In the past two years, the epidemic has lasted longer than many people expected, and many entrepreneurs, entrepreneurs, and investors have felt a biting chill. Among them, the consumer sector has been particularly severely affected. Entering 2022, what problems will the new consumption track face? What new trends will there be in the second half of the year?
On July 13, guided by Zhengzhou Municipal People's Government , sponsored by Jinshui District People's Government, China (Zhengzhou) New Retail Industry Base, Ai At the China (Zhengzhou) New Consumer Brand Industry Summit hosted by IP Commune (IP Commune) and the Gold Medal Award Henan Operation Center, well-known financial writer, investor, and founder of 8090 Business School Wu Xiaobo put forward his own thoughts.
Text/Top News • Henan Business Daily reporter Bai Liuyang Chief reporter Yang Guifang Intern Jia Xinyu
01
Excerpts from the speech:
Aesthetic independence promotes the rise of domestic products
Wu Xiaobo concluded that up to now, there have been four “new consumption movements” in the history of Chinese enterprises , the first three times started in 1904, 1916 and 1978 respectively.
The latest one started in 2015. This round of "new consumption movement" is very different from the previous one.
First, we have achieved aesthetic independence. In the previous three waves of and new consumer , all companies and brands used Western culture and Western aesthetics as anchors and imaginary enemies. At that time, our aesthetics were led by the United States, Britain, and even Japan.
However, this round is different. From the beginning of the "Forbidden City phenomenon" to today, we have found that Chinese culture itself has become an important trend point in this new wave of consumption. We can see that today’s young consumers born in the 90s and 00s are very willing to pay for Chinese culture.
In this sense, I think there will be many opportunities for entrepreneurs of new consumption and new domestic products in Henan in the future, because this is the source of China.
Secondly, in the first three rounds of new consumption in China, when we competed with foreign brands, we basically relied on cost-effectiveness. For the same product, we are 20% or even 40% cheaper than him. We first complete the accumulation in second- and third-tier cities and then move to central cities.
But this round has undergone particularly big changes. Statistics in 2021 show that online retail sales of new domestic products in first- and second-tier cities accounted for 46%, third- and fourth-tier cities accounted for 29%, and others 23%. From the perspective of growth, the compound annual growth rate of the third and fourth tiers is 45%, and that of the first and second tiers is 22%. This is very beautiful data.
What does it mean? It means that new domestic products and new consumption are first awakened among the most sensitive young consumers in central cities. This is a scene that has never appeared in the previous three new consumer movements.
Therefore, young consumers’ confidence in Chinese culture and Chinese products is the greatest benefit to all our entrepreneurs today. What we have to do is to truly make good products that can meet the needs of these young consumers.
02
What problems do new consumers face?
The epidemic that has lasted for several years has added a few dark clouds to the sky of the new consumption track.
The first is consumption downgrade. In recent years, as the general environment has become colder, many companies have experienced salary cuts, layoffs, etc. In the past year and a half, the DAU of several apps in China has increased very quickly, one is called Xianyu, one is called Pinduoduo, and one is called 1688.
Due to the impact of the epidemic, everyone’s income expectations have gradually decreased and their wallets have tightened. We can see that the empowerment brought by design and brand to enterprises is weakening.
Second, innovation in all categories faces a red ocean. Many categories have emerged since 2015, and countless category innovations have appeared in various industries such as prepared dishes and household appliances.Today we went to Taobao, , JD.com and and saw that these new domestic products have completed full category coverage, and there are new categories every year. For example, zihaiguo , you will find that after the category of zihaiguo became a hot word, it was immediately everywhere in China.
China has the most diligent entrepreneurs and the lowest costs in the world. So we can see that all category innovations are facing the red ocean phenomenon.
Third, because of market stagnation, the capital market has also encountered a cold winter.
In recent years, we can see the phenomenon of valuation inversion in the venture capital market. The price in the primary market may actually be higher than that in the secondary market. This scene can be seen in the milk tea industry, small household appliances industry, beverage industry, etc. This also makes China's venture capital hesitate in new domestic products and new consumption tracks.
Fourth, traffic-based new brands first prosper and then decline. In recent years, many companies have had the same feeling, and traffic has become more and more expensive. Secondly, there is the issue of repurchase rate. Many traffic brands are generated through advertising. However, due to insufficient product quality and product iteration capabilities, the repurchase rate is very poor.
