Hello everyone, I am Zhao Bo, founder of New Distribution. Thank you to brand owners, distributors, retailers, and service providers from all over the country for taking the time to travel to Shanghai for the 7th China FMCG Conference & the 5th China FMCG Retail Innovation Conference & the 5th China FMCG Distributor Conference. Today, my topic is "Emotional Awakening: Supply-Demand Restructuring and Business Breakthrough in the Third Consumption Era." The economic and consumption environment we face is different from any previous stage. But in this environment, from a brand perspective, what should we do? Consumption Phenomena at China's Macroeconomic Level From a macro perspective, several key data points for the first half of 2025: GDP grew by 5.3%, resident disposable income grew by 5.33%, but the consumer price index barely rose, only 0.1%. Meanwhile, the FMCG market growth rate was only 2.5%. We can observe three important phenomena: First, high savings growth. Household deposits rose significantly in 2025, with a net increase of 10.77 trillion yuan in the first half, reaching a balance of 162.02 trillion yuan, a record high, with a growth rate (+7.42%) significantly faster than the +5.1% average of the same period in the past three years. This shows that people are not without income, but are saving their money. Second, investment remains sluggish, and the market lacks vitality. Fixed asset investment nominally grew only 2.8%, but after deducting price factors, it actually grew 5.3%; private investment still saw negative growth of 0.6%, indicating weak entrepreneur expectations and financing willingness. Third, consumption is in a downturn. People's willingness to save is greater than their willingness to consume. These three factors form a "scissors gap": people have money but are unwilling to spend or invest, leading the overall economic form to deviate from the mild inflation the market originally hoped for, replaced by consumption contraction and even deflation. Consumers are not short of money, but are unwilling to spend. This situation directly leads to severe involution in industry competition. Behind the involution are multiple reasons: a new economic cycle, overcapacity, insufficient consumer confidence, insufficient innovation investment, supply-demand mismatch, and the decline of demographic dividends... These factors together have completely changed the market competition environment. In the past, the growth logic of enterprises was based on scarcity: limited resources, continuous population growth, expanding GDP, and rising resident income, so the market capacity showed a trend of continuous expansion. In this context, supply was the core driver of growth. As long as there was new supply, there would be corresponding consumption to support it. But today, we see systemic overcapacity, insufficient consumption has become the norm, and more importantly, consumer attention is being fragmented into smaller and smaller pieces. However, the entire industry still continues the supply-driven competition logic of the scarcity era. Obviously, this logic is no longer applicable in the era of surplus. So the major issue facing all enterprises now is: How to achieve growth in an era of surplus? The biggest pain point in consumption today: the problems raised by the demand side are not answered by the supply side! Take Sam's Club as an example. Although its product prices are generally higher than the market average, it is still packed with people, and consumers are willing to queue up to buy. Kangshifu launched a "Niu San Bao Noodles" at Sam's, priced at 25 yuan per pack, 100 yuan per box of four, and it sold out in the market, with monthly sales reaching 1.2 million boxes. Are consumers really reducing consumption because they lack money? Obviously not. The real reason is that consumers want to buy truly valuable good products. The key to the current consumption problem is not that consumers cannot afford to buy, but that they "cannot buy good things." The market is flooded with low-quality, homogeneous imitation supply—the clustering imitation of sugar-free tea and electrolyte drinks is a typical case. Low-quality imitation worked in the scarcity era, but it completely fails now. What consumers pursue is emotional satisfaction and value identification. Just like the trendy toy IP "Labubu," which can neither be eaten nor drunk, yet triggers huge consumption enthusiasm. These phenomena show that the pace of supply upgrading lags far behind the speed of consumer psychological transition. Consumers have moved to a higher level of needs, while the market supply remains stuck in low-level imitation and competition. This supply-demand mismatch is the biggest challenge facing all enterprises. Consumption is actually the intersection of demand and supply. In the early stage, demand far exceeded supply, and the market could fully absorb all supply. In the middle stage, demand partially overflowed, and consumers bought a large number of luxury goods and traveled abroad for shopping. But today, we see a large amount of demand not being met, remaining outside the supply. At the same time, a large amount of supply capacity is in surplus. Taking manufacturing as an example, China's capacity utilization rate is only about 74%, with more than 20% of capacity unused. This fully shows that supply has not truly met consumer demand, especially high-end, differentiated, and personalized demand. Consumption Trends in the Third Consumption Era In this context, consumption is undergoing new changes. First is K-shaped consumption and M-shaped income structure. The polarization of income and consumption occurs simultaneously, which is a direct manifestation of the "middle-class trap." As the Engel coefficient drops below 30%, Chinese society has entered a new consumption era. Looking from groups to individuals, this trend is more evident. According to a survey by BP Research Institute, the primary factor for post-00s shopping is emotional value, accounting for 47%. They are not without money, but spend cautiously: they spend without hesitation on consumption that satisfies