2024 Consumer Track May Be More Difficult

This article analyzes from many aspects and compares with the Japanese economy to conclude why the consumer track may be more difficult in 2024. In the face of such great pressure, how can we overcome difficulties and find our own direction?

1. It’s a bit of a headline, but it’s not bad news

I usually don’t dare to talk about such grand questions.

First of all, it is sensitive. Content that criticizes others will not last long (of course, I am not criticizing others in nature).

The second is contempt. They run around every day for 3 packets of instant noodles with seasoning, but they keep saying "you have a hard time" to the big guys who earn 300 million or 3 billion a year... It's the fate of leeks, they have to say the lines of kols.

Finally, the predictions are basically inaccurate. I remember that CICC made 10 predictions last time, and after the New Year review, only 1 was accurate. Another friend complained that his boss always issued the top ten predictions at the beginning of the year, and they were never accurate for several consecutive years.

I said, this might be to confuse the opponent.

But what finally got me talking about was my damn vanity. I saw a project before and fell in love with it at first sight. I thought it could be the next Starbucks, so I boasted about it to every friend I met.

Then I checked all kinds of data and information, but the enthusiasm of three minutes gradually cooled down, and I wanted to back off. What should I do with the boast? I wrote an article to confuse these friends, so I came up with "The consumption track in 2024 may be more difficult."

It's a bit slow to enter, let's get down to business.

2. Consumption has dominated China’s economy for at least 10 years

First of all, I want to make a clear statement. I think that overall, the domestic consumer market is absolutely strong.

I mentioned in my new book, Reinventing Consumption, which was more difficult to give birth than a porcupine covered with quills:

Data released by the National Bureau of Statistics showed that in 2014, the three major demands of national final consumption expenditure, gross capital formation and net exports of goods and services contributed 50.2%, 48.5% and 1.3% to the growth of gross domestic product (GDP) respectively, and drove GDP growth by 3.7%, 3.6% and 0.1% respectively.

It is obvious that among the three driving forces of the economy, consumption has replaced investment as the primary driving force, which has also led to the Chinese economy entering a new stage of development dominated by consumption.

This dominance continues to this day. The National Bureau of Statistics shows that in 2023, China's total retail sales of consumer goods reached 47,149.5 billion yuan, up 7.2% year-on-year, contributing 82.5% to economic growth.

Confidence is coming.

3. Then why do you say it is difficult?

With consumption leading the way and things improving so quickly, why would I still say it’s difficult?

The first is that I am very conservative.

Every time I bring something up, I always start with the worst possible outcome, just like every time I go on a business trip, even if the weather forecast says it will be sunny, I will still carry an umbrella in my bag.

For many small and medium-sized enterprises, as long as they are not under lockdown due to the epidemic, the macro-economy does not have much impact on them, and they can just focus on their own business. But as Alibaba CEO Ma said many years ago, we must constantly remind ourselves to repair the roof on a sunny day, because it will be too late when it rains heavily.

Second, from a macro perspective, the ceiling of the entire economy has actually been lowered.

The capital shortage in 2018 was finally overcome, and everyone thought that 2019 would be able to take off. But 2019 was unexpectedly difficult.

At the end of 2019, when everyone thought that 2020 would be a great year, Meituan CEO Wang said that 2019 was the worst year in the past decade, but it might be the best year in the next decade. When the epidemic came, CEO Wang was really good at fortune-telling.

In fact, former Alibaba CEO Wei said it well at the time. The epidemic is not the epidemic. The epidemic is just an accelerator . The entire macro-economy has reached this point. People who manage funds and play with capital are more or less one step ahead of us in cognition.

Three years into the pandemic, all losers blamed the pandemic. When they wanted to make great plans in 2023, the sudden cold snap in late spring left many bosses with nothing to show for it. Why are the accounts of many companies not doing well in 2023 without the pandemic? I have found an excuse for everyone: the general economic situation.

How is this trend developing? Here are my personal opinions:

① Japan’s Lost Thirty Years

According to a report by Nomura Orient International Securities, in 1992, Japan's household consumption growth rate dropped sharply from 8% to 2%. In the following 30 years, the data never rose by more than 1% for two consecutive years. It was not until 2022 that Japan's household consumption growth rate exceeded 5% again.

This is known as Japan's lost 30 years.

On the other hand, a large number of people working in the consumer sector are learning from Japan, saying that Japan's consumer market is at least 30 years ahead of China.

This logic is tossed around like this. Adding the development data of 2022/2023, it feels like the next 30 years will be an open-book exam.

Of course, our social system is different, which means we are likely to enjoy the "protagonist halo". 30 years becomes 3 years? No one dares to make a final conclusion.

② Kondratieff cycle

In addition, a more scientific discussion usually starts with the economic cycle. This year, Professor Wu Jiuling mentioned the Kondratiev cycle in his annual speech. This is an economic cycle discovered by Russian economist Kondratiev, which is divided into four stages: recession, recovery, prosperity and recession, which lasts about 50-60 years.

Mr. Wu said that we are in the third stage of the Kondratieff cycle, but we don’t know “how long this wave will last”. In other words, has the fourth stage arrived? Or how long will it take? The big guys will definitely say they don’t know, and the bosses will feel it themselves when they look at the account books.

