Refer China: How MINISO redefined value in China's cut-throat consumer market

How one Chinese brand escaped the \x26quot;squeezed middle\x26quot; by offering emotional connection with customers.

China's consumer markets are currently experiencing a "sandwich effect", where middle-tier products are being squeezed out by both the high-end and the low-price segments. From luxury cars and lingerie to lipstick and coffee, the middle is losing market share to its competitors above and below.

So, what do you do if you sell a middle-tier, medium-priced product? Ideally, you move out of the middle, strategically repositioning your brand to become either more of a premium offering or more of a "low-frills/no-frills" value proposition. Neither option is easy for an established brand, and it's never as simple as changing a price tag.

As a case study of Chinese retailer and variety store chain MINISO demonstrates, however, it is possible to achieve an effective market repositioning that makes the most of your existing strengths while satisfying the deeper needs of today's consumers.

This article draws its conclusions from a recent CEIBS Master Class delivered in Guangzhou by Professor of Marketing and ESG Research Director Yajin Wang.

Price matters to Gen Z, but so does experiential and emotional value

While every generation of consumers creates new trends, there are some universal truths that apply to all consumers, grounded in basic human psychology. Generally, we all base our purchasing decisions on how they reflect on our lifestyle aspirations, moral values, and social connections. The way we spend our money is a reflection of more than our current circumstances; it ties directly to our societal standing and long-term goals beyond any one specific purchase.

While these factors apply to Gen Z consumers (those born between the mid-1990s and early 2010s), they also exhibit era-specific characteristics that set them apart from previous generations of shoppers. They prioritise:

Social connections based more on shared values and interests, rather than geographic proximity. They want products that connect them to a community of fellow enthusiasts.

Cost performance over ownership. Price and value matter more than the prestige of owning the product.

Experiential and emotional value. The functionality of the product matters (as this ties to its cost performance) but it should also deliver a deeper experience that connects with the consumer's interests. They want consumption experiences that are not just useful but meaningful.

These emerging consumer preferences are amplifying the sandwich effect across Chinese consumer markets. Gen Z shoppers want higher cost performances but also deeper experiences. Middle-tier products, increasingly, seem unable to deliver either as effectively as the upper and lower segments of the market.

MINISO – From pure price performance to delivering value

Over the years, MINISO's product range maintained an affordable price point, but overall emphasised the design and general quality of its products. By 2015, it had grown to encompass 1,400 stores and annual revenues of RMB 5 billion. But, with the explosive arrive of ecommerce in China, the brand found itself fighting off hordes of new competitors who used digital innovations to undercut them on price.

MINISO had solved the growth puzzle, only to run headfirst into a competition problem. They now found themselves sitting squarely in the "squeezed middle", necessitating another strategic pivot.

2015 saw the company undergo a brand upgrade, focusing on combining the existing value of the MINISO offering (competitive prices married to good design and product quality) with greater emotional value, which would be achieved through IP collaborations. Partnering with over 150 major IPs including Disney, Marvel and Hello Kitty, MINISO succeeded in creating a new offering that was highly desirable to Gen Z customers, satisfying their need for affordable prices and reliable quality alongside consumer experiences that tie them into a community of like-minded fans of popular IP.

By 2023, MINISO's revenue had grown to RMB 13.8 billion, up nearly 44% year-on-year (YoY). Overseas markets contributed RMB 4.8 billion (44% YoY growth), representing 40% of total revenue, demonstrating that the new model was suitable not only for the Chinese market, but for a wider global audience.

Learning from success – How did MINISO deliver emotional value?

Authenticity commands a premium price in today's market – a lesson MINISO learned effectively. While any company can strike an agreement with the owner of popular IP and slap it on their product, this approach is unlikely to encourage any kind of deeper emotional connection between brand and consumer.

Instead, MINISO took the necessary time to make IP collaborations an integrated part of its offering. It trained dedicated teams suited to:

▸ Finding appropriate IP to partner with

▸ Incorporating IP into suitable MINISO products

▸ Marketing the products and wider collaboration via the most effective channels

▸ Building community engagement around new product launches, events, and existing product ranges

Rather than merely trying to catch the next big trend, MINISO was able to anticipate and build genuine consumer excitement for its upcoming collaborations. Many of its most successful IP partnerships were the direct result of suggestions from MINISO fans, gathered through social media interactions and other forms of open communication between the brand and its fanbase.

While this methodology required more resources, research, and consumer consultation than a more basic approach would, MINISO demonstrated its efficacy in developing meaningful consumption experiences that delivered genuine emotional value, elevating the product beyond its functionality or its price value.

Strategic considerations – Don't shift prices, shift perceptions

MINISO's story shows that we are no longer in a commercial landscape where low-cost consumer goods segments can compete only on price. Delivering experiential and emotional value is not just the purview of middle and higher-tier products; any brand, at any price point, can and must compete on these aspects.

Winning over consumers, particularly those from Gen Z, requires a more strategic approach to ensuring that your product provides deeper emotional value than your competitor. It is not enough to race to the bottom by slashing prices, or alternatively, boosting prices in a bid to escape the middle tier and enter the premium market. Without meaningful actions to support them, such price shifts are highly unlikely to deliver sustainable growth in revenues or consumer loyalty.

To improve cost performance:

▸ Ensure that your changes deliver clearly perceivable value added for your consumers.

▸ Leverage marketing and business model innovations to reduce your costs.

▸ Simplify consumer decision making – they should not have to deliberate on what to purchase and why, but rather, your offering should instinctively guide them towards appropriate products and experiences.

To deliver experiential and emotional value:

▸ Gather comprehensive consumer insights by asking questions that extend beyond your product, directly addressing the values, ambitions, needs and concerns of your customers.

▸ Build shared value communities through digital and offline events and platforms – give your fanbase easily accessible avenues to share their love of your brand.

▸ Collaborate with appropriate IP owners and design consumption experiences that go beyond retail and support the development of a broader lifestyle.

By addressing the evolving needs of today's consumers, any company can elevate the combined value of its offering and the brand that stands behind it. The goal is not to merely differentiate on price; it is to achieve a successful brand upgrade that is accepted by existing customers and new converts alike.

About CEIBS Global EMBA

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