Advertising Alone Can't Buy a Top-Tier Brand: If Kans Wants to Break Through, It Should Get the Product Right First

Kans took ten years to walk every road open to a Chinese cosmetics company, and three more to hold its ground. What now?

This is, at bottom, a conventional success story about a conventional Chinese company: hire the celebrity of the moment, buy television spots by the truckload, title-sponsor the hottest variety shows — and spend several hundred million, eventually well over a billion yuan, a year doing it.

The story has everything: ambition, nerve, smug arithmetic, the shortcuts clever people take — and then a huge, unsure body of consumers to sell to. It worked. The company won in the market.

We are talking about Kans. In 2015 Kans said its retail sales reached 9 billion yuan, close to what the L'Oréal Paris brand sells in China. That made its owner, Shanghai Chicmax Cosmetics Co. (hereafter Shanghai Chicmax), the second-biggest homegrown cosmetics company by sales, behind only Shanghai Jahwa.

Kans now occupies a particular slot in the conversation. It comes up when people discuss the rise of homegrown Chinese cosmetics brands. When they talk about the fortunes made through WeChat selling — and about its decline — it comes up as proof of how much a WeChat seller gains from having a brand. When someone invokes a vague "pain point," its Red BB or its Mega Hydration line gets named. And when the subject is seizing a market opening, it comes up again.

How did this company, which seems to have barged into our lives out of nowhere, turn Kans into a top-tier brand? What exactly did it do?

Before It Got Famous, It Had Walked Almost Every Road Open to a Homegrown Cosmetics Brand

Kans is far older than you probably think. Between its founding in 2002 and 2010, it took the same road as most Chinese cosmetics companies.

Back then a homegrown cosmetics brand would start with a mass-market product — little real technology in it, and both the product and the name faintly suspect of copying a famous label. It then built distribution around "branch offices" set up across the country, pushing stock into third- and fourth-tier cities, where the counters of the older, fading direct-sales networks often served as its own points of sale.

Kans did much the same.

Companies at that stage stay small but earn fat margins, which is a good way to build up capital early. By 2005 Kans said it was already taking in 100 million yuan in sales.

That momentum let the Shanghai-born company look again at first-tier cities. An article in Cosmetics Business Online noted that one of Kans's goals for 2009 was to use department-store counters to lift the brand's image and get out of competing on price; at the time it opened counters and standalone shops in Shanghai department stores, including Super Brand Mall.

That strategy can hardly be called a success. Had TV shopping not opened a new door at the same moment, Kans might well have fallen back to the lower tiers. In 2012 Shanghai Chicmax CEO Lü Yixiong said so plainly: "Kans cannot go up against first- and second-tier products," and "it needs third- and fourth-tier retailers to carry Kans ashore before it can finally climb into the first- and second-tier market."

First- and second-tier cities were still held by foreign brands and established homegrown names like Shanghai Jahwa. "Move the battlefield down to the third and fourth tier — there are more openings there," said Zhou Ying, Shanghai Chicmax's director of media and public relations, in an interview with QDaily.

It is worth noting that even around 2010, when the industry had begun talking up "national brands" again, Kans was barely to be seen among the homegrown brands the media noticed. It was still a small company nobody had heard of.

In the Three Years After 2012, Kans Became a Marketing Specimen

Moving into TV shopping set Kans apart from domestic brands with much the same pedigree and much the same path.

In a sense it was the third- and fourth-tier market one level up. The appeal was obvious: no shops to run, direct selling, promotion and distribution in one, and a ten-minute-plus segment for only a few thousand yuan. But a channel that cheap also meant it lived only on the TV shopping channels of remote places. And the average age of that audience was nowhere near the "20 to 40" bracket the company now stresses.

What TV shopping undeniably did was make Kans "rich."

By the time the public noticed the brand, Kans was already tied to Lin Chi-ling's face. Then it began sponsoring variety shows, one after another. Retail sales ran 1.8 billion yuan in 2013, 3.1 billion in 2014 and 9 billion in 2015. Over the same stretch, ad spending jumped from 150 million yuan in 2012 to 550 million, then 1 billion, then 1.3 billion. For 2016 the ad budget was set at 1.3 billion yuan, one-seventh of the previous year's retail sales.

Buying ads and knowing how to buy ads are two different things.

Kans's largest single marketing outlay came in October 2014, when it paid 500 million yuan to title-sponsor Jiangsu TV's If You Are the One. The sum won it the name of "the biggest single ad deal in Chinese advertising history," but what mattered more was the attention: in the first week of the sponsorship, Kans's Baidu Index passed Pechoin's for the first time.

None of Kans's ad spending has been small change. It title-sponsored Jiangsu TV's If You Are the One twice, for 230 million and 500 million yuan; Tianjin TV's Only You for 55 million yuan; Dragon TV's Grandpas Over Flowers (《背着青春去旅行之花样爷爷》) for 58 million yuan. It paid 19.6 million yuan for spots on Dragon TV's Chinese Idol, and 18 million yuan to sponsor Dragon TV's The Goddess's New Clothes.

Title sponsorship is to some degree an either-or game. A brand pays partly to grab consumers' attention and partly, by the same stroke, to deny a rival that exposure. There are only a handful of variety shows that can gather young viewers in one place — and once you see that, you also see why homegrown cosmetics brands such as Pechoin scrambled to title-sponsor If You Are the One too.

That matches Lü Yixiong's own view. "Advertising won't necessarily build a brand," he once said, "but without advertising it is very hard to build one."

