A quarter of 2024 has passed, and the business trends of the beginning of the year cannot avoid two topics - the "sinking" of daily consumer prices and the "sinking" of business.
- "9.9 Coffee" is invincible;
- Jia Guolong: Hamburg in China changed its name to Longbao to focus on the sinking market;
- JD.com has made it clear that the sinking market will be an important growth engine in 2024;
- Nova Coffee plans to open 1,000 new stores in 2024 to vigorously explore the sinking market;
- On March 4 this year, Haidilao, the domestic hot pot leader, also announced that it was open to joining, hoping to further release the brand and scale effect in the sinking market......
Sinking the market - in fact, it is already a common topic.
However, brands talked about sinking ten years ago, with a high-spirited expansion momentum, and now brands talk about sinking again, with a yearning for "re-creating myths" and "second entrepreneurship".
In the past decade, both in high-tier cities and in the so-called "sinking markets", consumption concepts have undergone tremendous changes, urban consumers have begun to become more and more Buddhist, and the so-called sinking markets and small-town consumption have begun a journey of quality improvement. On the one hand, the city has launched a reverse consumption movement, and on the other hand, more and more successful brands have come out of the sinking market.
(Some of the successful brands that have come out of the sinking market.)
Because of its similar logo color system, it was ridiculed in the industry as a "sinking straight flush")
So, what are the opportunities for different "hierarchical markets"? Before discussing this issue, let's first discuss the main body of the market - people.
01.
The differentiation of consumption concepts and the reasons behind them
Rational regression vs. Wild" ascension
The "return of rationality" in high-tier cities
Recently, I saw a very interesting hot search: "Travel agencies began to dislike young people", "Why are travel agencies more and more afraid of young people?"
Young people are obviously the main force of consumption and the focus of the market in the future, how can they still be disliked.
Click in to take a look, which basically means that the current post-95 and post-00 young people are too "sober", and will do everything possible to improve the "cost performance" of spending, and know how to defend their rights, and they will expose it on the Internet when they encounter bad things.
With the rapid urbanization process in the past few decades, urban people continue to pursue material satisfaction and consumption pleasure, and countless new things are flocking to them, and people are overwhelmed and dazzled. When the general environment is good, people are willing to try new things, and even willing to overdraft the future to enjoy the present.
Then, the novelty gradually became numb, coupled with the market downturn after the special event, and the high cost of living of urban people are paying for the overdraft, followed by a significant change in consumption concepts.
Whether it is the return of consumer reason, the continuous growth of spiritual needs, or the focus on sustainable development, the era of overconsumption is a thing of the past.
The return of rational consumption
In the wave of consumerism, people have come to realize that material things alone do not bring true happiness. Therefore, some people have begun to advocate rational consumption, paying more attention to the quality and cost performance of products, rather than just pursuing brands, high prices and trends. As a result, more and more old domestic brands such as Bee Flower, Vitality 28 and Yu Meijing have frequently come out of the circle and risen again.
In the battle report three days before the 2023 Pinduoduo 11.11 promotion, the scale of Pinduoduo's 10 billion subsidized users exceeded 620 million yuan, and the order volume of users in first-tier cities increased by 113% year-on-year.
The growth of spiritual needs
In some high-tier cities, people are more focused on spiritual fulfillment. They are starting to live a minimalist lifestyle, spending less and devoting more time and energy to self-improvement, social and cultural activities. City walks, park-style tours, and the camping economy are hot, which has led to the ridicule that "the new hobbies of the middle class in Beijing are fishing and visiting parks".
(Source: Xiaohongshu)
Increased environmental awareness
With the country's long-term goal of peaking carbon emissions before 2030 and achieving carbon neutrality before 2060, more and more people are aware of the huge pressure on the natural environment caused by excessive consumption, especially in first- and second-tier cities with a population density of more than 10 million.
People in cities are thus choosing a greener, more sustainable, more natural and healthier lifestyle. For example: sustainable recycling, second-hand platform trading, etc.
The "Myth of Scale" in the Sinking Market
According to public data, the consumption scale of the sinking market accounts for the highest proportion of the national consumer market, and it continues to expand, and is expected to reach 100 billion. At the same time, the "100 Cities, 1000 Streets, 10,000 Stores" Consumption Index Report released by the Outlook Think Tank and China Minsheng Bank shows that compared with the first and second-tier cities, the consumption improvement effect in the third- and fourth-tier cities is more obvious.
The secret of "longevity" in business cannot be avoided from "quantity" and "demand".
The so-called "sinking market" has the largest market size and consumer group, and the high cost performance of economies of scale is still valid here. Not only that, with the continuous layout of brands and businesses, the shortcomings of diversification are also being made up at an accelerated pace, and consumers are gradually upgrading their consumption.
