After studying the sinking market for a month, I gained 11 "business insights"

A large part of China's population lives in cities, counties and towns below the third tier. Compared with the first and second tier cities that have attracted much attention, the sinking market represented by these cities is a tiered market that is still to be explored. This article focuses on the sinking market and analyzes the concept and characteristics of the sinking market in detail from various angles, trying to find marketing strategies for the sinking market. I hope it will be helpful to you who are concerned about brand marketing.

The real China is hidden in the sinking markets.

The population of my country's third-tier and below cities accounts for 70% of the total population. There are about 1 billion people consuming and growing in 300 prefecture-level cities, 2,800 county towns, 40,000 townships and 660,000 villages.

So many "hidden champions" in the sinking markets have surfaced, and so many research reports on the sinking markets have been released, but to this day we still have deep misunderstandings about this vast land.

For example, when many Internet apps show off their strength to investors or customers, they still emphasize their share of the first- and second-tier population. For example, when many people start their businesses, they still like to anchor the first- and second-tier markets first, and then try to penetrate the sinking markets.

In my opinion, this is a wrong way of thinking. From the first day of starting a business, if you can anchor a broader market, don’t just focus on the so-called high-net-worth market. If you can anchor the minds of 1 billion people, don’t just think about the pockets of a small group of people.

I think that the premise for doing well in the sinking market is: stop using the four words "sinking market" to define the sinking market! The four words "sinking market" are just a way for first- and second-tier people to look down on non-first- and second-tier people, and it is an irresponsible label.

Because the sinking market is a very rough concept, there are huge differences in the living habits and consumption habits of people in different regions, such as prefecture-level cities, county towns, townships, rural areas, south, north, coastal areas and inland areas.

Regional differences are not just between the south and the north. There are also huge differences between Qiqihar and Mudanjiang in Heilongjiang.

If you are a chain barbecue brand, your strategy is different when you enter Qiqihar and Mudanjiang. Qiqihar is a barbecue city in the northeast, where locals are used to grilling on iron plates, and the competition among barbecue restaurants is particularly fierce. If you want to open a barbecue restaurant in Qiqihar, you need to re-examine your advantages and find blank areas in the market.

The real name of the sinking market should be "tiered market". The key to doing well in the sinking market is to design marketing strategies in thousands of areas and in accordance with local conditions.

This article of mine is an attempt to sort out the commonalities of the sinking market while respecting the differences, and to find the "greatest common divisor" in the sinking market. In this 10,000-word article, there are a total of 11 insights into the sinking market.

*I do not agree with the definition of “down-market”, but for the sake of easier understanding, the article will continue to use the term “down-market”.

1. The “high quality and low price” model does not work well in the lower-tier markets

Many people think that the biggest obstacle to entering the sinking market is the price issue. Companies with this idea often fail, such as Heytea's Xixiaocha and JD.com's "Jingxipinpin".

Many brands that have opened up the market in first- and second-tier cities with “high quality and low price” are able to get low prices because they have a large number of customer traffic in first- and second-tier cities.

Some entrepreneurs who receive investment in the first-tier cities use a common approach when entering an industry: they rely on user subsidies and quickly acquire customers at low prices, generating a large number of orders in an instant.

This order volume will in turn reduce the production cost of the supply chain. For factories, the more orders they receive, the lower the cost. The lower the cost, the cheaper the product. The cheaper the product, the easier it is to win a larger market share, ultimately forming a positive business cycle.

But in small towns, many stores do not have such a large flow of customers, so big brands cannot use this method to get sufficiently low prices. Moreover, many first-tier brands that focus on cost-effectiveness are based on brand premiums.

For example, Uniqlo is a major international brand. It has big stars like Chen Kun and Ni Ni as its spokespeople, and its stores are located in the most luxurious shopping malls in the city center. So a pair of leggings at 69 yuan seems particularly cheap to people in first- and second-tier cities.

But in the sinking market, Uniqlo is far less well-known than Heilan Home and Septwolves. A pair of leggings at 69 yuan is not cheap, but a rip-off.

