware, one strategy for you to enter the market is really to look out at what is lacking in the market, right? So you want to not compete in whatever that is in the market. So a deletion where you have your mass brand like Nike, Adidas, and

and, you know, Reeboks and these other brands, right? And then you have the slightly more expensive ones with better quality as they claim, like Under Armour, like Lululemon. Yeah.

But then there is a gap. Now, the gap is, hey, you know, the tier one young consumer would like to shout out to the world that they're very cool, you know, doing sports. And then they could also, with their sportswear, you know, put up something. And then, you know, they can, after their yoga session, their gym session workout, to grab a brunch, you know, easily or grab a dinner easily.

So Particle Fever really fits that gap. They provide really trendy athleisure wear. So they don't even want to categorize themselves as sportswear, right? It's less functionality and more about, hey, you know, I'm cooler. The design is better. You know, I'm going to give you, you know, this very shiny outerwear where you can run

on the treadmill and then also you can wear out to grab a drink with your friend. When it comes to these type of products that you're using as a consumer to shout out to the world, to showcase who you are and your personality and your culture, obviously it makes more sense to maybe wear something that is designed with a small twist of Asian in it than taking a totally Western brand and do it.

I think that's where the consumer have matured now, right? Where you're very much looking for something that is more niche and that is more genuine, closer to who you are and where you grew up versus just the overall brand that exists for everyone around the world. Yeah, and if you look at it in the most simple way, we just noticed the pattern is this is designed and produced by individuals

people like me, right? So instead of maybe, you know, designed and made by somebody that is culturally different or age group difference, these products and these brands are really made by people that has the same culture with you and is in the same age group. So the natural fit is

they really know what you need, right? They know the kind of price point that you're going to buy. They know the products that you need. They know the design that you most likely would like. So it is specifically more easy for them to reach out to this tier one young target audience in China because they are themselves tier one young target audience in China. And you've actually mentioned one word very often, Emi, which is the word online.

Considering, you know, the huge growth of e-commerce and now social e-commerce and social media channels such as TikTok or Red in China. One thing I've seen here is that these new up and coming brands are really good at leveraging these new social channels just in order to build this huge fan bases, but also to do product development. When I mentioned online, it is pretty much online.

the only way to get started. Okay, so we have to understand offline is not a good channel when you want to start a brand, right? It is, you would spend most of your money with rental and then the rest of your money on renovations. And then you realize, hey, you've got nothing left.

So online being the most straightforward way and direct way for you to reach that niche of target audience that is going to help you morph your product is particularly important. And the patterns that we see from this brand is similar. It is that they are able to first launch a brand online,

tell a story and make their target audience understand what is different between them and something that the target audience would buy or has always been buying and then get the target audience interested about them. The next step they would work on is growing their brand with their target audience.

Basically, it's like any tech product, right? So now these young brands also take on a tech product methodology. You know, they would roll out a product, they would look at the market feedback about the products, and they will reiterate, you know, they will launch new product ranges until they hit a SKU that helps them hit a critical mass.

And I think that's the difference of China versus many other countries. Thanks to very mature social e-commerce behavior here, new domestic brands have a much easier way to get started and sell products and get to critical mass without these huge investments that might be required in other markets where people aren't that used to share about fashion, to buy new things on the internet.

I think it is really intuitive, right? Like one of the things that I've been saying is these brands are created and made by also young tier one brands.

target audience in China. So these are the same group of people that is very similar to the creators and the makers of these brands. So these creators and makers of these brands, they themselves understand up to what extent they've been using this social media. So when they kickstart their brand strategy,

even though they might not have the ability to launch a marketing strategy themselves, they intuitively will be able to understand the difference between a good strategy and a bad strategy. So, you know, that is specifically very, very different from the rest of the world. So coming from overseas, you know, going to China, you're really clueless, right? You don't know what strategy is good. You don't know what platform makes sense. And you don't know how much you need to spend. Yeah.

So let's talk a little bit about the future.

