Click 'Read Original' for details. In the past few years, 'consumption upgrading' has been a buzzword from government documents to various media. Then starting last year, voices of 'consumption downgrading' began to emerge, and with the popularity of self-deprecating internet terms like 'invisible poor population', this trend seems to have been set. Yuanwai has always advocated that everyone should think independently and not be fooled by the 'big words' on new media. Of course, this is not to say that 'consumption downgrading' is wrong, but to provide a logic to understand current consumers. In social psychology, there is an effect called 'availability cascade', which means that for certain social phenomena or events, media public opinion not only influences public interest but is also influenced by it. In other words, if the public likes to see 'consumption downgrading', everyone will write articles about it. (This is similar to the pattern of writing about 'counter-terrorism' after 9/11 in the US, or writing about Guangzhou falling out of the first-tier cities a few years ago.) Especially in today's internet society, because media KPIs are reading volume and sharing volume, the 'availability cascade' phenomenon is more obvious. From the heuristic theory, our judgment of a phenomenon is often influenced by two factors: 1, how many typical examples we can think of; 2, the ease with which we think of these examples. Regarding 'consumption downgrading', there are two well-known examples: The surge in Fuling Zhacai's stock price Many people think that the rise in this stock this year is because more people are eating pickled mustard to get by. Actually, anyone with a bit of economics knowledge knows that the fundamental reason for a stock price rise is the market's increased expectations for its future. (In fact, this year, the company did attempt to reposition its products, such as the 288 yuan premium gift box available on Taobao, and three consecutive years of price increases.) If a stock price rises because more people use the product, does that mean that when agricultural tool company stocks rise, it proves more people are going back to farming? Pinduoduo's listing Because Pinduoduo's products are cheap, and the company listed this year, people think it's because more people are buying low-priced counterfeit goods. Actually, let's think carefully: without Pinduoduo, wouldn't these low-priced counterfeit goods exist? Of course not; they just weren't visible to the elites in Beijing's 6th ring road, Shanghai's Lujiazui, Shenzhen's Qianhai, or Guangzhou's Zhujiang New Town. Pinduoduo just provided a more convenient channel to serve those who want to buy low-priced goods of a certain quality but couldn't due to channel restrictions. It has little to do with 'consumption downgrading'. NetEase Yanxuan is a magical platform because both 'consumption upgrading' and 'consumption downgrading' arguments use it as an example. The reason for saying it's consumption upgrading is that many of its products are items that the public wouldn't normally spend too much on. For example, a 799 yuan pajama set or a 149 yuan felt hat. These categories can be bought on Taobao for less than one-third of the price with acceptable quality. But their popularity shows we live more refined lives. Items that could be compromised on now have certain quality requirements. But that's only one side of NetEase Yanxuan. On the other side, the same NetEase Yanxuan products are priced significantly lower than brands like Armani, Muji, and Samsonite. Since you can buy similar quality at less than one-tenth of the brand price, why not? This is what many people see as consumption downgrading. So, is our consumption upgrading or downgrading now? Many articles have explained the changes in consumer behavior in recent years, with familiar concepts like: Not valuing brands but quality, pursuing cost-effectiveness Personalized consumption, pursuing small brands Pursuing diversified entertainment and leisure experiences Paying attention to life details, vertical and segmented consumption Willing to pay a premium for better service, design, and quality These concepts are all correct, but they focus more on describing phenomena and lack an explanatory framework. To analyze consumer behavior, we must first return to a fact: what a product means to consumers. (In other words, what value can the product bring?) Generally, a product can bring two types of value: Physical value: shape, size, color, material, etc. Intangible value: displaying social status, providing usage experience, social value, emotional value, strengthening self-cognition In recent years, the physical value of products hasn't had many breakthrough changes. The main reason for changes in consumer behavior is the change in the intangible value perceived by consumers. 