Let's take a look at a chain brand called "Chao Yi Ku", which has opened many stores in the sinking market, and their clothing prices are generally below 20 yuan. Obviously, Chao Yi Ku directly crushes Uniqlo in terms of price.

Not only that, even the sense of quality that big brands are proud of is often not as good as that of local brands in the sinking market.

Many chain restaurants often fail when entering the lower-tier markets because they cannot beat mom-and-pop restaurants. The dishes in mom-and-pop restaurants are probably brought in from the countryside by the boss’ uncle, and the chicken used is free-range in the countryside. Not only is it fresh, but there are no middlemen to make a profit from the price difference.

All brands that focus on cost-effectiveness will lose half their effectiveness after entering the lower-tier markets. Cheapness is only a ticket to enter the lower-tier markets, but it is definitely not a killer feature.

Moreover, each region of the sinking market has different consumption stratification. There are a large number of "rich people" among them, and this group of people are the main high-consumption force in the sinking market, but their consumption concepts are different from those of white-collar workers, gold-collar workers and bosses in the first and second tier cities.

If you go to the streets of the county town, you will find that there are quite a few Mercedes-Benz, BMW and Cadillac cars. Some people drink tea that costs one or two thousand yuan, and some people recharge their membership cards for 10,000 yuan at a time at a beauty salon.

This shows that real high consumption does exist in the lower-tier markets, and it is not an isolated case. But who are the high-spending class in the lower-tier markets? What impresses them? These are things you don’t know.

2. More willing to spend for the eyes of others

If you walk around the commercial streets of a county town, you will probably see some knockoff brands from time to time. They copy the brand names, packaging styles, and even the products and services of first- and second-tier big brands, but at a cheaper price. Even though they know they are knockoffs, these stores still have many customers.

Based on these phenomena, many people believe that people in the lower-tier markets do not pay much attention to brands. I think this is a very wrong perception. People in the lower-tier markets also pay attention to brands, but their understanding of brands is different from that of people in the first and second-tier cities.

I think that the lower the market, the more brands are equivalent to big brands. For some consumers in lower-tier markets, brands represent identity and reliability. But for first- and second-tier users, brands are not equal to big brands. Brands are an expression of personality and taste, and a choice of certain values.

For residents in lower-tier cities, they bought Heilan Home instead of Muji because they thought Heilan Home was of better quality. But for residents in higher-tier cities, they bought Muji instead of Heilan Home because Muji represented their philosophy of life.

The reason for this difference is that the lower-tier cities are a society of acquaintances, where people have a deeper influence on each other and their consumption concepts tend to be similar. In first- and second-tier cities, consumption and lifestyle choices are diverse, and in many cases there is no so-called best, only whether it is suitable for you.

Take buying clothes for example. If you wear LV or Chanel to go shopping and walk on the streets of Sanlitun, others may not think you have good taste. In everyone's eyes, wearing all branded clothes may mean worshipping money or being the daughter of a "coal boss". The real taste is to wear the same clothes as others and it is a comprehensive consideration of the brand and the style of dressing.

In an environment with a single consumption concept, you may consume because of other people's opinions. In an environment with diversified consumption concepts, you pay more for your own preferences.

In Beijing, the down jacket brand "Canada Goose" was particularly popular in the past few years, but when people wearing this brand were wearing the same clothes everywhere, everyone began to consciously put their own big goose on the top of the closet to collect dust. But in the county, the situation may be completely the opposite.

If several wives of section chiefs in the community wear a bright brand-name coat, then all the ladies in the community want to get one, because if others have it and you don't, it often means that you are "inferior".

In Beijing, Shanghai and Guangzhou, people pursue "I have what others don't". In small towns, people often pursue "I must have what you have".

In a county town, a person may drive a BMW worth 600,000 or 700,000 yuan, but wear home clothes worth 19.9 yuan; he may use a 5 yuan trash can, but spend several thousand yuan to treat friends to dinner in a big restaurant; on a person's 20,000 yuan desk, there may very likely be a box of "Xin Xiang Yin" tissues.

