In the era of inventory, it is the best time for retail to actively seek change | Annual trend

In 2024, when the retail industry is facing difficulties and changes, how companies can find incremental growth in the existing market has become a key issue. This article summarizes the key trends in the retail industry in 2024, including K-shaped differentiation of consumption, retail returning to the essence of goods and services, the importance of omni-regional operations and user stickiness, and the trend of digitalization of industrial belts and brand overseas expansion.

What kind of year will 2024 be for the retail industry?

2024 is a year in which the difficulties continue.

According to statistics from the China Chain Store & Franchise Association, 55 of the top 100 supermarkets in 2023 had negative sales growth, which is almost the lowest point in the supermarket industry. In 2024, retail sales data showed that national catering revenue from January to August increased by 6.6% year-on-year, the lowest growth rate in nearly a decade. This is the recovery period after the epidemic, but the expected consumption rebound did not occur. The pressure of declining performance has caused many businesses to join the price war, and the discount model has also developed rapidly.

2024 is also a year to seek change.

In April, Pang Donglai helped BBK, marking the beginning of retail reforms; in June, the most difficult 618 shopping festival in history ended, and the e-commerce platform’s low-price goal was initially achieved, with the focus of competition shifting to GMV; in September, MINISO announced that it would acquire a controlling stake in Yonghui; in December, Alibaba sold Intime Department Store, and the transformation of offline retail by e-commerce finally came to an end. Adjustments and actions in the retail industry continued throughout the year.

Although the retail environment is different, the positive enterprises have proved with their actions that the essence of retail, "goods and services", has returned. Without destruction, there is no construction. Organizations that aim to build resilient enterprises will never give up their determination to move forward and their motivation to innovate under any circumstances. In the overall stock market, they adjust their expectations, adapt to the current low growth situation, revitalize the stock, and look for growth.

On this basis, based on Narrowcast’s observations and reflections on the retail industry for a whole year, we chose to take "finding incremental growth in existing stock" as the main line, summarize the key retail trends in 2024, and based on this, give several development forecasts for 2025.

Key trends for 2024:

1. K-shaped differentiation of consumption: efficiency-driven operations are healthier

The low-price banner of 2023 is raised by online Pinduoduo and offline "Pinduoduo" (discount channels for snacks). Pinduoduo's market value once exceeded that of Alibaba, and snack discount stores such as Snacks Are Busy opened 20,000 stores in two years, which made the market take a new look at the power of the four words "small profits but quick turnover".

However, in the consumer sector, economies of scale and low prices have never been the only solution. Under the general trend of consumer stratification, individual consumers are also experiencing K-type differentiation: they pursue low prices and white-label products for mass-market goods, but they still have a passion for products that provide unique experiences and reflect lifestyles. The popularity of Pang Donglai, Sam's Club, and local cultural tourism, which combine experience and quality consumption, is an example.

Especially in the first half of 2024, the low-price involution that disregards business common sense began to show negative effects. For example, the relationship between large online and offline retailers and suppliers has been repeatedly exposed, and the low-price quagmire faced by the industrial belt has also led to the frequent occurrence of bad money driving out good money.

The strategic adjustment started in the second half of the year. More and more retailers are learning from Pangdonglai and introducing first- and second-tier big-name products. Taobao, Douyin e-commerce, Pinduoduo and other platforms have also successively changed their main phased goals from low prices to achieving GMV growth.

Because differentiation does not mean that consumers have given up their pursuit of product quality. Especially in the stage of oversupply, merchants need to create value for consumers and their own sustainable development from an efficiency-driven perspective.

Take Youming, a snack brand that has quickly opened thousands of stores, as an example. On the one hand, it directly connects with source manufacturers and optimizes procurement links to pass on benefits to consumers and achieve sufficiently low prices. On the other hand, it uses the digital capabilities of Tencent Smart Retail to optimize site selection and marketing, thereby improving operational efficiency and performance and reducing trial and error costs.

Therefore, in the context of consumer differentiation, improving efficiency and enhancing operational resilience through digital means will become a basic capability for businesses.

2. Retail returns to its essence of “goods and services”

In 2024, Pangdong's revenue will reach nearly 17 billion yuan, doubling from two years ago without a significant change in the number of stores; Sam's Club China's annual omni-channel sales will exceed 100 billion yuan, also achieving double-digit growth.

Their success is due to their return to the essence of retail "goods and services". Take Pang Donglai as an example. Its own-brand products such as baked goods, cooked food, and tea are highly sought after, making product power an advantage for positive learning in the supermarket track. Moreover, it proposed the service concept of "return if not satisfied" a long time ago. For example, the shelves are equipped with magnifying glasses for the elderly, and commercial spaces are sacrificed as rest areas for consumers.

The same is true for foreign retailers such as Sam's Club and Aldi, who have become category experts by relying on their purchasing advantages in the global supply chain. Whether it is Aldi's 9.9 yuan value series or the tens of thousands of "Sam's Must-Buy List" notes on Xiaohongshu, they are all reducing the cost of choice for consumers through the continuous accumulation of product trust.