1. Weakening of social status value In the 20-30 years of reform and opening up, due to the surge in social wealth, a considerable number of people achieved wealth and social class advancement through their own efforts. This group had a strong need to display their new class. The best way was through luxury goods (like designer bags) or high-end real estate (like luxury cars). So there was a time when the most important purpose for consumers buying a product was to distinguish themselves from other social classes. (Social status value) But in the last decade or so, the image of the upper class has changed dramatically. Luxury goods no longer display social status because people with high social status present a very common image to the public. Walter Wüllenweber's book "The Anti-Social" describes this phenomenon. In Germany, the upper class is often not those sitting in luxury cars, but those living in shabby gray-white houses with fences. In today's big cities in China, we don't consider people carrying LV bags or driving BMWs and Mercedes as the upper class; people with social status often hide in the city. (This is also why the Volkswagen Phaeton has such a modest appearance.) The trend that follows is the perceived function of displaying social status in many products has been weakened. (That is, people no longer judge a person's social status by the products they use.) So if a brand's premium comes from social status value, consumers are likely to abandon brand products and switch to similar quality products. (Consumption downgrading) For example, suppose an Armani pajama set has a physical value of 799 yuan, but with the Armani brand, it can sell for 5999 yuan (this is hypothetical for illustration; actual may be more), then consumers pay a premium of 87% for social status value. In summary, in this era, the social status value of many products has been weakened, leading consumers to no longer be willing to pay this premium, which is the essence of 'consumption downgrading'. 2. Rise of other intangible values With the weakening of social status value, we see more low-priced, high-quality products selling well (like the early Xiaomi phones). But we cannot ignore that we also see mid-to-high-end products and services achieving great success (like milk cap tea at dozens of yuan per cup). The reason is that although social status value has weakened, the perception of other external values brought by products has been strengthened: Experience value -- What do I feel during the consumption process? Social value -- What can I share with friends about this product? Emotional value -- What emotions does the product evoke in me? Self-cognition value -- What kind of person does using this product prove I am? Below, I'll analyze how to design products and marketing more effectively in this era when these external value perceptions are enhanced. I. Experience Value "What does the consumer feel at any point in the entire consumption loop?" We often see descriptions of consumer behavior like: Pursuing diversified entertainment and leisure experiences; emphasizing participation; needing ritual; These all refer to consumers paying more attention to the experience value of products or services. On this topic, you can refer to my previous article "You May Provide Good Service, But Don't Know How to Provide Good Experience", which explains how to increase the sense of experience value. If your product aims to save users time (like Bullet SMS or Ctrip), then experience value may not be a good core value, because consumers need speed, simplicity, directness, few steps, and low decision cost. If your product's core value is not efficiency-oriented, then you need to note that consumers' experience with products is not limited to the product itself. In the traditional era, the experience value of a product was basically equivalent to its use value. For example, for a refrigerator, the experience value is reflected in whether it has smart temperature control, whether it matches the home decoration style, how many different temperature zones it has, etc. If it's a bed, the experience value lies in whether it has odor, whether the robot vacuum can clean under the bed, how much storage space it has, and even whether it squeaks when you're having intimate moments. For today's consumers, the change is: Any point in the consumption loop can generate huge experience value, not necessarily limited to the usage