In 2018, China's consumer market entered a new era of transformation. Chinese consumer confidence remains high, while discussions on consumption stratification are widespread. The halo of 'shopping with reason, proud to be broke' is fading, and rational, diversified, and personalized consumption characteristics are increasingly prominent. The consumption pattern dominated by big brands is being broken, with brands and products undergoing rapid iteration of 'upgrades and renewals'. New retail has entered the fast lane of comprehensive development, with leading players showing their prowess. Traditional commerce faces invasion by new species with innovative ready-to-drink offerings. Digital empowerment of offline retail stores is maturing. Offline retail, following the trend, is experiencing both the pain and the carnival of reform. Change is always accompanied by pain, but also heralds opportunities. How to accurately understand the reconstruction of the relationship between people, goods, and places amidst uncertainty? How to deeply grasp consumption trends in an era of change? How to drive iterative improvements in marketing effectiveness? Currently, China's FMCG market remains vibrant, with omnichannel sales growth exceeding 14%, but the driving forces are more complex. Product innovation, consumption upgrading, physical store growth, and e-commerce development together constitute the main drivers of the current FMCG market. Among them, in product innovation, new products contribute 41% to overall FMCG growth, and the efficiency of new products has decreased to 50% in category share; consumption upgrading contributes to 84% of growth categories, while categories with weakened drivers account for 70%; the overall store growth rate for physical stores is 10%, with a store opening/closing change rate exceeding 43%; in e-commerce development, online FMCG sales growth exceeds 32%, and the monthly user growth rate of non-comprehensive e-commerce platforms exceeds 194% compared to comprehensive e-commerce. People Trend 1: In the era of universal consumption, life is worth living. In the current Chinese consumer market, whether it's young women, children, young wives, the elderly, men, or even pets, all are consumption targets, just with different proportions. Therefore, manufacturers should understand: in consumers' minds, it's not that I don't buy, it's just that you don't understand. Trend 2: In the era of rational consumption, only buy what is suitable, not the most expensive. According to data from the National Bureau of Statistics, in 2017, the national per capita consumption expenditure was 18,322 yuan, with food, tobacco, and alcohol having the highest proportion, reaching 31.2%. Chinese consumers are gradually saving on traditional consumption expenditures and shifting towards spending on security and enjoyment projects. At the same time, the mainstream consumers today have shifted to shopping behavior that values substance over face, with over 48% of consumers' purchase behavior driven by cost-effectiveness. 39% of consumers are willing to buy products of better quality but at relatively higher prices, and 9% are willing to spend more on products that reflect their identity and status. It is worth noting that minimalist products represented by plain-bottle liquor have grown significantly, and from the third quarter of 2017 to the third quarter of this year, the market share of small manufacturers has increased from 26.6% to 27.1%, indicating that the brand halo of big brands is gradually weakening. When purchasing products, consumers no longer blindly chase discounts and promotions but choose products and brands that suit their own needs. In the era of rational consumption, consumers are more enthusiastic about 'comparing prices before buying'. In 2018, among cross-channel purchasing consumers, modern channels + e-commerce accounted for 84%, modern + traditional channels 65%, e-commerce + traditional channels and modern + traditional + e-commerce both 60%. 24% of consumers compare prices across multiple channels and choose the cheaper one; 45% of consumers join Tmall 88 paid membership, with 31% joining because of member-exclusive prices; additionally, 65% of consumers are willing to join group buying because of lower prices, with the growth rate of group buying users exceeding 57%. Trend 3: Interests and acquaintances reconstruct social connections. It is worth noting that interests and acquaintances reconstructing social connections form new consumption growth points. 