Real opportunities and strategic analysis of the consumer industry in 2023

The analysis of the consumer industry on the market is difficult to provide practical help. Based on the market changes in the consumer industry in the first half of 2023, the author of this article finds the underlying determinants of consumption trends from the public psychology level and provides strategic recommendations on the market, products, and marketing. I hope it can give everyone some inspiration. Let's take a look.

The analysis of the consumer industry on the market often stays at the "big data" level, which is relatively superficial, or it extracts a few trend concepts, such as nostalgia, self-pleasing, consumption downgrade, emotional healing, etc. Although these words are correct, they are difficult to produce practical help.

We hope to see through the surface of the data, grasp some truly important key points, and use this as a starting point to see the essential changes.

What is the real reason and what can we gain and grasp from it?

More importantly, in the face of opportunities, what specific strategies and methods can enable companies to gain benefits?

Therefore, based on the market changes in the consumer industry in the first half of 2023, we try to truly find the underlying determinants of consumption trends from the public psychology level, and provide strategic recommendations on the market, products, and marketing, hoping to give everyone some inspiration.

1. Alternative Upgrading of High-end Consumption

Let's look at some interesting data first. You may have some feelings:

• Since 2023, sales of high-end skin care products in China have continued to decline, with La Mer and Shiseido falling by 47% and 57% respectively compared to 2022;
• The recovery of the medical beauty industry is exceptionally strong. Judging from the revenue growth rate in Q1 2023, Aimeikang’s growth rate reached 46%, Huadong Medicine’s medical beauty business segment reached 33.3%, and offline medical beauty institutions as a whole also performed strongly;
• Car companies collectively cut prices this year. In January, Tesla China announced that the prices of Model 3 and Model Y would be reduced by 20,000 to 48,000 yuan. In February, BYD directly reduced the price of an entry-level car to less than 100,000 yuan, and started to charge the same price for its oil and electric vehicles. Then, more than a dozen new energy car companies followed suit. In March, it was the turn of joint venture fuel vehicles. Seven brands and 56 models of the Oriental Automotive Group started to cut prices. Then, 40 traditional car companies followed suit.
• In the consumer electronics industry, Apple's sales in the first quarter of last year fell 15% from the previous quarter, and projectors experienced negative growth for the first time in March this year, with a growth rate of -8%. Ecovacs and Roborock also saw a sharp decline in profits in the first quarter.
• The eye protection lamp category performed well. In the first quarter of 2023, Taobao Tmall's sales reached 600 million yuan, a year-on-year increase of 85.5%. Among them, the most popular one is Honeywell's high-end desktop floor lamp (large street lamp); our new species Tiantian girlfriend machine - a movable extra-large tablet, has been on the market for two months and its sales have exceeded 100 million yuan.

Based on the above data, it is not difficult to find that in the relatively high-priced consumer goods market, a seemingly contradictory consumption logic has emerged:

On the one hand, people tend to reduce or even give up their purchase budgets for traditionally expensive products (luxury skin care products, cars, sweepers, etc.);

On the other hand, when faced with unheard-of or even new species, people are willing to spend real money to try, even if the price is high.

The former is easy to understand. The reason is that according to the "active steady state " theory of psychology (many stable psychological characteristics are actively maintained by people), people's perception of the price of various consumer categories is in a relatively stable state and is not easy to change. La Mer, Tesla, Apple, etc. are "high-end consumer goods" in people's cognition. When consumer confidence is insufficient, people will subconsciously take a certain vigilant attitude towards these products:

You can choose not to buy it, or buy it later.

But this does not mean that people have given up on high-end consumer goods.

Improving the quality of life is a basic consumer demand. When people "abandon" those consumption options that have " always been expensive and have high premiums ", they will spontaneously think that " they have saved a lot of expenses " and turn to look for smarter, more reasonable and more advanced consumption options.

Therefore, this group of new species has begun to be recognized by everyone. From the perspective of consumers: compared with traditional expensive products, these products may be more advanced and more effective purchasing options.

