The Great Consumer Shuffle

Data from the Beijing Statistics Bureau shows that in the first half of 2024, the total profit of Beijing's catering industry above designated size (i.e., annual revenue of over 10 million yuan) was 180 million yuan, a year-on-year decrease of 88.8%, with a profit margin as low as 0.37%. Related news that went viral was that Din Tai Fung, a 'Michelin-level' dumpling restaurant, announced it would close 14 stores in Beijing, Tianjin, Xi'an, and other places by the end of October this year. In fact, high-end dining is just the tip of the iceberg. Due to increasing downward pressure on the economy, insufficient effective demand, weakening market expectations, cautious consumer spending, and sluggish market prices, the entire consumer market is undergoing an unprecedented reshuffle. High-tier cities, above-scale enterprises, high-end markets, and major categories of consumption are rapidly declining. Related enterprises are struggling on the edge of thin profits or losses, either closing stores, laying off employees, transforming, or competing fiercely. At the same time, amid the waves of change, some markets are growing against the trend. This article analyzes the super-cyclical risks and structural opportunities in China's current and future economy from a consumption perspective. Logic of this article

1. Five Major Divergences 2. Five Major Trends

3. Five Major Opportunities Five Major Divergences The End of the Era of Major Category Consumption In my 'July Macroeconomic Analysis', I analyzed social retail data, which contains a wealth of information. In July, the total retail sales of consumer goods reached 3,775.7 billion yuan, a year-on-year increase of 2.7%, with the growth rate rising by 0.7 percentage points compared to June. However, in June, retail sales exceeded 4 trillion yuan. From March to July this year, the average growth rate of social retail was 2.7%, at a relatively low level. Looking at a longer time frame, the growth rate of social retail has been continuously declining over the past decade. China's economy maintained high growth of over 8% for more than 30 years. Logically, residents' consumption welfare should be very good. Why is consumption sluggish? Consumption is a function of household wealth and marginal propensity to consume. Fundamentally, it is determined by one data point: the proportion of household disposable income to GDP. This indicator reflects how much of the wealth generated by GDP growth falls into the household sector. Our figure is about 43%, while the international average is 60%. This determines that our consumption rate is around 40%, while the corresponding international average consumption rate is around 60%. If this data could reach the international average level, based on current GDP accounting, Chinese household disposable income would increase by 19 trillion yuan annually, and there would certainly be no problem of insufficient effective demand and sluggish consumption. In recent years, affected by the pandemic, household balance sheets have suffered scars that are difficult to repair. Coupled with a mortgage burden of 3.8 trillion yuan and insufficient measures to boost demand, residents' income and consumption expectations have weakened. Consumption recovered after the pandemic but quickly fell again. Monthly social retail has not yet successfully exceeded 4 trillion yuan, and consumption has not yet recovered to the potential growth rate before the pandemic. From the data of the National Bureau of Statistics, we can clearly see five major divergences: 1. Above-scale decline, below-scale growth. In July, total social retail sales increased by 2.7% year-on-year, but retail sales of consumer goods above the quota limit decreased by 0.1%. In the first seven months, social retail increased by 3.5% year-on-year, while above-quota only increased by 2.7%. The so-called 'above quota' mainly refers to wholesale enterprises with annual main business revenue of 20 million yuan or more, retail enterprises with annual main business revenue of 5 million yuan or more, and catering and accommodation enterprises with annual main business revenue of 2 million yuan or more. Taking catering as an example, in July, catering increased by 3% year-on-year, but catering revenue above the quota limit decreased by 0.7% year-on-year. Moreover, the market share of above-scale catering in the first half of the year fell to 26.8%. According to data from the catering industry platform Hongcan Big Data, as of July 21, 2024, the proportion of restaurants with per capita consumption above 500 yuan in Shanghai was 0.59%, a decrease of more than 1,400 compared to May 10, 2023. Due to declining demand and customers' extreme pursuit of cost-effectiveness, high-end restaurants with an average order value above 500 yuan had to cut prices to maintain cash flow, but this not only failed to bring revenue growth but also led to a decline in profits. In the first half of the year, the revenue of Beijing's above-scale (i.e., annual revenue