At present, in the "sinking market" of third-, fourth- and fifth-tier cities, consumers are eager for a sense of gain brought by consumption, and they are very concerned about the entry of chain brands. Just like Haidilao, Luckin, Cudi, etc., are becoming the new queue kings of young people in small towns.
According to the data, in 2023, Starbucks, which used to be the "third space for middle-class life", will add a net of 885 new stores in China, and enter 27 new cities, of which 74% are fifth-tier cities.
（图表来源：Marketing）
Behind this is a shift in consumption perception driven by relatively low cost-of-living pressures.
Raised incomes and a lower underlying cost of living
With the development of the economy, the income level of consumers in the sinking market has gradually increased, and at the same time, the basic cost of living is much lower than that of the first and second-tier cities, they have more balance to enjoy life, and the requirements for quality of life are getting higher and higher.
After returning home during the Spring Festival in 2024, several topics about "small town happiness" rushed to the hot search, and urban migrant workers generally feel that the happiness of a well-off life in a small town is beyond what they once realized, and the quality of life and relaxation are even much higher than those of urban migrant workers.
A shift in consumer attitudes
Consumers in the sinking market have also changed their consumption concepts, and they are no longer satisfied with basic living needs, but pursue a more personalized and high-quality consumer experience.
Platform-based popularization
Grid rapid layout of logistics
If the network gives the sinking market the "eyes" to see the world, then the platform gives them a "door" to upgrade the quality of life. The popularization of the Internet has made information more rapid and transparent, and hundreds of millions of price-sensitive consumer users can more easily learn about various products and services, thereby breaking down information barriers and promoting the continuous upgrading of consumption.
The impact of cultural diversity
As people see the world more and more, the exchange and integration of different cultures have made people have more understanding and pursuit of happiness and quality of life.
The rise of anti-consumerism in cities and the upgrading of consumption in sinking markets are two important trends in the development of the consumer market, and these two phenomena are separated and integrated with each other in the current Chinese market.
However, there are dividends in the sinking market, which does not mean that whoever goes can make a profit.
Many brands in high-tier cities have made unsuccessful attempts. For example, Heytea made a new brand Xixiaocha to expand the sinking market, but left the market in a hurry; Yuanqi Forest did not blow sugar-free wind into the sinking market, so it was difficult to occupy a place in the freezer of the sinking market; Xiabu Xiabu hot pot, which mainly focuses on one-person food under the "lonely economy", was tragically defeated in the sinking market.......
Therefore, the sinking market not only carries the dream of the myth of "scale", but also represents the intensification of competition in market segmentation, as well as the unpredictability of multi-level changes in consumer psychology, which puts forward higher requirements for the formulation of future business strategies.
02.
The different meanings of offline consumption
What is it like to go to the mall?
Traceable data shows that in 2022, the size of the mainland's retail market in the lower tier will reach 17.6 trillion yuan, which is about four times that of the retail market in high-tier cities, and the year-on-year growth rate of the retail market in the lower-tier markets has reached 9%, two percentage points higher than that in the high-tier cities.
Source: Joint Research Industry Consulting (Joint Research Network)
At the same time, unlike the painting style of "young people only go to B1 and B2 when they go to shopping malls", the retail transaction scene in the sinking market is more offline.
Why is this happening?
From the perspective of offline business, there are several obvious differences between consumers in high-tier cities and lower-tier markets:
New brands and business models have different time to reach
Consumers in first- and second-tier cities generally have a higher awareness of brands and businesses, and consumers in high-tier cities are able to access new consumption patterns, brands, consumer categories, and so on more quickly than consumers in lower-tier markets.
(In March 2024, Supreme opened its first independent store in Shanghai, China)
According to incomplete statistics from Yilan Commerce, in 2023, a total of about 200 new "first stores in the country" will be opened in 37 cities across the country. From the perspective of city distribution, the first stores in the country are still mainly focused on first-tier and new first-tier cities. Among them, the number of first stores in Shanghai is 84, accounting for 42.2%, still ranking first. Followed by Beijing, Zhejiang, and Guangdong, 22, 14, and 13 national first stores landed respectively throughout the year.
Moreover, in the first- and second-tier cities with a high degree of commercial development and the explosion of self-media information, what new shopping malls will be opened in the city, what Internet celebrity brands will open their first stores, and what new entertainment models will come...... Major commercial accounts, local information accounts, Shuangwei Yishake Xiaohongshu, various big Vs, Internet celebrity KOLs, etc., information is bombarded in turns, and the fence has not been demolished, and everyone has already pre-sold the number.
