New consumption in 2023, lively and lonely

2023 is generally regarded as a year of "consumption cooling". In short, the industry is both lively and lonely, companies are always unwilling to give up, and consumers are fickle and unchanging. The author of this article analyzes from three dimensions: industry trends, corporate actions and consumer mentality, and objectively presents the real dynamic changes.

At 23:59 on December 18, 2023, a magnitude 6.2 earthquake occurred in Jishishan County, Linxia Prefecture, Gansu Province. As of press time, the earthquake has caused 135 deaths.

The cold in late winter is biting, and people in Jishishan County feel it especially hard.

Recently, the north has been hit by heavy snow, and people have had a brief revelry. The red walls and green tiles of the Forbidden City have been covered in white, and young people in Chaoyang Park have spontaneously started a snowball fight involving hundreds of people. In a flash, the heavy snow drifted to the south, and Shanghai and Nanjing City were also painted the same pure white.

The background is still cold. The Changping Line of Beijing Subway broke with a violent collision. The track slipped on a snowy night and two trains rear-ended each other, directly affecting Xi'erqi, where many Internet companies are concentrated. 300,000 workers also returned home on a snowy night. It was poetic but cruel.

The business world is always full of new things that everyone is talking about, and as the end of the year approaches, it is as lively as ever.

Dong Yuhui and Meng Yutong, the former was a New Oriental teacher and now does live streaming to sell goods, while the latter, with the title of "former Gree successor", also does live streaming to sell goods. They were both pushed into the whirlpool of public opinion due to passive or active conflicts with their bosses and became the hotly discussed "top streamers" at the end of 2023.

Amidst all the controversies, the core issue is still the difficulties faced by enterprises in transformation and survival, which is still difficult.

The new consumption trend ignited in 2019. Just four years have passed. According to conventional narrative logic, it was the era when the wave was at its strongest. However, now, it has found a similar low point as its "predecessors" such as Gree and New Oriental.

What we can see is:

The cooling of investment and financing in the new consumption track has made it difficult for new wealth creation myths to sprout. If new tea drinks and Chinese fast food companies take a step forward, they will be confined to the pace of IPOs, and if they take a step back, they will continue to fight in the red ocean. But in the midst of fatigue, there will eventually be innovative solutions.

In the fierce competition in the existing market, there are always companies that are good at coping with changes and struggle to stand out - even though products are no longer the protagonists on the stage, and auxiliary marketing methods have become popular, who can deny that it is the path to success?

Consumers seem to be the most complex and changeable, jumping back and forth between spending money in revenge and holding on to their wallets, making it difficult for brands to figure out. But the game between the two sides is a perennial proposition in the consumer world.

2023 is about to pass, and this is the real 2023.

1. The industry is both busy and lonely

No young investment manager would take the initiative to introduce himself as "new consumption", just like the loneliness of this track itself.

According to data from Winshang.com, in the first 11 months of 2023, new consumer brands raised a total of 161 financings, less than half of last year. In 2021, at its peak, the number was 513.

Those crazy stories of Chinese noodle shops, national trend dim sum, and beauty sample stores, where each store is valued at hundreds of millions of dollars and hundreds of stores are opened in cities, have been gone for a long time. After the argument that "capital doesn't love ×××" was put into practice, as we can see in offline shopping malls today, the former upstarts have hurriedly closed their stores, leaving only lonely signs.

It is no longer easy for the industry to produce new stories of wealth and dreams. Instead, fierce beasts are swallowing up and becoming kings. In addition, the combination of strong and strong is so smooth and pleasant.

At the end of 2023, the dramatic footnote belonged to mass-market snacks. Two mass-market snack brands, "Busy Snacks" and "Zhao Yiming Snacks", announced a strategic merger - the former has 4,000 stores nationwide, and the latter has 2,500 stores. After the formation, the "Busy Snacks Group" has become an undisputed industry leader with a scale of over 6,500 stores.

On December 18, the group once again won new investments totaling 1.05 billion yuan from snack manufacturers "Hao Xiang Ni" and "Yanjin Puzi Holdings".

It should be noted that before the two companies "embrace" today, they have fought numerous battles for city expansion, marketing and price. Today's handshake and peace will surely make Sequoia Capital, Gaorong Capital and Black Ant Capital behind them breathe a sigh of relief.

It is also easy to find that unlike the "bicycle wars" in the TMT era, which often forced parties to sit down at the negotiating table after bloodshed, today's companies are increasingly "calmly" seeking the optimal solution.

Not long ago, the old tea company Cha Baidao and the new tea company Bawang Chaji established a supply chain joint venture, which was seen as a signal of "cooperation" in the involution of the tea industry. In this already red ocean industry, new and old brands continue to reach new heights in terms of products, supply chains, and marketing methods. In the end, all of them have agreed to join the franchise and go public.

Since the beginning of this year, tea beverage brands such as Mixue Bingcheng, Cha Baidao, Shanghai Auntie, Guming, Xinshiqi and Bawang Chaji have successively promoted IPOs. After expanding to a scale of tens of thousands of stores, entering the capital market seems to have become the only solution to escape from the "sea of ​​suffering".

