2023, the consumer world looks for its own reasons

In 2023, the biggest change for consumers is a return to pragmatism, with "price-sensitive consumption" replacing last year's "wild consumption". Not only has the consumption concept changed, but the demand has also changed from rational and functional needs to perceptual and emotional needs. Let's take a look at the author's analysis.

In 2023, it seems that every platform wants to become "Pinduoduo". Take the issue of "subsidies" for example, e-commerce platforms have collectively fallen into a unilateral carnival of "10 billion subsidies".

During the 618 mid-year promotion, all major platforms shouted out the slogan of "the best in history". For example, Taobao and JD.com used "historic investment" and "618 with the largest investment in the entire industry" to show their sincerity to consumers respectively; and during the "Double 11" period, the "10 billion subsidies" across the entire network made consumers tired of hearing about it. Douyin launched an official instant discount, with the price of a single product dropping by 15%. Kuaishou planned to distribute 18 billion traffic dividends and 2 billion subsidy dividends throughout the year. Vipshop, Xiaohongshu, Bilibili and other platforms have also joined the battlefield; in addition, there are also many dazzling promotional activities on Labor Day, Dragon Boat Festival, National Day, and the upcoming New Year's Day, and there are big promotions almost every month.

All the spearheads behind these "price wars" point to one word - pricing power.

The reason is that this is the inevitable result of the overall growth of the e-commerce industry reaching its peak. For many consumers, returning to "rational consumption" is also the spending philosophy they follow.

The "2023 China Consumer Insight White Paper" released by iResearch Consulting shows that "refinement" has become the key word for consumption this year, and more than 92% of consumers said that they need to plan more carefully or reduce consumption.

Some people call this consumption concept "twisted consumption". They look around and compare products from multiple angles when choosing products; they look for "coupons" everywhere before paying and are unwilling to spend a penny more.

In order to cater to the changing tastes of young people, businesses have to take the initiative to keep up with this "new consumption revolution". For example, on November 30, Liangpin Puzi announced its first large-scale price cut in 17 years, and earlier, Heytea also launched affordable drinks, starting the "low price" trend in the tea industry.

From "impulsive consumption" to "cautious and rational", young people pay more and more attention to "cost-effectiveness" when shopping, and high quality and low price are what they "want to have".

Some young consumers have even used "stingy" as a label for themselves and boldly admitted that they are "stingy". After the joke "It's not that I can't afford XX, but XX is more cost-effective" became popular, the "stingy style" gradually extended from "military coats" to catering, travel, clothing and other aspects.

In 2023, consumers returned to pragmatism and replaced last year's "wild consumption" with "price-sensitive consumption".

1. "If something is expensive, find out why it is expensive"

This year, Li Jiaqi’s “What’s so expensive about it?” meme went viral on the Internet, pushing consumers’ dissatisfaction to a climax.

On September 10, Li Jiaqi, the "top influencer" in the live broadcast room, promoted a 79-yuan Huaxizi eyebrow pencil, which aroused doubts from consumers and then "educated" netizens, saying the words that angered countless people: "How can it be expensive? Sometimes you should look for the reasons yourself. Have your salary increased over the years? Have you worked hard?"

"What can you buy for 79 yuan?" has also caused heated discussions online. According to the official flagship store information, the net weight of Huaxizi eyebrow chalk machete slim version is 0.08 grams. The product contains a replacement core, that is, a total of two refills, with a total net weight of 0.16 grams. The price of the eyebrow chalk is 89 yuan per piece. After conversion, the price of one gram of net weight of the product may be around 556 yuan, which exceeded the real-time basic gold price at that time.

Subsequently, many domestic brands such as Fenghua, Hongxing Erke, Lotus MSG, Hainan Nanguo, and Yuhua launched "super value luxury packages" at a price of 79 yuan in their flagship stores. Fenghua even started to play with the slogan "79 yuan = 5.5 kilograms". The package includes 2 bottles of 1L conditioner and 1 bottle of 750ML shampoo. In other words, 79 yuan can buy 5.5 kilograms of Fenghua products.

