"Lack of consumption power" is the biggest shield in 2024

In the current economic environment, the weakening of consumer power has become a hot topic. This article deeply analyzes the multiple factors that affect consumer power, from the decline of the wealth effect to the changes in consumerism, to the lack of innovation in product supply, and the impact of emotions on consumer behavior, providing us with a comprehensive perspective.

Consumption is a huge topic. No single reason can explain everything that is happening.

In essence, the current consumption situation is the result of a combination of multiple factors. There is also a concept called fallacy of composition in economics, and this phenomenon may also occur in consumption.

This article cannot cover all the factors related to consumption power, and we welcome your comments. We will not cover the ones that are too macro because they are easy to go into nothingness.

01

Consumption was very good in the past few years, partly due to the wealth effect.

What is the wealth effect? ​​Simply put, it is a group of people who spend money freely because of the pleasure brought by the appreciation of their assets, so Mercedes-Benz, BMW and Audi have been booming in those years.

Because people at every wealth stage have the desire to reach up, and because of overly optimistic expectations about future asset appreciation (especially in hindsight, but irrational at the time), many people at that time would take out loans to buy cars that were higher than their full payment ability, and spend more than their income each month.

His actual situation may be that he pooled together six wallets to pay a down payment of 1 million yuan to buy a house worth 3 million yuan, with a loan of 2 million yuan. The couple's monthly cash flow may be between 15,000 yuan*2 and 20,000 yuan*2, which is 30,000 to 40,000 yuan/month. The mortgage is about 14,000 yuan, leaving 16,000 to 26,000 yuan for other expenses. Of course, people who are short of money will save some money.

At that time, the housing price may have doubled again, and the house may have reached 6 million yuan. After deducting the loan, the net assets would be 4 million yuan. Often at this time, people have forgotten that they have a loan because they think it is not a big deal and their income will continue to increase.

So at this time, many people's consumption will reach a level that is higher than their actual ability in all aspects.

We have not considered the effects of multiple houses and equity here. If they are local natives in medium and large cities, it can be considered that the monetization of their demolished houses is a cost-free business, which is basically equivalent to giving away millions to tens of millions of yuan for free (most people do not have dozens of demolished houses).

For the first batch of white-collar workers, hard-working people and businessmen who came to Shanghai early, if they started buying assets before 2005, it would be almost like giving them away for free.

Many of my friends around me achieved historic highs in their nominal total assets during those years.

The Davis double buff (meaning double superposition) happens every day, and every day is exciting. It is normal for equity to appreciate tenfold in a year in the VC era, and it is not uncommon for stocks to rise 30CM in a week. Chinese stocks were once so eye-catching.

So the most popular saying at that time was - how much money can you spend on food and drink? Big money can't be saved, it has to be earned.

02

Yes, even today’s big money is not earned by saving.

But you really have to be careful not to spend the small amount of money if you don’t have big money coming in.

If there is a Davis double-click, there will be a Davis double kill (doublekill means double critical hit), which is something that happens in any market.

Therefore, many people who complain every day seem to be very confident and righteous, but in fact it is because they had no sense of risk in the past. As former vested interests, their path is now invalid and they did not leave in time, so they are reduced to their original form.

Take the friend who just bought a house for 3 million yuan. His current situation may be that the house has dropped back to around 3 million yuan, and it is very likely that one of him and his wife has encountered a cash flow problem, such as being laid off or having a salary cut, and the current cash flow is only enough to cover the loan.

If he had not saved money before, he would have to take out some consumer loans, and the money he saved before would have to live off his savings. Now that his net assets have returned to around 1 million yuan, will he still maintain his past consumption that exceeds his current status?

This does not include examples of those who bought houses at the highest prices. I believe that the bands I have selected here are still relatively mainstream, and I will not talk about the most exaggerated ones.

03

I think another important reason is that in the past thirty years when consumerism was prevalent, all the tricks that should be played have been played.

For example, forcing a man to buy something for a woman, and if she doesn’t buy it, it means she doesn’t love her.