The belief is shared inside Shanghai Chicmax. "We are a competitive company with a wolf's appetite. We have to keep up a certain volume of noise, and (advertising) also shows we are confident we can build the brand well," Zhou Ying told QDaily.

The ads caught at least one young Chinese woman, a Weibo user who goes by Cherry. She is 19, studies in Hunan, and buys Kans hand cream; she first heard of the brand from a television commercial. "Blanket advertising matters a lot. Once a brand is known, it makes your list when you are choosing. If you have never heard of it, you are certainly not going to buy it."

Kans May Understand Its Consumers Better Than They Understand Themselves

First, one thing needs settling: who actually buys Kans?

Feng Chen, Kans's director of brand marketing, calls them "people working hard for a better life," and insisted to us more than once that they belong to no particular region or occupation. What they share, she said, is that they are "a very distinctive group among Chinese consumers, people who reach the state they hope for, the state they idealize, through their own effort." And, as you would expect, they are said to be between 20 and 40.

Of course that is not it. A sales promoter at the Watsons in Shanghai's Global Harbor mall described Kans's mainstream customers — the Cherrys of this world — far more bluntly: "People who buy Kans usually don't spend much."

Li Wanwei, a college student in Guangzhou, rated Kans first of all on "value for money." The verdict came from a beauty blogger she follows on Weibo, who had once broken down the ingredients in a Kans whitening product. Li Wanwei trusted the evidence behind the analysis, and on the strength of it bought her first Kans product.

She also uses Shiseido and Sulwhasoo, both priced well above Kans's 60-to-150-yuan range. With those brands, she admits, she usually buys only the mid-size samples: "I'm still a student. I don't spend that much money on skincare."

Even so, she buys more skincare than most people her age. Her roommates "hardly ever buy the expensive stuff" — expensive here meaning anything over 100 yuan apiece.

Li Wanwei is exactly who Kans aims at: just arrived at university, newly deliberate about looking after her skin, and not yet able to pay for anything dearer. These are people who "want more out of life" — but for now, set against international brands that charge hundreds or thousands of yuan, they would rather try a cheaper one.

Then came the WeChat-selling interlude, a sudden boom in 2014 and an equally sudden bust in 2015. In 2014 Kans's WeChat sellers were averaging 100 million yuan a month, and the company expected the channel to clear 1.5 billion yuan for the full year. Then 2015 arrived: Kans was accused of looking like a pyramid scheme, and that same year it fell out with Weimob over licensing, a row that ended with the partnership cancelled. Chen Yuxin, who ran Kans's WeChat-selling business, said at the time that a "new WeChat-selling platform" was about to launch, but the cliff-edge drop in WeChat selling as a whole left that promise lifeless. All of it is, in the end, still the story of who its consumers really are.

We asked people in first-tier cities; few of them hear Kans mentioned by anyone around them, and the company's claim of 20,000 WeChat sales agents at its peak meant nothing to them. Whatever changed, the market WeChat selling lived in was the same market Kans had always served.

This story — from who the customers really are to how the brand broke through — could have been told better. For a company of this size, Kans still has a serious flaw.

Talk About the Flaw and You End Up Talking About the Product

WeChat selling is less the notorious "pyramid scheme" than an online version of early Avon-style direct selling. One can only hope that a sales channel open to everyone, and the suspicion of pyramid selling that came with it, has sobered Kans up a little.

But the risk of playing something until it breaks never goes away. Take the "Han" in its Chinese name, Hanshu.

Its success rests almost entirely on that one blurry syllable.

Tang Xiaov, who buys Korean cosmetics to order as a side business, fields questions about Kans from customers every month. "Far too many people think Kans is a Korean brand," she told QDaily. "A lot of young girls see the 'Han' in the name and assume it's Korean." The same confusion is still sitting in answers on Baidu Zhidao.

Kans's official explanation, Feng Chen said, is that "the name is Hanshu because the founder's surname is Han. (Although) some people think of Korea, we are a homegrown brand, born and raised here."

But Kans spends almost no effort correcting the impression. Who would? The Korean wave is at its height. Korean entertainment and Korean idols have both created fresh demand: sneakers, coats, gradient lips — nearly all of it pulled along by the stars of Korean dramas. A link that faint can only help the brand.

As for the product line, apart from Red BB and Mega Hydration, the two that run constantly in the commercials, nothing else at Kans has much presence. Feng Chen told us that hits like the Mega Hydration series account for close to 40% of Kans's total sales.

Red BB arrived in 2012, and it did ride the BB-cream craze. Missha's BB cream was priced very close to Kans's at the time and had already built a following by word of mouth online, but its reach and its sales were limited, and it never broke through on market share. That gap was Kans's chance to come from behind.

"Chinese consumers are becoming more expert, and clearer about what they need," Feng Chen said.

True enough — except that what people buy is the product of both their horizons and their budget. By pushing hard at young people with little money, Kans was simply building its own sales base.

Kans said it would rather not tell us what share of sales goes into product research, but said its parent, Shanghai Chicmax, has this year started two companies, one in Japan and one in South Korea, to bring in good research talent from both.

The move comes a little late. After the blow from WeChat selling, Kans will find that without marketing on the same enormous scale, the market has no room for its products. It was never a company driven by what it makes.

In its first ten years Kans walked, end to end, every road a Chinese cosmetics company has walked. In the three that followed it nearly lost its way when WeChat selling failed, yet it held its ground — and it could still become the story of an underdog that turned into a genuine top-tier brand. That outcome is bound up with the "more expert" demand Feng Chen describes. Which is the real test of whether a company is any good: Kans has to get expert itself first.

Cover image from Visual China