Although the "lowest price on the entire network" has become a thing of the past, consumers are still highly sensitive to the prices of various live broadcast rooms. More and more young consumers realize that the most important thing about consumption is to please oneself, not to please others.

According to the "2023 618 Consumption New Trend Insight Report" released by Nandu, nearly 60% of people believe that they have become more rational in their consumption, and more than 60% of respondents value cost performance more, transitioning from the previous fixed channel consumption to the current shopping around. DATA100 data shows that 36% and 24% of respondents believe that they value rationality and planning more after experiencing the epidemic, respectively, while the proportion of respondents who think they value impulse, stimulation, advancement, famous brands, passion, etc. less is more than 25%, showing a consumption concept that is not blind and does not compare.

The old idea of ​​"expensive means good" is no longer feasible. Various brand marketing tactics such as advertising, variety shows, and endorsements increase costs, and these costs are ultimately passed on to consumers. Nowadays, these homogenized marketing methods are difficult to resonate with and to move consumers' wallets. Instead, young consumers are pursuing "quality-price ratio", that is, buying high-quality products at a more affordable price.

Take pearls, which have become popular in the live broadcast rooms of anchors this year, for example. In the impression of many consumers, exquisite and noble pearls belong to high-end accessories, which are expensive and difficult to buy. But in fact, after taking advantage of the live broadcast, the sales volume of pearls across the country has increased significantly. In the first five months of this year, the total online and offline sales of pearls in Zhuji, Zhejiang Province reached 25 billion yuan, which has completed more than 60% of the sales volume of the whole year last year.

Low-priced pearls in Taobao live broadcast room. Image source: Screenshot of Value Planet

Mr. Xu, a pearl merchant, told Value Planet that he has never seen such a lively market in Zhuji in his 20 years in the industry. "This year, supply is really in short supply. We used to get off work at 5 or 6 o'clock, but now we have to stay up all night to queue up for goods. I know that there are a lot of live broadcasts now, and young people love to watch this."

Jeweler Ms. Wu said that in their live broadcast room, you can buy a pair of earrings for more than 20 yuan, and a pearl necklace for 300 or 400 yuan. The best pearl necklace in the live broadcast room is less than 2,000 yuan. With various red envelopes and discounts, basically everyone can afford it. In order to obtain stable traffic, she contacted fashion bloggers on Taobao, Xiaohongshu and other platforms as a drainage port.

Changes on the consumption side are also forcing reforms on the supply side. Some consumer brands that respond quickly to the market have begun to "look for their own reasons" and "catere to consumers" by lowering prices.

At the 2023 New Consumer Industry Unicorn Summit, Wu Shichun, founding partner of Meihua Venture Capital, publicly expressed his views on the changes in consumer brands this year. "It's not that consumption is failing, but that your brand is failing. There is no sunset consumption, only sunset brands. Pinduoduo's market value has exceeded Alibaba, which shows that users need cheaper things and consumers need things with higher cost-effectiveness. The consumer industry is no longer the '80/20 rule'. In the past, 20% of companies made money, but in the future, only 2% of the top companies may make money."

The snack discount stores that have become popular this year are also a typical ecosystem spawned by this supply-side reform. The lower pricing strategy is extremely attractive to consumers who are already sensitive to prices.

Zhang Ziwei, a franchisee of a branded snack discount store, told Value Planet that in the county where he opened a store, a branded snack discount store had an average daily customer flow of 700-800 people in the early stage of its opening, based on the activities launched by the store and the curiosity and herd mentality of county consumers. Although the enthusiasm of consumers has decreased later, the average daily customer flow can still reach 300 people, and there is a gross profit margin of 20%. This shows that the low pricing strategy has been successfully implemented in the snack consumption field in the county.

In the automotive sector, according to incomplete statistics, Tesla officially cut prices about 59 times in the first half of this year, which even triggered a large-scale "price war" in the Chinese auto industry. Even BYD Chairman Wang Chuanfu reluctantly said that he would be ready to adjust prices at any time within 3-5 years.

