2022, consumption is not abandoned

In 2022, the consumer industry encountered unprecedented challenges. The author of the following article analyzes in detail the brand consumption under the influence of the epidemic. Friends who want to understand the brand can take a look.

Data from the National Bureau of Statistics show that from January to November 2022, China's total retail sales of consumer goods was 39,919.0 billion yuan, a year-on-year decrease of 0.1% .

Among them, the total consumption of catering was 397.84 billion yuan, a year-on-year decrease of 5.4%; the total consumption of clothing, shoes and hats, and needlework textiles was 116.88 billion yuan, a year-on-year decrease of 5.8% ; the total consumption of cosmetics was 365.2 billion yuan, a year -on-year decrease of 3.1%; the total consumption of household appliances and audio-visual equipment was 811.4 billion yuan, a year-on-year decrease of 3.0% ; the total consumption of furniture was 145.9 billion yuan, a year-on-year decrease of 7.7% .

According to incomplete statistics from Yilan Business, nearly 7,000 physical stores in various retail formats announced their closure in 2022, including stores of well-known brands such as RT-Mart, Walmart, Haidilao, Anta, Maybelline, etc. In terms of formats, the closed stores include 1,138 supermarkets, 35 department stores, 287 restaurants, 757 beauty and personal care stores, 4,723 clothing stores, 29 cinemas, etc.

However, although overall consumption has experienced negative growth due to the impact of the epidemic, consumption has not been abandoned. Instead, new opportunities have emerged in many areas.

01 No matter how difficult life is, you still have to eat well

As the saying goes, "food is the first necessity of the people." At a time when overall consumption is sluggish, food and drink have proven to be resilient among many consumer sectors.

According to incomplete statistics from Yilan Business, in 2022, there were 254 financing events in the food and beverage, tea and coffee, and beverage and alcohol related sectors, with a financing amount of 14.756 billion yuan, accounting for 40.8% of the total financing times and 39% of the total financing amount for the whole year.

From January to November 2022, the total retail sales of grain, oil and food among consumer goods increased by 8.5% year-on-year; the total retail sales of beverages increased by 5.3%.

Although most consumer industries are under downward pressure, food and beverages, as basic consumption, have maintained good growth, and some more detailed characteristics have emerged.

The most eye-catching one is pre-prepared meals. With the advantages of convenience and speed, pre-prepared meals stand out in 2022.

According to incomplete statistics from Yilan Business, a total of 15 companies in the pre-prepared food sector received financing in 2022, covering multiple categories including Chinese food, Western food, and local specialty snacks.

According to data from iMedia Consulting, the scale of China's pre-prepared food market reached 419.6 billion yuan in 2022, a year-on-year increase of 21.3%. It is expected that China's pre-prepared food market will maintain a high growth rate in the future, and the scale of the pre-prepared food market will reach 1,072 billion yuan in 2026.

Retail giants such as Hema and Walmart, as well as time-honored giant restaurant companies such as Xi'an Catering, Guangzhou Restaurant, and Quanjude, have all increased their investment in pre-prepared meals. Not long ago, home appliance and kitchen appliance companies such as Gree Electric, Haier Smart Home, Robam Electric, and Midea Group also entered the market.

This year, Qudian was also preparing to make a big splash in the pre-prepared food market, and its founder Luo Min threatened to open 20 stores. Although it became popular for a few days after receiving heavy subsidies in the live broadcast room, Qudian quickly fell out of favor due to its dark history of campus loans, but this did not hinder the popularity of pre-prepared meals.

The dietary characteristic that consumers are most concerned about is "health".

According to incomplete statistics from Yilan Business, there were a total of 28 financings in the food and beverage categories related to "health", involving categories including probiotics, sugar-free beverages, healthy low-fat foods, nutritional supplements, etc.