At the same time, they use localized thinking to improve digital capabilities, connect online and offline through mini programs, and provide services through corporate WeChat. For example, Sam's official App provides "Extreme Speed" and "Citywide Delivery" services. After becoming a member, you can join the corporate WeChat community in the corresponding area to obtain one-on-one customer service and daily consultation, product information and other services. And they will also improve efficiency from the cloud infrastructure level through cooperation with Tencent Cloud, ensure the efficient operation of upper-level product capabilities and data, and further ensure the stability of front-end products and services.

3. Global operations to increase volume, user stickiness to increase stock

The essence of retail remains unchanged, but the industry has changed and consumers have also changed. Therefore, retail companies must not only return to their essence but also accumulate new capabilities.

In 2024, more and more businesses began to talk about "omni-domain management", using digital means to achieve online and offline integrated management, brand and channel combination, and further connect the public and private domains. For example, last year, Jiangnan Buyi and Shenyang China Resources MixC jointly built a Lianyu Mini Program Mall (Shenyang China Resources MixC Jiangnan Buyi+), connecting the content, membership, payment, activities, etc. of both parties.

The short-term dividends of full-domain operations come from the public domain. In the era of stock consumption, the traffic dividend has dropped sharply, and companies are forced to accept the reality of low growth. In many cases, this low growth needs to be achieved by increasing sales channels and expanding the boundaries of public domain operations, which is costly.

Therefore, only by paying attention to exploring the needs of existing private domain users and fine-tuning user operations can the value of traffic be maximized.

In 2024, many excellent cases emerged, such as Alibaba's 88VIP and Meituan's God Member, which increased subsidies and expanded the scope of application this year; individual brands such as FILA also set up phased service content for consumers after purchase to create a full-time accompanying service experience, and members contributed 90% of its sales performance. Cotton Times has improved user stickiness through tools such as corporate WeChat, mini programs, and video accounts, and has accumulated more than 53 million global members by the end of 2023.

4. Digitalization of industrial belts drives a virtuous cycle of supply and demand

We have been discussing why the platform needs to pay attention to industrial belts since 2023. Today, the importance of industrial belts is becoming increasingly clear.

Around Double Eleven in 2024, platforms such as Pinduoduo and 1688 will launch further initiatives to support new quality merchants. With the help of the platform's digital capabilities, they will provide full-link support to merchants in products, marketing, operations and supply chains, helping to upgrade the industrial belt.

The reason for this round of efforts is to solve a new round of supply and demand mismatch problems: low-price competition has dragged many industrial belts into the struggle of falling both volume and price, but some consumer demands are still not met, such as the demand for emotional consumption based on rigid needs and the demand for small-scale wholesale.

These changes in demand will also affect the way the industry circulates. For merchants in the industry belt who used to be more engaged in B-end OEM and OEM, it is difficult to realize their accumulated manufacturing advantages. For example, e-commerce operations, communication with consumers, and even overseas expansion are areas they are not familiar with.

At the same time, some merchants in the industry belt that have been trapped in traffic hijacking and price involution have begun to awaken their awareness of independent operation. They are trying to get out of the false prosperity of burning money for traffic, break the platform restrictions, and transform and upgrade in the direction of branding. Establish their own private domain, provide consumers with unique products and differentiated information, and ensure competitiveness.

At this time, it becomes even more important for platforms with To C understanding and digital capabilities to help and support industrial belt merchants. A group of industrial belt merchants with stronger digitalization and retail capabilities will stand out.

For example, Jingdezhen launched the Taobo City Selection Mini Program in 2024, attracting more than 250 brands to settle in. Tencent Smart Retail's research and development, operations and other special teams have taken root in Jingdezhen, and with more than 300 days of hard work, they have helped merchants master the operational capabilities of video live streaming, corporate WeChat and mini programs. So far, the product platform has created 60 million GMV.

5. Going overseas to seek new growth

By 2024, it has become a complete consensus in the industry for consumer brands to go overseas.

Regarding the overseas expansion of trendy toys and sundries, Pop Mart and MINISO have set industry benchmarks. Pop Mart's overseas revenue in 2024 is expected to exceed the company's overall revenue before its listing (1.69 billion yuan), and MINISO is also expected to achieve a 50% share of overseas revenue in the next two to three years.

It is more difficult to export food and beverage products overseas because the taste preferences of a region are closely related to its history and culture, and the export of related categories is still concentrated in the Chinese community.

At present, the exploration of tea beverages to go global in Southeast Asia is the most successful, because Taiwanese milk tea is still the mainstream in the local market, while in the Chinese market, the enthusiasm for Taiwanese milk tea has turned to new tea drinks after 2015, entering the next stage. Therefore, in terms of products, the development speed of Chinese tea beverage brands is faster.

More importantly, the degree of digitalization of membership marketing and supply chain in domestic tea drinks is already quite high. For example, Shanghai Auntie has implemented a digital strategy since 2020. It currently uses products such as Qidian Marketing Cloud to stratify nearly 100 million users and operate according to personalized needs, which has significantly increased the repurchase rate and coupon redemption rate. These experiences can also help improve the success rate of enterprises in the process of going overseas.

