---
title: "Zhao Bo of New Distribution: The Evolution of Order in the FMCG Industry from a Consumer Perspective"
description: "Zhao Bo, founder of New Distribution, discusses the evolution of the FMCG industry order from a consumer perspective, highlighting the shift from scarcity to abundance to experience economy, and the need for new quality supply to meet changing consumer demands."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-03-17"
language: "en"
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# Zhao Bo of New Distribution: The Evolution of Order in the FMCG Industry from a Consumer Perspective

> Zhao Bo, founder of New Distribution, discusses the evolution of the FMCG industry order from a consumer perspective, highlighting the shift from scarcity to abundance to experience economy, and the need for new quality supply to meet changing consumer demands.

Hello everyone, I am Zhao Bo, founder of New Distribution. I would like to thank brand owners, distributors, retailers, and service providers from all over the country for taking the time to travel to Chengdu to attend the 10th China FMCG Innovation Conference, the 4th China FMCG Hard Discount Conference, and the 4th China FMCG Distributor Conference.
Today, my topic is **"The Evolution of Order in the FMCG Industry from a Consumer Perspective"** .
Over the past two years, all industries have faced enormous challenges, with severe involution and intense competition. This is the common situation for brand owners and distributors, but involution offers no way out. If this continues, the industry will have no future.
We need to step out of the immediate difficulties, adopt a long-term perspective of ten or twenty years, combined with a global vision, to re-examine industrial development and find new breakthroughs.
At the same time, we should return to the consumer perspective and explore possibilities for industry change. I propose this topic today, hoping to trigger your thinking and jointly discuss the future direction of the industry.
**From the Perspective of the Engel Coefficient**
**China Has Entered a Highly Affluent Society**
Let's look at a set of data: In 2024, China's nominal GDP reached 134.9 trillion yuan (approximately 18.9 trillion US dollars), about 73.9% of the United States; in terms of purchasing power parity (PPP), China is 1.37 times that of the United States, indicating that China's actual purchasing power far exceeds that of the United States.
China's GDP grew by 5.0%, and residents' disposable income grew by 5.1%, but total retail sales of consumer goods only grew by 3.5%, and the FMCG market growth rate was even lower at 1.7%, not keeping pace with the overall GDP and residents' disposable income.
So, where did people's money go? The answer is: they saved it.
In 2024, China's savings rate hit a record high. Residents have a pessimistic outlook on the future, with over 70% of assets concentrated in real estate, which is a liability. To ensure the stability of their assets, they have to save in advance to repay mortgages, making them relatively cautious in consumption. This is the current situation for most residents.
In addition, China's total retail sales of consumer goods reached 48.79 trillion yuan, and the growth rate in rural areas far exceeded that in urban areas, with residents' disposable income also increasing significantly. However, unfortunately, China's population has been declining for three consecutive years, and the total consumption volume is continuously shrinking, with the industry entering a stage of contraction and stagnation.
From the data, we see severe involution, oversupply, and most consumer categories entering negative growth. If we only look at these data, it is inevitably pessimistic.
But I want to tell everyone that we must look beyond the present and observe the industry from a long-cycle perspective. Here, I introduce a piece of data—the Engel coefficient, which is the proportion of food and beverage expenditure to income.
Taking the consumption trend from 1978 to 2024 as an example, in 1978, China's Engel coefficient was above 65%. According to global standards, China was in a stage of extreme poverty at that time; by 2024, this figure had dropped below 30%, and China has entered a highly affluent stage.
But the question is, from a long-cycle perspective, overall affluence has basically been achieved, yet surplus and involution have become the norm in the industry. What is the reason behind this?
**Surplus and Involution**
**Why Have They Become the Norm in Today's Industry?**
Taking time as the axis, I divide China's consumption into three cycles.
**First Consumption Era (1979-1998):** In 1980, China's Engel coefficient officially fell below 60%, meaning that Chinese people began to "have enough to eat" from 1980.
**This stage was characterized by scarce supply, a scarcity economy, where consumers moved from having nothing to having something.** For example, if the household lacked a washing machine, refrigerator, electric fan, television, or tricycle, they would buy it.
**Second Consumption Era (1999-2018):** In 1998, China's Engel coefficient fell below 50%, meaning that Chinese people began to enter a moderately prosperous stage.