Users in the sinking market do not ignore brands and are willing to buy counterfeit goods. They care more about brands in some categories and not in others.

In categories that are generally related to face, users in the lower-tier markets pay particular attention to brands and are more willing to pay high prices, such as high-end hotels, famous cigarettes and wines, and big-name cosmetics.

It is worth mentioning that when it comes to furniture, people in the sinking market pay special attention to brands. Cities like Beijing, Shanghai and Guangzhou are a society of strangers. Your home is rarely visited by outsiders. Your home is a private place for you, and your decoration and layout are more for your own pleasure.

The sinking market is a society of acquaintances, where people often have guests at home. People living here are more likely to decorate their homes for the sake of face. The size of the TV in the living room, the brand of the sofa, and the bookshelf are what they value most.

If you want users in the sinking market to be willing to pay a high premium for your brand, you need to study the "face business" here.

For example, the wedding business is done differently in high-end and low-end markets. In the high-end market, the key is to create style and customize the ideal wedding according to the customer's needs. But in the low-end market, whether the wedding is grand or not is very important.

Weddings in lower-tier markets are still popular with rituals that have disappeared in higher-tier markets, such as motorcades and parades. People also pay special attention to which people of status attend the wedding.

If you can throw a grand wedding on a similar budget that gets the town talking, your brand will likely become an instant hit.

3. Small town youth are not the main consumers in the sinking market

Some reports say that young people from small towns will be the main consumers of the future sinking market. In my opinion, this is a false proposition.

There is a serious outflow of population in the sinking market. Most of the young people in counties, towns, and villages are scattered in major first- and second-tier cities, either working or studying outside the city.

For most of the year, a young man from a working-class family in a small town may be Mike in an office building in Beijing, Shanghai or Guangzhou, or the third child in a dormitory. Only when he returns to his hometown during the New Year holidays will he become Dapeng in the eyes of his relatives.

Even if the young man from a small town is at the bottom of his class, cannot get into university, and cannot get a job in a big company, he may choose to work outside. He may go to a Foxconn factory, or come to a first-tier city to be a delivery man.

Most of the people who stay in the sinking market all year round are actually middle-aged and elderly people and children. Young people are just "wanderers" in the sinking market.

The young people who really stay in their hometowns are extremely polarized:

The first type is people who have some family background and can enter the local system. After graduating from college in other places, they usually return to their hometowns to work in banks, power bureaus, schools, or take over their family businesses. They belong to the local "rich second generation" group.

Another group of young people are from rural areas. They often drop out of school and cannot make a living through their studies, but they work their way to the city with their skills or physical strength. For them, this is already a victory in life.

The people who really live in the sinking market for a long time are actually the middle-aged and elderly people and children. Small town youth are only a small group. They are on the edge of the sinking market and it is difficult for them to become the main consumers in the sinking market. The main consumer force cannot be the elderly. Although the aging of Chinese society is gradually intensifying, most Chinese elderly people are still reluctant to spend money on themselves.

The real main consumer group in the sinking market is those mature men and women between the ages of 35 and 50. Most of these people are the local social backbone, with money and leisure time. They use their money for social interaction, children's education, respecting the elderly, and daily expenses. In fact, if you capture them, you will capture half of the sinking market.

Among these middle-aged people, men are often responsible for earning money, while women are responsible for spending money. Apart from major expenses such as buying cars and houses, mature women control almost all family income.

They spend most of their money on their children's education, daily life, and beauty, and occasionally buy their husbands a belt when they are in a good mood. Men's big expenses are mainly around socializing, such as business banquets and daily gift exchanges.

If you want to do a good job in the sinking market, you must figure out who holds the initiative in consumption in the sinking market. Only by winning them over can you expand your business in the sinking market.