of over 10 million yuan) catering industry decreased by 2.9% year-on-year, but total profits plummeted by 88.8%. The survival and livelihood of these above-scale catering enterprises and their 280,000 employees are facing challenges. On the contrary, the below-scale catering and retail industries have maintained some growth: below-scale social retail increased by 4.2% year-on-year. 2. Decline in major categories and optional consumption, growth in essential consumption. In July, major categories of consumption declined overall: automobiles fell by 4.9%, building and decoration materials by 2.1%, furniture and home appliances by 1.1% and 2.4% respectively. Retail sales of consumer goods excluding automobiles increased by 3.6%, higher than the overall retail sales. This indicates that the comprehensive decline in real estate and overcapacity in automobiles are dragging down the consumer market. Optional consumption declined overall: tobacco and alcohol, clothing, shoes, hats, textiles, cosmetics, and gold, silver, and jewelry fell by 0.1%, 5.2%, 6.1%, and 10.4% year-on-year respectively. In one word: 'decluttering'. Only essential consumption maintained growth: catering revenue increased by 3% year-on-year; grain, oil, and food; beverages; daily necessities; sports and entertainment goods; Chinese and Western medicines; and communication equipment increased by 9.9%, 6.1%, 2.1%, 10.7%, 5.8%, and 12.7% respectively. In summary: 'eating, buying medicine, exercising, and scrolling on phones'. 3. Decline in consumption in first-tier cities, growth in rural consumption. In July, rural consumption increased by 4.6% year-on-year, higher than urban consumption's 2.4%; in the first seven months, rural consumption increased by 4.5%, still higher than urban consumption's 3.4%. If urban areas are further subdivided, the growth rate in high-tier cities is significantly lower than that in low-tier cities, with consumption in first-tier cities declining. In the first half of this year, among social retail in first-tier cities, except Shenzhen which rose by 1%, Guangzhou was flat, while Beijing and Shanghai fell by 0.3% and 2.3% respectively. In June, Beijing, Shanghai, Guangzhou, and Shenzhen fell by 6.3%, 9.4%, 9.3%, and 2.2% respectively. Taking the Yangtze River Delta as an example, in the first half of the year, Shanghai led the decline in consumption. Among the second-tier provincial capitals, Hangzhou, Nanjing, and Hefei were 0%, 3.4%, and 3.7% respectively, while third-tier cities around major cities were significantly higher: Shaoxing, Jiaxing, and Yangzhou grew by 10.2%, 8.4%, and 7.8% respectively, significantly higher than the national overall and the Yangtze River Delta average. 4. Decline in department stores and brand specialty stores, growth in convenience stores and professional stores. In the first seven months, among retail units above the quota limit, convenience stores, professional stores, and supermarkets increased by 5.2%, 4.5%, and 2.0% year-on-year respectively; department stores and brand specialty stores decreased by 3.8% and 1.6% respectively. Under downward economic pressure, business formats are clearly diverging. Convenience stores and professional stores can maintain growth, but department stores and brand specialty stores will fall into survival difficulties. Taking Wangfujing Department Store as an example, in the first quarter of this year, Wangfujing's operating revenue decreased by 1.74% year-on-year, and net profit decreased by 10.86%. The Wind Department Store Index fell by 24% this year. Taking high-end fruit retailer Pagoda as an example, in the first half of this year, revenue decreased by nearly 15% compared to the same period last year, and profit attributable to owners of the company decreased by nearly 70% year-on-year. Pagoda's stock price has fallen by 74% this year. 5. Decline in physical goods consumption, growth in online consumption. In the first seven months, online retail sales of physical goods increased by 8.7% year-on-year, much higher than the overall social retail growth rate of 3.5%. In fact, in the past, online consumption growth has consistently outpaced physical consumption, especially during the pandemic. After the pandemic, online consumption growth has actually declined somewhat, but the growth rate is still higher than overall consumption. In physical consumption, the trend of shifting from goods to services is obvious. Goods consumption is declining, service consumption is growing, and service consumption that can integrate online and offline is growing against the trend. In the first half of this year, the profits of Beijing's above-scale catering industry declined significantly, but the number of employees in catering delivery and food delivery services increased by as much as 49.7% year-on-year. This indicates an increase in online food ordering consumption and flexible employment. Are the above five divergences short-term phenomena or long-term trends? Five Major Trends The Arrival of Post-Industrial Consumption Behind