---
title: "New Distribution Zhao Bo: Only by Starting from Scenarios Can We See Today's Consumption Increment"
description: "People prefer saving over spending. Recent reports show that in the first half of 2024, Chinese residents' savings increased by 11.46 trillion yuan, with household savings up 9.27 trillion. The McKinsey 2024 China Consumer Survey highlights that predictable high-certainty expenditures suppress consumption. Three trends emerge: consumer confidence divergence, category spending divergence, and the need to focus on psychological needs in a saturated market."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-12-05"
language: "en"
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---

# New Distribution Zhao Bo: Only by Starting from Scenarios Can We See Today's Consumption Increment

> People prefer saving over spending. Recent reports show that in the first half of 2024, Chinese residents' savings increased by 11.46 trillion yuan, with household savings up 9.27 trillion. The McKinsey 2024 China Consumer Survey highlights that predictable high-certainty expenditures suppress consumption. Three trends emerge: consumer confidence divergence, category spending divergence, and the need to focus on psychological needs in a saturated market.

**People prefer saving over spending**

Recently, I read two reports. One is the "2024 First Half Financial Statistics Report" released by the People's Bank of China, which mentioned that in the first half of 2024, Chinese residents' savings increased by **11.46 trillion yuan**, of which household savings increased by **9.27 trillion yuan**. The second report is the "McKinsey 2024 China Consumer Trend Survey Report", which highlights the first trend: **predictable high-certainty expenditures suppress people's consumption**. From these two reports, I have identified three trends:

**First trend:** They conducted a social survey, and about 76% of people are optimistic about China's economic development, but only 67% are optimistic about their own future development. This is a simple conclusion: **most people believe China's future is bright, but whether I will be fine is uncertain**. The report also mentioned an abstract phrase: "predictable high-certainty continuous expenditures are the core reason suppressing people's consumption." These expenditures refer to mortgage, car loans, children's education fees, parental support, and unemployment anxiety... When the economic environment fluctuates, the money people spend is visible, but the money they earn becomes uncertain, making people anxious. In fact, many people's incomes haven't changed. People are more influenced by external news, leading to pessimistic consumption sentiment. In summary, the reason for low consumption can be summed up in one sentence: **uncertainty about the future environment and predictable high-certainty expenditures are the main reasons people keep saving rather than spending**.

**Second trend: "continued divergence in consumer confidence"**

This report divides Chinese consumers into five profiles. There are too many details to elaborate, but in summary:

> **First, urban Gen Z**: spend without hesitation; **Second, affluent silver-haired in first-tier cities**: have ample savings, spend compensatorily; **Third, affluent silver-haired in third-tier cities**: have pensions, but only spend on children and save for retirement; **Fourth, new middle class in first- and second-tier cities**: have seen the world, spend rationally; **Fifth, rural middle-aged and elderly**: spend only if children give money, otherwise don't spend.

Although these profiles cannot fully capture China's complex market, they offer some reference for understanding consumption confidence divergence.

**Third trend: divergence in spending intentions across categories, with both downgrading and upgrading prevalent**

* Some industries see consumption downgrading, but the overall market is growing; some see upgrading, but purchase frequency decreases.
* Consumer confidence across the market continues to diverge; it's not a unified picture: some spend without hesitation, others "remove desires and keep needs."

When consumer expectations are pessimistic, and demands across demographics and categories become increasingly fragmented, individual consumer needs disappear. **Whether in first-tier or lower-tier cities, young or old, consumers will become more divergent in their spending given limited purchasing power**.

**Despite economic downturn, food and beverage still has a very low Engel coefficient in China**

The Engel coefficient is the proportion of food expenditure to total personal consumption expenditure. This indicator is often used to measure the standard of living in a country or region. **Generally, a higher Engel coefficient indicates poverty, while a lower one indicates wealth**. Internationally, it is generally accepted that:

> Engel coefficient above 60% is poverty; 50%-60% is subsistence; 40%-50% is moderately well-off; 30%-40% is relatively affluent; 20%-30% is wealthy; below 20% is extremely wealthy.

In recent years, China's Engel coefficient has shown a continuous decline:

> 2012: 33.0%; 2017: first dropped below 30% to 29.39%; 2018: further declined to 28.4%; 2021: 29.8%.

From 1978 to 2018, over 40 years, China's Engel coefficient fell by nearly half. This indicates that **the living standards of Chinese residents have been continuously improving, and the consumption structure has been optimizing**. Although the overall trend is downward, there is still a gap between urban and rural areas:

> In 2021, the Engel coefficient for urban residents was 28.6%; for rural residents, it was 32.7%.

From the above data, we can conclude that **Chinese residents' disposable income has been continuously increasing over the past 40 years**. I once conducted a survey: over 40 years of reform and opening up, China's economy has grown at a compound rate of 9%, and income has risen from $311 in 1984 to $12,741 in 2023. Compared with the global economy, Chinese residents' living standards are between relatively affluent and wealthy. In recent years, China's consumption structure has also seen significant upgrades: **the proportion of non-food consumption expenditure has risen**, such as education, medical care, and tourism, while the share of food and beverages has continuously declined. There has also been a major shift in consumption concepts: **people have moved from focusing on subsistence to pursuing quality of life**. Additionally, the development of China's market economy has kept food prices relatively stable.