2. "The collaboration is great, don't do it next time"

As early as last year, new tea and coffee practitioners began to "look for reasons" from themselves, and Heytea's price cut was just one of many actions. This year's popular Kudi Coffee, when Luckin Coffee's 9.9 yuan per cup became normalized, Kudi Coffee further reduced the price of coffee to 8.8 yuan per cup, which was ridiculed by netizens as "opening the big price to the face".

After entering 2023, the tea and coffee industry has been "sitting up" in low prices and joint names, and has become more and more "competitive". In detail, there are three most popular joint names this year, from Heytea, Luckin Coffee and Nayuki.

On May 17, Heytea joined hands with luxury brand Fendi to launch a special drink called "Fendi Joy Yellow" at 19 yuan per cup, as well as four limited-edition baked products. This was the first time this year that the cross-border collaboration ignited consumer sentiment. On the first day of the event, many stores were overwhelmed with orders. According to data provided by Heytea, more than 1.5 million cups of the special drink "Fendi Joy Yellow" were sold within three days of its launch.

The second phenomenon-level screen-sweeping came from Luckin Coffee. On September 4, Luckin Coffee and Moutai jointly launched the "Sauce Flavor Latte", which used white wine-flavored thick milk and contained 53% Moutai liquor, and was priced at 19 yuan. On the first day of its launch, the Sauce Flavor Latte not only swept the WeChat Moments, but also topped the Weibo hot search list.

On the day of the launch, Value Planet found that the product was sold out in many Luckin stores in Beijing, and those that still had it on sale had to wait in line for two hours or even longer. According to data released by Luckin, the sales volume of Jiangxiang Latte exceeded 5.42 million cups on the first day of its launch, with sales exceeding 100 million yuan.

Luckin Coffee's sauce-flavored latte. Image source: Weibo @Luckin Coffee

Nayuki also reaped a wave of "memories" through the co-branded milk tea launched with Fantasy Music Universe. As the "King of Jay Chou" in the hearts of many people born in the 80s and 90s, Jay Chou not only has a high "box office" at his concerts, but also has amazing sales of co-branded drinks. According to data provided by Nayuki, the sales of the co-branded milk tea on the first day of its launch reached 1.46 million cups, setting a new record for the first-day sales of Nayuki's new products.

It is obvious that this year’s three phenomenal hits have all accomplished their joint missions, and the results have been both critically acclaimed and commercially successful.

Under the influence of the leading brands, many tea and coffee brands have joined the co-branding army. The categories of co-branded brands have long jumped out of the scope of film and television dramas and celebrity IPs. Beauty, automobiles, 3C electronics, luxury goods, etc. have become new co-branded partners for tea and coffee brands. For example, Luckin Coffee has co-branded with Gulangyu Music Festival, Nayuki's Tea has co-branded with skincare brand Zhuben, Mixue Ice City has co-branded with domestic brand Pechoin, Nayuki's Tea has co-branded with OPPO mobile phones, and so on.

However, looking back at the whole year, there are only three cases that have stood out, which shows that consumers' "happiness threshold" is getting higher and higher, and it is becoming more and more difficult to please them. Consumers no longer need simple marketing and publicity, but joint brands that can truly meet the emotional value needs. Only such brands can seize the opportunity to pry open consumers' wallets.

There are also many cases of "failure" in the joint venture. A Shanghai aunt maliciously teased the players and the male protagonist of the partner's love mobile game "Light and Night Love", hurting the feelings of fans and causing controversy in the public opinion. The joint activity came to an abrupt end on the day of the official announcement, and was called "the shortest hand-holding in history" by netizens. The "Buddha Heytea Latte" jointly launched by Heytea and Jingdezhen Ceramics Museum went from causing heated discussions to being summoned for suspected violations of the Regulations on the Administration of Religious Affairs in less than three days.

This year, the logic of co-branding has also changed. It is no longer the motivation for price increases. On the contrary, the more co-branded the product, the more affordable it is. The prices of "Fendi Joy Yellow" and "Sauce Flavor Latte" are the same as daily drinks, and the co-branded products of Naixue and Bohe are only 1 yuan more expensive than daily drinks. The premium space brought by co-branding is getting smaller, and the prices of co-branded products and basic products are basically the same. Consumers are willing to "generate power for love" and still consider price factors when making transactions.