stage. For example, in the furniture industry, traditional furniture makers compete on usage experience, mainly comfort, appearance, and style. But IKEA uses showroom scene design to make it easier for consumers to compare different combinations in actual sensory terms, and by having consumers assemble furniture themselves, it increases participation and the ritual of 'creating your ideal home'. We can see examples in various industries of increasing experience value by highlighting other parts of the consumption loop besides usage. For instance, traditional milk tea focuses only on taste and flavor. But Heytea socializes the purchasing process, making the queue experience not just a talking point but also adding ritual. II. Social Value If there's a universally accepted persona in this era, it's that we all want to be seen as positive, interesting, and somewhat deep in the eyes of friends. In other words, a combination of 'insider + fun'. A perfect example: on the first day of a botany class at Tsinghua University, the professor asked why students chose this subject. If this question were asked a decade ago, the best answer would be to explore the mysteries of nature or contribute to national natural science. But in this class, the professor's answer was to help you pick up girls better, and everyone accepted it happily. This is, of course, a joke, but we can observe that the public's values place more emphasis on social value. Imagine a boy and a girl walking on a beautiful university campus, suddenly picking up a leaf. He says it's a seven-ripe pine leaf, which can be brewed as tea to aid sleep, and he'll make it into tea leaves for her later (content is fictional, but the plot is roughly like this). At this moment, the boy displays his insider knowledge (of plants) and fun (turning waste into beneficial tea), making the girl find him charming. So rather than saying consumers 'pay attention to life details, vertical and segmented consumption', it's more accurate to say they focus on displaying their 'insider + fun' image through the products they use. (PS. The social value of products is not limited to displaying personal image; for more analysis, refer to my other article "If You Want to Imitate Durex's Digital Marketing, You Need to See This Formula First") For example, DJI drones are a very niche field in photography equipment, essentially personal aerial cameras, similar to GoPro's positioning. Many people buy DJI drones not because they frequently travel for aerial photography (maybe only two or three times a year). For them, the real value of the drone is that it allows consumers to show their insider knowledge (professional terms like gimbal, one-key return, jelly effect) and appear fun when traveling with others. This is social value. There are many similar examples in life, like bananas from Ecuador, cherries from Chile, Argentine red shrimp. Their taste may differ from other regions, but the premium over other varieties largely comes from the Moments post before eating. (Insider knowledge of fruits + fun of enjoying life) In summary, an important driver of consumption upgrading is that consumers are more willing to pay a premium for a product's social value to display their insider and fun image. III. Emotional Value Danish designer Poul Jensen said, "Good design can make lines smile." Emotional value is often overlooked in marketing and product design, but it's increasingly important in this era. In the past, the two most understood emotional values were family love and romantic love. The once-rural gift staple Brain Gold played the family card. Through advertising, it brainwashed rural parents into thinking it was the best nutritional gift their sons could give, and filial consumers had to follow their parents' wishes. I once saw a toilet advertisement that cleverly played the family card. This toilet was high-tech and high-priced, costing several thousand yuan. Its selling point was absolute silence, so no matter how many times parents went to the bathroom at night, it wouldn't affect our sleep. I even think the recent bike-sharing red envelopes and Alipay's scan-code red envelopes play the family card. The common feature is that both the user and the sharer get red envelopes. For us young people, doing 2-3 extra steps for a few cents is annoying. But many still do it because they need to scan their parents' red envelopes. Older parents especially like the feeling of getting a little money each time. When parents are happy, the emotional value of these scan-code products is realized. The emotional value of romantic love goes without saying. Diamonds, from a pure carbon