**Today, we have entered an era of consumption saturation**

Recently, I read Toshifumi Suzuki's "The Philosophy of Retail." In the book, he mentions the concept of consumption saturation. Suzuki believes that today we have entered an era of product surplus and consumption saturation. The main characteristics include:

**1. The market is full of a dazzling array of products.**
**2. Consumer needs are basically satisfied.**
**3. Traditional price competition strategies are losing effectiveness.**

Consumer behavior in a saturated consumption era:

**1. Quality first**: Consumers no longer focus solely on price but pay more attention to product quality.
**2. Value orientation**: Compared to price, whether a product has new value becomes the key factor in purchase decisions.
**3. Unification trend**: Despite product diversity, consumer preferences are becoming more unified.

Take the recent Swiss roll incident as an example: Today, no one lacks a Swiss roll, but what caused all men to "shiver" and quietly order a Swiss roll from Sam's Club or Hema? On the surface, the "Swiss roll incident" is about gender opposition, but it actually hides a business secret: **emotion creates consumption increment**.

When consumers are no longer hungry, their reason for shopping is not to fill their stomachs but to eat well and meaningfully. Therefore, Suzuki believes that 7-Eleven's rice balls should not be as cheap as possible but as delicious as possible. From a business perspective, **7-Eleven is no longer selling products but selling "things"**. What does that mean? Simply put, it means making 7-Eleven a destination for customers' daily lives. But today, all retailers are desperately competing on low prices, never thinking that low prices only compete for existing market share with competitors, but cannot stimulate consumers' desire to buy or create increment. Whether the Swiss roll incident is a staged photo op to create gender opposition, its inspiration is: **consumers' reason for buying today is no longer to fill their stomachs**.

**In an era of pessimistic future expectations, stagnant income, and consumption saturation, how do consumers spend?**

In his new book "The Theory of Lonely Consumption" published in November this year, Miura Atsushi mentions a viewpoint: In the past 20-plus years, even without income growth, we have learned how to live happily and meaningfully. Unlike the consumption patterns of the bubble economy era, "**consumption detached from consumption**" has gradually become widespread. This form of consumption has two characteristics that are notably similar to current Chinese consumption habits:

**First, people tend to buy affordable goods.** This does not mean consumers choose low-quality cheap products, but rather they seek items that offer value for money and bring happiness and satisfaction. For example, in 100-yen shops, you can find designed, cute, and creative items.

**Second, related to the first, people start buying second-hand goods.** That is, consumers shop at various second-hand specialty stores, online auction platforms, online flea markets, and physical flea markets.

Image: Tianjin Jinbaibai Discount Supermarket

This logic aligns with the earlier Engel coefficient data: when income reaches the affluent class, consumers focus on price not because they lack money, but because they are pessimistic about the future, so they tend to focus on cost-performance, i.e., high quality and affordable goods. **So products need to be not just cheap, but good and cheap**.

**In times of material abundance, consumption saturation, and economic downturn, brand owners must pay more attention to customers' psychological needs**

In addressing consumption saturation, Suzuki believes: "**When customers' physiological needs are met, we should pay more attention to their psychological needs.**" We should understand consumers from a psychological perspective, not just an economic one. **Merchants must change their previous promotion methods of discounts and cheapness, and pay more attention to users' psychology and what the actual purchase factors are.**

In the book, Suzuki gives an example: 7-Eleven sold radishes at 200 yen each, but sales were not good. Later, they cut the radishes in half and sold them at 120 yen per half. Even though a whole radish at 200 yen was a better deal, the half radish at 120 yen sold better. Japan is an aging, low-fertility country, and household sizes have been shrinking. That is, single-person or two-person households are common. In such cases, buying a whole radish might lead to waste. Based on this consumption demand forecast, 7-Eleven adjusted its marketing strategy. They believed that today's consumers should buy according to need, buying the right portion rather than seemingly cheaper items. Hence, they offered half radishes at 120 yen.

Suzuki particularly emphasizes the balance between price and value. He has a new business development idea: finding the gap between quality and convenience. He believes that **quality and convenience are not completely contradictory; if these two conditions are perfectly balanced, you can enter any market**. For example, 7-Eleven developed its own coffee, called Seven Coffee. Suzuki noticed that people in office areas had to walk far to Starbucks, which was too time-consuming. If they went to a convenience store, they could only get low-quality instant coffee. There was a so-called blank zone in between.

**Psychological needs occur in customers' consumption scenarios**

Having discussed consumption saturation at length, I want to express: consumers' life needs have been fully satisfied; cheapness and quality can no longer stimulate purchase desire. **The era of material civilization has ended, and spiritual civilization is just beginning. The yearning for a better life is the most basic psychological need of every person.**

Media fragmentation causes consumers' attention to be influenced by massive information, major events, KOLs, and algorithms. This leads to significant divergence in consumption preferences across different demographics and income groups. Moreover, shopping is very convenient today; consumers no longer need to buy products in specific channels. Bei from Heyin Network proposed "heartbeat and get," which is the greatest manifestation of today's consumption convenience. However, consumption needs are too diverse, and purchasing is too convenient; no single retail store can meet all of a consumer's needs, and consumer needs no longer accumulate due to lack of satisfaction.