How to break the deadlock in 2025:

As we enter 2025, with the basic structure of the existing or even shrinking market remaining unchanged, how we can navigate through the cycle, or move forward steadily, or accumulate strength to break through, will be the focus of our attention.

Each platform is also trying to bring new solutions to merchants. For example, Tencent upgraded its video store to WeChat store in August 2024, and plans to use WeChat store as an atomic component to connect the entire transaction and product delivery system including mini programs, video accounts, service accounts, and corporate WeChat, bringing more room for imagination to merchants. Douyin e-commerce is also working on low prices and only refunds.

On this basis, the consumer market in 2025 will usher in more changes.

6. Channels continue to differentiate

We have cited the BCG report many times, comparing the current retail stage to the United States in the 1980s, facing similar social systems and the impact of declining consumer incomes. Since then, the retail formats in the United States have undergone a great degree of differentiation, rapidly evolving from 5 to 20, with the emergence of formats such as boutique organic supermarkets and specialty supermarkets for different groups.

Behind the channel differentiation is the consumption differentiation. From a geographical perspective, in the third quarter of 2024, the growth rate of total retail sales of consumer goods in most second-tier cities in China exceeded that of first-tier cities. Under the impact of the economic cycle, wealthy and leisure consumers in county areas have shown stronger consumption resilience. From a category perspective, industries such as cultural tourism and outdoor have higher growth, and more and more consumers regard them as part of their lifestyle.

This will lead to a further differentiation of retail formats. Discount stores or low prices are not the only solution. Retail formats that target precise customer groups and meet specific needs will have development opportunities.

For example, we believe that in addition to snack shops, vertical specialty stores such as drugstores and jewelry stores have also reached the point of upgrading. The popular Pangdonglai gold shop, tea shop and Laopu gold jewelry store have already shown similar signs. In the process of upgrading a large number of specialty stores, franchising is still the core grasp of the rapid expansion of various channels. How to use advanced productivity and production relations to manage and empower franchisees will be the core test.

7. Quality consumption is about to emerge

Zhimeng Consulting's annual trend survey shows that in 2024, consumers will be more rational and pragmatic, and 64% of consumers will no longer follow the trend or make impulse purchases; 62% of consumers will carefully read product reviews and ratings to help them make purchasing decisions.

The phenomenon of bad money driving out good money due to low prices has gradually been corrected. For example, the concept of "high-end cost performance" proposed by Three Squirrels is more accepted and recognized by consumers. Some brands, channels and platforms with core consumer trust have also begun to focus more on their core advantages and core users, providing more professional information, products and services.

These trends and the need for refined operational capabilities will continue in 2025. Companies that have more efficient supply chains, more professional intermediary service providers, and more comprehensive retail capabilities (including private domains, membership, content operations, etc., which we have repeatedly mentioned above) will gain broader competitive advantages and create higher-quality consumer experiences.

Decentralization is the general trend, and a new generation of brands is about to emerge

Under the current situation of fierce competition for existing products, the pattern of big brands and big categories has been determined, and the head effect will remain stable in the short term.

However, in the context of consumer differentiation, a group of new brand small businesses will also emerge in large numbers. They do not excessively pursue traffic, scale and growth rate, but instead satisfy the consumption needs of a certain group of people to the extreme through population segmentation and a small and beautiful development rhythm.

Although being small and beautiful also means that the cost of technology may not be friendly to them, platforms that are able to provide low-threshold infrastructure will have the opportunity to become the breeding ground for a new generation of brands.

In this context, we are optimistic about decentralized platforms (referring to a system or organization in which control or decision-making power is not concentrated in the hands of a single entity or individual, but is dispersed among multiple participants or nodes), such as WeChat, which has rich infrastructure capabilities and an open ecosystem and content ecosystem, and the decentralized Xiaohongshu.

8. New digital tools and skills are becoming a necessity. Whoever has digital talents will win the world

Using digital models to stratify users, push personalized marketing information, and adopt A/B group control tests are what we will see brands trying to improve customer acquisition and conversion effects with the help of marketing cloud in 2024. Including store location selection, it is increasingly relying on scientific and intelligent analysis based on multi-dimensional big data, reducing the trial and error costs of enterprises.

These tools alone are not enough. Professionals who know how to use the tools and understand digital development are needed to help companies achieve internal and external collaboration and carry out holistic operations.

In 2024, "User Growth Operator" was included in the "Classification of Occupations of the People's Republic of China", emphasizing the role of skills in understanding operations and user management. Data shows that Tencent Smart Retail has provided relevant training courses to nearly 30,000 companies and nearly 60,000 people in recent years, which also proves the great market demand for such talents.

In 2025, connecting with digital service providers externally and reserving digital operations talent internally should be the company's further digital strategy, helping the company to gain more accurate insights into user needs and achieve sustainable business growth.

Author | Xiao Chao (Kuala Lumpur)
Producer | Shao Lele (Shanghai)