The "Decision of the Central Committee of the Communist Party of China on Further Deepening Reform and Promoting Chinese-style Modernization" deliberated and adopted by the Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed to "accelerate the cultivation of a complete domestic demand system" and "improve the long-term mechanism for expanding consumption", which pointed out the direction and provided guidance for the work of expanding consumption and promoting domestic demand under the new situation.
It is necessary to expand consumption and focus on bulk consumption, but it is also necessary to fully recognize the important role of niche consumption. In recent years, the "niche economy" represented by trendy toys, customized tours, small city tours, domestic beauty, pets, independent coffee, etc. has ushered in a big explosion. What are the characteristics of the "niche economy"? What is the relationship between the "niche economy" and "mass consumption"? To tap the market potential of the "niche economy", how to exert force at the policy level? With these questions in mind, this issue of Jinguan Think Tank interviewed Professor Mao Zhonggen, Dean of the Western China Economic Research Institute of Southwestern University of Finance and Economics.
The "niche economy" has sprung up
It reflects the deepening of consumer market segmentation
Jinguan Think Tank: With the continuous improvement of residents' living standards, niche consumption is becoming more and more widespread. What are the characteristics of the "niche economy"? Behind the rise of the "niche economy", how to reflect the continuous improvement of innovation awareness and technical capabilities of Chinese enterprises?
Mao Zhonggen: In recent years, emerging consumption patterns represented by trendy toys, domestic beauty products, and customized tours have sprung up, diversified and personalized consumption has been emerging, and the "niche economy" has flourished with strong momentum. Taking the pet economy as an example, the pet market boom set off in 2019 has continued to this day, and by August 2023, the number of pet lovers has surged to 323 million, driving the development of pet sales and adoption, pet life services and other industries, and related niche apps have come into being.
As one of the new trends of current economic development, the "niche economy" has the following characteristics:
First, from the perspective of consumers, young people have become the absolute main force of the niche economy. Young people are more inclined to express themselves, pursue uniqueness and individuality, and are proficient in the use of digital technology, willing to pursue new things, and brave to try innovative products, which is a new force to promote the development of the "niche economy".
Second, from the perspective of consumer objects, niche consumer products emerge in an endless stream, and the consumer market has broad potential. On the one hand, due to the influence of factors such as audience groups, living environment, social public opinion and fashion trends, the current popular niche consumption has a wide variety of types and different durations, showing significant diversification characteristics. On the other hand, the "niche economy" is also showing a trend of specialization, marking the deepening and segmentation of the consumer market.
Third, from the perspective of the consumption environment, social media and cultural identity play an important role. The "niche economy" usually revolves around a specific social group, and consumers express a sense of identity with a particular culture in the process of consumption; The "niche economy" is generally shared and disseminated through online channels. Social media platforms have not only become the most effective promotion channel for niche brands, but also broken the time and space constraints of consumer communication and promoted the spread of consumer culture. The "niche economy" requires a more inclusive social environment to meet the preferences and needs of different consumer groups and protect a more diverse supply of products and services.
The rise of the "niche economy" not only conforms to the trend of consumption development of mainland residents, but also reflects the continuous improvement of innovation consciousness and technical capabilities of mainland enterprises.
From the perspective of consumption, with the increase of residents' income level, residents' consumption has gradually changed from survival-oriented consumption to development-oriented consumption and enjoyment-oriented consumption. The rise of the "niche economy" has met consumers' demand for personalized, diversified, high-quality and high-cultural products and services. The "niche economy" has also promoted the diversification of the consumer market. In the future, new personalized needs will continue to emerge, but the trend of residents' consumption evolution will remain unchanged, and in this context, the "niche economy" has become a mature and stable consumption model.
To meet the personalized and diversified needs of consumers, it is inseparable from the support of the production level. Therefore, from a production perspective, companies must change their traditional production methods to achieve low-volume, customized production and ensure an efficient response of the supply chain. First, it is necessary to quickly capture new personalized consumer needs, adjust production plans and product mixes in a short period of time, and respond to the rapidly changing consumer market; Second, we must continuously improve our innovation awareness and production capacity, including product design innovation, production process innovation and business model innovation, so as to maintain our competitiveness; Third, to further strengthen quality control, the "niche economy" needs higher product quality and more unique product characteristics; Fourth, effective supply chain management should be carried out to ensure that production can quickly respond to the market and the timely supply of raw materials.
"Niche economy" in nature
It is an important part of "mass consumption".
Jinguan Think Tank: It is necessary to expand consumption and focus on bulk consumption, but it is also necessary to fully recognize the important role of niche consumption. How do you view the relationship between "niche economy" and "mass consumption"? Is it possible for a "niche economy" to develop into "mass consumption"?
Mao Zhonggen: "Niche economy" and "mass consumption" are not strictly opposed, in essence, "niche economy" belongs to one of the links in the development of "mass consumption". Continental has gradually transformed from a global production plant to the world's largest consumer market, with final consumption expenditure contributing 82.5% to economic growth in 2023, further highlighting the role of consumption as the "main engine" of economic growth. Data shows that in the first half of 2024, the total retail sales of consumer goods in the country will reach 23.6 trillion yuan, a year-on-year increase of 3.7%, and the performance of online consumption is eye-catching, with a year-on-year increase of 9.8% in online retail sales and 8.8% in online retail sales of physical goods, accounting for 25.3% of the total retail sales of consumer goods.
