Brand Building in China’s Digital Ecosystem

May 2021 Who are we

THE NEXT GENERATION E-COMMERCE 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

A COMPANY INVESTED BY

A z o y a 2 Our vision: Connect BEAUTY Global Retail and Consumer Markets

Collaborating with 30+ premium overseas retailers from 12 countries on quickly accessing abundant brands and product resources. WELLNESS • Deep industry knowledge in beauty, fragrance, fashion, nutrition, mom & baby industries. • Working with Fortune 500s and SMEs To build successful China e-com business. • Expert in both multi-brand retailing and mono-brand DTC. LIFESTYLE

A z o y a 3 About the Speaker - Franklin Chu

Franklin Chu is Managing Director U.S. for Azoya International, a provider of turnkey cross-border e-commerce solutions to assist retailers and brands as they expand into China through a strategic, cost-effective and asset-light investment that leverages Azoya's proprietary technology and marketing infrastructure. Azoya has completed hundreds of consulting and market implementation mandates for our clients. Moreover, over 35 retailers from 11 countries are partnering with Azoya to expand into China with ease, including beauty retailers like U.S.-based Amala, b-glowing, FragranceNet, and HASK, 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.

A z o y a 4 About the Speaker - Amy Daugherty

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

A z o y a 5 Digital Landscape China Has The World’s Most Busy Internet Space

TOTAL MOBILE PHONE INTERNET ATIVE SOCIAL POPULATION CONNECTIONS USERS MEDIA USERS

1.44 1.61 854.5 1.04 BILLION BILLION BILLION MILLION

URBANLISATION: Vs. POPLUATION: PENETRATION: PENETRATION: 59% 112% 59% 72%

A z o y a 7 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

A z o y a 8 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 not work in China, or could be higher cost. This means that your digital marketing strategy will also need to adapt.

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 at opportunities from different platforms.

Cost & return operating on different platform is different – brands need to be strategic about launching marketing campaigns in China. What works for other brands does not always work for you.

A z o y a 9 Marketing in China does not stop at the marketplaces

Taobao In-channel • It’s difficult to only rely on marketplaces. • Brands need to leverage the full digital • Brands rely on the customers of marketplaces to get to know the ecosystem in China to generate brand brand and make the purchase awareness & consideration. • Digital marketing in marketplaces can effectively drive sales

A z o y a 10 Key strategies for Digital Marketing

Social Media Platforms In China

KOL and KOC Marketing

Livestreaming

In-channel Marketing

A z o y a 11 Social Media Platforms In China

Building online presence through official accounts is necessary for beauty brands. WeChat: The most influential platform

1.2 billion monthly active users

WeChat Moment Ad • China’s top messag ing platform.

• Influencer seeding with different KOLs.

Brand’s WeChat Official Account WeCom Chat Box WeChat Channel

A z o y a 13 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 A z o y a 14 Weibo: Build Brand Exposure And Gain Popularity

312 millions monthly 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

A z o y a 15 Emerging Platforms: Tik Tok & Bilibili

500 millions 200 millions monthly active users monthly active users

• TikTok is China’s largest short- • One of the fastest video platform. growing social Shiseido Online Launch Event platforms. • TikTok began incorporating closed—loop e-commerce • China’s Generation Z. functions this year. • More than just a • Second-largest platform for e- place where young commerce livestream. Chinese watch anime.

• Gen-Z and the Millennials.

A z o y a 16 Why does brands need to launch own social media account

An official platform to New users Acquisition Engage with users User loyalty building release the brand's content

• Advertisement • Advertisement • WeChat Work Group • In-depth content • Shared content • Visual & text content • Live-stream campaigns • OA Following • Campaign info • Video content • Interactive comment • Campaign info • Live-stream campaigns

A z o y a 17 KOL & KOC marketing

18 A z o y a 19 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

A z o y a 20 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 campaigns More...