For these products, high prices are not a barrier to ordering. On the contrary, they make people more confident and assured in their choices: when faced with new products or services (where there is uncertainty), people's decision-making logic often corresponds to the old saying: "You get what you pay for . "

1. Response strategies and methods

Let's first clarify a concept, what exactly is a "new species":

To avoid falling into misunderstandings, we quote Dennis J. Harputley’s view in the book “Building Truly New Products”:

"For the average buyer, utility is the most valuable, followed by appearance (which is far less valuable than utility in most cases), and novelty comes last."

In other words, a simple change in appearance or a slightly cool feeling is not enough to make people think "this is a new species worth trying." Especially in a period of low consumer confidence, only the increase in "net utility" can really leverage purchases. Therefore, around "net utility", we have summarized three fulcrums:

Prolonged efficacy : People expect the products or services they purchase to work for a longer period of time. For example, compared with expensive skin care products, optoelectronic medical beauty projects are more expensive, but their effects last longer. The girlfriend phone can be moved freely, allowing users to watch in various scenes: bathroom, dressing room, living room, bedroom, kitchen, etc. Compared with projectors or TVs, the usage time is significantly increased.

One thing with multiple effects : If a product can integrate multiple forms of functions, people will also think it has higher utility. This year, superfood powders are very popular (such as kale), one of the reasons is that they meet multiple needs at the same time: supplementing high fiber and high protein (health), low calories (weight loss), antioxidant (beauty), etc.

Technology upgrade: Technology is also one of the important factors that make people willing to pay. This year's hot water softener (sales on Taobao platform increased by 946% year-on-year in 2023) uses ion exchange technology to remove calcium and magnesium ions in water and reduce water hardness. Although it is expensive, the technology level is still recognized by consumers.

To sum up, for the consumer track that is relatively decision-making-intensive, when new products have the attributes of extended efficacy, multiple effects, and technological upgrades, they are more likely to be seen as "a better choice for consumption."

2. New consumption options: Actively stripping off premiums

Let’s first look at a few sets of comparative data:

JD.com has been in a difficult situation in the past two years. In the first quarter of 2023, operating income increased by 1.4% year-on-year, and the year-on-year growth rate continued to decline, down 5.7 percentage points from the previous quarter. Among them, commodity revenue (self-operated goods) decreased by 4.3% year-on-year. The CEO change and the substantial adjustment of the entire group's organization and purchase also confirmed the huge revenue pressure.

Sam's Club, which also focuses on the middle-class business, has seen unstoppable growth. According to the fourth-quarter financial report released at the end of January 2023, Sam's Club had sales of US$21.4 billion, a year-on-year increase of 11.3%, and membership income increased by 7.1% year-on-year. Among the top ten Sam's Club stores in the world in terms of sales, four are located in China.

Another comparison is that international big-name skin care products are not popular, but many domestic skin care products in the sub-sectors are growing against the trend: in the top 20 skin care brands (sales ranking) from January to April 2023, the number of domestic brands increased from 4 to 6; Winona, a brand under Beitanni that focuses on sensitive skin, also performed very well on Double Eleven last year. Throughout 2022, its market share increased from 1.6% to 23.2% in 2022;

The light meal track is also very interesting. On the one hand, New Element closed its stores and Wagas was acquired. On the other hand, Super Bowl, which focuses on healthy and nutritious meals, has quietly become popular. After the epidemic was lifted this year, several stores with monthly sales of one million appeared in Beijing.

Behind these trends, it all comes down to one point: changes in consumers’ decision-making logic:

Strip away the premium surrounding the product, but still focus on the core qualities of the product itself.

As consumption matures and information becomes more transparent, consumers are already adept at stripping away peripheral premiums when making purchasing decisions, including:

Advertising premium: Celebrity endorsements, luxurious packaging, and large-scale advertising, these advertising fees added to the final price are clearly seen by consumers, and they also think they should not pay for them. Many niche skin care products even deliberately use "ugly packaging", "simple boxes", "no money for advertising" and so on in their promotions.

