A substitute has come, is the big name dead?

More and more young people are choosing substitute products, and some low-price shopping platforms and brands have benefited from this. This article interviewed four consumers, analyzing the reasons why the public chooses substitute products, and how platforms and brands can upgrade products and market according to consumer psychology.

In early November, Alibaba Group announced that it would upgrade 1688 and Xianyu to strategic innovative businesses. As one of Alibaba's oldest e-commerce businesses, the 24-year-old 1688 finally achieved a "flying" in status. The reason behind this is not difficult to understand. The young consumers that Taobao and Tmall want to capture have already flocked to this ancient shopping platform.

According to statistics from Yiou.com, the proportion of young buyers on 1688 increased by nearly 10% in the first half of 2020. Looking through Xiaohongshu and Weibo, you can also find that there are many more 1688 shopping guides in the past two years.

Coincidentally, Pinduoduo's business is also getting better and better. Financial data shows that as of September 30, 2023, Pinduoduo's total revenue in the third quarter was 68.8404 billion yuan, a year-on-year increase of 94%. The net profit attributable to Pinduoduo's ordinary shareholders was 15.537 billion yuan, a year-on-year increase of 47%.

Young people are keen on finding "substitutes" on low-price platforms such as 1688 and Pinduoduo, which has become a major trend in the consumer market in recent times. Along with this, people are keen to talk about various money-saving shopping strategies amid consumption downgrades.

Previously, New Retail Business Review has discussed the topic of consumption downgrade many times, such as buying yoga pants on 1688, and young people have announced that they will not buy them. Today, we want to explore in depth what the change from consumption upgrade to consumption downgrade actually means.

01 Thoughts on consumption downgrade

From consumption upgrading to consumption downgrading, the key lies in whether consumers can really go from extravagance to frugality?

"Face towels, wet toilet paper, kitchen wipes, sleeping pants..." Xiao An counted the disposable items he used in his daily life with his fingers: "Just for washing my face, I can't go back to using towels." Xiao An told Retail Jun that he used to scrub his face towels clean and disinfect them with boiling water almost every week. "Since I started using face towels, I no longer have to do this tedious process every week. The same goes for other disposable items. It saves time, effort and is convenient."

Disposable items and paper products around us, photo by New Retail Business Review

"Can't go back" is a fact, and "lack of money" is also a fact, so it provides room for development for various substitute products.

"At first, I used a Korean brand of facial cleansing towels, which are indeed easy to use but also really expensive. During Double 11 this year, I started looking for substitutes on various platforms such as Xiaohongshu, and finally found domestically produced facial cleansing towels that are cheap and easy to use." Xiao An introduced that now many of his colleagues and friends are keen on finding substitutes for daily necessities, clothing, beauty and skin care products, and will post on Xiaohongshu to exchange their experiences.

Huanhuan recalls that she fell into the "pitfall" of dental care around 2019: "I brush my teeth with an electric toothbrush in the morning, use a water flosser to clean my mouth at noon, and have my teeth cleaned every six months." Originally, Huanhuan thought that although such a good habit cost a little money, it would allow her to maintain a good set of teeth, enjoy delicious food, and look better in photos. However, plans cannot keep up with changes. At the beginning of the year, the company announced a salary cut, and the good habit of dental care gradually became a burden for Huanhuan.

Therefore, Huanhuan adjusted the teeth cleaning institution, dental floss brand, and the frequency of updating electric toothbrush heads: "The teeth cleaning institution I went to originally had considerate and meticulous service, but it cost 600 yuan for one teeth cleaning. I thought that as long as the purpose of teeth cleaning was achieved, other service experiences were not important, so I changed to an affordable dental clinic; dental floss, from imported to domestic cheap and large, the feeling of use is not much different; electric toothbrushes are mainly expensive because of the consumables such as the brush head. I changed it from every three months to when the bristles are broken, and I change it about every six months..."

The same situation also happens in the coffee industry.

Ning Ning didn’t have the habit of drinking coffee. A few years ago, she came to Shanghai for work and was attracted by the various coffee shops in the streets and alleys. After trying them once, she couldn’t stop. She used to drink a cup of Starbucks Americano every day, but now she says, “Starbucks? I can’t afford it!”

This year, Ningning downgraded from Starbucks to Manner, and had to bring her own cup to get coffee to enjoy the 5 yuan discount. Later, she downgraded to Luckin Coffee's 9.9 yuan per cup. In the first two months, she changed to drinking drip coffee: "I'm used to drip coffee, and I think Luckin Coffee's 9.9 yuan is too expensive." Ningning told Retail Jun that she tried several brands of drip coffee on Haotemai, "The average price of coffee is one or two yuan, which makes me get through a whole day of work."

Nowadays, she only drinks "outside coffee" once or twice a month: "Usually in business occasions when I meet with clients to discuss cooperation."

Xiao An, Huan Huan and Ning Ning are not isolated cases. Many similar examples can be found on social platforms such as Xiaohongshu: young ladies who used to do manicures once a month have changed to buying nail polish and jelly glue to DIY at home; white-collar workers who used to carry brand-name bags to and from work have found the fun of canvas bags; the elite middle class who admire lululemon and Arc'teryx have also begun to think that "1688 is really good"... Countless examples show that it is difficult to go from extravagance to frugality, and young people who are "holding on to their wallets tightly" have not completely given up their past consumption habits, but have turned to looking for more cost-effective alternatives.