66% of consumers purchase products recommended by friends and colleagues, and 56% consider recommendations from interest groups as important references. Among comprehensive e-commerce, social e-commerce, flash sale e-commerce, second-hand stores, and cross-border e-commerce, the year-on-year growth rates reached 21.8%, 439.2%, 8.1%, 46.4%, and 38.5%, respectively. It can be seen that the explosive growth of social e-commerce has become the fastest-growing channel. Therefore, manufacturers and retailers should adjust their sales models to adapt to this major trend. Goods Trend 4: What is purchased is the product, but what is experienced is warmth. On one hand, in the current mainstream consumer groups, the FMCG market is flooded with countless products. For example, there are over 10,000 face cream products alone, and consumers need to be understood. Therefore, many manufacturers are no longer just talking about the product but are racking their brains to use cool copywriting to evoke emotional resonance and drive purchase behavior. For example, for child consumers, although parents pay, children's emotional needs also influence parents' purchasing decisions. When biscuits leverage popular IPs like Peppa Pig or candies leverage Paw Patrol, children's emotional needs prompt parents to pay. In this process, value often goes beyond simple factors like nutrition and health. Therefore, when targeting consumers' limited purchasing behavior, manufacturers should focus more on conveying warmth. Big brands are no longer 'hardcore'; upgrades and renewals drive category growth. As can be seen from the chart above, whether in home care, personal care, beverages, or candy snacks, the market share of leading brands is being diluted, and the number of SKUs in all categories is continuously rising. Trend 5: Attractive and substantive, we are different. We are in an era that values appearance. According to Nielsen's neuroscience data, rational consumers' purchase behavior is actually formed in the subconscious of the brain. 64% of consumers try new products because of packaging, and the return on investment for packaging is higher than that of advertising. Transparent packaging facilitates product preview, secondary packaging enhances brand resonance, and the brain prefers soft curves, so packaging should avoid sharp lines, while products with strong color contrast often stand out. Functionality has also become an important factor in consumer purchases. Therefore, manufacturers need to understand consumers, know their pain points, and proactively cater to their functional demands. Additionally, as of June this year, the overall sales growth rate of food and beverages exceeded 9.8%, but contemporary consumers have a strong 'survival desire'. 82% of Chinese consumers are willing to spend more on healthy food and beverage products, far higher than the global average of 68%. The sales growth rates of major health categories such as fruit tea, packaged water, yogurt, and sports drinks reached 36%, 14%, 13%, and 12%, respectively, while concentrated juice declined by 4%, and instant coffee and chewing gum also declined by 2%. Trend 6: Product innovation moves forward in small steps, with rapid life cycle iteration. In the current market, the product life cycle in FMCG categories exhibits characteristics of short, frequent, and fast. Over 70% of new products survive in the market for less than 18 months, making innovation one of the core tasks for manufacturers. Innovation models are divided into manufacturer-led innovation and consumer-centric innovation. FMCG companies face four major innovation challenges: rapidly changing consumer demands (67%), difficulty in creating strategic products with sufficient market potential (54%), high costs but low ROI (44%), and faster time-to-market (33%). In the current FMCG industry, 18,000 new products are launched annually. Although new products account for only 2.7% of sales share, they contribute as much as 41% to category growth. Therefore, for manufacturers, upgrading and renewing remains a driving force, but the success of new products depends mainly on four factors: appearance, functionality, health, and occasion. What manufacturers can do is to carefully craft every product. Place Currently, China's FMCG market is recovering overall, with further diversification of channels. Physical stores remain the main retail channel, with sales growth returning to double digits, but online channel growth reached 34%, online+offline channel growth was 14%, and offline channel growth, although the slowest, still reached 8%. Trend 7: Intensified small-format upgrades, faster store turnover. Growth is accompanied by intensified channel turnover, which further increased in 2018. Henan and Jiangxi provinces have seen intensified channel turnover for two consecutive years, while Heilongjiang and Guangdong have the largest channel changes this year, leading the country in channel upgrades. Hypermarkets: The vigorous development of fresh and premium supermarkets injects new vitality into this channel. Hypermarkets at all city levels are still growing, with fresh and premium supermarkets being the most important drivers. Among all new hypermarkets, lifestyle supermarkets account for 16.6%, fresh supermarkets 4.5%, global direct sales centers 2.5%, and premium supermarkets 1.6%. Fresh and premium supermarkets account for 