Platform premium : JD.com’s speed and convenience are becoming increasingly difficult to impress consumers: for a better price, they would rather spend half a day in the Douyin live broadcast room, or bargain hard on Pinduoduo, not to mention just waiting for a few more days for the delivery at home.

Environmental premium : The high-end feeling of "urban elite" represented by new elements and Wagas dining environment is no longer attractive. What people need is just a high-quality healthy food.

However, most people do not lower their requirements for product quality due to downgrade. In other words, what cannot be stripped of the premium is the value of the product itself.

The core competitive advantage of Sam's Club lies in its own-brand products, which are few but good. The proportion of its own-brand products has reached 40% - we have what others do not, but we are better than JD.com (better in services other than products). Sam's own-brand products have also produced a large number of Internet celebrities - mochi bread, Swiss rolls, beef rolls, lime juice, these exclusive products have even allowed Sam to develop a large and systematic purchasing system.

1. Response strategies and methods

What product values ​​can be recognized by people, and they are even willing to pay a premium for them?

We believe that in the current consumer environment, the focus should be on these three value points: safety, health and stability.

Safety is a value point that people are willing to pay the highest premium for, needless to say. Winona, mentioned above, stands out among a bunch of brands that focus on ingredients because it focuses on safety and even puts forward the slogan of "safety first, efficacy second" , allowing dermatologists and experts to evaluate and endorse the product to ensure its safety.

In the post-epidemic era, there is no need to say much about the importance of health. The light meal brand Super Bowl focuses on nutrition and health. A set meal costs around 40 yuan. If you look closely at the cost, the profit is actually not low, but people don't care - they are willing to pay a premium for a reasonably matched healthy meal. There is a detail worth noting. In the takeaway menu, it not only standardizes clear calories, but also indicates the proportion of carbohydrates, fats and proteins (wagas and new elements are not marked), thereby making the nutritional and health value explicit.

This year, jasmine yogurt and blueglass are also very popular. Although they are expensive, people are still willing to pay for them because they "look very healthy". The brand is very smart in making the "health value explicit" and highlighting yogurt and fruit - which are considered "healthy foods" by people - in the product appearance and materials, reinforcing their nutritional, health and slimming attributes.

The third is stability, that is, product stability. In an era when consumer decisions are more cautious, consumers hope to get the expected value every time they spend money, and have higher requirements for stable quality. For example, in order to achieve consistent sweetness, Heytea has made a fully automatic sugar adding machine to automatically add sugar, thereby reducing the probability of error, strengthening product stability, and better constraining franchisees.

If our products can occupy the value points of safety, health and stability , and display them explicitly in consumer communication, they will have a premium that cannot be easily stripped away, and consumers are willing to pay for these actual values ​​that they can "see and experience" .

3. Consumption downgrade to become an "Internet celebrity"

Without any data to support it, "consumption downgrade to internet celebrityization" should be everyone's most intuitive perception of this year's consumption trend. The most representative ones are special forces tourism and Zibo barbecue, which are extremely popular on social platforms.

The public psychology behind this is also worth pondering: consumption downgrade itself is not worth showing off, but why are people willing to share it?

There are two reasons:

1. Added the "fun" entertainment attribute
2. KOLs and influencers take the initiative to lead

These two points make "downgrade consumption" itself popular with internet celebrity attributes.

The first point is easy to understand. Zibo barbecue has a fresh way of eating everything with small pancakes, special forces tourism implies a gamified experience of "completing challenges within a specified time", and convenience store cocktails have all kinds of creative options... These ways of playing can stimulate young people to actively share.

Secondly, the participation of big Vs has a strong demonstration effect. One of the detonating points of Zibo BBQ is the 17 million fans on Douyin @B太, who published reviews of 10 stores including Zibo BBQ, certifying that all stores are honest and affordable. Another example is that Pinduoduo has continued to cooperate with various B station up hosts, promoting its 10 billion subsidy activities in the form of "inviting fans to report secret codes to get free stuff" in the video, and the effect has been good.

