Brand Building in China’s Digital Ecosystem

May 2021

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Who are we

We are a borderless e-tailing

group. We power global retailers

and brands with managed e-

commerce solutions and

consulting services to help them

to grow in China

THE NEXT GENERATION E-COMMERCE

A COMPANY INVESTED BY

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Our vision: Connect Global Retail and Consumer Markets

Collaborating with 30+ premium overseas retailers from 12 countries on quickly accessing abundant brands and product resources.

• Deep industry knowledge in beauty,fragrance, fashion, nutrition, mom &baby industries.

• Working with Fortune 500s and SMEsTo build successful China e-combusiness.

• Expert in both multi-brand retailingand mono-brand DTC.

BEAUTY

WELLNESS

LIFESTYLE

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About the Speaker - Franklin Chu

Franklin Chu is Managing Director U.S. for Azoya International, a provider of turnkey cross-border e-commerce solutionsto assist retailers and brands as they expand into China through a strategic, cost-effective and asset-light investment thatleverages Azoya's proprietary technology and marketing infrastructure. Azoya has completed hundreds of consulting andmarket implementation mandates for our clients. Moreover, over 35 retailers from 11 countries are partnering withAzoya to expand into China with ease, including beauty retailers like U.S.-based Amala, b-glowing, FragranceNet, andHASK, as well as Feelunique, the largest online beauty retailer in Europe.

Chu is also President of Sage Capital Group Inc., an active investor in China technology and global beauty companies.

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About the Speaker - Amy Daugherty

Amy Daugherty is the Global Head of Marketing at Amala Beauty, a German luxury natural skincare brand. She recentlyled the brand's evolution, conducting a full creative and communication refresh to prepare it for global, consumer-facingexpansion. Previously, Amy spent a decade at Atlanta-based international Beauty and Home brands including leadingMarketing for clean beauty brand COSMEDIX and working at giants such as Newell Brands and Georgia Pacific. Beforemoving to Atlanta, Amy held Sales and Marketing roles with luxury jewelry design houses in New York City including theaward-winning Italian brand, Stefan Hafner, and the Madison Avenue legend, Oscar Heyman. Amy is a graduate ofSavannah College of Art & Design and Georgia Institute of Technology where she holds a BFA and MBA, respectively.

Digital Landscape

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China Has The World’s Most Busy Internet Space

TOTALPOPULATION

1.44BILLION

URBANLISATION:59%

MOBILE PHONECONNECTIONS

1.61BILLION

Vs. POPLUATION:112%

INTERNETUSERS

854.5MILLION

PENETRATION:59%

ATIVE SOCIALMEDIA USERS

1.04BILLION

PENETRATION:72%

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Digital Marketing Landscape In The U.S. Vs China

Facebook, Twitter Social Networking Weibo, WeChat

Google Search Engine Baidu, 360

YouTube, Netflix Video-streaming Bilibili, Youku, iQiyi

TikTok Short-video TikTok (or Douyin), Kuaishou

Amazon, eBay E-com Marketplaces Taobao, Tmall, JD.com

Wikipedia Encyclopedia Baike

Reddit Vertical community Red, Zhihu, Douban, Hupu

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What We Can Learn From The Differences

China’s digital ecosystem is very different to that in the U.S. What works in the U.S. may notwork in China, or could be higher cost. This means that your digital marketing strategy willalso need to adapt.

Cost & return operating on different platform is different – brands need to be strategicabout launching marketing campaigns in China. What works for other brands does notalways work for you.

Internet users’ daily social media usage and screen hours become increasingly scattered –consumers are active on multiple channels and it make sense for brands to look atopportunities from different platforms.

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Marketing in China does not stop at the marketplaces

Taobao In-channel

• Brands rely on the customers of marketplaces to get to know thebrand and make the purchase

• Digital marketing in marketplaces can effectively drive sales

• It’s difficult to only rely on marketplaces.• Brands need to leverage the full digital

ecosystem in China to generate brandawareness & consideration.