03
New trends under the cold winter
China is the "sexiest" entrepreneurial market in the world, and it is also the most cruel entrepreneurial market in the world. During this process we saw some new trends and changes taking place.
The first trend, I think, is the differentiation of the K-type era.
I firmly do not believe that today’s Chinese consumer market has seen a comprehensive downgrade. I think what is happening today is called consumption grading.
The prices of good products and brand-empowering products will become higher and higher. They can leapfrog the cost range, and I think this should be the mainstream market for our new consumption in the future. For any product, if your product pricing is closely related to cost, your raw material cost, and labor cost, you will definitely have no future. Because the retail pricing of your products can never keep up with the rate of increase in your costs, your profits will definitely be eaten up in the next three to five years. Therefore, I firmly believe that in China, products that are capable and possible in the future must be able to get rid of cost pricing. This is the real future.
But at the same time we also see the second scene, the ultimate cost-effectiveness will still exist for a very long time. The ultimate cost-effectiveness is also a benefit for many entrepreneurial companies. Entrepreneurs can find extremely low-cost supply chains through various channels.
Therefore, for entrepreneurs, there are opportunities above the K-type, and there are opportunities below the K-type, but these are completely two markets, two groups of people, and two possibilities.
The second trend is from winning by traffic to winning by supply chain.
We have seen that after 2015, there are really a lot of financing, and even new consumer and new domestic brands that have been launched are completely obtained by traffic. But this is really very difficult now.
There is a company in Hangzhou that makes snack food . They asked people to do a live broadcast on Douyin . One live broadcast made more than 20 million, and the result was a loss of 2 million.
Therefore, it has become more and more difficult to build products with complete traffic. What you will find in these years is that these new domestic products and new consumption brands have returned to the supply chain from traffic.
You will find that when consumers today buy something, many of them will look at the ingredient list of the product. When consumers begin to pay attention to the details of a product, the supply chain becomes very important. Moreover, the supply chain involves the depth of a product iteration, so we see that traffic is a good thing. Traffic has allowed many of our startups to achieve market achievements that their predecessors took ten or twenty years to achieve. But the hardships their predecessors endured and the pits they stepped on must be stepped back over again.The pitfalls we have stepped through are technology research and development, laboratories, and supply chains. These are the hurdles that our startups today must overcome.
The third trend, I think, is the new empowerment of smart manufacturing and collaboration tools.
The epidemic has caused us to face many difficulties, but we can see that there are still people investing billions or tens of billions in smart manufacturing. Why? Because everyone still thinks China has a future. This investment also means a new round of intelligent transformation, and China is the most radical experimental site. Secondly, the factory organization has undergone tremendous changes during the epidemic. Through smart manufacturing and collaboration tools, the production line and consumer delivery can all be glued together. All factories and headquarters, marketing departments and production departments, warehousing, production, terminal store delivery and after-sales services in China can be combined through various tools to complete a digital construction.
What does this mean? This means that every new consumer brand in the future may become a solution. This solution can not only be sold domestically but also to foreign companies in the future.
The fourth trend is that we have seen some new technologies reinvent new domestic products.
Two days ago I saw a doctor of materials science making noodles. But the material of his noodles is not rice or noodles, but more than 20 kinds of vegetables. The noodles are made by 3D printing technology. Before this, because Slim was liquid food , it was easy for the machine to clog, but he solved this problem. Moreover, 3D printed noodles are a hundred times faster than before.
Another company that makes mattresses uses bone materials to make mattresses. When you sleep, the mattress will adjust in real time according to your sleeping position. Through this technology, sleepers can reduce the frequency and frequency of snoring on a large scale.
A facial mask, a noodle, a mattress, these things around us have changed beyond the imagination of many ordinary people today.
The fifth trend is the global experiment of cross-border e-commerce and solutions.
As early as 2016, we have seen that Made in China bid farewell to the previous OEM model, ODM, and OEM model, and directly entered Amazon in the brand model, becoming the fastest growing among Amazon's global warehouses.
At the end of 2020, Amazon began to clean up Chinese products. In the past year or so, many cross-border e-commerce products in our Guangdong, Fujian, and Zhejiang regions have suffered great setbacks. But after 2021, these new Chinese brands will begin to enter markets such as Southeast Asia, the Middle East, Northern Europe, and Africa.
Therefore, the global experiment of cross-border e-commerce and solutions is an unprecedented sight in this round of new consumption and new domestic products in China.