trends, there must be relatively reliable logical support. Whether consumption divergence constitutes a trend depends on the underlying reasons and logic. The decline in economic growth, high-quality development, and an aging population are relatively certain directions for the future. We need to focus on how consumers' psychology, preferences, and behaviors change under these three factors, and deduce future consumption trends from these changes. In the future, China's consumption will exhibit five major characteristics: 1. Trend from upward long-term consumption to downward short-term consumption. In the past, during the era of high economic growth, income and consumption expectations rose, consumption moved upward overall, and cycles lengthened. Houses and cars were bought bigger and more numerous, restaurants became more luxurious, phones were upgraded to larger sizes, watches and bags became more high-end, gym and massage parlor cards were topped up more, credit card limits increased, and spending became more lavish. When economic growth slows, consumption expectations weaken. The manifestations are: first, consumption becomes more rational, no longer blindly comparing, and increasingly pursuing cost-effectiveness; second, consumption no longer moves upward, but may move downward, i.e., consumption downgrading; third, cycles shorten, making it easier to arrange long-cycle consumption. For example, taking out a loan to buy a house or car is long-cycle consumption. A 15-year mortgage means locking in future mortgage payments for 15 years; buying a car means locking in annual car expenses of 20,000-30,000 yuan for insurance, parking, etc. At the same time, topping up gym and massage parlor cards is also long-cycle locked consumption. In the past few years, the closure of many stores has increased the risk of long-cycle consumption. One of the future consumption trends is to shift to downward short-term consumption, shortening consumption cycles, reducing risks, and pursuing extreme cost-effectiveness, such as online food ordering, convenience stores, quick haircuts, budget gyms, and cost-effective hotels. 2. Trend from durable goods, major categories, and optional consumption to service consumption and essential consumption. Industrialization and urbanization are the golden age of durable goods. In the era of high economic growth, industrialization and urbanization rose, many people entered cities to work, live, and settle down. Starting a family requires purchasing durable goods and major categories. Japanese households completed the purchase of large durable goods such as houses, cars, color TVs, refrigerators, and air conditioners in the 1960s and 1970s. Entering the 1980s and 1990s, durable goods and major category consumption declined as urbanization slowed and real estate declined. China is entering the post-industrial, post-urbanization, post-real estate era and the era of population aging. The golden age of durable goods and major consumer goods has passed. In fact, the consumption of furniture, home appliances, and automobiles peaked and declined as early as 2017-2018. In the future, houses and cars cannot be bought bigger and more numerous, furniture and home appliances will continue to shrink, and household consumption will shift to service consumption after durable goods are satisfied. This is a long-term trend. In addition, due to weakened consumption expectations, households have reduced optional consumption expenditures, retaining only basic essential consumption such as food, clothing, housing, and transportation. This trend is difficult to change in the short term. A typical example: In recent years, fewer people in Shenzhen buy cars, license plate bidding prices have continued to decline, but the number of people taking the subway has continued to hit new highs. This means that car sales, maintenance, and insurance are on a downward trend, while subway passenger transport and commercial services at subway stations are growing against the trend. 3. Trend from high-tier cities to surrounding low-tier cities. Why does consumption in high-tier cities underperform low-tier cities? It is difficult to explain solely by income growth. The main reason is that the growth of high-tier cities has hit the ceiling of macroeconomic growth, and residents of first-tier cities are more sensitive to economic and income trends. Conversely, in recent years, the real estate downturn, financial rectification, layoffs in big tech, declining growth in foreign investment, and salary cuts for civil servants have had a greater impact on high-tier cities. Compared with low-tier cities, high-tier cities use more leverage for investment and consumption. When macroeconomic and income expectations decline and debt burdens increase, consumption expectations of residents in high-tier cities are more likely to decline. In high-tier cities, major categories such as houses, cars, furniture, and home appliances account for a high proportion. The significant decline in major categories has