Consumption downgrade refers to a phenomenon in which consumers' willingness to spend on goods and services decreases, resulting in a decrease in total consumption. Generally speaking, consumption downgrades are caused by factors such as economic downturns, falling incomes, and rising prices. In this case, consumers are more inclined to buy cost-effective goods and services, rather than blindly pursuing brand and quality.
Consumption downgrade corresponds to consumption upgrading, which refers to consumers' willingness to spend more on goods and services, pursue brand and quality, and are more willing to pay higher prices for high-quality goods and services.
Consumption upgrading generally occurs when the economy is booming and income increases, and people are more willing to spend money on better goods and services to meet higher consumer demand. Consumption downgrading and consumption upgrading occur alternately, and the relationship between them is mutually reinforcing.
In the case of an economic downturn, consumption downgrading may lead to consumption upgrades. And in the case of economic prosperity, consumption upgrading may lead to consumption downgrade.
The characteristics of consumption downgrade are that consumers reduce efficiency, experience, personality, taste, and attitude to a certain extent, so as to maximize the cost-effectiveness of shopping and strive for good quality and low price. For example, don't buy a sweeping robot if you can sweep the floor, don't go to the gym if you can exercise at home, don't eat pasta if you can eat Chongqing noodles, and if you can buy cheap noodles, don't buy expensive if you can buy cheap
After the impact of the three-year epidemic, people's income declined, and after the epidemic, with the global economic recession and the slow recovery of the domestic economy, coupled with the extremely sluggish property market and stock market, people's consumption desire has also fallen to a low point, just like the stock market. The expected upgrade of China's consumption not only did not come, but ushered in a consumption downgrade.
The cause of consumption downgrade
1. Rising prices
Rising prices are one of the main reasons for the downgrade in consumption. As prices continue to rise, people's purchasing power gradually decreases, and they have to reduce their consumption levels. In this case, people pay more attention to the cost performance of goods and no longer blindly pursue high-priced goods. Secondly, economic pressure is also one of the reasons for the decline in consumption.
With the intensification of social competition and the increase in employment pressure, many people have to face financial pressures such as high mortgages, medical bills, etc. In this case, people are more focused on saving money and lowering consumption levels to cope with economic pressures.
In recent years, Wal-Mart, Carrefour, Yonghui, RT-Mart, China Resources Vanguard, Hema Fresh and other supermarkets have closed a large number of stores due to large losses and had to withdraw from the market. In fact, if they don't stop their losses in time, they will lose more in the future.
The failure of Hema Fresh is a typical case, Hema Fresh has high requirements for the income of people in the region, and consumers will only buy fresh food if the income reaches a certain level. This shows that the success of Hema Fresh depends largely on consumption upgrades, rather than on new retail itself. Under the current trend of consumption downgrading, Hema Fresh seems to be a little out of time.
More importantly, with the development of the times, people's consumption concepts have changed dramatically. In the past, people were more materialistic and willing to spend more on high-end goods and services. But now, people pay more attention to practicality and cost-effectiveness, and pay more attention to spiritual satisfaction. This shift in consumer attitudes has also led to the emergence of consumption downgrades.
2. Rational consumption and the pursuit of cost performance
Contemporary young people have begun to use "discounts" to fill the "cost performance" of life. In the past, "discounts" always seemed to be anchored to several fixed time nodes, such as "Double 11", "618", "Black Friday", etc., in these promotional festivals with the theme of "buy, buy, buy", consumers can wait for the rare "low price".
However, in recent years, the trend of "reverse consumption" has gradually formed, and the consumption of the post-90s and post-00s has become more rational. Even shopping festivals are no longer blindly "carnivals".
According to the data, more than 92% of consumers said that they were more conservative in their consumption concepts, while 45.6% of post-00s young people were more inclined to try product substitution. Under this consumer trend, discounts are no longer limited to specific shopping festivals such as Singles' Day or 618, but have become the norm in daily life. Some young people only visit discount areas, and their consumption is downgraded, which reflects the complex changes in modern socio-economic conditions and consumption concepts.
These young people pay more attention to practicality and cost-effectiveness in their consumption behavior, and no longer pursue brands and high-end products, but turn to find cheap and practical products. They are not influenced by advertising and social media promotions, but make decisions based on their actual needs and budget.
3. After the epidemic, people are more cautious in consumption and focus on saving to cope with future uncertainties and risks
The post-pandemic economic downturn, which has caused many people to lose their jobs, is stressful for house slaves, and in this situation, they still need to repay their loans every month, forcing them to manage their finances more carefully, and this change in consumption perception reflects their uncertainty about the future economic situation and reflection on excessive consumption.
So, what will be the impact of the downgrade in consumption on the economy?
On the positive side
1. Promote people's rational consumption
The most direct benefit of consumption downgrade is that it reduces people's cost of living and spends less money. Consumption downgrades can help people reduce economic pressures and prepare for unpredictable risks in the future. Consumption downgrading can also make people more aware of their real needs and avoid blindly following trends or comparisons.
