New brands are collectively moving down-market. If the three years of the pandemic brought urban middle-class the uncertainty of layoffs and the insecurity of reduced income, it brought small-town youth a historic opportunity to quickly bridge the information gap. While white-collar workers in first- and second-tier cities are worrying about the widening gap between mortgage and car loans and their income, with less and less actual disposable income, young people in small towns are planning their next consumption upgrade. In an obscure county in southern Anhui, many people have already installed smart home devices throughout their houses; traditional shops selling counterfeit phones and screen protectors are now selling VR glasses, smart bracelets, and drones; and on the county's commercial street, besides the traditional four major brands—Champion, Yishion, Metersbonwe, and Kuaiyu—several independent women's clothing stores with a fresh and stylish vibe have opened. Even in the mom-and-pop shops on the street, several hit products that have appeared in Li Jiaqi's live streams are displayed, and their sales are surprisingly good. In the past two years, the geographical distribution of consumption was fragmented. Consumer goods in first- and second-tier cities were refined and trendy, while those in small towns belonged to the sugar and wine fair—white-label, factory-brand, and counterfeit. At the semi-annual sugar and wine fairs, it was even hard to see the new brands that investors have been追捧 in recent years. Because their main battlefields are Tmall, Douyin, CVS, and KKV, representing traffic, brand marketing, and order. The sugar and wine fair represents another discourse system: down-market, distributors, shipment volume, and the ways of the world. But now, a county that has long been a "small transparency" on the map is colliding with various new brands. Things that were once unimaginable are happening in more than 2,000 county-level units across the country. With changes in population, disposable income, channels, media, and spiritual needs, the brand choices of small-town people have also changed. New brands gradually moving down-market has become a trend that cannot be ignored. A shop in a small town in Nanning, Guangxi Population Changes: First-tier elites counter-urbanization Expansion of small-town civil servants Why is this happening? Simply put, there are five major reasons: changes in population, disposable income, channels, media, and spiritual needs. First, let's look at the most basic population changes. Within cities, large population inflows intensify competition, housing prices rise, prices rise, and the wealth gap widens. Everything is "involution," and young people's excessive anxiety leads to physical and mental exhaustion. In this context, more and more people are feeling the limitations and challenges of urban life, choosing to return to their hometowns or move to less populated small towns, starting a process of counter-urbanization. Similarly, to avoid "involution," many urban residents are also spilling over to villages and towns. The most typical example is the large group of small-town civil servants created by grassroots expansion. They usually have higher education backgrounds and broader horizons, which make them more inclined to pursue a refined life. They are an important force driving new consumer brands to small towns. These two groups have a relatively high acceptance of new consumer brands, paying more attention to the cultural connotation, personality, and tone behind the brand. Especially in home furnishing, culture, and entertainment, emerging brands targeting the new middle class and emphasizing health and personalization can better reflect the lifestyle they want compared to traditional brands. Beijing young people's subway commute Disposable Income Changes: No mortgage or car loan pressure, but more willing to consume Next, let's look at the most direct disposable income. In recent years, with the acceleration of urbanization, more and more people are flocking to big cities. However, while enjoying the prosperity and convenience of the city, people also face the problem of high living costs. Take housing as an example. Needless to say, Beijing, Shanghai, Guangzhou, and Shenzhen, but other new first-tier and second-tier cities like Hangzhou, Nanjing, Tianjin, and Suzhou also have prices of 20,000 to 30,000 yuan per square meter. The down payment empties the six pockets of the family, and the monthly payment for a million-yuan loan is a mountain for ordinary white-collar workers. Even though mortgage rates are being cut everywhere, and in some cities the first-home rate has fallen below 4%, compared to income, the per capita disposable income of urban residents in 2022 was 49,283 yuan, an increase of 3.9%, and after deducting the 2% CPI, the real increase was 1.9%, which can be said to be almost no growth. With changes in family size and structure, the burden on Chinese families is also increasing. Children's education and elderly support have become important sources of financial pressure for many families. For example, in education, a good kindergarten in the city can charge close to the annual income of an ordinary family; and when entering compulsory education, various extracurricular interest classes have a greater impact on family spending. This year's new medical insurance reform also brings uncertainty to future medical costs. The financial expenditure of urban families is gradually shifting to a passive type, needing to solve not only the daily expenses of the whole family but also more and more financial risks such as buying a house, children's education, and elderly care. In contrast, small-town youth have a more comfortable living environment. Whether they build their own houses or receive land compensation, they don't have high mortgage payments. Although their income is lower, they don't have to bear the various costs passed on by merchants in daily consumption, so their monthly disposable income is higher. Small-town youth who don't bear the various urban pressures can enjoy a more relaxed economic environment, are more likely to accumulate assets, and are willing to pursue a higher quality of life. Many new consumer brands are gradually discovering the gap between expected consumers and actual consumers. Many brands initially targeted first- and second-tier urban white-collar workers, Gen Z, fitness enthusiasts, and vegetarians. But after operating for a while, they found that the proportion of small-town youth is not low, and even one brand has more than half of its consumers from small towns. The slow-paced life in a fourth-tier city in Heilongjiang Channel Changes: From WeChat business to community group buying Breaking traditional radius to multi-platform A few years ago, due to the lack of sufficient sales channels and consumer demand, small towns became a good soil for the development of WeChat business. This semi-social economic form was very popular in small towns and was also a side job choice for many young people. However, with the rise of Pinduoduo and various group-buying platforms, WeChat business gradually lost its era dividend. According to Q3 2022 data, the number of users using WeChat and other social tools for WeChat business side jobs decreased by 7.3% year-on-year. Shopping platforms represented by Pinduoduo, with features like group buying, sharing, and bargaining, did not deviate from the past friend-social model of WeChat business, but through platform technology and big data, they quickly surpassed the ceiling of traditional WeChat business. Large-scale