Click the image for details A wave of more rational and discerning consumers is approaching. In terms of consumption, we often benchmark against Japan and the United States. Especially Japan, after Wu Xiaobo created the "toilet seat phenomenon" two years ago, not only investors but also ordinary consumers started a wave of spending in Japan. Subsequently, calls for consumption upgrades emerged. Unfortunately, the so-called new middle-class dividend from this wave has not brought much surprise to many industries in the Chinese market that have hit peak sales—how many truly eye-catching product upgrades have appeared in the past two years? Perhaps it is necessary to re-examine this consumption upgrade; it is an upgrade based on consumption cognition. More Rational Consumption Environment: Sellers Are No Match for Savvy Buyers In a sense, consumption upgrades go hand in hand with price upgrades. But we cannot simply equate consumption upgrades with price increases. The main consumer group driving this upgrade is both pragmatic and idealistic. The increment comes from their demand for higher-end products with better value for money. More importantly, due to the emergence of various new channels and media, they face a more rational consumption environment, leading to an extraordinary ability to judge product quality. First, consumers are increasingly seeking quality assurance. This is a fundamental shift in consumers' underlying psychology and behavior. Quality, simply put, is the pairing of good products with reasonable prices. It is a more sensible balance, representing consumers' strong ability to judge quality. If a company launches products that meet this need, consumers will be very receptive. For example, targeting the social and consumption habits of urban white-collar women, Huatime (花点时间) set its main battlefield on WeChat official accounts and Youzan Mall, offering a monthly subscription model of "pre-order + periodic purchase" for weekly flowers (starting at 99 yuan/month, 4 bouquets per month), with a specific flower type each week and a short text giving it special meaning, making the inherently romantic consumption behavior appear more artistic. For just over 100 yuan, you can receive a different bouquet every week, averaging less than the price of a Starbucks coffee per week. This flower consumption model is particularly popular among white-collar women who love life and have an artistic flair. Second, the essence of consumption upgrade is to upgrade the value of products. This has two implications: First, the conventional social psychological phenomenon that "high price equals good product" is being debunked. Companies can raise prices, but they must have sound reasons that convince consumers; second, price increases should always remain within a reasonable range. The intrinsic value of the product is the fundamental reason consumers are attracted. Finally, the mainstream trend of this round of product upgrades is: mass products become higher quality, and niche products become mainstream. The article "Going to Japan to Buy a Toilet Seat" revealed not that Chinese people are rich and foolish, but that Chinese consumers have an urgent need for high-end daily necessities. It is not a demand for symbolic luxury goods, but for high-end daily products with tangible performance improvements. These "high-end goods" are economical and stylish. For example, in the past, people casually bought any socket, but now they want sockets that are both aesthetically pleasing and functional. Just like NetEase Yanxuan's slogan, "Good life, not that expensive," this hits the pain point of many people. Consumers who once wanted to buy Muji but found it a bit expensive have found a "high cost-performance choice" at NetEase Yanxuan. Time and Experience Have Become More Valuable The consumption upgrade of "this generation of people" is more about pursuing "being better to oneself." The popularity of knowledge economy platforms and the boom in online video paid subscriptions illustrate this. It represents a yearning for a better life and the means to achieve it. Consumers are willing to spend money to save time. Curated e-commerce models represented by NetEase Yanxuan are becoming increasingly popular. For example, Ma Yun operates the self-operated lifestyle brand "Taobao Xinxuan" on the Taobao app; maternal and infant e-commerce platform Mia.com launched its own brand "Rabbit Mother's Selection"; Xiaomi also launched its curated e-commerce project "Mijia Youpin"... These curated and selected business models actually provide consumers with "information within information," serving as platforms that help consumers filter products and reduce the time and cost of choosing. Consumers are also willing to pay for better experiences. For example, previously they listened to free music, but now they are willing to pay for lossless quality music; previously they watched free videos on Youku or Tencent Video, but now they are willing to pay for annual VIP memberships, not only to skip long ads but also to access more movies exclusive to VIPs. Nowadays, more and more "cyber cafes" (网咖) are appearing on streets. "Cyber cafes" are commonly known as internet cafes. They have been popular in Europe and America for many years, initially providing a comfortable and fast internet environment for business people. Cyber cafes no longer only provide internet access but also offer freshly ground coffee, milk tea, pastries, rest areas, and office services. With the upgrade of cyber cafes, all-in-one Apple computers, honeycomb-style computer desks, ergonomic leisure chairs, independent coffee areas, and gaming rest areas have been introduced. Customers