dragged down overall consumption in high-tier cities. Among first-tier cities, the growth rates of automobile sales in Beijing, Guangzhou, and Shenzhen in June were -13%, -8.3%, and -3.2% respectively, with Beijing and Guangzhou falling more than the overall decline of -6.2%. The year-on-year declines in second-hand housing prices in Beijing, Shanghai, Guangzhou, and Shenzhen were 7.2%, 5.6%, 12.4%, and 9.8% respectively, with the declines in Beijing, Guangzhou, and Shenzhen significantly higher than the -8.2% and -8.1% in second- and third-tier cities. In the future, consumption growth in high-tier cities may underperform low-tier cities for a long time, but not all low-tier cities can grow against the trend. In the past decade, third- and fourth-tier cities in the mainland have mainly relied on shantytown renovation monetization and urban investment bond investment. As this round of debt bubble is compressed, real estate in third- and fourth-tier cities lacking industrial support will remain sluggish, and consumption will be difficult to rise. Low-tier cities around high-tier cities will benefit from spillover dividends, especially tourism and leisure cities within the 2-hour living circle of Beijing, Shanghai, Guangzhou, and Shenzhen. As households in high-tier cities save on major category consumption such as houses and cars, they turn to service consumption, especially catering, hotels, and tourism in surrounding cities. A typical example: After the opening of the Shenzhen-Zhongshan Bridge, Shenzhen residents flooded Zhongshan, driving there to eat, stay, and play, causing crowds everywhere. Zhongshan seemed unprepared for this sudden influx of wealth. In fact, Guangdong Province needs to re-plan and design to create a Greater Bay Area tourism and living circle. Data shows that in the first month after the opening of the Shenzhen-Zhongshan Bridge, traffic exceeded 3 million vehicle trips, with a peak of over 8,000 vehicles per hour, of which passenger cars accounted for about 93%. On weekends, traffic increased by about 30%. 4. Trend from department store brand consumption to small, beautiful, specialized, and refined consumption. As downward economic pressure increases, foot traffic in department stores declines, and sales in brand stores, especially international luxury brands, naturally decline. Data shows that in the first half of this year, LVMH Group's sales revenue in the Asian market mainly in China (excluding Japan) decreased by 10% year-on-year, making it the only region with declining sales; Kering Group's sales in the Asia-Pacific region (excluding Japan) fell by 22%. High-end cars represented by BBA began to decline: BMW's deliveries in China fell by 4.3% year-on-year, Mercedes-Benz sales fell by 9%, and Audi sales fell by 2.0%. The future direction of business formats is no longer large department stores and luxury brand stores, but small, beautiful, specialized, and refined stores represented by convenience stores, professional stores, and boutique stores. International luxury brands are trying to adapt to this trend by opening boutique stores and pop-up stores. According to incomplete statistics, as of the end of July, Hermès, LV, Bottega Veneta, BALENCIAGA, LOEWE, Prada, and Burberry have all opened new boutique stores. Convenience stores and professional stores are the future trend. The decline in the economy, population concentration, aging, and the increase in single people have driven the growth of convenience stores. Last year, convenience store sales reached 424.8 billion yuan, a year-on-year increase of 10.8%, and the number of stores exceeded 321,000, a year-on-year increase of 7.0%. Currently, industry concentration is increasing, with the top 10 companies having 115,741 stores, accounting for 63.5% of the total. The future direction of convenience stores is mainly in third-, fourth-, and fifth-tier cities. 5. Trend from uniform standardized consumption to diversified consumption. The common feature of high growth, urbanization, and industrialization is standardization, that is, highly unified consumption concepts, product designs, and service standards. The biggest feature of industrialization is large-scale machine production, especially the rapid supply of a large number of standardized durable goods. It can be said that people who have experienced the industrial era have their aesthetics, values, and thoughts shaped by industrialization. In the post-urbanization and post-industrial era, people's consumption preferences have begun to change, gradually shifting to diversification. Young people in the post-industrial era find uniform buildings, furniture, cars, and designs very outdated. So, what does diversification mean? Japan's convenience stores are the epitome of consumption diversification. Small convenience stores display a variety of products, such as dozens of beverages, and they are refreshed in large quantities every week, causing Chinese tourists to have choice paralysis. Will China be like this in the future? Consumption