social marketing and low-price product promotion strategies have become the gathering place for explosive products under 1,000 yuan in China, quickly capturing the psychology of mass consumers. Consumers have also begun to transform from pure shoppers to shopping experts who share products, recommend friends, and earn cashback, which to some extent strengthens social stickiness more than WeChat business. In addition to Pinduoduo, various group-buying platforms are also an advanced form of WeChat business. The process of group leaders purchasing and picking up goods is the same as WeChat business, but a major feature of group buying is face-to-face communication. When consumers want to consult with an individual about shopping information, they can easily find the group leader or the brand for one-on-one inquiries. Traditional WeChat business, on the other hand, has layers of uplines, making it difficult to communicate quickly, so group buying is extremely competitive in this regard. Furthermore, quality issues are common in WeChat business products. Various platforms are increasingly accepted by consumers due to their strict regulations and consumer protection, completing an upgrade from consumption experience to social interaction in all aspects. In the past, logistics in small towns was underdeveloped, and consumers in small towns had a self-defined "shopping radius"—village, town, county, city, provincial capital, etc. With the significant improvement in logistics technology and efficiency in recent years, small-town consumers increasingly don't need to worry about the source and distance of goods. They have more choices in purchasing methods, time selection, payment methods, and transportation. In addition, the enhancement of logistics equipment performance and cost reduction have also promoted this development. Cold chain logistics took about five years to reduce the average cost per kilometer by 27%, and combined with the improvement of the regional distribution system represented by sales-warehouse, it meets people's growing demand for quality assurance. Pinduoduo going deep into the down-market. Source: Phoenix Net Media Changes: Personal opinions are amplified Live streaming bridges the information gap Let's talk about cognition. We have completed the media form innovation from print media to radio and television to new media in just ten years. In the current new media, content platforms like WeChat Official Accounts and Xiaohongshu, short video platforms like Douyin and Kuaishou, and social platforms like Weibo and WeChat constitute a network-based public space for national participation. New media platforms have violently destroyed the original information distribution pattern, allowing information to be quickly transmitted and shared. Various topics and viewpoints can be discussed and debated. People can freely choose information sources and establish unique cognitive systems. In traditional society, as the gap in consumption ability widened, the advantaged class had better resources and opportunities, occupying an absolute advantage in social discourse. But the openness of new media platforms gives individuals greater equal space and voice in expressing their views. Personal views and voices are amplified, allowing them to some extent to stand on equal footing with more advantaged groups. The formation of these cognitive systems and their mutual collision also level the cognitive gap between different classes in traditional society. As an important representation of mass culture, they permeate and change the way people think. Due to reasons such as price, product, specification, and purchase timeliness, the difference between urban and rural markets in traditional offline retail is very obvious. In the new discourse pattern, live streaming e-commerce has completely broken the old sales model between urban and rural markets. Undifferentiated efficient and convenient promotion can connect a buyer to retail terminals across the country, achieving multilateral communication and timely feedback. At the same time, through the live room, consumers and anchors establish resonance and virtual trust relationships, providing undifferentiated education to consumers. This form is easily accepted by consumers, thereby enhancing the consistency of consumption cognition, astonishingly leveling the cognitive differences between urban and rural consumption, and promoting the consumption upgrade of the township market. Live streaming e-commerce on the Kuaishou platform. Source: woshipm Spiritual Changes: Live streaming and gaming bring Economic control and social identity Finally, let's talk about changes in spiritual needs. With the rapid development of productivity, people's life factors are very complex. Coupled with the selling of anxiety by various parties in society, the positive public opinion guidance sometimes fails, and pressure and anxiety are always present. Many people choose the virtual world to fill their spiritual emptiness. Live streaming and gaming are natural ways to relieve stress. Live streaming can meet people's needs for relative authenticity and interactivity. The development of electronic games in the past decade has reached a new peak. In games, players can temporarily forget the pressure and constraints of the fragmented reality. This is more evident in the lives of small-town youth. Limited by infrastructure investment, daily entertainment options in small towns are usually very limited. The massive content output of online media cannot be supported based on LBS, and the entertainment methods of small-town youth are still fixed in fields such as movies, KTV, massage, and even bad behaviors like gambling. But they have a strong interest in innovative forms of entertainment. However, the current market supply in small towns is mostly limited, making it difficult to meet the personalized needs of various consumers. In contrast, the freedom, transparency, and internet-based characteristics of live streaming and electronic games allow small-town youth to gain economic control and social identity. From a psychological perspective, the premise of people's consumption behavior is to seek a self-realizing ideology or life philosophy. Therefore, it can be considered that paying in live streaming or games is a way for people to seek better self-experience in family, social relationships, and personal achievement, or even to find some signal source for their personal spiritual world. The colorful world of electronic games. Source: Wenhui Bao Commentary: With the development of small-town economies and the promotion of urban-rural integration, the demand of small-town youth for new consumer brands and innovative entertainment activities is increasing. New consumption is a very fascinating field. If it can further penetrate into the lives of small-town residents, this new field will bring more business opportunities, expand the scale of the small-town economy, promote the sharing and exchange of resources, and achieve an internal cycle between demand and supply, generating huge consumption power. In addition, the down-market of new consumption will further guide small-town residents, making it easier for them to understand new things, new culture, and new entertainment, cultivate their confidence in the future, and form good social benefits. PS: Friends interested in the on-site speech content can follow the recent push of the "New Distribution" WeChat official account. We will organize and publish all guests' speeches for readers. Click "Read the original text" to see more highlights of the 8th China FMCG Innovation Conference...