can not only sit in soft booths, drink various delicious beverages, chat with friends online, watch movies, but also participate in e-sports. These are market opportunities brought by consumption upgrades. At the right time, consumers are willing to pay for these petty-bourgeois pleasures presented in an appropriate way. Service Upgrades Have Great Potential Professionalism in business details is the foundation of all business. The phenomenal reaction to last year's Starbucks "tall cup incident" hides the changes in consumer demand upgrades. Driven by the surging power of the internet, users' individual and identity awareness is awakening. They urgently want businesses to know who they are, their consumption preferences and habits, and that they are living, unique individuals. Therefore, innovations like new retail and shared bikes, which are not considered transformative, can cause business earthquakes because they achieve efficient experiences—this is a service upgrade. The product selection, SKU expansion, supply chain management, and original design that NetEase Yanxuan focuses on are not new concepts in e-commerce, but they address precise needs in niche areas. Lehe Yogurt allows fans to vote on flavors and participate in taste tests, supporting their dreams (emotional consistency), giving users a high sense of participation, as if they were the boss. Consumption upgrades will bring more segmented consumption and service demands. Paying attention to changes in "process experience" and "emotional identity" and reflecting the differences in segmented emotions is the service upgrade that companies need to work on in this round of consumption upgrades. De-emphasizing Brand Concepts Another feature of this round of consumption upgrades is the de-emphasis on brand concepts or turning "no brand" into a brand, with brand premium effects weakening. Brands have stepped down from the altar of quality; consumers have their own scales, re-ranking traditional and new brands. Correspondingly, consumers' barriers to accepting new products are disappearing; they are willing to try innovative products and accept new brands. Now, KFC's sales in the Chinese market are declining or growing very slowly; Pizza Hut has seen year-on-year sales declines for more than ten consecutive quarters (just recently recovering slightly); Häagen-Dazs has been closing stores; Walmart is also closing stores. These signs indicate that the glorious days or fastest growth periods of very famous foreign brands in China are over. Instead, some brands with no background or fame have suddenly risen to prominence. For example, Miniso, a retail chain founded in September 2013, has achieved astonishing annual sales. Miniso advocates a "high quality, low price" strategy, for which it has innovated its supply system. Miniso has a supplier cooperation model it is proud of: pricing by volume + buyout customization + no payment delays. The underlying mechanism is: Miniso and suppliers jointly develop products, buy out the copyrights, and form exclusive sources; during the product plan period, they purchase specific quantities based on market demand, relieving suppliers of inventory concerns; the purchase price is determined by order size. Under the premise that suppliers comply with the above agreements, Miniso guarantees no payment delays. Jiangxiaobai, launched in 2011, has thrived in just a few years, also riding the wave of consumption upgrades. Compared with traditional brand thinking, Jiangxiaobai does the opposite: it does not dwell on history or associate with celebrities. It takes a light-taste route to adapt to the tastes of new consumer groups; the brand lives in the present, seeks resonance with new people, and creates consumption scenarios that match young people—these are the main paths for Jiangxiaobai's rapid success. In short, this is destined to be an era where new talents emerge. Consumption upgrade is a process of continuously expanding high-quality market demand. Seizing this process and daring to make strategic moves is the most fundamental business logic. Source: Sales and Market (cnmarket) Click the image for details The 3rd (CFIC) China FMCG + Internet Conference will be held in Chongqing in October 2017. At this conference, New Distribution has invited 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to participate. The theme of this conference: New Forces, New Ecosystem. We will invite well-known domestic B2B industry experts, mentors, and B2B platform founders to discuss the following topics:
How can the FMCG industry leverage B2B to achieve new growth opportunities
How to build the new supply chain behind new retail
How can intra-city logistics help B2B achieve leapfrog development Highlights of this conference: The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"
Case sharing of excellent distributors' transformation and upgrade
Conference + Exhibition upgrade: Hall 6 Internet Technology Exhibition strengthens networking
Leaders from Alibaba, Eternal Asia, Best Store+, Global Logistics, Unilever, Hd, Yunmei Co., Ltd., and other well-known enterprises in various fields will deliver speeches on-site, presenting pioneering viewpoints. October 17-18, 2017 Chongqing International Expo Center Registration is now open. Long press the QR code below or click "Read Original" to register. Early bird tickets before September 15 enjoy a 30% discount! Add friend with note "Conference Registration" Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: 2016 "FMCG + Internet" Summit Forum 2017 (2nd) China FMCG + Internet Conference Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: 2016 "FMCG + Internet" Summit Forum -END-