**Today's consumers have become very mature. We can understand this maturity as a mature consumption concept: smart consumption, emotional consumption, value-based consumption, and scenario-specific consumption.**

Therefore, we must uncover new pain points, create new categories, and find unmet consumer needs. For example, when dining with clients, you want to drink good wine; with friends, you want something different; with a girlfriend, you want what she likes; with family, you want healthy wine. These needs are essentially different scenarios. The problem is that no company can reach such finely segmented consumption scenarios with all its products.

In the traffic era, all strategic goals were about reach; enterprise marketing was about aggregating customer needs and delivering them centrally. In the past, this aggregation was based on stores, but today, in a saturated market, putting products in front of consumers is useless because they are full. To get them to eat again, you must stimulate their desire to buy. This desire arises from consumption scenarios.

We can summarize that consumption scenario divergence is due to: **abundant supply * convenient purchase * mature consumption concepts**. So, the traffic era is over; the first element of strategy has returned from traffic to the product itself. And products should be re-understood as "solutions" in consumers' consumption scenarios.

**How to understand needs within scenarios**

What is a scenario? We can understand it as **a series of behaviors that consumers engage in at a specific time and place, based on their roles and jobs to be done (JTBD)**. This is a bit abstract, so from a consumer goods perspective, we can break scenarios into three sub-scenarios: **consumption, transaction, and communication**.

**Consumption scenarios include: time-space, roles, relationships, and jobs to be done (JTBD)**

**Time-space**: time, place
**Roles**: person, persona, purpose
**Relationships**: relationships between roles
**Jobs to be done**: motivation, needs, pain points

**Transaction scenarios include: motivation, needs, behaviors**

**Motivation**: physiological needs, impulsive emotions, values, learning and growth, social belonging
**Needs**: fast, good, many, cheap
**Behaviors**: buy, browse, stock up, follow

**Communication scenarios include: attention, interest, reminder, memory, participation**

**Attention**: content, information, signals
**Interest**: triggers, persuasion (pain, itch, pleasure), convincing
**Reminder**: search, transaction, purchase reasons
**Memory**: differentiation, proof
**Participation**: interaction, co-creation

It's important to note that changes in any variable within a scenario can create new needs. Take transaction scenarios: the same person has different needs at different times. Elderly people shopping at supermarkets focus on freshness in the morning and discounts in the evening. Young people visiting convenience stores have different needs in the morning, noon, afternoon, and night. This requires us to focus on a topic: **channels (transaction scenarios) must be coupled with consumption scenarios**.

**Retail differentiation is essentially about matching consumers' needs for more, faster, better, cheaper with the behaviors of buying, browsing, following, and stocking up**

Let's describe a scenario: At 7:30 PM, a mother is walking her child downstairs after dinner. She sees a snack store along the street and takes her child in for a look. You might think this mother cares about price, but that's just a consumption need; focusing only on that indicator is insufficient. From a consumption behavior perspective, she doesn't have a clear purpose to buy snacks; it's just that there happens to be a snack store downstairs, the store is brightly lit, and there are many snacks. Coincidentally, both she and her child have snack needs, so she browses and buys some on the way. You see, in her purchase motivation ranking, the behavior of browsing comes before the need for cheapness.

If we categorize transaction scenarios using a quadrant, you'll find that **retail differentiation is an inevitable trend**. More importantly, **different behaviors and needs give rise to different retail models**. Of course, this is partly related to the inaction of large supermarkets, which has left room for community commerce. But the underlying logic of category killers is: targeting a specific group, providing narrow categories with deep SKU solutions. Snacks are for families with children who have snack needs and buy on the way while walking downstairs. The underlying logic is that if the category isn't broad enough, you must increase average transaction value by deepening the category.

Community discount supermarkets target the elderly: they have time but not much money, need social interaction, walk downstairs, and buy cheap and good ingredients. These are all browsing logics, but there are also buying, following, stocking up, and demands for more, faster, better, cheaper. There are also physiological, physical, emotional, social, and advisory needs. You can segment a community population in various ways: by age, gender, occupation, income, preference, habit, behavior... Imagine community commerce: fresh food convenience stores, tobacco and alcohol shops, convenience warehouses, affordable fresh produce, stationery stores, community group buying, snack stores, cake shops, and milk tea shops.

**In conclusion**

What is a scenario? I think Liang Jiangjun described it accurately in his article: "**A scenario is to see customers' psychological needs, not life needs, through the things they pursue and the experiences they hope to have.**" We should see the things customers pursue through "objects," predict their behavior, and create experiences they hope to have. Then, selling goods will come naturally. If our sales logic shifts from selling "objects" to selling "things," we should focus not on customers' life needs but on their psychological needs.

Why start from scenarios? **Because only from scenarios can we see today's consumption increment.**


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