So we're seeing these domestic brands now grow up. They have great skill set in building brands, at least among the Chinese tier one consumer. And they are making quite a lot of money because, again, there are a lot of people in the tech sector. We're seeing huge internet companies grow up in China thanks to a large consumer base. And before they even go out and globally expand, they have made hundreds of millions of dollars or actually in some cases billions of dollars.

And then they have so much money on their bank account before they go on the global expansion that enables them to do more mistakes than normal companies when they do globally. Although one thing with the older generation of Chinese companies is that they've been pretty bad at telling the brand story. I mean, if we look at some of the Chinese brands that have expanded so far, they usually sell very functional products that are good quality, but they're not charging that extra.

extra premium the way that Apple are doing with their iPhone. Going back to our topic about this new generation of domestic brands, one of their critical things that they are very good at is building brands in the competition against companies like Nike or Lululemon or Ikea, right? At least for me, that indicates, okay, they have a skill set. So the question is, can they do it abroad? Do they have any potential to compete?

outside China? Majority of them will be able to compete on a global level. I think it really depends on categories, right? So like if we talk about the brands that we just spoke of, for furnitures, I think it is a lot easier than fashion.

Because for furnitures, it is very straightforward. You know, it is about design, the price point. And, you know, once the design and price point is okay, I just have to figure out the shipment. You know, they can just do it via online. The only difficulties that I see is that because everywhere in the world uses a different set of online social media than China.

So that is the interesting thing and the difficulties that we are seeing. So basically to market themselves on WeChat, to effectively market themselves on WeChat overseas is impossible, right? To do anywhere else in China, most likely you will have to market yourself on Facebook, on Google, right? And on various other channels like Instagram, right?

So, you know, they will have to get a new set of digital talents to help them and they have to figure out their P&Ls, you know, when they want to invest in global expansion.

That is the only difficulties that I'm seeing for financial companies. But in a broader context, sure, maybe you need to recruit people that knows Instagram advertising and Instagram content, but that's so much easier than needing to, for example, recruit people that knows how to open retail chains across 30 different countries.

Yeah, of course. I mean, when we're looking at the stages of these brands, they would have to start with, most likely, the effectiveness would be starting from online first to overseas, even for furniture brands because they would have to really test through different online platforms. And then when they have really achieved a critical mass, then they would look at, okay, opening a retail stores online

offline in that specific country. If you look at how another brand did it, not a Chinese brand, like for Everlane, right? So Everlane is a San Francisco brand and

the way they deal with their overseas expansion is that they would only open up their special language of the website after they have gotten critical mass in terms of the orders from their countries. So it is similar. I mean, these young brands, makers and creators know that, hey, you know, it is not the way to go into the market and do offline firsts.

You know, they would still be like, okay, I'm going to test the market online. And depending on effectiveness online, then that's going to affect my offline strategies. Yeah, definitely. And if we actually look at numbers about, you know, global luxury consumption and stuff like that, actually Chinese consumers are going to stand for a very big part of that.

And so there is a very realistic take that the global product development from brands such as Louis Vuitton or Chanel will get more and more skewed towards the taste of the Chinese tier one consumer. And

I feel there's a scenario where through that, more and more people in the West are going to get educated and start buying products that are slightly more towards the Chinese twist in terms of style and in terms of design, which probably opens the door a little bit more for these domestic Chinese brands to actually expand globally with their products. Yes, I do agree. And I also do not agree on that context. Mm-hmm.

I think one of the challenges we see is the durability of the product itself.

If you really look at the products that is made in China for these two furnishes, no doubt they are really good in qualities. But in terms of different countries, you have different climates and you have different usage. So I think there is a lot that these brands need to do and localize in different markets. You can be in one part of the world where...

you know simply you know the things that you put on table could be much heavier you know like there is a requirement for heavy usage you

it's not something or this table is not designed or stress test for heavy usage. It could be as simple as that, right? It could be also as simple as how heavy the person is, average size of the person when they're lying down on the bed frame versus Asian, right? So I think those are product issues that we see. And also what I feel and what I think is that

there is not much need for these companies to go abroad. So the Chinese market is growing and in a lot of contexts, this brand is going to expand in China by cities.