Differences in spending habits
Lower-tier people in first- and second-tier cities may be more inclined to spend online in terms of daily retail consumption, such as online shopping and takeaway, because the surrounding convenience circle is smaller and there are more platform choices.
Compared with the polycentric business pattern of high-tier cities, the main business districts in the lower-tier markets are relatively single, and the concentration of commercial entities and commercial retail categories is relatively high, so consumers in the lower-tier markets are more likely to identify with the offline brand effect.
The "staggered peak" of lifestyle
First- and second-tier cities are more in pursuit of efficiency and economy, and workers often can't help themselves when they get off work, and the evening is the time for their own life, so the nightlife of high-tier and commercially developed cities is relatively rich, and the business hours are generally longer, such as 24-hour convenience stores, night leisure places, etc., and more and more shopping malls are also creating 24H living space;
In addition, with the acceleration of urbanization and the advancement of consumption upgrading, offline commerce has also taken on different meanings in different markets. Consumers in high-tier cities are in the mood when they go to shopping malls, while consumers in lower-tier markets are shopping for brands.
Pleasing yourself with a sense of detail
Scene of the city "memory point"
In high-tier cities, consumers go to malls in a mood setting, business and brand display scene and strength.
In first- and second-tier cities with a relatively high degree of commercial development, consumers have higher and higher requirements for offline business experience.
They not only pay attention to the quality and price of goods, but also pay more attention to the comfort of the shopping environment, the creation of atmosphere and personalized service. Therefore, today's offline shopping malls put marketing activities and operational capabilities in the same important position as brands, and are committed to creating space scenes that are highly recognizable, easier to leave memories, and have a better sense of experience.
For example, some shopping malls have turned commercial spaces into platforms for cultural and artistic displays by introducing elements such as art exhibitions and cultural activities, while others have created distinctive consumption scenes through well-designed architectural styles and landscape layouts. The creation of these scenarios can not only enhance the shopping experience of consumers, but also enhance consumers' sense of identity and belonging to commercial places.
At the same time, commercial complexes in high-tier cities will pay more attention to details, such as the rational use of "corner" space, the hygiene of supporting facilities and equipment (including garages and toilets, etc.), the display of shelves, the width of walkways and the brightness of lights.
(Different styles of toilets on different floors of Nanjing Deji "lobby")
The social currency of favors
Brand "play" in the sinking market
In contrast, because the sinking market has not completely separated from the uneven quality of products and services and the relatively fragmented market structure, the offline business of the sinking market is more focused on the construction of brand awareness, and consumers are more recognized and inclined to choose new and well-known brands and businesses.
Therefore, in lower-tier markets, well-known chain businesses and city/regional first stores of brands tend to have a competitive advantage.
(D County, Hubei, consumers waiting in line at Luckin)
Moreover, in order to meet consumers' demand for brands, commercial openings and node activities in sinking cities often require greater offline publicity to enhance business awareness and business reputation. Just like when a Wuyue Plaza in Shandong opened last autumn, the opening publicity has been done on high-speed billboards.
In addition, cooperation with well-known brands can also enhance their brand image and attract more consumers. For example: "Wanda Plaza is the heart of the city." This slogan, which once swept the first and second-tier cities, is still effective in the sinking market, and the confidence of this slogan comes from Wanda Plaza's strong brand appeal ability.
Affected by land acquisition in first- and second-tier cities and homogeneous competition, more and more commercial enterprises have settled in the sinking market. Just like Wanda Plaza, the overall distribution of the planned opening in 2024 is mainly in low-tier cities, accounting for as much as 60%, and the sinking cities in Anhui, Henan, Shaanxi, Zhejiang and other places are intensively deployed.
According to the statistics of Winshang Big Data, 30 shopping malls will be opened across the country in January 2024, with a volume of 2,443,300 square meters. Among them, the number of commercial projects opened in fifth-tier cities soared, which was on par with that of first-tier commercial cities.
At the same time, in 2024, low-tier cities will account for 39% of the total number of shopping malls to be opened in the country.
Wanda, China Resources, Longfor, Powerlong, Xincheng Wuyue Plaza, Country Garden Cultural and Commercial Tourism...... Whether it is the adaptation of product lines to local conditions or the rapid expansion of light assets, their arrival not only brings more lifestyle choices to consumers, but also gradually penetrates the operation and brand power of high-tier cities into the vast "sinking land".
Due to the differences in cultural background, customs and economic development level, although there are differences in consumption concepts between different cities, we can still explore some commonalities and opportunities for the development of sinking markets.
03.
The ability to "create demand".
Opportunities in the sinking market
The natural sinking soil and rigid demand attributes of the "sinking flush" have become their vitality to the whole country and even the world.