At the same time, joint ventures are becoming more and more popular. A research report pointed out that joint ventures among beverage chain brands were active in 2023, with one event occurring almost every day.

Liao Chenglin, a professor at the School of Business Administration of Chongqing University, said that consumers may try to buy cross-border co-branded products out of sentiment and curiosity, but what consumers care about most is definitely the product itself. For coffee and new tea drinks, it is still necessary to continue to launch high-quality, healthy and innovative products in order to attract young consumers in the long run.

Ms. Pan, who claims that she "can't live without coffee," also told Value Planet that two cups of coffee a day is a necessity, and she is also keen to try various new products and collaborations. "I have to buy coffee every day anyway, so when brands have collaborations, I treat it as buying peripherals. Except for some niche collaborations, I will basically try them. The most recent time was when I spent money on Tom and Jerry, because it is an IP from my childhood, and the small stickers are still on my computer."

But she also said frankly that many joint ventures are just a change of packaging, and the drinks inside have basically not been upgraded or even regressed, so she will no longer participate in joint activities except for those that are just needed. "It may be because the order volume of the joint products has increased rapidly, resulting in a shortage of staff in the store and a decline in the quality of the drinks. In addition, there are queues, so sometimes the experience brought by the joint products is not good." Sister Pan said.

From a macro perspective, the domestic consumer market has entered a new stage.

In his book The Fourth Consumer Era, Hidetoshi Miura, the “first person to research the consumer industry,” mentioned a term called “creative consumption” to explain this changing trend. Today’s consumption is no longer just consumption, but consumption for the purpose of creating one’s own lifestyle. This also means that the past era, when you could sell a good product as long as you produced it, is gone forever.

From consumption to "creative consumption", product strength has become more important. In the past, mass consumption and homogeneous consumption have been difficult to impress consumers. Instead, they are more picky and more personalized. Therefore, brands need to adjust their strategies and organizational structures to cater to and please consumers in product design.

Consumers' demands have also changed from rational and functional demands to perceptual and emotional demands. For most consumer brands with low technical barriers, the ability to mobilize consumers' emotions and provide emotional value will have a higher chance of winning.

3. “Spend less money, but give enough emotional value”

The change in young people’s consumption concept has also affected the direction of e-commerce shopping festivals to a certain extent. Although this year’s “Double Eleven” was quiet, the trend of consumers “paying for happiness” was very obvious.

"More and more consumers are beginning to pay attention to products that can provide emotional value and pay for happiness," said Ao Wen, president of Taotian Group's Brand Business Development Center. "The 'dopamine consumption' that is often mentioned recently is a typical manifestation. From the data, the hot sales of e-sports, cycling, skiing and other related products all reflect this consumption trend."

Data shows that the domestic sports and outdoor industry has shown explosive growth, with sales of products such as cycling, skiing, and outdoor footwear and clothing increasing by 300% year-on-year.

As those born after 1990 gradually become important participants in the consumer market, novel consumption and healing consumption products are emerging frequently, such as the popularity of Zibo barbecue and the rapid growth in lottery sales; at the same time, consumers have a higher willingness to pay for service consumption and experiential consumption.

Stamp collection travel, road rush, Citywalk, concerts, "hide and seek" and other consumption scenarios have successfully set off a boom this year. Taking concerts as an example, according to the Lighthouse Professional Edition, the total box office sales of music performances from January to August this year reached 5.704 billion yuan, of which the total box office of concerts was 4.452 billion (accounting for 78.1%) and the total box office of music festivals was 1.133 billion (accounting for 19.9%). In terms of age, the post-00s pay the most attention to various types of music performances, especially music festivals, accounting for nearly 60%, followed by the post-95s and post-90s consumer groups.

Yueyi experienced "interest consumption". Source: DATA100

With the arrival of winter, the warm and unique "military coat" has become a hot item.