Nowadays, men immediately click "hate" when seeing such posts, and ask them not to send me any more messages. The dog-licking economy has collapsed. Nowadays, many people are overwhelmed by various Valentine's Days, which puts them under great mental pressure. Chinese companies wish that Chinese men would celebrate the Valentine's Day of hundreds of ethnic groups around the world.

For example, she was anxious about her body shape and brought a lot of useless diet pills to the house. My mother has been harassed countless times since the radio era, but now she is not worried about it anymore, or maybe she is old and no longer has anxiety about her body shape.

When shopping malls were first established, most people felt that they would lose face if they didn’t buy anything when they went there, and they were easily pressured into making purchases by the salesperson. Now, this lack of confidence is long gone.

When big restaurants first appeared, people were afraid of being looked down upon if they ordered too little. Now, when you walk into a five-star hotel, you open Meituan Group Buying and start looking for a set meal, saving where you can and spending where you can.

I used to say that if you miss this level of discount, you will never get it again this year. Later, I found that the two-yuan store will go bankrupt if it is not managed well. This is a business model. I haven't used up the toilet paper I stocked up last year, but I'm being tricked into stocking up again on Double Eleven this year. But because I know that the price is about the same at any time, I have no desire to stock up.

In the past, there were all kinds of metaphysics that could cure all diseases, and many people were fooled. Now, we cannot say that there are no such things, but long-term illness makes a good doctor.

I think the above has nothing to do with whether one has money or not, or whether assets appreciate or not. It is just a normal change in consumers' "resistance" after being baptized by consumerism for so many years.

Whenever your sales are strongly tied to past routines, it will be difficult now, and this group of people don’t really want to change, they just lament the bad environment.

04

Current consumption is also largely related to product supply. I have been to more than 40 countries of all kinds, and the thing that makes me want to buy the most during my travels is Japanese pastries. Even a train station in Japan has its own co-branded products with manufacturers. For example, Nestle KitKat chocolate has about a thousand co-branded products in Japan. All attractions, all airports, and all train stations have different co-branded products, and there are also seasonal limited editions.

But consumers are also reluctant to spend money on Yiwu small commodities, rice cakes and thousand-layer cakes that are sold in scenic spots in China at a fraction of the price (I don’t mean to be unpatriotic, I think China’s beautiful scenery, mountains, rivers, lakes and seas, and historical heritage of various places completely crush most countries on this earth). So at this time, is it reasonable to attribute the problem to a lack of purchasing power?

Or are our tourism product packages still stuck in the past? We always hope that the business will be similar to the scam model of tour groups thirty years ago, tricking old ladies into buying fake jade and silverware. Is this possible?

I even think that it would be more appropriate to rename all the newly built ancient cities and towns in China as Yiwu Wholesale City, mainly selling Yiwu products, super giant squid, old yogurt, and wooden combs.

Here is another example:

More than ten years ago, when I went to Japan for the first time, my tour guide from Northeast China took me to a fake duty-free shop run by people from Northeast China to buy natto essence and a towel that would turn into a naked woman when it came into contact with hot water. I believe many people have encountered this.

More than a decade later, is it possible that some tour guides still want to make money this way? They just count on the fact that more and more people are going there for the first time, and they simply reap the demographic dividend.

But now there is a group of high-spending people who go there for the weekend. You can't imagine how they spend money. They may spend 5,000 RMB on a private hot spring. It is impossible for them to buy natto essence from you. Then you still say that the current tourists have low spending power.

This is the current situation of many scenic spots in China.

We don’t really want something no matter how cheap it is, and this cannot be attributed to lack of purchasing power.

05

The rapidly rising brands we have seen in recent years have, in essence, upgraded their quality while lowering their prices. For example, Bawang Cha Ji directly borrowed the monogram style of Louis Vuitton and Dior and printed it on the packaging. It opened stores in shopping malls that are the same size as Starbucks and have the same displays, but the prices are the same as those of Cha Baidao and Shaoxiancao on the roadside.

If you drink a glass of Bawang, you will drink one less glass of any other brand. After all, the demand is limited and it is impossible to expand indefinitely, so some people will feel that the business can no longer be done.