③ Kuznets cycle

If Professor Wu hadn’t mentioned the Kondratieff cycle, it would have been gathering dust in my brain along with my college textbooks. Now that I have opened my memory box, I can introduce another cycle to you: the Kuznets cycle.

Apparently, this was proposed by a man called Kuznets, an American economist, who proposed an economic cycle of 15-25 years, with an average length of about 20 years, based on the boom and bust of the construction industry.

I don't know if it's right, but our teacher mentioned it at the time, saying that based on the experience of countries like the United States and Japan, this cycle takes 17 or 18 years to go up, then it will decline for three or four years before going up again.

Attention, if you are thinking of buying a house, please check the calendar.

Of course, the economic background of the above two cycles is capitalist countries such as Russia and the United States. They are not applicable to us.

For example, after my country changed from welfare housing distribution to housing system reform in 1998, it should have entered the downward phase of the Kuznets cycle around 2008 or at the latest in 2013. However, after the 2008 financial crisis, our "four trillion" stimulus package provided a wave of stimulus, and this upward phase lasted until 2018 or even now.

Real estate affects consumption. This industry has too many industry chains and horizontal stakeholders. If real estate is not doing well, cement, building materials, furniture and home furnishings will all be in trouble. Who will consume?

The pressure is increasing.

The third is that the competitive pressure is increasing.

Let’s look back at the past 30 years. I can’t study further back than that.

Let's look at the mass consumer market, which is the market where prices are not that high and can be accepted by most people. In the 1990s, this market was mostly occupied by domestic companies, and there was no obvious brand perception at that time. I remember buying white mesh shoes when I was a child, but I still don't know what brand they were.

After the millennium, this situation began to change: people bought White Cat and Liby laundry detergent, Doublestar shoes, Mengniu and Yili milk. Local companies began to build their own brands.

But many international brands also joined in. Safeguard became a name for soaps, and Always even became a name for sanitary napkins for a while. From a big picture perspective, competition has begun.

Now we see that there are too many international brands in mass consumer goods. Not long ago, a girl in my team said that Dabao is not a domestic product... I held Dabao and thought, how about changing it to Longliqi?

In addition, the new consumption wave that started in 2019 attracted a large number of people from other industries. Internet people came to make consumer products. Yuanqi Forest and Luckin Coffee are examples. Other examples include online clothing customization, door-to-door manicure, and door-to-door massage (except for the marginal ones, which are beyond the scope)...

The competition is getting more and more intense.

Fourth, channels are becoming increasingly difficult.

Xiao Ma Song said that channel capabilities almost determine the life and death of a startup company. If consumer products want to open up channels now, the conventional way is online + offline.

Online is difficult. Tao/Jing/Pin, we have talked about the disappearance of traffic dividends for many years, no need to explain too much.

Douyin, a new channel, seems to be a traffic depression. In fact, it is also a traffic pit. A large number of Douyin brands are like the pigs squeaking on the chopping board these days, which are raised and then slaughtered.

Many brands have indeed achieved explosive growth on Douyin, and it can even be said that the biggest problem now is that the supply chain cannot respond. Then they work hard to build the supply chain and speed up sales.

Will this continue? The larger the brand's sales scale, the more marginal returns it will have . Whether it is platform intervention or business rules, you will find that the ROI is getting lower and lower, and the repurchase rate is getting lower and lower.

But you can't stop at this time. Once you stop, sales will drop. What will happen to your supply chain?

A brand has given an example before, where 70% of the revenue went to bloggers, and the brand became the leeks of the platform and bloggers.

Will offline business be better? Not really. Catering relies on Meituan Dianping, and consumer goods rely on new channels like Hema. But Hema has started to launch its own brands. I went to Hema today and saw that many craft beers and liquors were its own brands. When I saw the OEM factory, I found that they were also well-known new consumer brands.

Once a channel brand launches a private product brand, its brand and culture may not be that important. Everything is endorsed by the channel influence, and consumers are more likely to accept it.

At this time, the brand has no choice but to go back and deepen its own supply chain to ensure that the wine sold by Hema is produced from your brewing base, and even the sorghum is grown in your fields.

But what about the brand tax you paid for advertising in the past? It may be difficult to get it back from consumers.

4. Why might 2024 be more difficult?

In fact, most things existed before, so why do we have to target 2024?

First, looking at Japan’s lost 30 years, they also woke up and entered a low-profit society after adjusting for one or two years and began to generally engage in refined operations. The domestic market should accept this.

Second, everyone has high expectations for 2023, so there will be a lot of disappointment. I want to pour some cold water on them, especially those good friends, don't waste time, just grow slowly. If you don't do well, you won't be disappointed, and if you do well, it will be a surprise.

Third, I found that a large number of bosses have this hunch. Some bosses with capital think this is an opportunity, so they start to pick up bargains everywhere; bosses with tight funds are also taking big actions, shrinking and strengthening the regional markets with top revenue levels to consolidate their foundations - each one is preparing for 2024.

Of course, difficulty is the most common thing in doing business and starting a business. Whether it is the Kondratieff cycle or the Kuznets cycle, in fact, there is no heartbeat game like the stock market, most of them are volatile and rising.

We must firmly believe that, overall, tomorrow will be better! ):

Smile, finish, and scatter flowers.

Author: Huang Xiaojun; Official Account: Jingyan Brand Lab (ID: JingyanLab)