4. Thinking that “geo-arbitrage” is a way to open up lower-tier markets

The theory of geo-arbitrage was first proposed by Alexander Tamas, a partner of a Russian investment institution DST. Simply put, it is about taking advantage of information asymmetry between different regions to gain profits.

This theory is commonly used by Chinese Internet companies. Baidu initially learned from Google, and Alibaba copied Taobao after seeing the popularity of eBay. This makes many entrepreneurs think that the entrepreneurial methods that have been proven successful in the first and second tier cities can be simply improved and continuously replicated in the sinking market.

Many projects that were popular in first- and second-tier cities were considered mature, but they failed miserably when they migrated to lower-tier markets. For example, script-killing, cat cafes, blind boxes, Xiapu Xiapu... these products that were very popular in first- and second-tier cities were hit hard when they entered the lower-tier markets.

Especially Xiapu, you may think it is very suitable for sinking market format. Because Xiapu's customer unit price is very low, it is mainly driven by products, not services, and the whole model is very light. I thought they would be very smooth in opening up the sinking market, but in fact they encountered great resistance.

Xiapu is popular in first-tier cities because the lifestyle of people in first-tier cities is efficiency-oriented and the relationships between people are relatively distant. In an environment without interruptions and with cheap products, customers feel very comfortable. Therefore, the dining scene of "eating alone" is established. However, in lower-tier cities, what everyone calls "going to a restaurant" is still a social behavior, and there is almost no scene of eating alone there.

For example, Yuanqi Forest, which has 0 sugar and 0 fat, is very popular in first- and second-tier cities, but people in the lower-tier markets think it has no taste and is not a beverage. In county towns and villages, many people still buy gathered underwear because it has a better shaping effect. Instead, people think that underwear without underwires and sizes is a low-end product.

The lifestyles, consumption habits, aesthetics, and even perceptions of the same thing of people in the lower-tier markets are very different from those in the first-tier cities. If you want to directly transfer mature business formats in first-tier cities to lower-tier cities, you will often fail. This is the first reason why geographical arbitrage is not effective.

Another reason why geopolitical arbitrage does not work well is that information asymmetry still exists.

When a big brand is successful in the first and second tier cities and wants to enter the lower-tier markets, you will find that your brand power is not as strong as you thought. Although everyone says that the Internet has made the world flat and eliminated information asymmetry, in China, with an area of ​​9.6 million square kilometers, the information asymmetry between regions is much greater than you think.

I have a friend who wants to choose a set of high-end brand furniture to decorate his villa. In our hearts, the furniture brands that can match the villa are at least Huayi Space and Ruichi. But when my friend was chatting with his family in a county-level city in Heilongjiang, his brother asked in surprise: "Why not buy Sofia?"

In the eyes of first-tier users, Sofia is a mid-to-low-end brand. But his brother thinks Sofia is a high-end brand. Because Sofia has a particularly large flagship store in Harbin. In the eyes of Harbin people, high-end home furnishing brands are equal to Sofia.

In order to write this topic, I asked my colleagues what high-end brands are in the eyes of their hometown people.

When we asked about men's clothing brands, we found that many of our peers in third- and fourth-tier cities said that the high-end men's clothing brand is Heilan Home. However, Heilan Home is seen as a "daddy-flavored" brand by many users in first-tier cities. People in first- and second-tier cities often make fun of the taste of people who wear Heilan Home.

I would like to say one thing to all the high-end brands entering the sinking market: Don’t take geopolitical arbitrage as a shortcut. Always be respectful and you will have the chance to understand the sinking market.

5. Human relations business: high-line de-humanization, low-line strong human relations

If you want to develop the sinking market, the most important thing is to understand the human relationship in the sinking market. There is a big difference between high-tier cities and low-tier cities in this regard.

For example, people working in Beijing, Shanghai and Guangzhou rarely give gifts to their leaders because people in these places frequently change jobs, and after a year, either you leave or your direct leader leaves.

But in a low-tier city, the leader you join after graduation may be your leader for life. Your work, life, everything about you will be intricately intertwined with him.

