Netease Yanxuan’s re-positioning from e-commerce platform wins 30% Chinese middle class

Netease Yanxuan’s re-positioning from e-commerce platform wins 30% Chinese middle class thumbnail

With a series of internal adjustments in 2019 and re-positioning, Yanxuan, an e-commerce platform incubated by Internet company NetEase, is gradually becoming a “new middle-class favorite lifestyle brand.”.

Netease Yanxuan, as a new consumer brand, has completely lost its ODM burden and has made continuous breakthroughs in commodity design and sales.

Huluwa beauty products on Yanxuan

At present, more than 60% of Netease Yanxuan’s products are original designs, and the Christmas Xingyuan cup and Huluwa IP co-branded beauty products frequently turn out to be popular products.

Netease Yanxuan was the first to try the ODM model in China’s e-commerce industry, and it was difficult to find a similar business model in the first few years of the market.

However, after three years of blindfolded rush, the Yanxuan team still could not accurately answer whether Yanxuan is an “e-commerce platform” or a “consumer brand”. Their survey showed that about half of consumers surveyed consider it a platform while the other half take it as a consumer brand.

Launched in 2016, Netease’s Yanxuan ODM model is feasible because most of these collaborating factories have their own design capabilities and technical intellectual property rights, and Yanxuan can deliver consumers products with the same quality and design as those well-known brands.

But on the other hand, model innovation is easy to imitate. It faced the launch of similar models such as Taobao Xinxuan in 2017 and made in JD Jingzao in 2018. Yanxuan used ODM to shorten the distance between users and international brands, and other companies can also use ODM to shorten the distance with Yanxuan.

In 2019, the first thing Liang Jun decided after he became the CEO of Yanxuan is the positioning of Netease Yanxuan as a new consumer brand.

Such brand positioning is the foundation for Netease to firmly base itself on “the lifestyle brand loved by the new middle class“.

China’s New Middle Class

Netease Yanxuan targets the group of consumers with higher consumption requirements.

Netease’s strictly targeted users, aged 25-35, are mainly distributed in Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, and other top-tier cities. These young users, mainly white-collar workers, are the main component groups of urban “new middle class” users.

At present, the total number of new middle-class users in China is 33.2 million.

According to Wu Xiaobo’s “white paper on the new middle class “, it is estimated that the scale of new middle-class users and consumption in China will reach 450 million in 2029.  And Netease Yanxuan accounts for nearly one-third of these users.

According to the data recently released by Netease Yanxuan, in five years, Netease Yanxuan has penetrated 30% of the new middle-class families in China. At the same time, the re-purchase rate of Netease Yanxuan app is more than 54%, the product good-rating rate is more than 98%, and the return rate is only 2%.

The annual growth rate of Yanxuan Pro members is 263%.

In short, Netease Yanxuan has reaped a number of high-value, highly engaged new middle-class users. This group of 25-35-year-olds have more independent judgment ability.

In April 2020, Chinese influencer and entrepreneur Luo Yonghao sold 5 million yuan worth of 999-yuan ergonomic chairs in 10 seconds of its live-streaming e-commerce session.

In addition to utilizing the rise of Bilibili, Xiaohongshu, live streaming e-commerce and other emerging channels, Yanxuan also builds its own live streaming team. It has also developed its feedback collection for incubating best-selling products.

When a new product goes online for the first time, it will take the first small batch trial mode. By strictly selecting the app’s private domain traffic, it will provide the product to the core users and collect user feedback.

With the collection of product feedback and in-depth mining of user needs, Yanxuan’s big data system will form product iteration and optimization suggestions. This systematic and very quantitative way to guide decision-making can drive the real improvement of commodity power.

This is the biggest advantage of Netease Yanxuan in the manufacturing link: through big data enabling development, customized products can be realized; through the data collection ability of Internet brands, the demand for goods and the production behavior of suppliers can be pushed backward, and finally, a stable sales cycle can be formed.

Thanks to such a product model and precipitation ability, Yanxuan not only can quickly and efficiently create and copy popular products, but also has developed two independent brands of China’s first adult product brand “Netease Chunfeng” and intelligent hardware brand “Netease Zhizao”, realizing the operation and development of multi-product line.

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