emotional value, but weigh repeatedly on what does not. This differentiation is especially obvious among young people. From this, we can draw a conclusion: Chinese society has entered the Third Consumption Era. Consumers' constraints are no longer survival pressure, but identity, emotion, and lifestyle. They are no longer the "average portrait" of the middle class, but a layered, circle-based puzzle of people. Demand shifts from function to emotion, from "eating enough" to "eating well, eating worthily, and eating interestingly." In one sentence: the staple food becomes side dishes, side dishes become snacks, and snacks become emotional. This change is a major cognitive challenge for enterprises. In the past few decades, China's consumer market experienced the First Consumption Era (transition from traditional wholesale to large-scale distribution) and the Second Consumption Era (manufacturer-distributor division and deep distribution). But in the Third Consumption Era, consumption logic, supply-demand relationships, retail structure, and even supply chain models are undergoing profound changes. The experience of developed countries shows that supply chains are highly intensive, while the Chinese market is still highly fragmented, which means we must rethink how to build a supply model that matches consumers in the new environment. Under this new consumption logic, the overall role of consumers is also being reconstructed. They are no longer just "traffic," but become participants in narratives, producers of meaning, and creators of identity. The traditional Carrefour model treated customers entering the mall as traffic, assuming that as long as they came in, they would consume. But today, every consumer has a specific role and personalized needs. They are living individuals, not a unified group. They are not only buyers of products, but may also be "co-builders" like Xiaomi, emotional healers, part of social structures, and creators of identity. So the switch to the Third Consumption Era is not just product iteration or channel renewal, but a deep change in lifestyle, a leap from physical foundations to psychological structures. The path of social development goes from "what is lacking" to "what do I want" to "who am I." If brands cannot understand this structural change, they will remain stuck in price wars or superficial competition, and find it hard to truly move consumers. When a brand cannot touch consumers, price becomes the main measure; once a brand can make consumers feel its value in their lives, price is no longer key. The Deep Mechanism Behind the Rise of New Consumption In the Third Consumption Era, we must understand the deep logic behind new consumption phenomena. Whether it is Pop Mart or Mixue Bingcheng, there is common logic behind them. The first logic is that emotional value has become a necessity. When material foundations are met, human needs move up Maslow's pyramid. In modern society and large cities, due to the division of labor, kinship and traditional community social ties have become weak. High division of labor has weakened the sense of meaning derived from labor. At the same time, the hidden emotional labor attribute has increased. When people cannot obtain psychological achievement from labor; cannot get the feeling of being needed from kinship ties; cannot get responsibility and mission from marriage and children; cannot get comfort from religion; they urgently need to obtain some compensation and construction of new meaning from other places to solve their existential meaning crisis. Emotional value has changed from optional in the scarcity era to a necessity in the surplus era. The second logic is the scarcity of mental positioning. In the past, brand success relied on three scarce resources: production capacity, channel power, and brand communication power. As long as you could produce on a large scale at low cost, advertise on CCTV, and cooperate with deep distribution, you could occupy the national market. But today, these physical scarce resources no longer exist. Production, communication, and channels are no longer scarce. What is truly scarce is consumer attention and mental space. Whether a brand can occupy a position in the consumer's mind that "makes me better" is the core of current brand competition. Brands need to establish scarcity, professionalism, leadership, and emotional resonance and value consistency in the mind. They provide consumers with a sense of superiority, belonging, and identity. The third logic is the shift of consumption decisions to scene-triggered. In the past, consumers would search and compare prices, but now in an environment of oversupply, they trigger consumption needs instantly in scenes. For example, if you suddenly need a humidifier, you don't go to JD.com to order and wait for next-day delivery, but get it in 30 minutes via Meituan. The rise of instant retail is a manifestation of the shift of consumption logic to scene-triggered. The fourth logic is the circle-ization and island-chain-ization of connection methods. Algorithm recommendations lead to increasingly obvious interest and information barriers among people. Consumers live in independent circles. Brands no longer face a "unified" market, but need to reach precisely in different circles. Based on the above logic, I have constructed a PEST strategic growth model: Position (create mental scarcity) × Emotion (provide emotional value) × Scene (design jobs to be done) × Tribe (connect island chains) = New Growth Flywheel Brand's Future Action Path The PEST model is fundamentally different from past marketing logic. The traditional "occupy the mind" is no longer enough, because today's population stratification and circle-ization trends make the meaning of "first brand" gradually weaken. Consumers don't care if you are the number one in sales; they care whether the brand can help them express their unique taste, resonate with their emotions, provide timely value in life scenes, and make them feel connected and belonging to their circle. At the strategic level, brands need to complete three major reshapes: Value Proposition Reshape