A z o y a 21 8 Steps For KOL Marketing

Phase 1

Discover Identify Filter Brief

Phase 2

Negotiate Schedule Release Review

A z o y a 22 What Makes a Good KOL Partner for Brands?

Influencing power Strong sales capability

• Impressions • Sales 01 • Reach 02 • Conversions • Traffic • Face-to-face selling power • Likes • Comments • Mentions

Leadership in the specific Professional endorsement & trust 03 category/circle 04 building • Professional product reviews • Gives credit to brand • Explain brand’s USP to followers • Reliability among consumers

Strong personal network Mutual beneficial, sustainable & long-term partnership 05 • Peer-to-peer recommendation 06 • • Broaden exposure Win-win collaboration • • Reach more target groups Brand awareness building • Enhance KOL’s influence

A z o y a 23 KOC marketing in China: New choice for the brand

What’s KOC？ KOC – New choice for the brand

Key Opinion Consumers = Everyday consumers • Focus: Product reviews Only have a few hundred to a few thousand followers. • Value:  Relatability  Trustworthy nature  Compared to Top KOL, KOCs Personable  Friend-like appeal • Higher quality of fans: 1.16x • A powerful impact on purchasing decisions • More frequent fan interaction: 1ox • Work with KOCs on a mass scale • Fans pay more attention to the product: 2.1x

(with the same budget)

A z o y a International L t d . 24 How KOCs are Different from KOLs

KOLs vs. KOCs

Followers Less Followers More Followers

Influence Micro Influencer Macro Influencer

Authenticity Advertising Product Review

Brand Awareness Effect Buying Decision-making

Expense Free or cheap Expensive

A z o y a International L t d . 25 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.

A z o y a International L t d . 26 Livestreaming

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

Taobao Live has the highest percentage of 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.

A z o y a 28 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

A z o y a International L t d . 29 What Makes A Good Live-stream Campaign?

2019 Black Friday Campaign: Pixi x Austin Li live-stream

Why would live-streaming campaign work in China?

• KOLs’ influence and reliability

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

• Offer points of interest and deep discounts.

• Real-time, interactive communication.

A z o y a International L t d . 30 Taobao Live: A Key Feature For Emerging Brands To Increase Sales

Stats about Taobao Live

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 A z o y a International L t d . 31 TikTok emerges as the new capital for beauty brands

Stats from TikTok

The largest short-video platform.

Beauty & Personal care was the NO.2 category among 2020 TikTok Double 11.

18.7 Billion RMB 2020 TikTok Double 11 GMV.

Brands can set up cross-border e-commerce store.

A z o y a International L t d . 32 In-channel Marketing

33 Where Your Traffic Will Come From On 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.

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

Organic Traffic

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

A z o y a International L t d . 34 Brands can register to participate in Tmall platform-wide promotions to drive sales

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 media marketing.

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

Case: SkinCeuticals, Lancôme, Lamer A z o y a International L t d . 35 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 Medium Those who searched for your product Ads (超级推荐) and have high buying intent.

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

A z o y a International L t d . 36 Paid Traffic Options Within Tmall, merchants have the options to spend their budget on these paid advertising tools.

Zhitongche SEM Taobaoke Affiliate Diamond Booth Pinxiaobao Super Recommendation Display Ads DSP Ads Retargeting Ads

A z o y a 37 Recommendations on China Digital Marketing

1 Find a good partner 2Plan thoroughly 3 Get involved 4 Consistent 5 Adapt to change

• Seasoned experience • Annual plan • Joint effort • Long-term strategy • Marketing trends • Strong capabilities • Out-channel & In- • Campaign planning • Marketing investment • Consumer behavior • • Adequate industry channel marketing • Regularly review • Brand building Market demands resources

A z o y a International L t d . 38 THANKS

Azoyagroup.com

Facebook.com/AzoyaGroup/

Azoya International Ltd. Linkedin.com/company/azoya/ 微信/WeChat Shenzhen Haituncun Info-tech Ltd.