Therefore, for cheaper products or services that require little decision-making, turning them into internet celebrities is an efficient way to promote them.

1. Response strategies and methods

If a brand focuses on low prices (or allows consumers to "get a bargain"), how can it become an Internet celebrity trend?

We have extracted three methods:

(1) Unified form + personalized interpretation

Products and services need to have a unified sense of form (such as the small pancakes in Zibo barbecue, the combination of "base liquor" + "soft drink" in convenience store cocktails). With this form, everyone can have a personalized interpretation, thus presenting diverse content.

For example, in the first quarter of 2023, the year-on-year growth rate of coffee liquid reached 71%. Compared with coffee that costs 20 or 30 yuan per cup, coffee liquid is obviously much more cost-effective and very convenient. More importantly, there is a lot of room for personalization. Adding sparkling water makes it a sparkling Americano, adding oat milk makes it an oat latte... You can copy various Internet celebrity coffee drinks or even create your own exclusive drinks. As a result, clips of making homemade drinks with coffee liquid appeared in various bloggers' vlogs, driving more people to become interested in buying this product.

Compiled by Xiaohongshu netizens

(2) Collaborative KOLs lead the trend

This goes without saying. Especially for products with lower prices and less decision-making, allowing KOL and KOC to join in the promotion can quickly ignite a consumer boom.

For example, Gongmenkou Steamed Buns in Beijing was originally an ordinary time-honored steamed bun shop. However, after being reviewed and checked in by countless KOLs on Xiaohongshu, it not only became a popular check-in spot in Beijing, but also kept opening branches and the number of out-of-town purchases remained high.

(3) Continuously inject fresh elements

The life of an Internet celebrity is short. In order to make a product or service a long-term trend, in addition to product innovation and optimization, another must-do task is to constantly inject new elements.

We can think about this from two levels:

1) Add new elements to the vertical time dimension

For example, Zibo barbecue has new elements added over time, providing new stories and topics. For example, barbecue stall owners take the initiative to give small gifts to people in the queue, Zibo opens a barbecue train, etc.

The same is true for KFC Crazy Four and Maimen Literature. The followers of KFC and McDonald's are constantly creating, confronting each other, and occasionally betraying each other. These continue to create topics and inject fresh elements into the activities.

2) Adding new elements to the horizontal spatial dimension

The nationwide vegetable markets, night markets, and bazaars that became popular at the beginning of the year have remained popular. One of the reasons is that there are too many vegetable markets and night markets across the country, with different styles and cultural and food characteristics. This not only provides a steady stream of rich materials and content for check-in, but also stimulates people to continuously explore new treasures and fireworks check-in spots.

4. Scenario consumption requires a sense of immersion

During the May Day holiday this year, a photo-taking and check-in scene became popular, that is, the "Scenic Area Princess" (Yuwei also experienced it). In tourist attractions with strong ethnic customs such as Yanji, Xishuangbanna, and Dunhuang, there are "One-Day Princess Experience Card" projects, which include makeup, follow-up shooting, photography guidance, and photo retouching services.

Universal Studios and Disney previously offered Harry Potter character experience cards, Disney Princess experience cards, and other similar services (currently banned by the parks). Of course, there is the stimulation of the beauty economy and the contrast of cross-dressing. But there is one thing that cannot be ignored:

People are experiencing things in scenes, and increasingly hope to integrate naturally and natively into various scenes, and even become the protagonists of the scenes.

Nowadays, there are stores that specialize in designing makeup for concert support, and various Japanese restaurants and taverns are also providing kimono experience, Hanfu experience, etc. Scene-integrated check-in can not only make the scene experience more in-depth and interesting, but also increase the "filming rate" and attract attention and likes on social media.

In addition to offline scene substitution, we also look for a sense of substitution in the story scenes . Mango TV's drama "Go Where the Wind Is" has made Yunnan Courtyard popular, because white-collar workers also hope to extricate themselves from the rhythm of the wheel, and even resign gracefully, bid farewell to the big city and go to a picturesque place with simple people, so that they can relax their body and mind and become "Xu Hongdou" in another story.