What followed was a lot of debate about substitution.

Previously, people who oppose consumerism on social media suggested that shopping should also practice "long-termism", that is, buying more expensive products, using them for a longer period of time, and fully enjoying the higher quality of expensive products. In the eyes of these people, substitutes have no value.

Nowadays, there are more and more opponents. They believe that long-termism is the real consumerism. It is well known that expensive products have a serious premium. Why not spend less money to enjoy products with similar quality? Only buy the right ones instead of the expensive ones, and the best way is to buy the equivalent ones.

02 Is there a future for substitution?

Compared to before the pandemic, consumers clearly have a clearer standard for measuring the value of products. In addition to comparing product quality, they tend to pay more attention to the user experience and whether it can bring convenience to themselves.

A pair of lululemon yoga pants is indeed uniquely comfortable and durable. Compared with the 1688 yoga pants of the same factory and source, which cost only 30 or 40 yuan, although the wearing experience is slightly worse and they become a bit loose after washing a few times, is it really necessary to spend hundreds of yuan on a pair of lululemon?

At first, Jasmine bought a pair of yoga pants on 1688 with the mentality of giving it a try. Now, she would rather buy dozens of yoga pants of different colors on 1688 than buy a pair of lululemon. She happily said: "I can change them and wear them casually. If they become loose after washing, I can throw them away and buy new ones without feeling bad. This process is actually very happy."

The same Lululemon in 1688

In the communication with friends around me, I found that young consumers are more likely to accept substitute products in the fast-moving consumer goods and clothing industries, while for some industries with high technology, design and raw material thresholds, substitute products are difficult to become popular. "Compared with headphones that cost thousands of yuan and those that cost hundreds of yuan, the experience of using them is really different." Xiaoye told me.

However, the chaotic market environment has given some so-called substitutes an opportunity to take advantage. Reporters from Shangguan News found that on this year's Double 11, many low-priced substitutes chose to "copy famous brands" and use similar appearances to trick consumers into buying what they thought were genuine products.

On Xiaohongshu, you will often see posts that say "either the products are from the same factory or the original clothing." When you click in for careful identification, you will find that these products are actually high-quality imitations of big brands. Not only do they copy the styles, but they also cut corners on the raw materials... Under the temptation of low prices, many consumers are "dazzled" by the good prices and completely ignore details such as product quality.

03 Being a substitute also requires skills

"I have also used very cheap face cleansing towels, but after shaving, I ended up using them as disposable rags to wipe dust and the floor." While searching for affordable substitutes, Xiao An encountered many setbacks and wasted a lot of money.

Ning Ning's coffee downgrade is not without a bottom line: "I can't drink the kind of cheap but bland coffee."

Obviously, consumers have experienced good products, so they will look for substitutes based on the standards of good products - how "cheap" should the price be, and what kind of product value or user experience should be required to qualify as that "substitute".

This means that the ideal substitute for consumers is by no means to reduce product quality, but to comprehensively consider the user experience, make the most cost-effective product, and sell it in a way that directly reaches consumers.

Search results for "平替" on Xiaohongshu

After understanding this fact, it is actually a good thing for big brands. After all, who can compare with them in terms of product development technology and supply chain efficiency? Some big brands such as Apple and Huawei in the field of electronic products have launched their own alternative products . The latest example is Apple's plan to develop an affordable version of the VissionPro headset.

In addition to "I replace myself", another idea is to use the supply chain advantage to reduce prices and narrow the price gap between themselves and substitutes. For example, this year's tea brands have been reducing prices one after another, competing with substitutes.

Another idea is to leverage one's own R&D and patent advantages to continuously launch new products , find new ingredients, and keep imitators behind.

On the other hand, the classic brand, which was already a "fighter among affordable products", now has better development opportunities.

For example, during the Double 11 shopping festival this year, the coffee category of Nestlé's official flagship store on JD.com grew fivefold year-on-year. At the same time, the consumer base of Nestlé coffee has further expanded, with the middle class growing by 80% year-on-year and the student population of ready-to-drink coffee growing by 147% year-on-year.

It is reported that during this year's Double 11, Nestlé Coffee launched more than 100 new products in various categories including instant, ready-to-drink, capsules, concentrates, etc., and its core instant black coffee product line has also been adjusted and improved this year to further meet consumers' pursuit of a healthy lifestyle.

Such changes are undoubtedly welcomed by consumers. Facts have proven that these classic brands have long existed in the minds of consumers. If they are willing to make changes to meet consumer needs, consumers will actually trust their product quality more and be willing to return.

It is not difficult to find from Nestlé's practice that, relying on years of R&D accumulation and supply chain advantages, classic brands can actually easily launch a dimensionality reduction attack on substitute brands, but the difficulty lies in the fact that it is difficult to turn around.

If substitute brands want to catch up with classic brands, they also need to make more efforts instead of simply copying and pasting other people's products - they need to upgrade their own products, upgrade their own supply chain, and truly create a brand with their own tone.

The market has brought more choices to consumers in this game of competition and internal competition. In the end, only the real money can remain on the beach.

Author: Qian Luoying, Editor: Ge Weiwei

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