So they're going to conquer cities by cities. And the market is just tremendous in China. If we more generally look at this new generation, up-and-coming brands from China, where do you feel their strengths are? Is it in how to leverage the digital channels such as social media and e-commerce? Or is it in how they understand the new target group or their supply chain? What is it? I think the strength is really with how they maneuver online platforms. And

And if you really look at China and the difference with the rest of the world is that China is a country that's very advanced with online buying, right? Yeah. So online purchase, WeChat Pay, Alipay is very easy for anybody to buy anything online.

And I'm saying this with or without money, it is easy, right? You can use Huawei to pay, you know, you could pay with installments really easy. The ease of purchase has made China a very good platform for new brands with the capability to shout out to young consumers easier to start. So this is a fact.

Where else in the rest of the world, it is still very traditional. You know, a lot of people, I mean, they do buy online, but if you just look around you, right, if you are in some other parts of the world, like even in Singapore, people still prefer to buy things offline. Anything that I would buy in Singapore, I would still have to take a look at the product. I would still have to visit the stores, experience, test the products, right?

before I make that purchase. But it's totally different in China. Yeah, it's so astonishing because the more we study these domestic brands and the more I talk to you, Emmy, I get this kind of nervous feeling about that the traditional very big Western brands, whether it is IKEA or Zara or whatnot, are under totally new threat today.

domestically within China, they're going to be outcompeting not only thanks to good access to supply chain, but actually people that maybe are able to build better brands than they are and being able to execute much better because they know the social or the digital channels much better.

Yeah, I've been talking to and also advising a lot of overseas brands. And the same thing that I've been telling them over and over again, you know, if they are looking at Chinese strategies, if they're looking at how to enter China, the time is now, okay? Because there is no better time because the market is going to get more competitive, right? There are a bunch of young Chinese that has graduated from Parsons,

Central Saint Martins, you know, from the art schools of New York, coming back to China and basically understanding Western storytelling, understanding the Western sophistication tastes, you know, in certain product design, will come back and fuse it with their Chinese culture to produce something that is more suitable in the market.

and produce something at a better price. So in that, after a few years, Western brands that doesn't understand the cultural difference or who doesn't understand the threat of these young Chinese brands would be really obsolete. They would have a hard time because they would not be able to react fast enough. Even though they see China as a big market,

Without the DNA, without the culture feed, it is still going to be very difficult for them to change from anywhere from their brand story to the price point to even the product itself.

Fascinating. So are you saying that me as a Swede, I should be worried that IKEA one day might not be in China anymore because it's outcompeted by a local new furniture brand? Yes, I think we might be seeing that very soon. We might be seeing that very soon. And if you really look at the market, this young target audience, they are very open, right? Gone are the days where, oh, I'm just going to buy this from

from the Western brand because the Western brand is always better than local brands. No, these Chinese consumers are savvy. They know every single sheet is made in China. They are paying for a premium because, oh, this is a Swedish company. So they know the in and outs of brands building. They know the in and outs.

of how import words and import words, custom text works, because thanks to the availability in terms of information of social media, so they grow up with information. So with that, they're making very clever decisions and very clever choice in terms of purchase. So, you know, overseas brands that comes in with import text and custom text,

would really suffer. They would really suffer and they were really not being able to compete in terms of price point. Well, I'm so happy to be able to talk to you about this because a lot of my friends usually say I'm crazy when claiming that we might see a China without IKEA. So thank you so much for joining us today, Emmy. Thank you, Tom. And where can people find you on social media?

So you can add me on LinkedIn. So if you search Emmytio, E-M-M-Y-T-E-O, you'll be able to find me on LinkedIn. So you'll see that my company is Fuse and I'm also a growth hacker and new retail strategies. Thank you again. And as usual, if you have any questions or feedback, please feel free to reach out to us on Twitter. My handle is at T-O-M-X-I-O. Thank you for listening. ♪

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