This kind of social atmosphere of human relations in the sinking market also affects the business model of enterprises.

For example, will a brand like Haidilao, with strong brand power, powerful supply chain and excellent service, be able to enter low-tier markets smoothly? I don’t think it’s too optimistic.

First of all, Haidilao's biggest advantage is its good service. But think back to the restaurants in your hometown. The bosses and customers almost all know each other, and they are even friends. Not only can they give you a zero when you check out, they can even collect express deliveries for you and help you watch your children. No matter how good Haidilao's service is, it cannot cut off their human ties.

Let's talk about product quality. In small cities, I can buy freshly caught live fish, prawns, and crabs. If you talk about cost performance, your price can't be compared with the price of mutton from a restaurant owner's uncle's farm or the purchase price from his second uncle's vegetable garden.

In the sinking market, the business of personal connections is not a simple emotional bond. Personal connections can not only determine product quality and purchase cost, but can even provide you with the ultimate service that you could never imagine.

If you want to provide good service, you have to understand that the definition of good service in the first and second tier cities is not the same as the definition of good service in the sinking market:

Good service in first- and second-tier cities means getting things done without disturbing you as much as possible. Good service in lower-tier markets means you should help me like you would help a friend.

For example, if you open a bakery in Beijing, your focus is to make good products and give the waiters a set of standard SOP procedures. If you open a bakery in a sinking market, you have to know the names of customers who often buy bread, what their taste preferences are, and occasionally reserve bread for them... Only by doing these can your sales increase. But if you do this privately in first-tier cities, customers may think it is a kind of harassment.

This difference occurs because the lower-tier markets are small in size and are a society of acquaintances, while the first- and second-tier markets are a society of strangers.

When doing business in first- and second-tier cities, you need to respect other people's privacy more and standardize services while maintaining social distance.

When doing business in the sinking market, we cannot just pursue professionalism and standards, but also need to add humanity on this basis and give more power to franchisees, store managers, and employees in the sinking market.

If you want to do business in a society where relationships are important, you have to cater to that society and adjust your service model.

6. The real “private” domain is in the sinking market

People in the county rarely take Didi, because it is easy to hail a car, but there are many inter-city ride-sharing services. Some young people go shopping in the city from the village, and they don’t take the bus, but ride-sharing services that can pick you up right at your doorstep.

Many of these ride-sharing drivers are full-time drivers. After receiving orders from Didi and Hello, they will directly import the users into their own WeChat groups. However, few ride-sharing drivers in first-tier cities do their business so well. It is not because they are not working hard enough, but because the social forms of high-tier markets and sinking markets are different.

The high-end market is a society of strangers, and everyone has a USB-like relationship - use it and then unplug it, and people hope to maintain weak relationships. But the sinking market is an acquaintance society. If you tell the driver where you live, it is very likely that the driver has family and relatives living in the same community as you, and everyone assumes that they are neighbors or fellow villagers. Doing business across platforms is normal and efficient in the eyes of drivers.

When doing business in the sinking market, in addition to taking into account personal connections in terms of service model, you also need to pay more attention to the operation and maintenance of private domains than in first-tier cities.

The benefits of doing private domain in the sinking market are: people living in the first and second tier cities spend more time on the Internet, they pay great attention to protecting their attention resources, and often block social networks and Moments. However, people in county towns have a lot of free time, and they often don’t need to block anyone. Everyone’s network of relationships is relatively simple, and there is less information that can distract attention, so the efficiency of reaching private domains is higher.

What’s interesting is that not many companies in the lower-tier markets use WeChat for business when doing private domain business. People prefer to add WeChat accounts. But if you go to some big-name stores in high-tier cities, such as Chanel and Lancome, the shopping guides will ask you to add WeChat accounts for business.

Figure | Users communicating with personal microblogs (left) VS communicating with corporate microblogs

This is because big brands need to systematically manage their private domains and use many of the functions of WeChat. Especially when an employee leaves, the new employee can inherit the old employee's customers with one click.

