For a while, major investors liked to invest in consumer categories. For example, in 2021, there was a consumer investor ranking, with investments mainly in Genki Forest, Dongpeng Beverage, Babi Food, Xiaoguan Tea, Heytea, Zhong Xuegao, and so on...
Two years later, the overall logic of consumer goods has changed. Zhong Xuegao, once incredibly popular, has become embroiled in a wage arrears scandal. Official media used neutral terms like 'wage arrears incident,' but wage arrears are wage arrears. Once a company reaches this point, it is not far from the end. Because once wages are owed, the boss and employees are on opposite sides, and employees can no longer stand with the boss through difficulties. The so-called new consumer brands that were once all the rage had a common trait: they transplanted online tactics to offline. Just like the legend: 20,000 Xiaohongshu posts + 8,000 Douyin videos + 3,000 Bilibili videos + 150 Zhihu answers + super influencer live-streaming = a new brand. What route did they take? They took the online advertising route, using massive resources to shape a brand image, then harvesting at high prices. At the same time, they used slogans like 'Chinese people support domestic products' to bridge the gap between quality and price.
This kind of play can be applied when you have money in your pocket, but how can it last? Offline products, in the end, must be validated by the product itself. So, what is the new situation in the consumer market now? It is consumption downgrading. When I was young, around the 1980s, there were very few beverages. On the streets, there were orange drinks made from powder, costing five cents a cup or something, I don't remember exactly. In short, it was 'three essence water'—flavoring, coloring, and saccharin mixed with water.
Later, consumption gradually upgraded, with Jianlibao, Sprite, Fanta, Coca-Cola, and then milk tea and coffee on street corners... In the past two years, the pace of consumption upgrading has slowed, and even a trend of downgrading has emerged. In this process, those who can keenly grasp the changes will win the first-mover advantage. For example, a 30-40 yuan cup of Starbucks is indeed a bit expensive for many people's current income. Therefore, visionary merchants have keenly captured this business opportunity. Luckin Coffee, once involved in accounting fraud, has won a chance at life by grasping the new trends in the consumer market. In 2022, Luckin achieved revenue of 13.293 billion yuan, a year-on-year increase of 66.9%; net profit was 488 million yuan, a decrease of 15.62%; adjusted net profit was 1.048 billion yuan, compared to a loss of 110 million yuan in 2021. Filling this gap is also Manner Coffee.
This is Manner's first store. How did it manage to break out in Shanghai, where the coffee market is fiercely competitive? By brand? Obviously not. By taste? To be honest, Manner tastes good, but it is still far from master-level coffee. So what does Manner rely on? It relies on being cheap! Manner's coffee is priced between 10 and 25 yuan per cup, and bringing your own cup saves another 5 yuan, making prices one-third to one-half of established players like Starbucks. Since Manner opened under our office building, I've gotten used to bringing my own cup for a coffee. Starbucks? Forget it. How much is this Americano? 10 yuan... Buying one Starbucks is enough for three Manner cups. What about the milk tea market? The milk tea market is the same. Now, when you go out, which milk tea shop is the most popular? Do I need to tell you the answer? Mixue Bingcheng's main products are basically under 10 yuan. Young people can afford a few-yuan drink or milk tea without much burden. Asking them to spend 30 on a cup of milk tea? I can only say that market is getting smaller and smaller. The profit changes of major platforms also corroborate the path of consumer market changes.
On the evening of August 29, Pinduoduo Group released its Q2 2023 performance report for the period ending June 30. The financial report shows that Pinduoduo's revenue in the second quarter was 52.3 billion yuan, a year-on-year increase of 66%.
During the 618 mid-year promotion, Pinduoduo increased subsidies. Stimulated by subsidy benefits, during the event, sales of beauty brand subcategories increased by over 790%; mobile phone orders in county markets increased by 130% year-on-year; and home appliance brands' full-category sales scale increased by 113% year-on-year. What is Pinduoduo's advantage? Cheap and usable. Some subsidized products are exactly the same as those without subsidies on other platforms, so of course it can poach a large number of consumers from other platforms. Whether you like Pinduoduo or not, you cannot deny that Pinduoduo has grasped the essential demand of the current consumer market, which is cheapness. Even Li Jiaqi, who has won countless followers and fans with his personal charm, faced accusations of being too expensive during live streams, causing Li Jiaqi to lose his composure in the live room, leading to subsequent apologies and fan loss. All of this reflects profound changes in the consumer market, and businesses must see this change to adapt to the future. To summarize, there are three profound changes in the consumer market:
1. Consumption downgrading is a major trend that does not change with human will The just-passed double festival (National Day and Mid-Autumn Festival) profoundly indicated such changes. There were many tourists everywhere, but consumption, especially average consumption, was decreasing. You could say people's consumption concepts are more mature, but whatever the reason, this is the reality and trend. Those trying to play the high-price card may not find it effective.
2. The market cannot support so many enterprises selling sentiment It's not that you can't make a living by sentiment, but the entire market cannot support so many enterprises that focus on sentiment. Consumers have already tried hard to support a few. If you don't have the ability to closely link your product with the nation and ethnicity, it's best not to choose the high-price route. Ice cream, soda, and cosmetics have no qualification to take this route. After all, among these consumer goods, there is almost nothing that can be linked to the country's future and destiny.
3. For long-term success, enterprises must ultimately focus on the product itself It's not that cheap goods are bad; cheap goods can also be good and inexpensive. This tests the entrepreneur's control over the enterprise and cost control. Quality control and cost control are the exam papers for entrepreneurs in the new consumer environment; those who fail will be eliminated.
This is not a bad thing. A rapidly growing market masks many issues; some companies' chaotic management and high operating costs are hidden by high selling prices. When people stop paying for sky-high ice cream and the like, it becomes clear who is swimming naked. For enterprises to survive and develop, good internal management is a prerequisite. After all, the external environment is not something you or I can control, is it?