diversification can be understood as consumers pursuing their own preferences more, rather than choosing based on external unified standards. In the future, it may manifest as individuality, fashion, health, beauty, fun, and technology. Five Major Opportunities The Era of 'Black Myth: Wukong' When we confirm the long-term trends for the future, it means we can find structural opportunities from them. During Japan's Great Recession, which industries peaked and declined? Mainly durable goods, major categories, and children's products: real estate, furniture, home appliances, clothing, education, stationery, and baby products. Which industries rose against the trend? Caffeinated beverages (carbonated drinks, tea drinks, coffee), beauty (beauty instruments, cosmetics, beauty services), mass consumer goods, second-hand markets, insurance and pensions, convenience stores, medical and pharmaceutical, elderly care and nursing markets, and sports, leisure, and entertainment services. In July, I went to Tokyo with my community members to investigate 'business opportunities in a low-growth era'. Japanese consumption society research expert Mr. Miura Atsushi analyzed the five consumption changes in Japan over the past 100 years and their business opportunities at Waseda University. The biggest inspiration from Mr. Miura was that if we only focus on economic downturn, we can only see one opportunity: consumption downgrading; if we observe the rich changes in consumer psychology, preferences, and behavior from the perspective of economic downturn and aging, we can see diverse structural opportunities. Combining Japan's experience and deducing from the two dimensions of economic downturn and aging, future Chinese consumer psychology, preferences, and behavior may tend to: more rational, more frugal, more cost-effective, more focused on inner self-feelings, and more pursuing health, happiness, nature, and technology (truth, goodness, beauty, and joy). Based on this, there are five major structural opportunities in China's future commercial market: 1. Service consumption opportunities. Once major categories such as housing, automobiles, home furnishings, and home appliances, and durable goods are saturated, the proportion of goods consumption will decline significantly, and household spending will shift to service consumption. This is a long-term trend. In the short term, consumption risk appetite declines, consumption cycles compress, and immediate service consumption rises. In the past 30 years in Japan, stores selling goods have decreased, while stores selling services have increased. For example, liquor stores have decreased, while izakayas have increased. Another example: fewer people are willing to buy cars, but car rental services have increased, and more people take the subway and Shinkansen. Another example: fewer people buy treadmills, and more people go to gyms and outdoor sports. In the long term, households will save more on major category goods consumption and use part of it for service consumption. Service consumption that may grow in the future: catering, convenience stores, tourism, massage, fitness, leisure, entertainment, and other immediate service consumption. For example, in the past two years, KTV, a high-cost entertainment consumption, has aged, while billiards halls, a low-cost entertainment consumption, are booming. Data shows that in the first half of the year, domestic tourism trips and total spending by domestic tourists increased by 14.3% and 19.0% respectively, and box office revenue from commercial performances (excluding those in entertainment venues) increased by 13.2%. In the future, we should try to invest less in durable goods and major categories, and pay more attention to the above service consumption. If selling goods, then we should increase the servitization of goods. For example, the biggest difference between convenience stores and past stores is the provision of services, especially fast food and rest services. 2. Mass consumption opportunities. Mass consumption is a market that grew against the trend in Japan, mainly the daily necessities market, focusing on essential consumption (with less optional consumption). Representative companies include Uniqlo, Muji, and 7-Eleven. Economic downturn, income decline, and weakened consumption expectations have led to the downgrading and sinking of middle-class consumption, driving the rise of the mass consumption market. For example, sales growth of Starbucks, Naixue, and Heytea, which target the middle class, has declined, while cheaper Luckin Coffee and Mixue Bingcheng have risen. Another example: JD.com and Tmall sales growth has declined, while Pinduoduo and online live-streaming sales have grown rapidly. This can be understood as the 'lipstick effect'. This week, after Pinduoduo released its financial report, its stock fell sharply by 28%. The report showed that Pinduoduo's performance still grew at a high rate, but it fell short of expectations. The main cause of market panic was founder Huang Zheng's