molecule composition, became expensive luxury items because of the emotional value of love attached to them. But in recent years, a bigger emotional gap has emerged. Modern people need not only these two emotions but also to dispel loneliness. The most obvious phenomenon is the rise of danmaku (bullet comments) and live streaming. Think about it: when we're not alone (like watching a movie with your boyfriend/girlfriend), we basically don't send danmaku or watch live streams. Because both sending danmaku and watching live streams are ways for individuals to enhance their sense of participation in group behavior and seek attention to dispel loneliness. Consumption upgrading is because in the chaotic and explosive information flow, the cost of gaining attention is getting higher. Actually, think carefully: when watching live streams, we could just be bystanders. Why do many people prefer to give small gifts and want the streamer to interact with them? This is the extra cost they pay to dispel loneliness. So when our products target young people, the emotional value of dispelling loneliness will be particularly prominent. IV. Self-Cognition Value We often see descriptions of consumption upgrading like 'personalized consumption, pursuing small brands'. Many think this is about pursuing refinement, but a more accurate explanation is 'consumers re-understand themselves through the brand persona they pursue'. Someone once asked Luo Yonghao why he could be so passionate in every speech. Didn't he ever feel down? Luo's answer was that whenever he felt down before a speech, he would find an empty room and make the movements he would make when excited (like dancing and laughing heartily), and his mood would improve in a short time. This involves a theory in behavioral psychology. Generally, people think cognition affects emotion, which then determines behavior. But actually, our body can reverse this process: our behavior also affects cognition and emotion. For example, in my hometown, elders say wearing red clothes when going out makes you feel especially good and likely to have good luck. There was a psychology experiment where researchers placed donation information in two places: one next to the escalator exit (where trash cans usually are), and the other above the escalator exit (where customers could see it with a slight raise of their heads). The result was that the donation information placed above the exit received several times more donations than the one next to the exit. The reason is that when customers look at information next to the escalator, their eyes scan left and right, which subconsciously resembles shaking the head, leading to a default rejection cognition. Information above the exit makes customers look up, which resembles nodding, leading to a default approval cognition. Similarly, we use the brand persona we like to form self-cognition. For example, a football fan just starting to follow the sport finds he likes Liverpool, not knowing why, and then gradually discovers the team's character is resilient, passionate, and modest. Then he realizes he is such a person. Similarly, many boys don't know why they like a girl at first, but after getting along, they discover the girl's personality is cheerful and energetic, and then they know they like cheerful and energetic people. So back to the initial question, during consumption upgrading, consumers like small brands because often they can't find the persona they want in big brands. For example, many consumers can't find the cold and minimalist persona in clothing and home brands, and MUJI, when it first entered the mass market, just satisfied these consumers. In the process of buying and using small brands with unique personas, consumers gradually discover they are such people, and even develop new cognitions, like minimalism. Another example is Huadian Shijian (Flower Time), which brings consumers the greatest self-cognition value by reminding them through a weekly themed bouquet that the world is beautiful. In summary, in this round of consumption changes, consumers use niche brands with unique personas for self-cognition and constantly remind themselves of what kind of person they are (unique, not following the crowd, loving life, etc.). Adding these elements to brand personas and amplifying them through marketing increases the chance of winning consumers. Summary We have explained the changes in consumer behavior in this round from the framework of different dimensions of product external value. Whether 'consumption downgrading' or 'consumption upgrading', both are descriptions of phenomena. The fundamental change is due