Unfortunately, taking the sharp decline in the market value of Nayuki’s Tea, the “first stock in the new tea beverage industry”, as an example, it is difficult for the capital market to give a positive response to the “second stocks”.

And this is not just a pain point for tea beverage companies.

In 2023, all the "first Chinese restaurant stocks" experienced difficult births. First, in August, Lao Xiang Ji took the initiative to withdraw its IPO application. In November, another contestant, Lao Niang Jiu, also withdrew from the first stock competition because the sponsor withdrew its materials. The only remaining contestant, Xiangcunji, was highly expected by the industry because it successfully incubated Mr. Rice. Then in October, the media revealed that its prospectus had expired again.

At this point, in the Chinese fast food industry, who can be the first to go public is no longer the most important issue for people; who can survive longer is the primary issue.

The problem-solving ideas of various industries have stagnated. In the silence, the only lively new consumption is coffee.

In the past year, dozens of emerging coffee brands, including M Stand, Xiaoka Coffee, and Xiaokazhu, have received nearly 2 billion yuan in financing, and 7 of them have received 100 million yuan. M Stand, in particular, has now become a mainstream boutique coffee chain and a new brand that young white-collar workers in first- and second-tier cities are keen to check in.

However, it is hard to ignore that this year may be the last chance for the coffee industry. Under the expansion trend of land grabbing, coffee has been swept from first-tier cities into the sinking market, and a price war has been launched at the same time. On the positive side, brands with hot money inflows are accelerating their expansion, while on the negative side, franchisees and independent coffee shops are closing down and the corpses are everywhere.

This industry is always bustling and lonely.

2. Enterprises are always unwilling to

On August 1, 2023, Luckin Coffee released its second quarter financial report this year. During the reporting period, Luckin's total net revenue reached 6.201 billion yuan, and its quarterly revenue exceeded Starbucks for the first time.

This Chinese local coffee company, which was established only five years ago, first surpassed Starbucks in the number of stores at the end of 2021, and then in June this year, became the first domestic coffee chain brand to have more than 10,000 stores.

Local brands are fierce.

Rising from the vast counties, the Chinese hamburger brand Tustin now has over 6,000 stores. This number was only 500 in 2020, and it has only been in the mainstream vision for two years.

On December 15, with the opening of KFC's Grand Canal store at Wulinmen Wharf in Hangzhou, the number of stores of this fast food giant in China officially exceeded 10,000. It has been 36 years since it entered China.

The foreign corporate models that were once regarded as the benchmark have finally become the gods of the old business order in front of local companies that are more flexible and better at fighting.

Being flexible is a form of "voluntary slap in the face", self-innovation, and opening up for franchising.

In July this year, Nayuki's Tea, a leading new tea brand, opened for franchising, accelerating its store layout with a large store model of 90 square meters to 170 square meters. Lelecha, which it acquired last year, also explored it earlier than itself.

After all, nowadays, in addition to factors such as product variety and taste, scale advantage is also a point of contention for the development of new tea drinks. The franchise model is undoubtedly a good way to balance the contradiction between direct operation pressure and expansion needs. Take Heytea, which opened for franchising last year, as an example. It originally had only about 800 stores at the end of 2022, but in just over half a year, it has added more than 1,800 stores, achieving rapid store expansion.

Being flexible also means being able to turn the tables in the fierce competition in the existing market by relying on the marketing method of "co-branding".

Luckin Coffee and Moutai jointly launched a cup of Maotai sauce-flavored latte, which became a hot topic and achieved sales of over 100 million yuan on the first day of the product launch. Heytea and FENDI jointly launched a luxury product that young people can afford, which was quickly sold out.

Image source: Luckin Coffee and Heytea official Weibo

According to statistics from Shiwei Technology, mainstream tea and coffee brands have collaborated 122 times this year. Among them, Nayuki Tea topped the list of "model workers" with 26 collaborations, followed by Luckin Coffee and Lelecha, with 15 and 13 collaborations respectively.

“All great companies are born in the winter.”

This statement made by Jack Ma on the Alibaba Group’s intranet is most inspiring.

On December 1, Pinduoduo's market value briefly surpassed Alibaba's, which caused heated discussions and was called a historic moment in China's e-commerce industry. Alibaba, which has been the leading e-commerce company in China since its listing in 2014 and has taken "progress" as the key word for its development this year, has also been threatened this winter.

China's commercial society, which is full of fierce competition and chaos, has entered a winter of cold consumption after the epidemic. In this process, no one will always win, and no one will always fail. Players in the retail industry are still actively striving for it.

Companies will keenly capture changes in public consumption habits and adjust to respond. "Discounts" and "going overseas" are two very representative terms.

In October this year, Hema launched a comprehensive discount reform, planning to lower product prices starting from Hema Fresh offline stores and then expanding to online stores. In addition, Hema also regards the outlet format as a focus of subsequent development.

Yonghui, a representative of traditional supermarkets, has added "authentic discount stores" to its stores nationwide to join the price war. Dingdong Maicai, a fresh food e-commerce company, has opened outlet stores. Bubugao Supermarket, which has disappeared from the public eye for a long time, has also reopened stores nationwide and implemented a low-price discount retail strategy.

