This round of consumption upgrade, because the increment is not large, is not a carnival at all. It requires you to work harder to survive. It is impossible to fish in troubled waters like every previous bubble. Since the second half of last year, the concept of "consumption upgrade" has increasingly appeared in various occasions, articles, and forums. The author has also written many opinions on this topic several times. But recently, I increasingly feel that the "consumption upgrade" may not have come with the rolling red dust, or even if it has, most of the dividends are being eaten by overseas brands. It's just that the last time overseas took everything was by introducing backward production capacity into China at the beginning of reform and opening up. This time, it's launching several high-end product lines simultaneously into the Chinese market. If you don't believe it, look at those who truly have spending power; they still choose overseas brands for the vast majority of product choices. They go directly to Hong Kong, South Korea, Japan, Europe, and the US to sweep goods. The profession of daigou (personal shopping) has also emerged. Before the 11% cross-border e-commerce tariff was introduced, the boom in cross-border shopping also reflected that Chinese manufacturing is missing out on this round of consumption upgrade dividends. Fifteen or sixteen years ago, at the beginning of the new century, I became a loyal user of genuine Nike and Adidas. More and more upscale restaurants appeared on city streets, more and more people chose to have New Year's Eve dinner outside, more and more women began using foreign cosmetics, and Nokia and Motorola became identity symbols for a generation. Later, it was Dopod and BlackBerry. The core reason behind this was increasing income and optimism about the future. This was a true consumption upgrade, a true golden age. Consumption upgrades without actual disposable income growth have no driving force. Today's consumption upgrade is just eliminating outdated and aging brands, just a redistribution of the consumer market. The market has not seen significant growth; it's just a redivision of the cake. So this so-called consumption upgrade will not bring much prosperity, just a shift from one to another. 1 A friend works at a financial company in Tianjin. I asked her what brand of cosmetics she uses. She told me three overseas brands, two of which have counters or flagship stores in China. However, her main way to get them is through her sister who is a flight attendant on international routes, and a classmate working in the UK. I opened a saved link for her, a carefully designed advertising copy, and asked if she would buy it. After reading it, she searched on Zhihu, Tieba, and Weibo on her phone and said she wouldn't buy it. She said that because it claims to be a Japanese collaboration but is produced in Guangdong, its credibility is low. If the price is cheap, it's also not credible. If the price is high, why not directly buy overseas products? On Jeju Island, Chinese people are frantically shopping at Lotte and Shilla duty-free shops, and many counters already support Alipay payment. In Hong Kong, a friend even asked me to bring back a pack of wolfberries and cough syrup. 2 The current situation is: consumption upgrade is indeed happening among a small portion of the overall population, but basically all the profits go to overseas brands. But from the perspective of a larger population, consumption upgrade has not occurred; perhaps they spent more money but did not get an actual upgrade. In the summer clothing market of 2016, prices almost universally dropped by a quarter to a third, but storefronts remained deserted. The wholesale market was also bleak and cold, with a cold atmosphere. But people were about to die of heat because many markets were reluctant to turn on air conditioning. So did it shift to e-commerce? Not really. According to reports, JD.com's second-quarter revenue target was not met. Most Taobao sellers also said they couldn't make money. Various niche e-commerce platforms were doing well but basically never made a profit. Many demands have disappeared due to economic downturn. Many demands have gradually disappeared due to lack of security. Many demands have completely disappeared due to high housing prices. In fact, perhaps everything is illusory. If this round of consumption upgrade exists, the total volume is not large. It cannot achieve an economic leap by selling a few more cups and notebooks that are a few dozen yuan more expensive. Moreover, many truly profitable areas are firmly held by foreign brands. 