2. It is conducive to cultivating the habit of rational consumption
Consumption downgrading allows people to look at their consumption behavior more rationally, so that they can make more rational decisions. It makes people pay more attention to the quality, cost performance, and function of products or services, rather than just looking at appearance, brand, reputation, etc.
In the context of consumption downgrade, the wind of comparison between people in the past has been curbed, thus prompting people to consume more rationally. In the case of consumption upgrading, people tend to consume blindly because of the pursuit of material comforts, resulting in waste and unnecessary expenses. Under the trend of consumption downgrade, people will look at their consumption needs and budgets more rationally and avoid unnecessary expenses and waste.
3. Promote the rational allocation of social resources
Facts have proved that in the case of consumption upgrading, people tend to pay more attention to material enjoyment and luxury consumption, which may lead to waste of resources and unreasonable allocation. Consumption downgrading can encourage people to pay more attention to pragmatism and rational allocation of resources, and invest more resources where they are really needed.
4. Focus on improving the quality of life and avoid some unnecessary expenses
Consumption downgrading does not mean giving up enjoying life, but paying more attention to the quality of life. Consumption downgrading allows people to get rid of the burden and stress of overconsumption, so that they have more time and energy to do the things they love, such as studying, sports, traveling, etc. Consumption downgrading can also make people appreciate what they have more and develop a sense of fulfillment and contentment.
On the downside
1. The sluggish consumption affects the internal circulation of the economy
Consumption downgrading will have a certain negative impact on economic development. At present, consumption has become an important factor driving economic growth, and when consumers reduce their consumption spending, it will affect the sales performance and profits of enterprises, thus having a negative impact on the entire economy. Especially in the current global economic situation, a downgrade in consumption could exacerbate the risk of a recession.
If most people choose to downgrade consumption, it will lead to a decline in market demand, which will affect the production and sales of enterprises, and then affect economic indicators such as employment, taxes, and investment. Consumption downgrading can also discourage innovation and competition, leading to a decline in the quality or homogenization of products or services.
2. Reduce people's living standards
Consumption downgrades can have an impact on people's quality of life. The level of consumption directly affects people's quality of life. When consumers reduce their spending levels, they may reduce their purchases of high-quality goods and services, which affects their health and quality of life.
Consumption downgrading may cause people to miss out on some opportunities to improve their living standards, such as buying new technologies, new products, new services, etc. Consumption downgrading will also make people lose some of the pleasures of enjoying life, such as tasting food, watching performances, participating in socializing, etc.
In addition, the downgrading of consumption may also lead to changes in socio-cultural values, making people pay more attention to pragmatism and material comforts to the neglect of spiritual pursuits and cultural values.
3. Cause psychological problems
Consumption downgrading may make people feel negative emotions such as low self-esteem, frustration, anxiety, etc., especially when they see that the people around them are still spending at a high level. Consumption downgrading can also make people lose motivation and confidence, affecting their work and study efficiency.
In fact, the reason for the downgrading of consumption in the mainland is directly related to the excessive development of real estate in the past 20 years, which has led to a serious property bubble. According to the principles of economics, the modern economy generally uses credit overdraft consumption to increase domestic demand, if moderate, it is conducive to economic development, however, excessive overdraft consumption is harmful to the economy.
Because loans are cyclical, driven by the national housing speculation boom, people do not hesitate to use three generations of six wallets to pool money to buy a house, the consequence of this is that 400 million house slaves have overdrawn their income in the next 30 years in advance, use the income of the next 30 years to buy a house in advance, and then repay the loan to the bank in installments every month.
In order to repay their mortgage on a monthly basis, they must lower their standard of living, cut back on food, frugality, and budgeting. In such a situation, how can their consumption not be downgraded?
From the perspective of economic development trends, consumption upgrading is bound to be the trend of the times, because human society is constantly developing, and the purpose of our economic development is to meet people's yearning for a better life, improve the living standards and quality of all people, and protect and improve people's livelihood, enhance people's well-being, so as to promote the overall progress of society.
At present, China is at a historical juncture of overcoming the "middle-income trap" and moving towards a high-income country. To achieve this leap, it is indispensable to upgrade the quality of consumption. The increase in per capita disposable income will inevitably bring about the improvement and continuous upgrading of consumption power.
New consumption concepts such as green, safe and shared will be deeply rooted in the hearts of the people, and people will no longer be satisfied with low-quality and low-cost products and services. Personalized, niche, and high-end demand will become the future consumption trend.
It can be seen from this that the downgrade of consumption is only a temporary phenomenon in the current state of China's economy, which is determined by the stage of economic development of the mainland, when China's economy completely gets rid of the predicament of the property market and the stock market, and regains its vigor and vitality, a new round of consumption upgrading will surely come as scheduled.
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