1. Response strategies and methods

Offline businesses can make it easier for people to find opportunities to immerse themselves in the scenes by building scenes and providing design services. For example, coffee shops in Shanghai generally like to design some outdoor seats or large floor-to-ceiling windows to create an experience scene of "enjoying coffee in the sun".

Not only offline businesses, but also all kinds of products and services have the opportunity to be part of a certain scene. For example, cycling pants have become a must-have item for urban bicycle travel; blueglass has become an integral part of the Frisbee sports scene by sponsoring various Frisbee activities.

In order to truly grasp the psychology of "sense of immersion in the scene", we must also consider another psychological aspect, which is to let users subconsciously assume that " they have entered a scene with products and services and have become the protagonist ."

Let me share two examples with you:

(1) Immerse yourself in the characters’ life scenes

This year, Xiaohongshu live e-commerce became popular all of a sudden. A group of celebrity live broadcasts focusing on lifestyle suddenly gained extremely high attention and traffic, such as Dong Jie, Zhang Li, and the recently popular Veronica Yip.

Zhang Xiaohui's live broadcast is very beautiful and watchable. With a simple French background, she wears white Chanel and has thick black long hair, and talks about her understanding of skin care, fashion and art. A classmate shared with me that after watching her live broadcast, she felt like "pampering herself" like her.

The core value of this type of live broadcast that focuses on lifestyle is not to lower the price, but to bring consumers into her life scenes, making them the protagonists like her, and each product becomes an element of the life scene.

(2) Substitute product usage scenarios

We have observed that on short video platforms, there is a type of content that is very efficient. It skips the product introduction stage and assumes that consumers have already purchased it, and jumps directly to the "usage scenario". For example, skin care products do not introduce its functions, but directly tell you the details of how to use it: "Sisters who have already bought ***, please pay attention to how to use it..."

This subtle point is "loss aversion" from a psychological perspective - the psychological effect of loss is greater than that of the same amount of gain. When people face the same amount of gain and loss, they think that loss is more unbearable. Let people jump into the product usage scenario all of a sudden, as if they "already have it", and then look back and find that they "haven't owned it yet", which is more likely to stimulate them to place an order quickly because of this "loss".

5. Segment the population and enter the market with a narrow path and a wide approach

Since the beginning of this year, brands that target specific segments of the population have shown good growth trends:

In the maternal and infant parenting track, products and services that meet functional segmentation needs are growing rapidly: in 2022, the sales of children's mouth spray increased by 707.9% year-on-year, and the discussion of functional technology children's clothing on Xiaohongshu continued to increase, with searches increasing by 80% year-on-year. In the children's shoes category alone, various functional segmentation products have appeared, such as toddler shoes, rope skipping shoes, street dance shoes, climbing shoes, etc., and the corresponding brands have good development momentum in 2022-2023.

The demand segmentation of the silver-haired group has also shown further growth. In 2022, on the Taobao Tmall platform, furniture suitable for the elderly has become a separate category under independent residential furniture, and the sales of this category reached 22.261 million yuan in 2022-2023.1. Of course, in the fields of food, clothing, housing, transportation and entertainment, there is still a lot of room for improvement in the segmented demand of the elderly.

For example, in Japan, an aging society, the segmented demand has reached an astonishing level: for example, the Kewpie company actually divides food for the elderly into four categories according to the difficulty of chewing: easy to chew, can be broken by gums, can be broken by tongue, and can be swallowed without chewing.

In the pet market, in Q1 2023, the pet food track with the highest growth rate is high-protein cat food and raw meat and bones, reflecting people's more segmented demand for pet health. A number of star companies have also emerged in the segmented dimensions of pet medical care, beauty, and social interaction. Cutting in from a narrow group of people has been proven to be a feasible path, but the ceiling is low, the growth space is limited, and the ability to resist risks is weak. Therefore, to achieve a breakthrough, it is necessary to create more new products and services around the needs of a group of people and strive to widen the narrow road.