Another significant feature of the development of "mass consumption" is the obvious trend of consumption upgrading. In 2023, the continental Engel coefficient will be 29.8%, falling back to the level of 2017 again. According to the United Nations, Engel's coefficient is in the range of 20%-30% for the standard of abundance. Compared with before the epidemic, the proportion of food, tobacco and alcohol, transportation and communication consumption, and medical insurance consumption has increased, and the proportion of clothing, housing, education, culture and entertainment consumption has decreased, indicating that the consumption structure of mainland residents has continued to optimize and people's living standards have gradually improved. The direction of consumption upgrading has changed from survival-oriented consumption to development-oriented consumption and enjoyment-oriented consumption. According to Maslow's hierarchy of needs, when lower-level needs, which are mainly physiological needs and safety needs, are satisfied, people will pursue higher-level needs based on social needs, respect needs, and self-actualization needs. With the further development of "mass consumption", people's demand for high-quality, personalized and culturally rich products and services will increase day by day.
The "niche economy" is essentially an important part of "mass consumption". With its uniqueness, innovation and cultural value, the "niche economy" has become an important force in promoting the development of "mass consumption" while satisfying consumers' personalized expression needs and the pursuit of cultural identity. Therefore, from another perspective, the well-developed "niche economy" is very likely to be the specific content of "mass consumption" in the future, which depends on whether the "niche economy" can realize the personalized and diversified needs of consumers. Taking new energy vehicles as an example, with the increasing awareness of environmental protection and energy saving, more and more consumers tend to choose new energy vehicles. However, due to factors such as technical capabilities, policy environment and infrastructure construction, the sales of new energy vehicles were low, and after the launch of the new energy vehicle market in 2013, the production and sales of new energy vehicles in 2014 were only 78,500 and 74,800. With the support of policies, with technological innovation and the improvement of the industrial chain, the advantages of new energy vehicles such as "low cost of use", "intelligent technology", "good driving experience" and "design trend" have gradually become prominent, and their market acceptance has gradually improved, and by 2023, the production and sales of new energy vehicles will be 9.587 million and 9.495 million respectively, with a market share of 31.6%.
Create a better business environment
Tap into the market potential of the "niche economy".
Jinguan Think Tank: The Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed to "accelerate the cultivation of a complete domestic demand system and establish a long-term mechanism for government investment to support the construction of basic, public welfare and long-term major projects". To create a better development environment and tap the market potential of the "niche economy", how should the policy level exert force?
Mao Zhonggen: The rise of the "niche economy" is inseparable from the support of policies and the blessing of society and culture. For example, with the increase in the number of pet owners and the prosperity of the pet industry, relevant policies are gradually improving. The government has not only strengthened the supervision of pet food and supplies, but also promoted the development of pet medical, pet grooming and other related industries, providing more diversified and professional services for the pet industry. To tap the market potential of the "niche economy", the policy level can focus on both the consumption side and the production side, create a better development environment for its development, and help the "niche economy" to stimulate "mass consumption".
Consumption level. The first is to strengthen the consumption capacity of consumer subjects. The "niche economy" meets the high-level needs of consumers, and it is necessary to further increase the income of the corresponding consumer groups, especially the young ones. For example, vocational education and skills training should be strengthened to enrich vocational skills and enhance employment competitiveness; Supporting innovation and entrepreneurship, providing entrepreneurial capital support, tax incentives and entrepreneurial guidance services; employment subsidies and partial tax breaks or subsidies for younger groups; The second is to intensify the propaganda of the "niche economy". Although the "niche economy" is aimed at specific consumer groups, it can still strengthen public understanding, eliminate public misunderstandings, and expand the audience through publicity. The third is to strengthen the deep integration of the "niche economy" and digital consumption. The development of the "niche economy" is inseparable from the help of digital consumption, and many "niche economies" rely on digital consumption channels such as e-commerce platforms, social media, and live streaming to promote and disseminate goods. Fourth, optimize the consumption environment and strengthen market supervision. The development of the "niche economy" requires improving the overall quality of products and services, establishing a good brand image and consumer reputation, and strengthening quality supervision, which will help ensure the healthy and stable development of the "niche economy".
Production level. The first is to increase policy support and guidance. Through tax incentives, financial subsidies, credit support and other measures, reduce the operating costs of enterprises related to the "niche economy" and stimulate the vitality of enterprises; The second is to reduce market access. Simplifying the market access process for "niche economy" enterprises can help enterprises quickly respond to market demand and gain consumer recognition; The third is to promote the integrated development of "niche economy" and cultural tourism. The "niche economy" is aimed at specific consumer groups and specific consumer cultures, and strengthens the integrated development of the "niche economy" with cultural consumption and tourism consumption, which will help the "niche economy" to further promote and attract more audiences; Fourth, promote enterprises to strengthen innovation. The "niche economy" can not only promote the deepening and segmentation of the consumer market, but also an important force to promote industrial transformation and upgrading. Taking the new energy vehicle industry as an example, encouraging relevant enterprises to invest in R&D and strengthen innovation will help enhance product value and create emerging demand.
(Jia Yuyun, assistant researcher at the Western China Economic Research Institute, Southwestern University of Finance and Economics, also contributed to this article)
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