Sometimes you miss a chance to become a household name because despite being literally in every household…you don’t have a name… does that matter?
Over the last few months, China went through a series of pretty strict lockdowns. Starting with Shenzhen early in the year, Shanghai from March through May and Beijing a little later, the focus on Zero-Covid has meant varying degrees of restriction on movement and importantly, a regular schedule of testing for COVID. That typically means going down for a nucleic acid test most days as well as doing two self-tests a day.
With 25 million residents in Shanghai doing 2 self-tests a day, every day for several weeks, that’s several hundred million test-kits being sold. These seem to come mostly from two companies (Zhejiang Orient Gene Biotech – http://www.orientgene.com and Wuhan Ming De Gene Biotech – mdeasydiagnostic.com).
So every day, consumers all over Shanghai and other cities (total population affected by lockdown was a staggering 140 million at its peak) are looking at one of these self-test kits twice. Close up… and they’re typically taking a photo and recording it in their neighborhood group, often also uploading it into the health-code app. In normal consumer behavior terms we’d look at that as really deep brand interactions, sharing content and so on.
Except… there’s no brand. The kits carry the name of the company, but that’s pretty meaningless since consumers aren’t familiar with it.
You could argue that it doesn’t matter – the kits are procured by the government and distributed for free at this point and having a brand wouldn’t make a difference to that.
Both companies have a global presence and ambition – Zhejiang Orient Gene apparently sells COVID self-tests in over 100 countries via government procurement and Wuhan MingDe lists various international dignitaries visiting their facilities and being given an exhibition of capabilities in this area. Clearly, being a Chinese company, their default business model is to engage with governments rather than think of engaging consumers.
What about the future though? When people buy self-test kits because they need to travel or show a negative test for their own purposes, but the population at large doesn’t need to be tested? That opportunity is going to be around for a long time – I suspect we’ll still be worrying about COVID for another 5 years or so. It is unlikely that the government will continue to be involved in procuring kits – especially outside China – for that long. Most likely there will be a set of standards for the kits, perhaps an approval process for a manufacturer to quality and then it’s up to them to distribute to consumers through the OTC channels.
On the one hand, these two companies have done remarkably well to be ready with a mass-produced self-test kit that is now reaping significant revenue rewards. However, that large-scale opportunity is unlikely to last longer than a few months and they will end up having one spectacular year in 2022 but not being able to replicate it. The bigger opportunity that they could have built on for the long-term is to build a name as a brand of self-test kits for consumers to buy whenever they need – given how COVID has evolved this is likely to be a continuing need – but they don’t have to restrict themselves to COVID or even just to self-test kits in the future. The B2C market for flu & COVID self-test kits over the next few years, especially when viewed at a global level, will be a consistent opportunity for these hitherto B2B companies to build a consistent stream of new revenue. That opportunity could have had a huge kickstart over the past two months by exploiting the twice-daily exposure to huge numbers of consumers.
The lockdowns in Shanghai and Beijing seem to be lifting and while there may be some isolated “dynamic” closures of smaller parts of these megapolises, it feels like the window of opportunity for these companies is fast closing and they’ve missed out on the chance to build a brand that can drive a new, steady revenue source for years to come.
At Searchlight Management Consulting, we can help clients navigate new business models and revenue streams that may seem unfamiliar and forbidding. Write to us at email@example.com .