pessimistic outlook for future revenue. Some believe that Huang Zheng deliberately shorted Pinduoduo to maintain a low profile. This conspiracy theory cannot be confirmed or refuted. In fact, founders would not offend American institutions in such a simple and crude way. It should be noted that in the second quarter, American institutions significantly increased their holdings of Pinduoduo. I think this is the result of Huang Zheng's failure in expectation management. I want to use Pinduoduo to express this: the mass consumption market is not simply low prices, or even poor quality at low prices, but cost-effectiveness, and extreme cost-effectiveness. Therefore, the clear card in the mass consumption market is extreme cost-effectiveness. Enterprises need to do three things well: design, supply chain integration capability, and product iteration. Mass consumer goods such as Muji and Uniqlo are mainly designed with simplicity. There may be two reasons: first, to reduce process complexity and minimize costs; second, to cater to the aesthetic needs of de-complexification in the low-growth era. Supply chain integration capability is key to lowering costs and gaining cost-effectiveness advantages. Currently, China's overall supply chain costs are relatively low, but they are easily replicated by competitors. Miniso is like a 20-30 yuan Muji, doing global sourcing, simple design, and high cost-effectiveness. After Miniso, a bunch of followers copied its supply chain. The most critical and difficult is product iteration. For example, Muji first designed the lazy sofa, but it was quickly copied. At this time, if you want to stay ahead, you have to iterate products. If you cannot maintain product iteration, Uniqlo and Muji will also lose competitiveness in China. As a platform, Pinduoduo's best era has passed. Pinduoduo's approach needs to change. It will inevitably follow the old path of Taobao, that is, rectifying merchants, cracking down on counterfeit and shoddy products, and improving cost-effectiveness. This is an iterative path that must be taken and is full of risks. 3. Domestic consumption opportunities. Japanese consumption in the first stage had Westernization and European/American tendencies, in the second stage had American tendencies, in the third stage had high-end and European tendencies, and in the fourth stage, the economic recession stage, shifted to pursuing no-brand tendencies, simplicity, Japanese consciousness, and local consciousness. Mr. Miura Atsushi understands this process as 'the end of modernization and the revival of local areas'. Why does a round of domestic substitution opportunities appear when the economy enters a slowdown cycle? There may be three reasons: First, during the sustained high-speed economic growth, nationalism and national confidence increased, worship of international brands declined, and identification with domestic goods increased; second, with the introduction of a large amount of industrial technology, after 20-30 years of accumulation, domestic industrial technology and production capacity have matured, domestic quality has greatly improved, and domestic substitution has accelerated; third, when the economy declines, consumer psychology changes, people pay more attention to their own feelings, de-branding and de-luxurification, not being defined by brands, shifting from face to substance. Some high-income people dress simply and buy Muji clothes. Data shows that in 1995, Japanese people consumed 68% of the world's luxury goods; now, this proportion has dropped to only 10%. After 2000, Japan's wealthy class bought fewer international luxury goods. Their spending power did not decline, but their consumption preferences changed significantly. They no longer needed Hermès to decorate themselves, but turned to buying some lesser-known Japanese handmade brands. Japan has a 'shokunin' culture. In the Edo period, shokunin referred to artisans dedicated to a certain craft, who might weave cloth, make clothes, or repair temples for generations. Shokunin pursue excellence, which is also the source of Japanese craftsmanship. Japan's wealthy class reduced purchases of luxury goods like Hermès and turned to Japanese brands with shokunin traditions. This is what Mr. Miura Atsushi calls Japanese consciousness and local consciousness. In the past decade or so, the wave of domestic substitution has been one after another, from electric fans, TVs, refrigerators, washing machines, air conditioners to computers, mobile phones, and now cars. During our trip, a community member in the cosmetics industry reflected that in recent years, domestic cosmetics substitution has accelerated, with domestic brands' market share increasing by more than 5% annually, and the average annual growth rate of leading domestic brands is over 20%. In the future, enterprises do not need to package themselves as foreign brands, nor do they need to overemphasize domestic goods. They should pay more attention to product quality and service to people. 