Provide two extreme values: ultimate efficiency (save time & cost) and deep experience (worth spending time & money).

From product thinking to script thinking: use MOT method to design the user's "hero experience" journey;

From functional competition to meaning competition: products should not only solve problems, but also create stories;

From standardization to personalization: but this personalization is not product-level customization, but meaning-level co-creation. User Relationship Reconstruction From traffic thinking to stock thinking: not to acquire more users, but to deeply cultivate the user's lifetime value;

From transaction relationship to companionship relationship: brands should become part of the user's lifestyle, not just suppliers;

From one identity to multiple scenes: provide "solutions" to the "trouble lists" of the same user's different personas. Market Channel Reconstruction From occupying shelves to occupying mental scenes: not being visible everywhere, but being remembered at critical moments;

From reaching shelves to triggering purchase: build non-essential but attractive "new" jobs to be done for consumers;

From channel coverage to deep island chains: make the "islands" deep, make the "chains" smooth, and more advanced: create islands → build bridges → protect moats. In simple terms, use bipolar value to compete for scarce entrances, use jobs to be done to undertake consumption scenes, use emotional resonance to complete value experience, and use algorithm distribution × community connection to build channel penetration. At the tactical level, brands should focus on three directions. First, build MVP, that is, "Minimum Meaningful Product," not just Minimum Viable Product. Such a product should not only meet basic needs, but also create stress points, provide talking points, and strengthen identity. Second, build a three-dimensional consumption experience matrix of scene, task, and emotion, organically combining values from different dimensions. Finally, form a growth flywheel of content, community, and commerce, using algorithms and social structures to continuously drive the consumption cycle. In Conclusion Returning to the deeper social background, the rationalization process of modern society has led people into a sense of meaninglessness. As Max Weber said, "disenchantment," humans gradually lose the satisfaction obtained from religion or labor; as Sartre emphasized, "existence," contemporary people urgently need to rebuild their sense of existence through consumption and social roles. For marketers, the true mission is to help consumers gain this sense of existence in life. Therefore, we should not be pessimistic because of economic downturn and oversupply. On the contrary, precisely because of the diversification of scenes and the transformation of social structure, consumer needs have become richer. The key is whether enterprises have the ability to accurately identify and meet these needs. PS: Friends interested in the on-site speech content can follow the recent posts on the WeChat public account of "New Distribution". We will organize and publish all speakers' speeches for readers. Click "Read Original" to view more about the 7th China FMCG Conference & the 5th China Retail Innovation Conference & the 5th China FMCG Distributor Conference...