to changes in mainstream cultural values, consumers are less sensitive to the social status value of products. Instead, the perception of other dimensions has strengthened. Returning to the common descriptions of consumption changes online, we can roughly classify them as follows: Not valuing brands but quality, pursuing cost-effectiveness (social status value decline) Personalized consumption, pursuing small brands (self-cognition value rise) Pursuing diversified entertainment and leisure experiences (experience value rise) Paying attention to life details, vertical and segmented consumption (social value rise) Willing to pay a premium for better service, design, and quality (emotional value rise) When making products and marketing, we can focus on these four intangible value dimensions, which means grasping the root of this round of consumption changes. Source: Heyuanwai (ID: Yuanwai-HE) October 23-24, during the Autumn Sugar and Wine Fair, New Distribution will host the '2018 FMCG City Distribution Logistics Conference' . We will invite industry experts, FMCG warehousing and distribution specialists, and distributors who have transformed into unified warehousing and distribution platforms to discuss and answer questions about future trends in FMCG city distribution logistics and practical cases of distributor transformation to unified warehousing and distribution, under the theme 'New Distribution, New City Distribution'. We hope to bring you different inspiration and thinking! The specific agenda is as follows: List of Participating Companies In no particular order Hunan Zonglan Diandan Network Technology Co., Ltd. Jingbang (Wuhan) International Freight Forwarding Co., Ltd. Mengniu Dairy Qinghai Hanxiang E-commerce Co., Ltd. Unilever Services (Hefei) Co., Ltd. Shanghai Branch Huicong Hunan Xuan'ang Food Co., Ltd. Guangzhou Tongdaoren Information Technology Co., Ltd. Qingdao 888 Trading Co., Ltd. Uni-President Enterprises (China) Investment Co., Ltd. Hunan Province Zhongxiang Gongpei Logistics Co., Ltd. Shenglong Ingredients COSCO Shipping Logistics Warehousing and Distribution Co., Ltd. Guangxi Yongpai Liquor Industry Co., Ltd. Shangqiu Kangrong Trading Co., Ltd. Jinan Dingzhong Economic and Trade Co., Ltd. Liaoning Bimai Agricultural Technology Co., Ltd. Kunming Xiongjia Trading Co., Ltd. Shaanxi Houheng Trading Co., Ltd. Guangzhou Dingwo Enterprise Information Consulting Co., Ltd. Shaodong Jiajiale Trading Firm Boda Trading Industrial Bank Changsha Branch Wuhan Muchen Convenience Store Chain Co., Ltd. Fujian Fuxing Yuncang Logistics Co., Ltd. Guizhou Yilimi E-commerce Co., Ltd. Jiangxi Xiao Laoer E-commerce Co., Ltd. Jinshankoufu Shanxi Taihang Yuanjing Supply Chain Management Co., Ltd. Shanxi Dezhun Supply Chain Management Co., Ltd. Shaoyang Tongdeli Trading (Xiangbang Logistics) Huanfu Tongda Express City Distribution Beijing Xinjingxiang Food Co., Ltd. Wuhan Huizhong Tianhong Liquor Co., Ltd. Changsha Paide Biotechnology Co., Ltd. Chao'an Tuqiang Guizhou Yihe Bopin Supply Chain Management Co., Ltd. Jiangxi Kang'en Industrial Development Co., Ltd. Xiangtan County Yisuhe Town Yuhua Paper Store Luoyang Yuanlang Trading Co., Ltd. Tongchuan Yaozhou District Huayuan Supermarket Co., Ltd. Hunan Yongfu Jiujiu Trading Co., Ltd. Zhejiang Chengchengtong Logistics Co., Ltd. Chongqing Kaiguo Materials Trading Co., Ltd. Beijing Xianmaixianmai Data Technology Co., Ltd. Hanchuan Qixing Trading Co., Ltd. Tongxin Jiuzhiru Trading Co., Ltd. Guizhou Meiguo Guoguo Network Technology Co., Ltd. ...... Distributor Transformation Representatives (Tentative) In no particular order Jiangsu Huashang City Distribution Network Co., Ltd. Chairman, Rong Jun Hubei Yijiaren Logistics Co., Ltd. Chairman, Wang Bo Sichuan Chengdu Xingrenxing Trading Co., Ltd. General Manager, Jiang Shuming Shandong Yunbang Warehousing and Logistics Co., Ltd. Chairman, Liu Jichen Chongqing Lingyu Consumer Goods Supply Chain Management Co., Ltd. Chairman, Tu Mingyu Guangzhou Zhongshan Wanrong Marketing Co., Ltd. Chairman, Yang Su Sichuan Bajie Supply Chain Management Co., Ltd. Chairman, Yuan Xia Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd. Co-founder, Li Qiangyun Henan Xuchang Jiulegou E-commerce Co., Ltd. Chairman, Zhang Jianyong Hebei Changyi Logistics Co., Ltd. Founder, Ma Haichao Hebei (Chengde) Wulian Yun Warehouse Co., Ltd. General Manager, Meng Yucun Xinjiang Urumqi Su'an Jinchi Logistics Co., Ltd. Chairman, Zhang Xun Jilin Sanxing Lian'gou Chairman, Zhang Hailing Hebei Dunjie Supply Chain Management Co., Ltd. Founder, Qiang Huitao Hunan Damei Supply Chain Management Co., Ltd. General Manager, Liao Lei ...... -END-