New Money: China's brand collaboration craze
By Xia Cheng and Jin Yang

Brand crossovers are currently the hottest concept for limited product offerings in the digital era. Brands can join hands with their industry peers and reach beyond their normal scope.

Yongpu, a Chinese coffee company founded in 2014, has done more than 400 brand collaborations in six years.

Interestingly, the company chose to do brand crossovers six years ago because it didn't have enough funding.

"When we started, we only got 300,000 yuan ($44,835) in initial funds, very limited for expensive marketing and branding activities. So we decided to use brand collaboration to make our name heard," said Tie Pi, CEO of Yongpu Coffee. 

Tie said that through brand crossovers, the company could offer products with two brands for the price of one, a great deal for customers. He added that their customers, mostly women in big Chinese cities, reacted well to the chemistry and sparks between different brands, a major motivation for Yongpu to continue such brand collaborations to create products that cost less money but offer more experience.

But brand collaboration cannot, by itself, generate more profit. "We are not counting on crossover products or brand collaborations for profit. They are mostly limited offerings to increase the value and awareness of our brand," said Tie. He said that coffee brands need such collaborations to draw more attention on social media and guide traffic to its regular products.

Game producers are also among the first to host brand collaborations with companies outside the digital realm, capitalizing on their huge fan base and potential buying power. 

The Glory of King (GOK), one of the most popular mobile games in China, is working with Shi San Yu, a traditional Chinese garment maker, to sell clothes based on the GOK's characters. The game also joined hands with cosmetics giant M.A.C to create a line of GOK-themed cosmetics products. 

This collaboration has even attracted customers that are not traditionally associated with beauty products, such as men, who would love to spend on products that they don't usually use just to support their favorite mobile game.

Targeting younger generation

The younger generation reacts to brand crossovers particularly well, especially when the product reminds them of childhood memories. Chinese jewelry maker CHJ has been working with top Japanese manga series Doraemon to sell specially designed Doraemon jewelries in the Chinese mainland. It is also working with Pokemon to design affordable gold jewelries for Gen Y and Z.

"Many people feel emotional after seeing these jewelries and they post about their experience on social media. That could attract even more customers to our products," said Chen Jiayi, marketing manager for Beijing and Tianjin at CHJ Jewellery.

With more crossover collaborations, brands are able to stay relevant in the increasingly competitive consumer goods market. But business success still depends on consistent product quality.

"Next, we will focus on brand collaborations that create unique products," said Tie, who will look at new flavors for coffee-or tea-based drinks and hope to create something that people haven't yet seen in the food and beverage sector. "That's where the fun of brand crossover is," said Tie.

Brand crossover for customer acquisition

Brand crossovers have been gaining momentum since before the COVID-19 pandemic, as China's consumer sector becomes increasingly competitive.

When two very strong brands collaborate, they have the potential to create a lot of buzz among consumers.  What happens next is essentially attracting as much traffic as possible and turning the increased traffic into higher customer flows then into product sales. This is considered a cost effective strategy as customer acquisition is getting more and more expensive for brands in China.

"For some brands, successful brand crossovers could arrange three to five percent of the total business. Actually, it's beyond that... (brand collaborations) can create tangible business both for e-commerce as well as for physical source, especially under the COVID-19 situation where we see a lot of this offline store traffic hasn't come back to the normal levels of 2019 yet," said Thomas Zou, principal at the Boston Consulting Group.

What makes a brand collection effective?

The keyword for brand collaborations is relevance. Brands are looking for partners to work on adjacent areas. For instance, sportswear bands are collaborating with fashion brands, so that the sports brands can become more fashionable and the fashion brands can explore the more leisure-oriented product spectrum.

Collaborations could also be scenario-driven. For instance, people watch movies at home while consuming soft drinks and eating chips and finger food. These two categories are basically targeting the same group of consumers with similar demands.

For a brand to think about collaborating with another brand, it needs to really understand what its business objective at the moment is, said BCG's Zou. 

"It could be finding new sources of growth, it could be going into a new consumer segment, it could be getting into adjacent categories, and it could be rejuvenating the brand (image)," said Zou. 

Overall, based on different objectives or the target of the collaborations, the potential partners could be highly different and the collaborations would be done on a case by case manner.