Moreover, customers in high-tier cities have no psychological barriers to adding WeChat accounts, and people in low-tier cities have no psychological barriers to adding WeChat accounts. Because people in high-tier cities think that WeChat accounts are just accounts, not people, and they will not worry about being peeped. People in low-tier cities do not want to add an account that is cold and often unavailable. Only by using WeChat accounts can we connect with the human relationships in small cities.

7. Pay attention to offline reputation rather than online reputation

When it comes to word-of-mouth marketing, people will think of Xiaohongshu and Douyin, using KOL content to influence consumer decisions. Many first- and second-tier brands’ word-of-mouth efforts are online. But in the sinking market, your word-of-mouth efforts should be more focused on offline.

There are no secrets in small places. Because everyone knows each other, information spreads very quickly. Director Li’s colleagues may know which neighborhood Director Li’s mistress lives in before Director Li’s wife does.

Word of mouth is essentially the realization of trust. A skin cream recommended to you by a friend is more likely to win your trust than a brand recommended by a stranger online. In small towns, everyone is somewhat related to each other. If your cousin's classmate opens a maternity and baby store in the county, the store owner's ability to bring goods may be far greater than that of an online KOL.

Therefore, in the sinking market, the store manager is often the local KOL, and all users who have bought the product are more likely to become the brand's KOC and help you sell the product.

If word-of-mouth marketing in first- and second-tier cities requires leveraging the fan relationships of Internet celebrities, then the core of word-of-mouth marketing in the sinking market is to drive the relationship between acquaintances and let these people help you complete user fission through word of mouth.

Moreover, because it is an acquaintance society, people in the county will naturally be divided into circles. This circle is very different from the so-called online circle, which is more divided by interest, such as the second dimension, Korean culture, and pet raising.

The core of the naturally formed offline circle is maintained by blood ties and income. It is easier for an official's wife to become best friends with another official's wife because they often visit each other during festivals, and they may even live in the same neighborhood and their children go to the same class.

In the northern part of Henan Province, there is a tea brand called Jingcha Pinmo that relies on winning over acquaintances in the county to generate user fission.

They created a VIP group for customers who repurchased frequently. VIP customers can enjoy a half-price discount on the second cup for a long time. If they bring friends to buy milk tea, as long as there are no more than 5 people, each friend can get a free cup. This referral activity not only makes old customers look good, but also allows new customers to try it for free, which naturally creates word-of-mouth fission.

8. First-tier cities are segmented, and lower-tier markets are mixed

There is a coffee shop in Dongxing Village, Shantou, Guangdong. Although it is located in the village, its highest daily turnover can reach 10,000 yuan. I searched and found that most coffee shops in villages and towns have a daily turnover of less than 1,000 yuan and cannot survive for more than a year. This coffee shop can survive so well in the village because its business model is very different from that of coffee shops in first-tier cities.

For example, its business hours are from 8 am to 12 pm, while Starbucks is open until 10 pm at most. The reason why it is open so late is that there are few entertainment venues in villages and towns, and young people who want to find a place to sit at night can only come here. Although it is called coffee, they not only sell coffee, but also fresh milk tea, tea, lemon tea, sparkling water, alcoholic beverages, etc.

The business model of this coffee shop is very vague in the eyes of professional branders. But in fact, this approach is in line with the consumption habits of the sinking market. Because there are few entertainment venues and consumption options in the sinking market, their consumption and entertainment needs are not fully met. This has caused many business formats to be a bit mixed.

Those niche professional brands are not necessarily suitable for the sinking market.

Taking the coffee industry as an example, Manner's business model works well in first- and second-tier cities, but it may not be very smooth in the sinking market. Most of Manner's stores are small shops of a few square meters, the average customer price of coffee is cheap, and the core business is takeout and delivery, and dine-in is rarely done.

Manner's business logic is actually aimed at heavy coffee users in first- and second-tier cities. These people have the habit of drinking a cup of coffee every day and do not pursue the taste of coffee in Starbucks. For them, coffee is a rigid demand like tobacco and alcohol.