**This stage was characterized by abundant supply, an affluent economy, where consumers moved from having something to having better, which is improvement-oriented consumption.** For example, from black-and-white TVs to color TVs, from ordinary washing machines to drum washing machines, from electric fans to air conditioners, and so on.
**Third Consumption Era (2019-2039):** In 2017, China's Engel coefficient officially entered below 30%. Around 2018 was the peak of China's consumption, with high consumer confidence, abundant assets, and real estate at historical highs.
However, unfortunately, due to the three-year pandemic, starting in 2020, China's Engel coefficient jumped back above 30%, and it was not until 2023 that it fell back below 30%. During this period, people actually began to enter a highly affluent stage.
**This stage is characterized by oversupply, an experience economy, and emotional/scenario-based consumption.** Consumers have "eaten what they should eat, drunk what they should drink." Their consumption behavior has become extremely rational, and at this time, it is "save where you can, spend where you should." Their consumption comes from "consuming when needed in that scenario, buying only when there is emotion." Today, all consumer consumption comes from their experience and feelings.
Here, I want to add that the Second and Third Consumption Eras overlap slightly. As I explained earlier, in 2017, China's Engel coefficient fell to 30%, but the pandemic years created some intersection with the Third Consumption Era.
From "scarcity" to "abundance" to "experience," after entering the Third Consumption Era, what do consumers start to do?
I believe it is **the pursuit of higher consumption experience.**
Here, I reference two concepts: Maslow's hierarchy of needs and Max Weber's social action theory. The logic behind these two theories is called needs and behavior.
Maslow's hierarchy of needs: It divides human needs into five levels—survival, safety, love/belonging, esteem, and self-actualization. **In the Third Consumption Era, consumer needs shift from basic survival and safety to higher levels of love/belonging, esteem, and self-actualization.**
Max Weber's social action theory: It categorizes human behavior into four types—purpose-rational action, value-rational action, emotional action, and traditional (situational) action. **In the Third Consumption Era, emotional action and value-rational action gradually dominate.**
Combining these two theories and inserting the Engel coefficient curve into this interval, we find that **people's needs gradually develop from simple survival and purpose-rational behavior to diversification and personalization.**
**In the Third Consumption Era, consumers' purchase motivations have undergone fundamental changes, from "eating enough" to "eating well," and then to "eating happily."**
For example, in the past, people ate potato chips to satisfy cravings; now, it is more to relieve stress or anxiety, becoming an emotional comfort product. People know potato chips are unhealthy, but they are still willing to buy them to improve their mood.
In other words, in the past, it was to satisfy hunger, then to satisfy cravings, and finally to resolve emotions. In specific industries, this is called the "snackification of staple foods, the snacking of side dishes, and the emotionalization of snacks."
You should be able to feel this iterative change. For the same product, consumers' purchase motivations and needs have undergone significant changes. Under such changes, involution has become an inevitable phenomenon.
**China's Market Consumption Shows Significant Fragmentation:**
**K-shaped Differentiation & M-shaped Stratification**
At previous conferences, many people have talked about K-shaped differentiation and M-shaped stratification in consumption. Here, I combine the two and divide them into four quadrants.
**High Income & Quality-Price Ratio Oriented:**
> Core drivers: Rational consumption, pursuit of high quality and practicality, emphasis on long-term value.
>
> Typical behaviors: Prefer technologically advanced; reliable products; value cost-effectiveness and sustainability; focus on functional innovation and service guarantees.
>
> Representative groups: Debt-laden middle class, unemployed IT programmers, professionals.
>
> Representative channels: Hard discount - Aldi, 618/Double 11, second-hand luxury goods.
**High Income & Emotional/Social Value Oriented:**
> Core drivers: Pursuit of identity recognition and emotional satisfaction.
>
> Typical behaviors: Prefer luxury goods, art, high-end customized products; value brand stories, cultural background, and historical heritage; participate in high-end social activities such as luxury launches and private auctions.
>
> Representative groups: Corporate executives, affluent families, nouveau riche.
>
> Representative channels: Private domains, JD.com, KOLs, premium supermarkets, Hema, Sam's Club.