Many brands have set benchmarks, such as Babycare, which has expanded from diapers to a full range of product categories, and lululemon, which has expanded from yoga pants to a full range of sports product categories.

1. Response strategies and methods

So, how can we truly widen the narrow road, especially in the face of larger competitors, a more competitive track, and the situation of insufficient consumer confidence in 2023?

It is not an easy task:

Internally, there are challenges at the supply chain level, organizational efficiency and internal team interest games, and cognitive changes among the company's core decision-makers.

Externally, it is necessary to complete the cognitive transfer of consumers: corresponding consumers believe that the company’s new products and services are also the best in the category.

In this regard, our advice to these companies with good growth and development trends in their niche areas is: prepare for breaking out of the circle and work hard on internal strength during the 2023 window period. In addition to the above-mentioned internal and external training, there are two other points that are particularly important:

(1) Recognize the company’s true core strengths

For example, two education and training companies that were also "forced" to change their tracks, New Oriental and Xueersi, each took a different new path based on their core capabilities.

At first glance, both are educational training institutions, and both have advantages in teacher resources, but a closer look shows that they are actually different:

New Oriental’s core advantage lies in its teachers who are extremely expressive, while Xueersi’s advantage lies in its teachers who are good at improving scores and taking exams. Therefore, New Oriental used its expressive advantage to sell products in the live broadcast room and gained traffic; while Xueersi moved its score-improving training courses from offline to learning machines and also sold them.

(2) Strengthen the emotional connection between the brand and the audience

In a business centered around a group of people, emotional communication is more effective than rational choice. The reason is that when a brand moves to a new track and opens up a new breakthrough, in the initial market competition, its popularity, product reputation, and cost advantages have not yet formed an advantage. At this time, the emotions and trust between the brand and the user are the best persuasiveness.

How to establish an emotional connection between brands and people?

The first is to refine the brand’s core value proposition , transcending specific categories and centering on the values ​​of a group of people. For example, babycare’s brand proposition is “Redesigned for Love.”

The second is to hone the most appropriate communication method with the target group . For example, social brands like to use cross-border and joint-branded methods to stimulate young people to try new things; and in the live broadcast room for the elderly, the anchor will deliberately slow down the speed of speech and repeat it many times to communicate. When users are accustomed to a certain comfortable communication mode, they will be more willing to connect with this brand.

VI. Conclusion

To summarize:

Among the above new consumption opportunities, "Alternative upgrades of high-end consumption" and "New consumption choices: actively stripping off premiums" are the reconstruction of consumers' judgment on product value: In 2023, what kind of products will be recognized by the market and make consumers willing to pay for them?

The first option is to create a new species. The new species = net utility innovation and upgrade (delayed efficacy + one product with multiple effects + technology upgrade) . In a period of insufficient consumer confidence, it can become a more rational and smarter consumption choice that consumers consider.

The second is to build the value of the product itself, because consumers will actively strip away the premium elements outside the product , while the safety, health and stability of the product itself are still valued and recognized. Brands should not only integrate value points into products, but also make the value points fully explicit.

[Consumption downgrade to internet celebrity-ization] and [sense of immersion in scene consumption] are essentially new modes of communication between brands and users.

Create a "net celebrity feeling", entertainment (unified form + diversified interpretation) plus KOL guidance , so that more affordable products can get social media traffic, stimulate more people to experience and share, and form a snowball effect;

Design a sense of immersion, make people the protagonists of the scene story, focus on the integration point between people and scenes , and make products and services an indispensable part of the scene.

Finally, from the perspective of the track, we found that the number of companies in the segmented population track field is gradually increasing and growing rapidly. For these companies, they must "widen the narrow road" as soon as possible and seize the time window in 2023 to cultivate internal strength. We have given two methods : "finding the real core advantage" and "establishing an emotional connection between the brand and users."

That’s all for today. In the still difficult year of 2023, may we all have greater resilience and confidence .

Author: Lan Lan

WeChat public account: Taro and Cat Talk (ID: taro_cat)