The heat of the consumer goods industry after the epidemic in 2020 has a very accidental factor. Looking at China's consumer goods market, we need to find fundamental changes
Wen | Li Feng
From 2020 to the first half of 2021, driven by the listing of companies such as Perfect Diary, Bubble Mart, and Yueke, the technology Internet is no longer recognized as the most optimistic direction for funds, and consumption has become a new hot spot.
In 2020, consumption gradually recovered from the epidemic, and Yuanqi Forest and Zhong XueGao Company seized the opportunity and grew rapidly, and these dark horses made the investment market see opportunities. After that, the consumption format represented by noodle shops and cosmetic samples was chased and popular, and the phenomenon of investment overheating occurred. The market has become too expensive, and there are a large number of funds competing for all kinds of projects. Many projects have burned money to engage users, and the competition is fierce.
Recently, the wealth effect in the consumer sector has begun to shrink, the market is calming down, and the bubble may be about to burst. Why has the consumption boom extended from last year to this year? This issue deserves to be reviewed.
Many people have not noticed that today's very many consumption phenomena, some are very short-term things, some are phenomena caused by special circumstances, some are long-term trends, and some are fundamental changes.
Neglected short-term phenomena
Some consumer brands that burst into flames for a while are actually short-term consumption phenomena, caused by special circumstances, which are ignored by most people.
For example, noodle shops and retail chains that a considerable number of people pay attention to have benefited from the fact that after the outbreak of the epidemic in 2020, there have been a lot of shop vacancies offline, and these noodle shops and retail chains can get vacant shops or even preferential shops.
This situation also happened to Haidilao. Haidilao not only gets a lot of shops, it is said that Haidilao is rent-free in many shopping malls.
However, it is difficult to say whether this trend can continue. When consumption and rents are restored and the service industry returns to normal, the challenge will be highlighted, and the store catering will maintain a store turnover rate of 15%-25%.
Another example is domestic cosmetics. We found from the 2020 "Double 11" cosmetics category sales rankings including makeup and skin care products that contrary to people's perceptions, there is only one Chinese brand Winona among the top ten brands, while the huge domestic makeup brands Huaxizi and Perfect Diary are not among them.
This is because, due to the first recovery of China's consumption power in the epidemic in 2020, international big brands have given special prices to the Chinese market, and brands can break through the previous promotional price bottom line to sell genuine products.
Another trend in 2020 is cosmetics samples, even opened to the line. The rise and fall of cosmetics is mainly controlled by the will of international brands in the Chinese market, and everyone knows that small samples and gifts are the things of big brands themselves. In 2020," "Double 11", in order to make the genuine product less discounted, international brands allow the genuine product to break through the price bottom line, china can do price segment promotions, giveaways have entered the market significantly, samples and giveaways have begun to circulate, which is a huge inventory.
In fact, after 2010, Jumei Premium, Fifth Avenue and other flash purchase e-commerce platforms also sold big brands and small samples, they were referring to the American flash sale fashion e-commerce "unicorn" Gilt, but later these companies have lost power. After the special period has passed, the normal inventory sales ratio returns, and it is difficult for you to get these sources, and the operation and maintenance and development of the enterprise will be challenged. The histories are very similar, just repeated in different places.
Zhong Xuegao's popularity is also partly due to extraordinary factors during the epidemic. As a result of the pandemic, a significant number of people have been unable to eat out for up to 100 days, and have to eat their own menus that they have made over and over again. Luo Yonghao's live streaming was a tipping point for Zhong Xuegao. The first food that Luo Yonghao selected was Zhong Xuegao, and it just so happened that Luo Yonghao's first time bringing goods had a strong sense of freshness, and before Luo Yonghao brought the goods, it seemed that no anchor had brought ice cream goods.
Although April is the off-season for ice cream, a live broadcast still sends tens of thousands of bells into consumers' refrigerators, and the brand potential energy is directly pulled up. April's popularity is directly connected to May, ice products and drinks into the peak season, at this time large enterprises have not had time to restore the rhythm of new product launch, offline shelves lack of new products from large enterprises, Zhong Xuegao can just fill the gap in market innovation, during the 618 period Zhong Xuegao ranked first in Tmall ice category sales.
Zhong Xue Gaoneng grasped this extremely special time window, mainly thanks to the brand potential energy accumulated online. This phenomenon will exist for a long time when new online brands go offline, but it is almost impossible to recur during a special window period like last year's epidemic.
Platform traffic structure changes
From the perspective of the platform, looking at the rise and growth potential of products and brands, we found that the core traffic factors of the platform are undergoing logical changes, and this change is also one of the reasons why brands can break out in a short period of time, but in the long run, although brands become easy from 0 to 1, from 1 to 10 will become difficult.
