Home / غير مصنف / Alibaba-Backed Chinese Influencer Incubator Ruhan Announces Plans To Go Public

Alibaba-Backed Chinese Influencer Incubator Ruhan Announces Plans To Go Public

Last month, amid the hubbub leading up to Alibaba’s 11.11 Global Shopping Festival, a striking announcement went unnoticed in the Western media. While brands around the world are still debating whether or not influencer marketing works, Alibaba-backed Chinese influencer incubator Ruhan Holdings, co-founded by top Chinese fashion influencer Zhang Dayi, announced plans to go public on NASDAQ next year. Estimates say they will raise between $100 and $200 million.

How Ruhan Built its Influence

Ruhan started in 2001 as an e-commerce fashion retail company called LiBeilin (莉贝琳). LiBeilin grew to become one of the top 10 women’s fashion brands on Taobao.com, reaching approximately ¥200 million in sales in 2014.

That same year, Ruhan CEO Feng Min partnered with small-time model and influencer Zhang Dayi to test out a new influencer incubator business model. Instead of creating a store and hiring bloggers to promote them, they flipped the model on its head.

First, they helped Zhang grow a massive, loyal following on Weibo, one of China’s top social media platforms. Then, once they had this large customer base and marketing channel in place, they created products specifically designed to suit the taste of her audience.

Through this influencer-brand model, they hoped to reduce marketing costs, increase brand loyalty, create recurring customers and, effectively, eliminate all the problems they faced with LiBeilin.

Within a year, it was one of the top-selling stores on Taobao and, by 2015, Ruhan had fully transitioned their business model to become the first influencer incubator in China. During the 2016 Taobao Livestream Festival, Zhang Dayi broke records, reaching a ¥20 million sales volume in two hours. Then in 2017, during Alibaba’s 11.11 Global Shopping Festival, her store was one of the top-selling stores, making over ¥170 million. While this year’s 11.11 sales numbers have yet to be publicly released, Zhang Dayi’s store ranked 10th in terms of sales volume for top women’s fashion stores.

Inside the Ruhan Business Model

Once Ruhan proved their model with Zhang Dayi, they began replicating it with other influencers.

Here’s how it works.

Screenshot of Ruhan’s websiteScreenshot taken by author

Ruhan selects, trains and manages contracted bloggers. Each blogger will have their own team, who manages social media content, clothing manufacturing, and the Taobao store. While remaining a part of Ruhan, each influencer brand operates in its own silo, with their own following and self-branded products. To the average consumer, it appears these bloggers all work independently — it’s nearly impossible to tell that they work with an incubator.

While this model eliminates many of the problems traditional brands face, it comes with its own set of difficulties. Ruhan must use significant funds up-front for influencers to reach a level of popularity that produces a return on investment.  Just like at any talent agency, it can be hard to know who will end up taking off, and sometimes an investment doesn’t pan out.

While Ruhan works with dozens of influencers, much of their revenue comes from the top few.

Currently, Ruhan’s top three influencers are Zhang Dayi (Weibo: 6.4M fans. Taobao store: 8.14 M fans), Da Jin (Weibo: 2.63M fans. Taobao store: 2.86M fans), and Aunt Guan (Weibo: 2.02M fans. Taobao store: 1.19M fans).Infographic created by author

According to financial information disclosed by Ruhan, Zhang Dayi’s brand is still their greatest success story and source of revenue by far. In the first half of 2017, Dayi E-commerce (which Ruhan holds a 51% stake in) reported an operating income of ¥132 million, which accounted for 43% of Ruhan’s total revenue.

While relying on a handful of influencers for a majority of the company’s profit could be seen as a detriment, it is also a key to Ruhan’s success. Over the past few years, several other influencer incubators have cropped up in China. However, many of them spread themselves too thin, attempting to nurture too many bloggers at once, and do not achieve anything close to what Ruhan has with their prized few.

Ruhan’s Investment History

In 2014, Ruhan raised an undisclosed amount in Series A round. Then, in 2015, they raised $120 million in [DB2] a series B. The leading investors were SAIF Partners, Legend Capital, and Telescope Investment. In 2016, they did a backdoor listing through the National Equities Exchange and Quotations (NEEQ) at ¥7.66 per share with a valuation of ¥176 million (approximately $25.6 million).

After proving themselves with Zhang Dayi’s success in the 2016 11.11 Shopping Festival, Ruhan received a ¥300 million investment from Alibaba Group, immediately causing their share price to skyrocket to ¥96.43.

Finally, this February the company applied to go private again as part of their preparation to list on NASDAQ. According to the 2017 mid-year report disclosed prior to the delisting, Ruhan’s operating income at the time was ¥305 million yuan, a 293% increase year-over-year. At the same time, the company’s net loss during the reporting period was ¥15.3 million yuan, a year-over-year decrease of 287.64%.

The Outlook for Ruhan

Over the past four years, the market has changed dramatically and Ruhan no longer has the advantage it once did. When they began, the influencer marketing industry was still in its infancy, with far less competition than today. Now, not only are there more influencers but working with them has become the go-to marketing strategy for brands in China. This has made the space crowded and costly. With consumers having so much choice, it’s not so easy any more to drive traffic and earn loyalty.

Despite these difficulties, Ruhan’s future outlook remains strong for several reasons.

First, operating a fashion retail business isn’t easy, to begin with, but Ruhan has created a more streamlined operating model than many traditional retail operators. They’ve flipped the traditional model to make products they know will sell well. Rather than trying to predict what consumers will like and then selling it to them, Ruhan uses audience preferences and purchasing behavior to guide product development from the start.

For example, when creating a new line of clothing, the influencer will first let their followers preview items, ask them what colors they prefer, and get their feedback. For those items that seem popular, they will offer them on pre-sale, which allows them to get an idea for how many they should make. Because of the company’s close proximity to factories (Ruhan is headquartered in Hangzhou), the items can be produced and shipped within a week or two with low logistics costs.

Second, Ruhan has been in the market for a very long time and is adept at evolving their marketing strategies to meet trends. In 2015 and 2016, while brands were still testing the waters with live-streaming, Zhang Dayi was already streaming several times a week on Yizhibo and Taobao live and garnering massive audiences. And, while competition is fiercer now than back then, she doesn’t appear to be going anywhere anytime soon.

While bringing in strong sales numbers with her fashion brand, Zhang simultaneously used this year’s festival to promote her new cosmetics line on Tmall and launch a co-branded line with Maybelline.

Zhang Dayi using live streaming to promote her Maybelline cosmetics lineAuthor’s screenshots

During the 11.11 pre-sale period, Zhang’s cosmetic brand’s GMV was RMB 11 million and her best-seller eyeshadow cream palette sold 30,000 units. More than 40% of buyers were first-time buyers of Zhang’s products who said they never purchased her clothing, but were drawn to her cosmetics line by the massive amounts of positive reviews it was receiving on Tmall.

Time to Rethink Influencer Marketing

A legend in China’s influencer marketing space, Ruhan will once again make history when they go public on NASDAQ next year. While a $100-200 million listing isn’t the next Facebook, it’s nothing to scoff at for four-year-old influencer incubator.

More importantly, they are sending a signal to the world that influencer marketing is powerful and capable of creating a company large enough to IPO in the U.S.

 


Source link

About bader

Check Also

Facebook Adds New CTA Stickers for Page Stories

Facebook's added a new set of CTA stickers for Page-originated Stories, providing another incentive for …

Leave a Reply

Your email address will not be published. Required fields are marked *