While the bloggers are getting the fame and the credit for their success, in reality, they are not doing it alone. Far from it (This article was published on Parklu)

There has been a lot of news lately about bloggers changing China’s e-commerce landscape. According to CBNData, a commercial data company affiliated with Alibaba, the “internet celebrity economy” was worth approximately 58bn yuan in 2016. Unlike Bloggers in the West who rely on the traditional sponsored post monetization model, many bloggers in China are creating their own incredibly successful brands, manufacturing and selling their own products specifically created for their audience. Blogger incubators, like Ruhan, believe blogger brands are the future of China’s ecommerce industry. 

Behind many of these huge bloggers and their online stores are companies known as blogger incubators. Blogger incubators are essentially e-commerce companies who, instead of creating stores and hiring bloggers to promote them, flip the model on its head.

First, they create marketing channels and a customer base by developing bloggers with massive, loyal followings. Then they create the products. Blogger incubators are like traditional talent agencies except that the source of income is not advertising commissions but sales revenue from individual bloggers’ online stores.

Each blogger the incubator works with has their own following, their own store, and their own self-branded products.  To the average consumer, it appears these bloggers all work independently — it’s nearly impossible to tell that they are working with an incubator. 

The First and the Best

The oldest and arguably most successful blogger incubator in China is Ruhnn Holding. Ruhan originally started as an e-commerce fashion retail company called LiBeilin(莉贝琳). They grew Libeilin to become one of the top 10 women’s fashion brands on Taobao.com, reaching approximately ¥200 million in sales in 2014 before transitioning their business model to become the first blogger incubator in China.

They hoped to reduce marketing costs, increase brand loyalty and create recurring customers with blogger brands. Effectively eliminate all problems they faced with Libeilin.

And who was the first blogger they signed?

The now incredibly famous fashion blogger Zhang Dayi (张大奕eve). To put into perspective just how successful she has become in the two years since signing with Ruhan, Zhang’s store reportedly pulled in $46 million in 2016, slightly surpassing Kim Kardashian’s annual earnings ($45.5 million). She currently has 5.4 million Weibo followers.

In addition to Zhang Dayi, Ruhan works with approximately 50 other bloggers including delicious大金,  虫虫Chonny, and 左娇娇 Rosemary. The majority of their bloggers are young females who specialize in selling fashion and beauty products.

The Blogger Incubator Business Model

Blogger incubators select, train and manage contracted bloggers. At Ruhan, each blogger will have a team who will manage their social media content, the clothes manufacturing process, and the Taobao store.

Typically, the incubator will be responsible for:

Talent management – While bloggers are encouraged to retain their own unique style, Ruhan will help them refine that style, develop their public image, teach them how to pose for photos, and train them to interact with fans.

Social media marketing – Their team will help them shoot photos and videos, prepare and post content, and monitor accounts.

E-Commerce – Ruhan manages product development and manufacturing, as well as the daily operations of the online shop.

So what is left for the blogger to do? The blogger is the face of the company. They must focus on developing a loyal following and be an expert at engaging with fans to assess their wants and needs.

Competition and Risk:

There is a great deal of risk involved in the blogger industry and competition is fierce. Ruhan is not the only blogger incubator in China. There are at least 200 of them, if not more. Along with Ruhan, some of the top players in the industry include Fan Xing You Xuan (繁星优选), PBLAB (杭州缇苏) and Yu Jia Yu Le (娱加 娱乐).

While the industry still has great potential, some investors worry about the long-term prospects. One of the main reasons is the difficulty of duplicating the success of bloggers. The failure rate of investment of internet celebrity incubators is 95% or above.

The main problem is lack of originality. It is easy for incubators to copy each other. Chinese bloggers are highly homogenized, partly due to beauty standards in China, but also due to blogger incubators’ systematic production of bloggers. The majority of their bloggers are young, slender females selling fashion products. The similarity between individual bloggers creates risk because when the market changes direction the incubators will not have diversification to balance out the fallout.

In an attempt to minimize the risk of failure, many incubators increase the number of bloggers on their roster, but this quantity-over-quality tactic rarely works. For example, Yu Jia Yu Le works with over 1,000 bloggers. While this may seem impressive, it actually results in limited individual attention and consequently poor performance from the bloggers.

Another issue is unprofessional management. Blogger incubators have only existed for the past few years and have faced pressure to rapidly scale up in this time. Many of them haven’t taken the time to establish effective management systems.

On top of that, blogger incubators are facing higher costs.  The development of social media marketing in China has made advertising and sponsored posts more expensive, yet at the same time, due to the oversaturated nature of the industry, more necessary.

The Secret to Ruhan’s Success

While Ruhan is not the only incubator, they are the industry leader. Here are a couple factors behind their success.

Business model

Ruhan has a very deliberate cyclical model focused on developing talent and growing their fan base throughout the early part of the year, then converting these fans into customers on the massive Chinese shopping holiday Singles Day.

They do not constantly promote throughout the year. Instead, they bide their time and concentrate on growing a loyal following, priming them to become customers when the time is right.

Furthermore, unlike other incubators, Ruhan prefers the quality-over-quantity model. To date, they have only worked with approximately 50 bloggers. Though this past summer, Ruhan has been very active in recruiting new bloggers, so the total number of bloggers signed might be much higher. 

China’s Ecommerce Industry and the Specialization of Bloggers’ Management Teams

Because Ruhan started out as a successful online clothing store, they already know what it takes to do well in China’s ecommerce industry. They have developed highly specialized departments including talent acquisition, talent training, photography, social media management, analytics, external relationships, purchase and inventory management. These keep the company running efficiently.

Additionally, having fewer bloggers allows each blogger to have a dedicated team who are responsible for helping him or her succeed.

Great Office Location

Ruhan is located in the Jianggan District in Hangzhou, one of the largest clothing wholesale markets in China. Their proximity to the factories reduces costs because most of the inventory can be shipped out directly from the factories. It also enables them to quickly adapt their products to suit changes in consumer taste. In fact, many of these fast fashion factories in China have an incredibly short clothing manufacturing period of only 7 days. Yes, one week from start to finish.

Of course, they aren’t the only incubator choosing a strategic location. Many of the top incubators have a similar set-up.

Alibaba Group has invested in Ruhan

Alibaba Group invested in Ruhan after their success during Single’s Day last year. Through this relationship, Ruhan will potentially have access to more data and have a better understanding of market conditions.

The Future of the Incubator Industry

This flipped business model of first creating a marketing channel and then selling the customers what they want is the future of China’s ecommerce industry, and possibly the rest of the world. While Chinese bloggers beat their Western blogger counterparts by a landslide, take a look at the incredible success Glossier is having in the U.S. and you’ll see that this is not merely an Asian cultural phenomenon.

The Future of the Incubator Industry

This flipped business model of first creating a marketing channel and then selling the customers what they want is the future of China’s ecommerce industry, and possibly the rest of the world. While Chinese bloggers beat their Western blogger counterparts by a landslide, take a look at the incredible success Glossier is having in the U.S. and you’ll see that this is not merely an Asian cultural phenomenon.

Chinese blogger incubators are taking this model and 100x–ing it.

While there will always be risks, these incubators are here to stay. Many of them are seeking investment and looking to grow, and are even eyeing other markets in Asia.

Will the female-dominated fast-fashion machine last forever? No. Incubators who want to achieve success in the long-term will need to expand into more industries and as diversify both the gender and physical appearances of their bloggers. Ruhan is already moving into cosmetics, health, fitness, and parenting.