30% of the total output value of new hypermarkets in upper-tier cities, and the total number of premium supermarkets reached 364, an increase of over 26% compared to 2017. Small-format channels: Growth has further accelerated, but progress varies by region. In upper-tier cities, small-format development is led by Guangzhou, Chengdu, Zhengzhou, Hangzhou, and Shenyang; in lower-tier cities, represented by counties and prefecture-level cities in Jiangsu, Shandong, Hebei, and Hunan, a strong small-format trend is evident. Trend 8: Integrated formats drive upgrades to meet new consumer demands. The biggest demand for new format innovation is to achieve traffic redistribution between online and offline shoppers, and maximizing the guidance of online traffic to physical stores will become a new competitive point. Among them, traditional formats have clear positioning and each does its own thing. Traditional retail formats complement each other, with each format meeting different consumer needs through differences in category and operating hours. Each mature store has its stable target consumer group and relatively stable customer flow, with distance being a good moat. New format monsters, however, redistribute traffic. In areas where the number of consumers and demand changes are not significant, the emergence of integrated new formats, with their radiation radius and traffic interception capabilities, will redistribute offline consumer traffic. By comparison, it can be seen that mature stores with integrated new formats have a wider source of customers. At the same time, traditional retail small stores are also continuously expanding their consumer reach: 8% of surveyed small store owners have tried cooperating with online sales, food delivery, and social platforms to strengthen their bond with fixed surrounding consumer groups. The daily transaction volume generated through third-party platforms such as social platforms, food delivery platforms, and e-commerce delivery accounts for 13% of the total daily transaction volume. Currently, there are over 2.3 million traditional retail small stores in China, which will be an important engine for future growth. On the other hand, product innovation intensifies competition for in-store resources, and optimizing product mix and space layout will become the top priority for retail operations in 2019. This challenge is more pronounced in lower-tier cities, where hypermarkets have 7.5% fewer SKUs than upper-tier cities, and small-format channels like convenience stores have 29% fewer SKUs per store. The core of new competition is to grasp the essence of driving channel upgrades, which is the continuous change and iteration of consumer demands. Retail stores need to bring higher-quality products and better in-store experiences. Trend 9: Millions of mom-and-pop stores embrace digital transformation. Millions of small stores are about to become key to winning consumers, and winning the favor of small-format store owners is no longer limited to timely delivery. Digital B2B service platforms have sprung up like mushrooms, with over 50 nationally significant ones, and will surely usher in new competition in 2019. In the current traditional channel small stores, every store owner has a rich choice of purchasing platforms, and 22% of store owners choose to purchase on B2B platforms, with an average of more than 1.5 eB2B apps installed per store. Of course, the acceptance and evolution speed of channel reform vary by region. The East region has the highest richness, while small stores in the North are testing new purchasing channels but still rely mainly on traditional channels. The West is currently the most traditional region but also presents the biggest opportunity for change. Trend 10: Data becomes the core of reconstruction and connection of people, goods, and places. Retail in 2019 will revolve around the upgrade of different shopping scenarios for consumers, and making data the core of reconstruction and connection of people, goods, and places will surely become a new winning force. New scenarios, new content, new products, new channels, new media, and new models boost the maximization of data value. For people, only by continuously enriching crowd tags and integrating real-time geographic data can precise crowd positioning be achieved; For goods, only by optimizing product distribution and sell-through, combined with in-store space layout and consumption scenarios, can the potential of product space combination be optimized; For places, only by comprehensively covering geographic areas, breaking through spatial and temporal barriers of different channels, and optimizing multi-channel scenario layouts can better returns be achieved. Today's consumers have higher control and freedom, and maximizing their personalized needs is the most critical stage in the next 3-5 years. Therefore, manufacturers must seize this opportunity. Attached long image: Source: Nielsen -END-