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Key strategies for Digital Marketing

Social Media Platforms In China

KOL and KOC Marketing

Livestreaming

In-channel Marketing

Social Media Platforms In ChinaBuilding online presence through official accounts is necessary for beauty brands.

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WeChat: The most influential platform

1.2 billion monthly

active users

• China’s top messag ingplatform.

• Influencer seeding with different KOLs.

Brand’s WeChat Official Account WeChat Channel

WeChat Moment Ad

WeCom Chat Box

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Little Red Book: The Most Ideal Place For Product Seeding

30 millions monthly active

users

• Pinterest-like social community platform.

• Female-centric: targets woman ＜35.

• Share recommendations, and provide reviews.

• Brands can set up brand accounts.

User-generated content Live-streaming

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Weibo: Build Brand Exposure And Gain Popularity

312 millionsmonthly active users

• Twitter’s counterpart • People could

• share their pictures & news

• Interact by comments & reposts.

• An explosion of Online Celebrities in recent years.

Brand’s Official Account Homepage Celebrity Ads

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Emerging Platforms: Tik Tok & Bilibili

500 millions monthly active users

200 millions monthly active users

• TikTok is China’s largest short-video platform.

• TikTok began incorporating closed—loop e-commerce functions this year.

• Second-largest platform for e-commerce livestream.

• Gen-Z and the Millennials.

• One of the fastest growing social platforms.

• China’s Generation Z.

• More than just a place where young Chinese watch anime.

Shiseido Online Launch Event

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Why does brands need to launch own social media account

New users Acquisition An official platform to

release the brand's contentEngage with users User loyalty building

• Advertisement• Shared content• Campaign info

• WeChat Work Group• Live-stream campaigns• Interactive comment

• Advertisement• Visual & text content• Video content• Campaign info• Live-stream campaigns

• In-depth content• OA Following

KOL & KOC marketing

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KOL Marketing: The Key To Win Over Chinese Consumers

Why brands should adopt KOL marketing?

• Product seeding

• Brand identity

• Drive sales conversion

• Brand awareness

• New product promotion

• Search Engine Optimization

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How Beauty Brands Leverage KOLs’ Influence?

Basic KOL Marketing Content

• Professional Reviews

• Imitation / Makeup Tutorial

• Unboxing video

• Live-streaming

• Gifting

• Personal care and makeup knowledge sharing

• Product try-on

• Affiliates and special discounts

• Brand ambassadors

• Hashtag campaignsMore...

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8 Steps For KOL Marketing

Discover Identify Filter Brief

Negotiate Schedule Release Review

Phase 1

Phase 2

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What Makes a Good KOL Partner for Brands?

01Influencing power

02Strong sales capability

03Leadership in the specific category/circle 04

Professional endorsement & trust building

05 Strong personal network 06Mutual beneficial, sustainable & long-term partnership

• Impressions• Reach• Traffic• Likes• Comments• Mentions

• Sales• Conversions• Face-to-face selling power

• Gives credit to brand• Reliability among consumers

• Professional product reviews• Explain brand’s USP to followers

• Peer-to-peer recommendation• Broaden exposure• Reach more target groups

• Win-win collaboration• Brand awareness building• Enhance KOL’s influence

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KOC marketing in China: New choice for the brand

What’s KOC？

Key Opinion Consumers = Everyday consumers

Only have a few hundred to a few thousand followers.

Compared to Top KOL, KOCs

KOC – New choice for the brand

• Focus: Product reviews

• Value:

Relatability

Trustworthy nature

Personable

Friend-like appeal

• A powerful impact on purchasing decisions

• Work with KOCs on a mass scale

• Higher quality of fans: 1.16x• More frequent fan interaction: 1ox• Fans pay more attention to the product: 2.1x

(with the same budget)

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KOLs vs. KOCs

More FollowersFollowers Less Followers

Macro InfluencerInfluence Micro Influencer

AdvertisingAuthenticity

Product Review

Brand Awareness Effect Buying Decision-making

ExpensiveExpense Free or cheap

How KOCs are Different from KOLs

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KOL + KOC Combination

• Raise awareness: Top KOLs can create new topics.