3 In the past decade, e-commerce has moved from a minor role to the center of the stage. E-commerce has successfully enabled a group of companies to achieve a direct-to-consumer sales model. But obviously today, individual customers are not enough. Xiaomi has also started to return to offline channels. A few years ago, it was said that channels would be disrupted, but now it seems they haven't been, and it's unlikely to happen. But channel distributors haven't made money either. Suppose a product is very well-known, then the brand owner is very tough. The factory discount and how much inventory to push are clearly priced. Although channel distributors don't have to worry about not being able to sell, they have too much capital tied up, and profits are transparent, just earning a handling fee. Channel distributors are still very powerful in front of small factories; many small factories fawn over them, but although the goods from small factories have high profits, they can't sell. This is the dilemma facing the physical world. The rapid development over the past thirty years has led to redundant unnecessary links and excessive fragmentation of channels, resulting in everyone not making much money, and consumers not buying cheap products. In the end, each additional step means paying more tax. The universal lifesaver e-commerce is mired in price wars. If you want to be classy and upgrade, you might not survive to tomorrow. A company without profits, what can it use to upgrade its products? At most, it can upgrade a few lines of copywriting: "Facing the sea, with spring flowers blooming, always full of tears." Hearing that too many times, it's just that. It looks like an awkward situation. 4 If we look at the national base, the vast majority of people have no money to consume. The middle class with houses doesn't want to consume domestically. The middle and high-income people without houses have their money going to mortgage payments. The privileged class doesn't need to spend money to buy things. Manufacturers have no profits to make real upgrades. Overseas brands, because of their good quality and reliability (generally speaking), have intercepted most of the upgrade. I just want to ask the experts: How exactly should we upgrade consumption? Where is the path for consumption upgrade? I mean the big picture; this may be too macro, but from a micro perspective, if the big picture doesn't grow, most people won't get a share. Unless you are more hardworking, smarter, more... lucky than others. 5 Of course, consumption upgrade is indeed happening. For example, we can spend 40 yuan on a small cup of yogurt, spend 300 yuan per person on a meal, spend 500 yuan on a phone case or a nice-looking power bank, and spend over 200 yuan on a bottle of shampoo. These are all real. In contrast, old FMCG brands are continuously aging and declining. Old shopping malls and entertainment venues are closing. For example, the former Cashbox KTV was once a god-like existence. For example, Printemps and Parkson are continuously declining. Back in the day, just hearing the word "Paris" felt like it carried its own light. Now people are too smart, information is flat, and they have seen a lot. So demands are increasingly fragmented. Thus, heroes rise, and the world is in chaos. The current arena still has many regular armies, but also many guerrillas, miscellaneous troops, and small local separatists. Big brands are losing users, and that's where the opportunity lies for everyone. 6 When looking at this wave of accurate market conditions, you must not take it for granted. For example, we once made several designer products that looked very interesting but had no sales. We also made some micro-innovative snacks and clothing that sold very well. So, consumption upgrade does not entirely depend on "design"; practicality is still very important. Most people have not yet reached the stage of not considering cost-effectiveness. People who buy European and American cosmetics consider cost-effectiveness from another dimension. For example, this lipstick is Armani, only 400 yuan. So cheap, so cost-effective. They won't compare cost-effectiveness with domestic brands. So don't blindly think that just because something looks good, trendy, and interesting, people will pay for it. 7 Quality improvement, emotional connection, design sense, and differentiation. These are the main points of consumption upgrade. But I think these are not the only ones. Is Miniso a consumption upgrade? I discussed this with a friend. It imitates MUJI style but at only one-third of the price, yet it is already several times the price of the original domestic small commodities. Perhaps it can also be considered a consumption upgrade. I still hold the view that this round of consumption upgrade may disappoint most people because the increment is not large, it is not a carnival at all. Moreover, it requires you to work harder to survive. It is impossible to fish in troubled waters like every previous bubble. This article is by Shen Shuaibo, a senior marketing professional, contracted author of CITIC Press, and founder of Progress Business School. His WeChat accounts include: Progressivism (jinbuzhuyi), I Love PPT (iloveppt), and The Beauty of Marketing (yingxiaozhimei). His Weibo accounts @I Love PPT and @Progress Reading have a total of nearly 2 million followers. -END- The best learning platform for FMCG distributors in China Focusing on providing professional, practical, and actionable tutorials for companies and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Distributor B2B transformation | [Long press QR code to follow]