But in lower-tier cities, the loyal coffee community is not that large, and it is likely that most of the customers who come to your store actually want to order a drink and relax in a comfortable environment.

During the Spring Festival, my team visited a county-level city in Shanxi and found that many tea shops like Mixue Bingcheng, Yihetang, and Shanghai Auntie had a vertical structure, with orders taken in the front and ten to twenty seats in the back. Almost every store was full of young people.

The same is true for milk tea and coffee. In the low-tier market, the occasion you provide is as important as your coffee products. Under relatively poor consumer choices, you can provide more diverse products and services, and you can convert coffee users into catering users, milk tea users, and alcohol users. The conversion cost of this user is relatively low.

To sum up in one sentence: high-tier cities are a segmented market, and low-tier cities are a mixed market.

When we enter the sinking market to do business, while we find our own position, we must fully consider what peripheral demands this business may generate. Business in the sinking market is not black and white, but more likely to be gray.

There is a convenience store in Henan called 7 Days. Although it is called a convenience store, it has a delivery station and sells fresh products such as vegetables and fruits. On the surface, it is a convenience store, but in fact, it combines the daily needs of the surrounding residents and can be regarded as a convenience complex.

The reason why you should fully consider people's surrounding needs is that the low-tier market seems huge, but after it is cut into every county, every village and town, the market will be very small. If you only do a single sub-category, it is likely that you will not be able to support the survival of the business.

9. “Commercial centralization” leads to greater homogeneous competition

In order to write this article, we also did some field research. When my colleagues asked relatives living in the county what brands of clothing they would buy and what brands of toys they would buy for their children, several relatives looked confused.

When it comes to buying gold and silver jewelry, they immediately think of "Lao Feng Xiang" on the commercial street in the county town. Lao Feng Xiang is a big brand in the hearts of county people and the only choice for many young people to buy "three golds" when they get married. But in the hearts of users in high-tier cities, Lao Feng Xiang is actually a somewhat "outdated" brand.

The reason why Lao Feng Xiang has become a local big brand is that it has a grand store on the largest and most popular commercial street in the area. This store makes Lao Feng Xiang look very powerful.

There are differences in the channels through which people in high-tier cities and low-tier cities perceive brands. Simply put, users in high-tier cities perceive brands more from online advertising bombardment, while users in low-tier cities often perceive brands in a way that is influenced by the appearance of offline stores.

Why is there a greater offline brand effect than online in county towns?

Because high-tier cities usually have multiple commercial centers. For example, Beijing has commercial clusters such as Sanlitun, Guomao, Wangfujing, and Zhongguancun. However, county towns usually have only one large commercial cluster, and almost all local merchants with some strength are concentrated in this "commercial center."

This has given local people an illusion: the brands in the shopping center are big brands, while those outside the shopping center are small brands. If a brand is still the "most popular" in this commercial street where every inch of land is valuable, it is probably a big brand among big brands.

The centralization of business will lead to the clustering of similar brands.

For example, in some county towns, people selling electric vehicles usually gather on one street, people running restaurants gather together, and people selling fertilizers and seeds, and even those doing wedding planning, also appear in groups.

On the most crowded commercial street in a county-level city in the north, there are two Mixue Ice City restaurants, two Zhengxin Chicken Steak restaurants, two Heilan Home restaurants, and two Chow Sang Sang restaurants. How close are these restaurants? There is a Mixue Ice City restaurant on the south side of the road, and another Mixue Ice City restaurant is less than 200 meters away on the opposite side of the street.

This location selection idea seems a bit strange to some companies in high-tier cities. Because the location selection of high-tier market brands often needs to avoid fierce competition. For example, there can usually only be one Heytea or one Haidilao in the same shopping mall.

But for low-tier merchants, users are used to going to one place to select their favorite products at one time. Merchants of the same type and brand crowded together will indeed encounter fierce homogeneous competition, but if you are unique and not in the center of traffic, you may not even have a chance to compete with others.