On the other hand, unlike the situation of the first- and second-tier consumer reverse education market, most businesses and brands do the sinking market, which is the process of creating demand and enhancing consumer willingness.
There is a close correlation between the willingness to consume in the sinking market and the improvement of business development and happiness. The development of commerce has brought more employment opportunities and income sources to the sinking market, and at the same time, the rich and diverse goods and services have also met people's diverse needs and further enhanced people's sense of well-being. This benign closed loop of willingness eventually brings about the upgrading of the quality of life and more diversified service options in the sinking market, and also brings more opportunities for the layout and development of business.
Seize the sinking market
Offline cluster effect and word-of-mouth communication
People in high-tier and lower-tier cities have different ways of perceiving brands. Users in high-tier cities are more likely to perceive a brand through online advertising, while users in lower-tier cities often perceive a brand that is affected by the offline store form. Building commercial complexes or projects into "landmarks" is the best way to open up the sinking market.
(Data source: Wan Geng Digital Technology)
As mentioned in the previous article, the business districts in the sinking market are relatively concentrated, and the centralization of commerce will bring about the clustering of similar brands, thus becoming a passenger flow hub. Therefore, compared with consumers in first- and second-tier cities, people in lower-tier markets will believe more in the law of prime location, which is a consensus they have formed for a long time.
At the same time, consumers in lower-tier markets generally value social and interpersonal relationships, and they want to be able to connect and interact with others during the consumption process. Methods such as social media, community events, and word-of-mouth communication may be more effective for marketing and promotion in lower-tier markets.
Improve the rights and services of members
With the continuous upgrading of the sinking market, products and services have gradually become the main consideration elements in consumption decisions in the sinking market.
For consumers in sinking markets with ample decision-making time and small risk appetite, perfect pre-sale and in-sale services can effectively enhance consumers' willingness to buy, while intimate after-sales service can enhance consumers' trust in the brand.
At the same time, according to the research data of the Knowledge Economy Magazine, the membership stickiness in the sinking market is higher. For example, price discounts, exclusive membership benefits, and preferential incentives can all achieve customer acquisition to a certain extent. At the same time, cashback or gift incentives are more conducive to stimulating the sharing behavior of consumers in the sinking market, accelerating traffic fission, and realizing the secondary conversion of consumption and word-of-mouth.
(Source: Knowledge Economy Magazine)
Finally, improving membership rights and interests can also enhance user stickiness to a certain extent. According to the survey data of Knowledge Economy Magazine, consumers in the sinking market value more discounts (78%), followed by membership content (56%) and free logistics (49%), and having exclusive customer service is also one of the membership rights and interests that the sinking market cares about (35%).
(Source: Knowledge Economy Magazine)
Expand under the "leisure economy".
Diversified scenarios and quality pursuits
Compared with the hectic pace of the city, the pace of life in the sinking market is relatively slow, and people have more leisure time. People are willing to spend more time and money to enjoy life and pursue physical and mental relaxation and satisfaction.
As a result, people have more time to enjoy life and social interaction, and the pressure of competition in the homogeneous market is relatively small, which has prompted the formation of unique consumption patterns and business opportunities in the sinking market. For example, the leisure and entertainment industry, tourism, and e-commerce platforms have all developed rapidly in the sinking market.
Taking e-commerce platforms as an example, consumers in lower-tier markets are gradually getting used to online shopping. Unlike urban consumers, who pursue fast and convenient shopping methods, consumers in lower-tier markets are more inclined to enjoy the pleasure of browsing, comparing and communicating during the shopping process. They have more time to research products, communicate with sellers, and enjoy the shopping process.
In addition, the leisure economy in the sinking market will also promote the diversification of local business marketing activities, such as food markets, art exhibitions, and traditional handicraft workshops.
From the perspective of the industry, the most future stories in the sinking market are still concentrated in the catering and other rigid demand industries, and similarly, if other industries can find the target group, meet the rigid needs of life, and design highly competitive products and investment models, they can also create a new growth track in the sinking market.
Write at the end:
The sinking market has never been only the definition given by the first and second tier people, nor is it an extension or supplement of the first and second tier markets, it is a broader world with more complex and unique attributes.
Villages, townships, counties, cities, and provinces, one level at a time, have the largest population base in China. They are both consumers and producers.
Today, when science and technology are the primary productive forces, brands and commercial projects serve not machines, but still living and thinking people.
With the complexity of people's demands for consumption scenarios, levels, experiences, pricing and other dimensions, the future business track will also be more subdivided. Sinking is both an opportunity and a challenge.
And the so-called "sinking" strategy is never a choice, but an ability.