4. Health consumption opportunities. Similar to mass consumption, big health is also a market that grew against the trend in Japan. Aging and low growth will jointly drive the rise of health consumption, including elderly food, medicine, medical devices, wearable devices, companion robots, nursing homes, and care markets. Two points need attention: First, compared with Japan, China's average pension level is lower and internally unbalanced. The purchasing power of Chinese elderly may be insufficient, and the elderly market may not be as expected. However, the consumption ability and willingness of retired people within the system are strong. Entrepreneurs and investors can consider the 50-65-year-old retired population within the system, especially women. Second, the health consumption opportunities mentioned here are not only the elderly market, but all age groups and all markets have health consumption opportunities. The reason is that when economic growth slows, consumer psychology and concepts tend to be healthy and natural, pursuing self-worth and a quality life that one believes in. People are changing their lifestyles: from overeating and heavy drinking to health, nature, and moderation. For example, in recent decades, Japanese health foods have shown a trend of younger age. Not only elderly food, but even normal food is increasingly focusing on health and nature. Another example: China's Atour Hotel focuses on sleep quality, selling over a million pillows a year. Health consumption opportunities include massage, yoga, gyms, experiential travel, sports and other health and exercise services, slow consumption, including skin care, scalp care, nail care and other care services, healing consumption such as cat cafes and blind boxes, and also healthier pajamas, bedding, beverages, and other daily necessities and food. 5. Consumption upgrade opportunities. In the future, consumption downgrading is a trend, but there are also structural consumption upgrades. How to understand this? Consumption upgrade includes several aspects: First, spiritual upgrade. A survey by the Japanese Cabinet Office shows that since the 1980s, Japanese people have shifted their focus from material abundance to spiritual abundance. During the Great Recession, the proportion of 'spiritual abundance' continued to rise. Consumption has shifted from external recognition to self-identification. In Mr. Miura Atsushi's view, it is 'from purpose-rational action (utility) to value-rational action (truth, goodness, beauty, joy)'. In fact, de-luxurification and de-branding have deep reasons: consumption is returning from objects to people. People are the purpose. People are not kidnapped by brands, not labeled. Goods serve people. Muji's philosophy well satisfies the anti-consumerism and de-branding consumer psychology. Its proposition is 'return freedom to the people who live'. Spiritual consumption includes entertainment, health, leisure, healing, games, learning, and other consumption. Second, technology upgrade. Technology consumption is still one of the future trends. Technological progress lowers commodity prices, improves cost-effectiveness, and new supply creates new demand. In the next decade, AI goods and services will boom, such as driverless cars, AI applications, and online games. Third, quality upgrade. Consumption is shifting from bigger and more to fewer, finer, and higher quality. Some household consumption expenditures may not decline or decline slightly, with more focus on quality of life. For example, Walmart continues to close supermarkets and open higher-quality Sam's Club stores. Data shows that Walmart China has closed 36 stores since last year, and its Sam's Club stores increased to 47 in mainland China in 2023, continuing to expand this year. Another example: Huazhu Hotels' turnover in the Chinese market in the second quarter of this year increased by 16.2% year-on-year, maintaining growth against the trend. In addition to seizing the opportunity of tourism recovery, Huazhu has done product upgrades, especially the quality improvement of JI Hotel and Orange Hotel. Among JI Hotel's operating stores, the proportion of JI 4.0 and above products increased from 30% in 2020 to 71.2% in the second quarter of 2024; the proportion of Orange Hotel Lehuo in Orange Hotel pipeline hotels increased from 58.4% at the end of 2023 to over 90% in the second quarter of 2024. China is entering an era of great consumer reshuffle. Enterprises need to pay attention to macroeconomic trends, avoid financial risks, insight into consumption changes, and capture structural opportunities. Of course, no matter which structural opportunity, it will eventually be severely involuted. Finally, the recently popular 'Black Myth: Wukong' embodies several of the above consumption trends: service consumption, mass consumption (268 yuan), technology upgrade (3A), entertainment consumption, and domestic consumption (cultural and creative national trend). Using this as a metaphor, the future consumption is the era of the Great Sage. Recommended Reading