10. Products make money, but services win customers

When our editor went back to his hometown during the Spring Festival, he found that more than 80% of the beauty stores there were skin care experience stores. You can buy a set of skin care products, deposit the products in the store, and then come to the store for free to receive beauty treatments.

After asking several store managers, she learned that the price of a skin care gift box is basically between 450 yuan and 500 yuan. Customers who buy a set can come to the store for 10 skin care treatments, and each treatment takes at least 40 minutes.

From the perspective of operating efficiency and cost, this seems to be unprofitable. However, several of the stores she interviewed have been in business for six or seven years, and even if they change their addresses, old customers will still follow them.

In many lower-tier markets, products and services are more closely tied together.

When doing business in the high-end market, we may focus more on polishing good products. What we strive for is to standardize products as much as possible, reduce back-end services, and thus reduce operating costs.

But for the sinking market, you have to gather with your peers to capture the traffic in the county center. The price war and homogeneous competition between brands are often more intense. The reason why users buy from you instead of others is likely to be some more "soft" reasons. For example, whether the salesgirl introduces more carefully and is friendly enough.

The human element is more important in the order conversion rate in the sinking market. For many stores, although it is the products that make money, it is the service that wins customers.

For example, my relative bought an Internet TV in her hometown. She often calls the person who sells the TV to ask how to connect the TV to the Internet and how to watch TV series that are visible to members.

In fact, these are not within the scope of after-sales service of the TV seller, but my relative simply thought that since she bought the TV from you, you should help her fix these problems. The TV seller never told her that "this is not his responsibility", but patiently told her how to operate it every time, and even came to help.

In the sinking market, for all categories with "service" attributes, the service scope of merchants may be far greater than the items in the after-sales manual.

11. In the sinking market, stores are often more important than brand power

Brands active in first-tier cities often win people's trust through online advertising bombardment.

However, the current Internet marketing has led to an explosion of consumer information, and it is difficult for users to identify who is good and who is bad, who is strong and who is weak. For users living in the first-tier cities, they are more likely to actively search on platforms such as Xiaohongshu to find the truth about brands.

Compared with users in first- and second-tier cities, people in small towns believe that seeing is believing. A brand that can open a grand store on the busiest commercial street can often make people believe in your strength more than buying a three-day splash screen ad on an app.

During our visit, we found that brands like Sofia, Lao Feng Xiang, and Heilan Home, which are considered high-end brands in the sinking market, have very large and grand stores.

But in first- and second-tier cities, it is difficult for you to "show your muscles" and show your brand's strength through stores. Because land in first- and second-tier cities is very expensive, it is too expensive to build a large store.

Not only are small towns cheap land, but they usually only have one commercial street. The cost of large stores being discovered is very low, and a grand store is the best billboard.

For example, many ordinary people in Qinhuangdao only recognize Qumei Home Furnishings when decorating. Because Qumei has opened a very large store in Qinhuangdao, this store is a landmark building in Qinhuangdao. In everyone's understanding, being able to open such a large store proves that it has strength, the products must be better and more "reliable".

Let’s imagine that CK and HaiLan Home have entered a county-level city at the same time. Although CK is a high-end brand, it only has a 100-square-meter store in the mall, while HaiLan Home has a 1,000-square-meter independent store in the commercial center, plus the advertisement bombardment of Shanghai Lan Home. Do people here think wearing CK is more advanced?

Making your store into a landmark building is a shortcut to building a brand in the sinking market.

When you become a city landmark, the residents of a small place will soon form a consensus that you are the best in the local area. This sense of perception is far more convincing than if you invest in 20-day advertisements on CCTV.

12. Conclusion

I wrote this article to sort out the business commonalities of the sinking market and find the "greatest common divisor" in the sinking market. But I still want to remind you again: the personality in the sinking market must be far greater than the commonality. Only by always being in awe can you make money in the sinking market.

Author: General Liang

Source: WeChat public account "General Liang (ID:liangjiangjunisme)"