In terms of overseas expansion, in May this year, MINISO became the first Chinese brand to enter New York's Times Square. This domestic retail store, with an average customer unit price of around 10 yuan, achieved single-store sales of over 10 million yuan in its first month overseas.

Tea and coffee have spread from China to overseas markets. Luckin Coffee has entered Singapore, Kudi has entered South Korea, Japan and Thailand, and Mixue Ice City and Chabaidao have already reached overseas markets earlier. New energy vehicles continue to heat up overseas, with BYD as a representative. After accelerating its overseas layout last year, it has entered more than 50 countries and regions this year.

Chinese brands will emerge with more new possibilities and new stories.

3. Consumers are both fickle and unchanging

Stars hold concerts "in revenge", and their fans also listen to them "in revenge";

In the equally popular Citywalk, young people wear Dopamine in the summer and Maillard in the autumn, holding coffee and cocktails in paper and plastic cups, taking photos and checking in under the plane trees in the streets and alleys;

The aroma of Zibo barbecue spread all over the Internet. No one could resist the temptation of the meat. This small town was filled with a different atmosphere. Behind Zibo is the trend of young people from Beijing, Shanghai and Guangzhou using the "two-hour high-speed rail direct access" to measure travel distance and go to small towns to relieve work pressure.

In essence, more and more consumers are beginning to seek faster, cheaper and more direct ways of consuming to please themselves, while also moving more offline to engage in experiential consumption.

From this point of view, consumers are emotional .

But this year's consumers are also rational.

"Don't hold, don't buy unless necessary, consume inventory" has become a trend on Xiaohongshu. Sorting out, counting and consuming the large amount of inventory purchased on impulse has become a daily routine for many people. Some people believe that clearing out a bloated home is also clearing out a bloated mind and returning to a natural state - it has risen to the level of philosophy.

People are enthusiastically discussing consumption downgrades and actively looking for "substitutes". However, many times, they are unwilling to give in and completely abandon their established lifestyles. In fact, they are pursuing a more cost-effective lifestyle.

As a result, consumers have changed their consumption habits. Online, they have moved from Taobao, Tmall, and JD.com to Pinduoduo, 1688, and Xianyu. They also participate in community group purchases and join several "wool groups" from time to time. Offline, they have begun to frequently visit membership stores and discount stores that offer large discounts, thus opening the door to a new world.

In essence, behind the interweaving of sensibility and rationality is the anxiety about uncertainty.

At a time when consumption has slumped and has even been described as "consumption downgrade", new and old brands are all trying to portray accurate user portraits, closely monitor and analyze consumers' emotions, make the most immediate feedback, and try to use marketing methods and publicity campaigns to pull consumers back from rationality to sensibility over and over again.

Sensibility seems to mean "willing to spend money."

In fact, instead of craving for "sensibility", it is better to recognize the current situation of consumption cooling down, which should more appropriately be called the advent of the era of "consumption stratification". The most obvious feature of this trend is that consumers in the same circle will more concentratedly purchase similar products through similar channels, and under mutual influence, form a relatively fixed consumption pattern.

A typical example is that Sam's Club, which is known for serving the middle class, is still expanding across the country at an average rate of 6 new stores per year. By the end of this year, the number of Sam's Club stores in China will reach 48. On the other hand, 1688, discount stores and "big brand substitutes" are hot.

Of course, no matter what consumption trend occurs, the only constant is “don’t educate consumers.”

The most classic failure was Li Jiaqi's comment to Huaxizi consumers, "How can it be expensive?" This ignited the anger of consumers and also allowed old domestic brands such as Fenghua and Huoli 28 to take advantage of this emotion and increase their presence.

There are always no signs of who will become extremely wealthy, but the game between brands and consumers is a long-term proposition.

Four,

In 2023, a year that is generally regarded as a year of "consumption cooling down", New Retail Business Review attempts to objectively present its real dynamic changes from three dimensions: industry trends, corporate actions and consumer mentality. The most wanted signal is that despite the difficult times, there are always opportunities.

It should be recognized that, to this day, "long-termism" should still be the creed and bible of consumer brands, which corresponds to the characteristics of stability and quality. Although from the current pace of brand rise and expansion, speed is more important than anything else, and fame determines the market.

Is it a paradox? Obviously not.

We can see that although the new Tustin is the darling of the capital market, it cannot compete with the trust and loyalty that McCann has established in the hearts of consumers. The franchise expansion of Heytea and Nayuki will be questioned by the quality difference between their franchise stores and directly-operated stores. Huaxizi, which was once known as "not expensive at all", once reaped the benefits of domestic products. After backstabbing consumers, it will also make people realize that big-name beauty products may be more cost-effective.

For local brands that have successfully escaped the "consumer cold wave" and gained a foothold, the road ahead is still full of thorns.

Author: New Retail Business Review, Editor: Ge Weiwei

Source: WeChat official account: New Retail Business Review (ID: xinlingshou1001)