From 2019 to 2020, the traffic composition of Tmall Taobao has changed from more than 50% of users' organic searches to about 70% of "guess what you like" and "recommend". The most important connection between traffic platforms such as WeChat, Douyin, and Kuaishou and the Trading Platform of Tmall Taobao has become completely or mainly recommended by big data.
The direct result of this change is that the segmented brands can buy more accurate traffic because there are more labels and less repeatability. Over the past year or so, we've seen a lot of product brand influence in a lot of niches, precisely because they've gotten enough short-term traffic growth and explosive power. Beauty, snacks, pets and other categories all benefit from this.
The advantage of this change in traffic logic is that it is easy for brands to find accurate traffic, but the disadvantage is that it is difficult to find traffic that breaks the circle. Although accurate traffic is very helpful from 0 to 1, it is very destructive to the brand from 1 to 10, because if you want to become a big brand, you always have to generalize the consumer population, and when you generalize to buy traffic, you will find that it overlaps with people who have no label or lack of labels, and the competition is fierce and ineffective.
Another disadvantage brought by recommended traffic is that the proportion of traffic that Tmall Taobao can sell has increased significantly, almost the vast majority of traffic needs to be bought, the brand in the stage from 1 to 10, the traffic mainly depends on buying, and the spending effort is linked to the degree of recommendation, once the generalization of the purchase of traffic, the efficiency will drop a lot.
The shift from search traffic to referral traffic has also led to brands spending more time and time being remembered by users. When consumers browse through various "guess what you like" and "recommend", it is likely that they did not end up buying the product they had planned to buy, but instead placed an order for a recommended product. This shift in buying behavior has led to users becoming increasingly unable to remember what brand they bought. Products that reach consumers are not necessarily what he originally wanted.
Long-term factors affecting Chinese consumption
To understand those short-term, one-time, occasional factors, as well as changes in the dependence conditions of brand growth, we must also pay attention to the long-term factors that affect Chinese consumption, which contain important directions for China's consumer investment and entrepreneurship.
The pandemic has indeed created uncertainty about companies and living conditions for some white-collar workers, who save more money than they consume. After the epidemic, luxury cars and real estate took the lead in resuming growth, while the growth of total retail sales of consumer goods and the catering industry was not ideal.
But looking forward a decade from the perspective of policy guidance such as economic trends, market developments, and the third distribution of wealth, we should have confidence in middle-class consumption. The future will certainly give birth to a large middle class, so the greatest consumption potential in the future is certainly not polarized consumption. The polarization we feel today is only a short-term phenomenon caused by the psychological uncertainty after the epidemic.
Now China is already the world's second largest consumer market, with a scale of 40 trillion yuan, close to the United States and faster growth, and also has the world's most complete supply chain. When China becomes the single largest market and the most complete supply chain, the intermediate connection efficiency from supply chain to product will be very high, and the product iteration speed will be very fast. This means that China can give birth to excellent enterprises and launch the most cost-effective products, which has been fulfilled in the mobile phone industry and is happening in the new energy vehicle industry, and almost all consumer goods categories will also verify this.
China's per capita disposable income is now more than 30,000 yuan, and the average disposable income of Beijing, Shanghai, Guangzhou, and Shenzhen is 50,000-60,000 yuan. By 2030, it is estimated that the urbanization rate will reach about 70%, the disposable income of residents will double, and the average disposable income level of 1 billion people will reach the current level of Beijing, Shanghai, Guangzhou, and Shenzhen.
In this way, what products should be made in the consumer market, what groups of people, what price to sell, what positioning to do, and what connotations to do, everyone will have their own answers.
At the same time, it should be noted that cost-effectiveness will not be the only consideration for consumers in ten years. From the perspective of diet, the total amount of energy we consume will not increase significantly, but we will eat better and better. For example, Chinese consumers' current low intake of milk protein will be elevated in the dietary structure, so high-end yogurt, low-temperature milk, milk tea, latte, cheese and other product forms that increase milk protein intake will stand out.
Another example is luxury brands, the rapid growth of the middle class, the sense of cultural identity is enhanced, luxury goods must be a potential market.
Finally, from the perspective of consumer investment, the last round of bubbles is bursting, and we have also restarted consumer investment. In the short term, we believe that the consumption of necessities in 2020 is a high base, so the growth rate will not be high in 2021, and the most affected industries in 2020 will be low base, and this year will grow more.
The author is the founding partner of Fengrui Capital, this article is interviewed and sorted by Ma Lin, a reporter of Caijing, and edited by Yu Le