"Military coats" walking on campus. Photo source: Value Planet

Chen Qi, a college student in Northeast China, also claimed that he was "not swayed by capital" because he said, "It's not that I can't afford down jackets, but that military coats are more cost-effective." He began to wander between Taobao, Pinduoduo and Xianyu, searching for keywords such as "cotton military coat" and "authentic military coat."

If we say that almost all young people ten years ago lived paycheck to paycheck, and were even used to spending ahead of time through borrowing, then today’s young people adhere to the principle of not spending easily and only buying what they need. This kind of shopping, like concerts and military coats, often brings emotional value in addition to use value.

From the perspective of consumer psychology, young people’s passion for music and performances stems more from their deep pursuit of “self-pleasing”, and this “self-pleasing” is also based on deep “personalization”.

Zheshang Securities also pointed out in its research report that the trend of consumption upgrading in my country has shifted from "the more the better" to "pursuing quality", from "enough to buy goods" to "enough to buy services", and consumption has placed more emphasis on participation, experience and personalization. In order to highlight individuality, traditional Chinese clothing, JK (high school uniforms), trendy toys, cross-border joint products, etc. have become popular products sought after by young people.

This change in consumption habits also reflects many changes in the current consumption environment.

First, the halo of "brand value" has gradually faded. The younger generation of consumers have realized that brand premium is not directly linked to the brand's use value, and high prices are often just psychological values ​​for consumers. Similarly, "high prices do not mean high quality."

Secondly, consumption anxiety is gradually easing. In the current social context, young people are facing challenges in employment, study, financial pressure and marriage, and "saving is earning".

Finally, the concept of thrift is being reshaped. Many young people are beginning to realize the importance of saving. Through rational consumption and careful budgeting, they have a deeper understanding that material things are not the only pursuit in life, and thus have begun to look for a more meaningful and meaningful lifestyle.

A study in the Journal of Consumer Psychology found that wanting to buy something makes people happier than actually owning it.

Normally, Maslow's hierarchy of needs theory is similar to a pyramid, which includes physiological needs, safety needs, emotional and belonging needs, respect needs, knowledge and aesthetic needs, and self-actualization. The bottom part of the pyramid is usually the lowest level of needs, and the needs become more complex as you go up.

Today's young consumers, especially Generation Z consumers, are subverting the "Maslow's Pyramid of Needs". Park Ruiboer data shows that physiological needs and safety needs are still ranked first and second, and are considered by Generation Z to be the most basic, original and important needs. Self-actualization needs are ranked third, with an average score of 4.29, followed by respect needs with an average score of 4.28. The scores of the two are very similar.

The importance of various needs of Generation Z consumers. Source: Park Ruiboer

These survey data to a certain extent indicate that the previously stable "pyramid" consumption theory is changing in the minds of Generation Z consumers.

Looking back at 2023, under the arguments of "reverse consumption" and "consumption downgrade", it can be seen from the waves of major consumer events set off by young consumers on the Internet that they are regaining their own consumption discourse power, and a unique consumption trend belonging to young people is taking shape - they are looking for individuality in low prices, paying attention to their emotions in individuality, and accurately positioning themselves in the consumer world.

References:

[1] Guotai Junan Securities, “Guotai Junan Macro: New Trends in Consumption”

[2] Macro-depth research: A top-down look at new trends in Chinese consumption, Huatai Ruisi

[3] “Interpretation of New Consumption Trends in 2023: Unpredictable Consumers”, Zhuoer Digital Technology

[4] 2023 Consumer Trend Insight Report - Recovery and Opportunities, DATA100

[5] “China’s Consumption Recovery Outlook: What New Changes Will China’s Consumer Market Expect in 2023 and Beyond?”, Oliver Wyman

[6] When “object” language meets “heart” flow: A research report on the “Maslow’s needs” of Generation Z, Park Ruiboer

[7] “Brand collaborations can no longer control young people”, DT Business Observation

*This article is based on public information and is only for information exchange purposes and does not constitute any investment advice

Author: Tang Fei, Editor: Ding Jueyu (Senior Editor of The Paper)

Source: Public Account: Value Planet (ID: ValuePlanet), discovering company value and telling capital stories.