Chinese Bloggers Turn E-Commerce Moguls

SHANGHAI — They are known in China as wang hong, a term that literally translates to “net red” because of their red-hot online popularity.

These cyber celebrities have quickly emerged as a force to be reckoned with in China over the last two years and, until now, their rise to fame follows a familiar pattern. They are, in general, beautiful young women who post about their aspirational lifestyles on Chinese social media platforms, such as Weibo and WeChat. They develop a following of thousands (if not millions) of young fans who are buying into the fantasy of their idols’ idealized lives, both figuratively and, increasingly, literally.

Yu Xiaoxiao, 26, is a member of the fast-growing wang hong army. Previously a clothing model for Taobao stores, based in the city of Hangzhou, Yu decided to turn her posts to commercial advantage after her outfit of the day posts garnered in excess of 800,000 fans on China’s most popular social media platforms. In 2015, she opened a Taobao store selling her own brand of clothing, which garnered 30 million yuan, or $4.56 million at current exchange, in sales last year.

And she’s not the only Chinese cyber celeb looking to Taobao as their platform of choice to monetize their popularity. Social media “fit-spiration” model Chen Nuanyang opened a Taobao store almost two years ago to sell her line of workout clothes. She now employs 154 people and in March racked up 14 million yuan, or $2.1 million, in sales for a single month.

In fact, during last year’s Singles’ Day sale, China’s biggest annual e-commerce event, five of Taobao’s top ten best-performing stores for women’s fashion were fronted by wang hong.

A report from Guotao Junan Securities released in January estimated the potential for the wang hong clothing market to grow to more than 100 billion yuan, or about $14.91 billion, over the next year.

This has, in turn, spurred a legion of wang hong incubation companies in China. They operate as fully vertical operations, signing young women, helping them raise their social media profile, then managing everything from their Taobao store to the production of their apparel lines, as well as logistics and customer service.

Bob Ding, a former angel investor who recently founded Red Bang, a consulting firm focused on China’s wang hong industry, agreed that the industry is on track for a 100 billion yuan valuation this year.

“I think it’s a phenomenon. It’s a huge rising industry,” Ding said. “People are seeing the world through the eyes of wang hong and experiencing this ideal lifestyle through the eyes of the wang hong. There is more trust when you follow someone, that reputation and trust is built up over time and so their recommendation means so much more.”

According to research from McKinsey, Chinese consumers rank their friends’ recommendations as the most important factor in their online buying choices and their definition of “friend” includes the key opinion leaders they follow online, even if they have never met them in person.

Recognizing the increasing importance of these KOLs with consumers, Alibaba last year launched a program that allows online personalities to post content on Mobile Taobao, the platform’s mobile-shopping app. As part of the initiative, content creators can earn commission by making product recommendations that convert to sales. Alibaba expects the program to generate 2 billion yuan, or $298.2 million, in commissions over its first three years.

“The younger generation in China spends lots of time on their mobile phones and on social media,” said Chen Lei, a manager at Mobile Taobao. “Cyber celebrities are strong personalities and thought leaders who show others products that fit their attitudes. They fit right in with [the mobile and social] trend.”

Taobao is essentially using content from China’s KOL community to turn a mobile shopping app into a lifestyle channel, increasing customer engagement in the country’s increasingly competitive e-and m-commerce environment.

Earlier this year, Taobao launched video streaming on the app, tapping into the quickly evolving nature of online celebrity in China.

According to Ding, in the future it will no longer be enough to simply translate a pretty face and envy-inducing selfies into a wang hong empire; the latest generation of China’s cyber celebs is attracting scores of fans with quirky, funny and personality-filled live-streamed videos.

The name Papi Jiang might not mean a lot to Western audiences but the 29-year-old vlogger is rapidly becoming a household name in China. So much so that the Shanghai-based cosmetics company Lily & Beauty in April paid 22 million yuan, or $3.4 million, for an ad auctioned off to run during one of her wildly popular video monologues.

This came only a month after Papi Jiang, whose real name is Jiang Yilei, revealed investment from four domestic venture capital funds — ZhenFund, Luogic Show, Lighthouse Capital and Xingtu Capital — of 12 million yuan, or $1.84 million.

In general, these video content creators make their money from “gifts” sent virtually by fans over the live-streaming platforms, though Jiang is leading a new band that are expanding their monetization methods.

“The biggest wang hong care about their reputation and then they gain fans’ trust and these fans are willing to make purchases to support their Internet idols and also support their own dreams,” Ding said, adding that he believes online celebrities will replace traditional ones as the standard-bearers for product endorsements in the near future.

This, according to Ding, is good news for international brands, in particular niche labels from the U.S. or Europe that might not have the resources or reach to pay for traditional celebrity endorsements or widespread traditional media marketing campaigns in the China market.

“Each wang hong has their own characteristics, their own lifestyle which attracts people who want something similar, so for niche brands wang hong can be a perfect match,” he said. “If you are a niche brand, you might not be able to get much attention through the traditional media, the marketing expenses are just too much, but wang hong are still affordable.”