• Product seeding: authentic reviews that makes consumers trust the brand more

• Spread content: Mid-level KOCs can add to the discussion

• Deepen penetration: KOLs and KOCs can then prompt their followers.

• Activate conversion: Working with KOLs to livestream products.

• Share experiences: KOLs, KOCs, and customers can then further the discussion.

Livestreaming

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Closed-loop Live-stream campaign: from traffic acquisition to drive sales

Taobao Live has the highest percentageof consumers, followed by TikTok and Kuaishou.

Taobao Live’s 12-month GMV

400+ billion RMB (US$ 62.2 bln)

Beauty was the NO.1 category

among 2020 Tmall Double 11.

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How Live-streaming Adds Value To Beauty Brands

• Increase exposure and reach people

• Professional endorsement and product

seeding

• Customer acquisition

• Continuous live streaming to stimulate

repeat purchases

• Increasing sales conversion and building

buzz

• Brand storytelling and value delivery

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What Makes A Good Live-stream Campaign?2019 Black Friday Campaign: Pixi x Austin Li live-stream

Why would live-streaming campaignwork in China?

• KOLs’ influence and reliability

• Anchor’s strong face-to-face selling power.

• Offer points of interest anddeep discounts.

• Real-time, interactivecommunication.

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Taobao Live: A Key Feature For Emerging Brands To Increase Sales

12 individual products sold over 100 million

RMB in 1 Hour during the pre-sale.

71.9% of new brands launched live-stream

during Tmall Double 11.

21% of new brands‘ sales came from live-

streaming.

KOLs + merchants live-streams

Stats about Taobao Live

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TikTok emerges as the new capital for beauty brands

Stats from TikTok

The largest short-video platform.

Beauty & Personal carewas the NO.2 category among 2020

TikTok Double 11.

18.7 Billion RMB2020 TikTok Double 11 GMV.

Brands can set up cross-bordere-commerce store.

In-channel Marketing

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Where Your Traffic Will Come FromOn Tmall, your customers will come primarily from two channels: organic traffic and paid traffic. Brands have to spend heavily on paid ads and brand marketing outside of Tmall to build awareness.

Organic traffic can come from many channels: home pages, category pages, search results, etc.

Paid traffic can come from search ads, affiliate ads, retargeting ads, display ads, group-buying campaigns (Juhuasuan), etc.

Paid Traffic

Organic Traffic

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Brands can register to participate in Tmall platform-wide promotions to drive sales

Case: SkinCeuticals, Lancôme, Lamer

The importance of in-channel marketing

• Tmall is China’s largest domestic B2C e-commerce platform.

• Drives traffic. In the early stages, there will be low organic traffic.

• Combined with the effects of out-channel/social mediamarketing.

• Long-term customer acquisition. Users who discover your brand may come back.

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Main paid traffic options

Name ROI Suitable for which users

Taobaoke affiliate ads (淘宝客) High Users who are likely to buy.

Zhitongche SEM ads (直通车) Medium Those who searched for your product and have high buying intent.

Pinxiaobao SEM ads (品销宝) Medium Targets more visual users.

Super Recommend Retargeting Ads (超级推荐)

Medium Those who searched for your product and have high buying intent.

Diamond Booth Display Ads (钻展) Low-Medium New customers.

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Paid Traffic Options

Zhitongche SEM Taobaoke Affiliate Diamond Booth Display Ads

PinxiaobaoDSP Ads

Super RecommendationRetargeting Ads

Within Tmall, merchants have the options to spend their budget on these paid advertising tools.

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Recommendations on China Digital Marketing

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Find a good partner Plan thoroughly Get involved Consistent Adapt to change

• Seasoned experience

• Strong capabilities

• Adequate industryresources

• Joint effort

• Campaign planning

• Regularly review

• Annual plan

• Out-channel & In-

channel marketing

• Long-term strategy

• Marketing investment

• Brand building

• Marketing trends

• Consumer behavior

• Market demands

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THANKS

Azoya International Ltd.Shenzhen Haituncun Info-tech Ltd.

Facebook.com/AzoyaGroup/

Linkedin.com/company/azoya/

Azoyagroup.com

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