Nipple pleasure, lipstick effect, and spending little money to get a sense of satisfaction are appearing in all walks of life.

06

Let’s take the small category of nuts as an example.

Nuts are a typical snack consumption upgrade product that only appears after eating and drinking. You can't spend money to buy nuts without eating a full meal.

More than 20 years ago, buying cashews in a supermarket was a high-end consumption behavior and the price was also very high, much higher than today's price, because there were not so many people buying it and the supply chain was not as complete as it is today.

20 years later, cashews are not rare anymore, at least in second-tier and above markets, the price has long been lowered. As production capacity increases, more and more people are involved, and the price is getting lower and lower.

Total GMV = sales volume x unit price, this is a very simple truth.

For a long time, we relied on the continuous growth of sales to offset the price reduction and increase the total GMV. This is a cycle that does not require any thinking and is called the best golden age.

Today, the unit price is almost at the ground level, and the total demand based on this unit price (cost price) is also saturated. So GMV has reached its peak.

If you apply the above formula to wholesale business, that’s basically it.

But now there are all kinds of small bags of nuts (more than a dozen kinds of nuts are mixed in them), and now these small bags of nuts are also distributed on planes. If one airline distributes them, other airlines will follow suit.

Nowadays, when companies provide benefits, they also choose more practical things, such as a box of nuts.

For example, there are various flavors, such as those coated with lactic acid bacteria, which I like to buy. For example, many yogurt cups now come with a bag of nuts, which can be mixed with food.

And made into nut bars, turned into fitness calorie supplements and other products.

Alternatively, you can put yourself into a large channel like a snack shop and expand your business to the lower-tier markets.

With this in mind, there is a cure for business. Nut companies that can quickly transform themselves into snack and fast-moving consumer goods companies have seen good growth in recent years.

So in essence, what is happening in many industries is structural relocation.

At this time, very high capabilities and willingness to transform are required.

07

Emotions themselves are also an important influence.

For example, at noon, when four or five people are having a meal together, if everyone else orders chicken drumsticks, you might also order one. At night, when everyone suggests having another drink, you will most likely join in. The same goes for the other side.

At present, many times, I even feel that emotions are driving down consumption. In fact, some people have money in their pockets, so they can afford to eat the chicken drumstick. They just feel that they need to match their emotions and should not eat the chicken drumstick, otherwise they will seem out of place. Why not eat meat porridge?

The same is true for the hotel industry.

The leaders have taken the lead in staying in economy hotels, so shouldn't everyone be more careful? But does the company really have no money to pay for the executives' business trips? Not really, but this statement is very important, very important.

If we assume that the total room nights demanded by society remain unchanged, but the business travel that accounts for the majority of the room nights has been cut from 700 to 500, then 40% of the room nights have disappeared, and if spread to the entire industry, it is more than 8-10%, which is roughly consistent with the data released by Beijing. So what happened at this time? The product is designed to give the feeling of staying at 700 when staying at 500, and it has skyrocketed. Because it is difficult to go from luxury to frugality, no one wants to reduce the living experience when traveling.

The main 700-room hotel didn't know what it did wrong. The general manager squatted in the lobby for a long time and couldn't see what it did wrong, but it seemed that a group of customers had disappeared, and they used to be frequent travelers. The 700-800-room hotels even gave breakfast to a larger proportion of customers, upgraded the room type, and gave souvenirs. But nothing changed, and the problem may not be with them.

Of course, this is not the only reason. The composition factors are multiple and complex, so the fallacy of composition occurs.

This also happens in the following dialogue:

Buy one less piece of clothing.

Buy one less pair of shoes.

Order one less main dish when eating, there will definitely be enough food anyway.

08

Attribution is a complicated matter that concerns human nature and psychology.

Simple attribution is crude and simple, but it also blocks one's own way out.

Only by breaking away from one's own class limitations (as much as possible, although it is difficult) can one get a little closer to the truth.

Finally, I must emphasize that this article cannot cover all the factors of consumer problems. I just shared some of the ones I think are more important.

You can also add more in the comments section.

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