**Low Income & Quality-Price Ratio Oriented:**
> Core drivers: Price sensitivity, meeting basic needs, pursuit of cost-effectiveness.
>
> Typical behaviors: Frequently participate in group buying, flash sales, coupons, and other promotional activities; purchase affordable brands or private label products, such as Pinduoduo, low-price discounts; focus on practicality and durability.
>
> Representative groups: Small-town youth, working class, students.
>
> Representative channels: Pinduoduo, soft discount - HotMaxx, bulk snack stores, wholesale markets.
**Low Income & Emotional/Social Value Oriented:**
> Core drivers: Psychological compensation, emotional identity, pursuit of spiritual satisfaction.
>
> Typical behaviors: Prefer IP collaborations, internet-famous products, such as Pop Mart, Palace Museum文创; actively participate in social media interactions and fan activities; willing to pay for interests and hobbies, such as game skins, anime merchandise.
>
> Representative groups: Generation Z, subculture groups, fan economy participants.
>
> Representative channels: Merchandise stores, Miniso, Douyin, Taobao.
In the Third Consumption Era, consumers' income has significantly increased, and purchasing power is no longer limited. They do not think that paying a bit more within limited choices is a problem.
When consumption freedom is high, all consumer decisions are based on the scenario: who I am with, what problem I need to solve, what my pain points are, and which product can provide the best solution.
In such a market environment, **the past CDDS model can no longer meet today's channel changes. The value chain must be re-optimized and iterated according to channel needs.**
The job-to-be-done in consumption scenarios becomes the first principle of marketing. Enterprises need to provide different products in different transaction scenarios to meet consumer needs.
For example, the same potato chips or cola can be offered in different specifications, prices, packaging, and flavors in convenience stores, supermarkets, or e-commerce platforms to meet needs.
**Users have completely different shopping motivations, needs, and pain points in different transaction scenarios. Brands should reshape the OBPPC sales model based on the user behavior characteristics and needs of retail channels.**
**In the Third Consumption Era, the Market Urgently Needs New Quality Supply**
What is the current market contradiction?
Market confidence is gradually recovering, and consumption is beginning to revive, but the industry is still in a painful period, and industrial upgrading is imminent. **The main contradiction in the market lies in the mismatch between low-end supply and people's aspirations for a better life.**
We see market phenomena: hypermarkets are struggling, while Sam's Club, Pangdonglai, and Hema are packed. Essentially, it is a difference in supply quality. Consumers are willing to pay for high-quality supply.
What needs do consumers actually have? Four keywords: **high emotional intensity, high quality-price ratio, high social attributes, high scenario coupling, and high health attributes.**
These most important needs can no longer be met by the original supply; new supply is needed to match them.
In simple terms, buying is no longer a problem; why to buy is the problem. Once people have choices, they instinctively choose high-quality product information and services. When reach becomes easy, triggering becomes extremely difficult. Enterprises need to develop new purchase reasons for products/categories. This is what we call new quality supply.
**Build a New Value Chain and Supply Chain System**
**to Achieve Coordination of Production, Supply, and Sales**
**Today, it is not simply a matter of product, channel, scenario, or communication; the most important issue is the enterprise value chain.**
Based on this, New Distribution established the **Top500 China Distributor Supply Chain Alliance** (hereinafter referred to as "Tower Alliance") in 2023. Currently, more than 500 distributors across the country have joined, forming a nationwide layout.
We hope to build an integrated supply chain system for production, supply, and sales through the Tower Alliance, and have established Xiaoxiang Feichi Supply Chain Company, jointly owned by Tower Alliance members. Our mission is to help distributors connect and open up digital platforms, and jointly build an integrated supply chain system for production, supply, and sales.
In this process, we have established a complete set of business logic:
• Pindiantong Platform, helping brand owners connect with national supply chain platforms;
• Xiaoxiang Zhanggui Supply Chain Service Platform, providing efficient support;
• Manscore Supermarket Retail Franchise Platform, helping national distributors achieve digital transformation and empowerment of the supply chain.
 _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 guest speeches for readers._
 _Click **Read Original** to view more about the 10th China FMCG Innovation Conference and the 4th China FMCG Hard Discount Conference & the 4th China FMCG Distributor Conference..._


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