Emerging brands grab market share in China and South Korea, forcing established ones to reinvent

By omshreeinfotech Feb 6, 2024
Emerging brands grab market share in China and South Korea, forcing established ones to reinvent

Customers store at a grocery store in Qingzhou metropolis, East China’s Shandong province on Jan 12, 2024. 

Future Publishing | Future Publishing | Getty Images

The rise of on-line buying, social media and simpler entry to factories are driving the expansion of recent shopper brands in components of Asia — placing stress on conventional business giants.

Over the final a number of years, such upstart shopper brands have been gaining market share in China and South Korea, in accordance to a report from Bain and Company launched Monday.

“The shopper merchandise firm of the long run goes to want to be continually reinventing its model portfolio,” mentioned David Zehner, head of shopper observe at Bain.

“If you are in a position to each leverage the benefits that your scale and your incumbent place creates, whereas additionally being nimble and agile and responsive to the patron,” he mentioned, “then there’s a likelihood that you could win, even regardless of the troublesome atmosphere, as a result of there are such a lot of insurgents.”

Bain defines an rebel model as a enterprise that generates greater than $25 million in annual revenues, has grown greater than 10 instances in their class’s common development fee during the last 5 years and is unbiased or has been purchased by a big agency in the final 2 years.

Incumbents are leaders in the sector and have a agency place in the market.

For instance, sponge model Scrub Daddy is an rebel model whereas its competitor Scotch-Brite is an incumbent one.

The firm studied 23 shopper product items classes throughout 11 Asia-Pacific markets from 2018 to 2022 to discover out whether or not rebel and incumbent brands have been thriving or struggling in the international locations surveyed.

China and South Korea stood out as markets the place rebel brands have been doing significantly nicely.

Incumbent brands solely grabbed market share in eight out of 23 sectors in China — sports activities, bathtub and bathe, skincare, confectionery, candy biscuits, milk method, consuming milk merchandise and juice, the Bain report mentioned.

In South Korea, incumbent brands dominated simply 4 sectors — fragrances, confectionery, diapers and bottled water, the report confirmed. 

E-commerce increase

China and South Korea’s thriving e-commerce scene has made it simpler for insurgents to penetrate these extremely aggressive sectors, Zehner highlighted. 

Online buying accounted for 34% of 2022 retail gross sales in South Korea, and 27% of such gross sales in China, the report mentioned.

“We see quite a lot of model launches in a market like China as a result of it is simple to attain customers. It has change into fairly powerful as an incumbent model in these classes since you continually have all of those new opponents,” Zehner advised CNBC. 

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The nation’s “rebel pleasant” market can also be due to the boom in live streaming, he added, referring to a gross sales observe the place sellers present and speak about merchandise on social media to entice prospects.

High penetration of e-commerce in Indonesia (26%) and Singapore (13%) additionally gave rebel brands a lift. Incumbent ones solely grew market share in seven and three sectors, respectively, out of 23 classes in every nation, the Bain report mentioned.

In distinction, rising brands stay in style in Malaysia, the Philippines and India due to decrease reputation of e-commerce and increased ranges of traditional trade. 

All three growing international locations noticed e-commerce gross sales penetration of lower than 8% in 2022.

Fast-moving shopper traits

New shopper preferences, typically influenced by social media, are producing demand for brands that may adapt shortly.

In South Korea, Zehner identified that new brands have been in a position to profit from traits in which “individuals change their complete wardrobe each season as a result of what’s in style has moved so shortly.”

“That’s in attire. Same factor goes on in different shopper items as nicely,” he mentioned.

Industry buildings are additionally fragmenting, permitting customers and small enterprise homeowners to talk immediately with factories.

“There’s additionally this ecosystem of third-party suppliers that enable a model proprietor to in a short time outsource any a part of its enterprise if it wants to,” Zehner mentioned, noting that slightly than having to make investments closely upfront, new firms can discover companions for each step.

By product, Bain discovered that rebel hair care and skincare firms have been the preferred amongst customers, however when it got here to confectionary, they most popular established brands. 

It’s additionally unclear how lengthy new brands can survive in such a aggressive atmosphere.

“For any a type of insurgents you might change into very talked-about in a short time due to the power to attain customers so simply, however you then change into a casualty of the subsequent development,” Zehner mentioned.

Incumbent brands nonetheless scorching

Bain’s findings revealed that regardless of the leaps rebel brands have made in some markets, incumbent brands have maintained or elevated their market share in others.

There was no single sector in which incumbents misplaced share throughout all Asia-Pacific markets, nor a single market the place they misplaced share in all classes, in accordance to the report. 

For instance, in the colour cosmetics class, established brands gained in two markets, misplaced in seven and remained secure in Singapore and Vietnam. 

“There are traits, there are patterns however there are quite a lot of nuances and exceptions,” Zehner mentioned. 

“If you’re an incumbent [brand] and you miss a brand new shopper development and another person will get it and grows the model in a short time, you then have a alternative — you possibly can attempt to defend your current place, you possibly can attempt to innovate and discover the subsequent shopper development, or attempt to purchase the model that has simply grown,” Zehner identified. 

He added that throughout the pandemic, prospects briefly returned to brands they knew and trusted, and which had a extra secured provide chain in place.

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