A recent consumer survey data from CBNData shows that from staple foods to daily snacks, fitness enthusiasts want low-calorie, light, and low-GI (low glycemic index) snacks. Consumers of different age groups also have their own preferences when purchasing light meals. Whole wheat bread and low-GI staple foods are popular among those born in the 1990s and 1985s as high-quality carbohydrates; low-calorie meal packs are favored by those born in the 1995s and 1980s; and low-calorie, zero-sugar snacks represented by Daily Dark Chocolate are used as daily snacks to satisfy cravings and are exclusively favored by those born in the 1995s.

Obviously, with the continuous upgrading of the consumer market, people have higher requirements for food safety, and health has become an important consideration for consumers' purchases.

As the focus of consumption shifted to food and drink, more and more catering supply chain companies have begun to come to the fore.

According to incomplete statistics from Yilan Business, in 2022, the catering supply chain track received 8 financings, including the food supply chain service company "Shuhai Supply Chain", the cold chain logistics service platform "Ruiyun Cold Chain" and many other companies.

After the scale of store opening increases, in order to efficiently meet the diversified needs of the front end, restaurant companies must rely on the supply chain backend, and have supply chain companies provide standardized ingredients, standardized seasonings, as well as R&D and technical support on a long-term basis.

However, the supply chain itself is a very complex field, including multiple links such as food raw material procurement, equipment selection, production and processing.

Mixue Ice City, which has more than 10,000 existing stores, took 6 years to stabilize the supply system behind lemonade. Therefore, many catering companies and stores will first consider cooperating with supply chain companies, and then consider building their own supply chain after reaching a certain scale, which has further catalyzed the development of supply chain companies.

02 New opportunities emerge in the retail sector

The epidemic has changed the behavior of many consumers, and has brought new opportunities to the retail industry.

According to incomplete statistics from Yilan Business, there were 63 financings in the retail sector in 2022, with a total financing of 3.773 billion yuan, including discount stores, new vertical e-commerce, etc.

The first is the near-expiry discount store.

According to incomplete statistics from Yilan Business, the discount store track received a total of 4 financings in 2022.

Public data shows that the size of China's discount retail market was only 56.5 billion yuan in 2010, but by 2021, the market size had reached 1.62 trillion yuan, with an annual growth rate of more than 40%.

As of October this year, the number of stores of "Haotemai", a discount retailer of near-expiry goods, has reached 500, mainly in first-tier cities, including 150 stores in Shanghai and nearly 100 stores in Beijing. It plans to open 2,000 stores by 2023. Some chain supermarkets have also entered the discount store market.

In August, Wumart Group’s discount store brand “Meitao” opened in Ximao Building in Mentougou District, Beijing; in September, Hema Outlets also opened in Shanghai.

Consumers' consumption concepts are gradually turning towards rational pragmatism, and products are beginning to return to their use value itself. Near-expiry discount stores that focus on cost-effectiveness just meet the current consumer's pursuit of cost-effectiveness.

The second is warehouse membership stores.

Warehouse membership stores display and sell bulk commodities in a warehouse manner, and provide members with cost-effective and high-quality commodities by charging membership fees. New and old players such as Sam's Club, Costco, Metro, Hema X Membership Store, Carrefour, Fudi, Jiajiayue, Hualian Supermarket, RT-Mart, Beiguo Supermarket, Renrenle, and Yonghui Supermarket have joined in one after another.

On December 23, 2022, the fourth Sam's Club store in Beijing officially opened, which is also the 42nd store in the country. On November 24, the Hema X Membership Store Shanghai Donghongqiao Store officially opened, which is also the 8th Hema store in the country.

On November 19, Metro Shanghai Membership Store opened, which was the 23rd membership store opened by Metro in one year. On October 1, Fudi had already opened 3 membership stores in Beijing. RT-Mart's first membership store in Yangzhou is expected to officially open on April 28, 2023.

Under the impact of e-commerce, community group buying and the epidemic, the performance of some traditional supermarket companies has declined significantly. Many companies have begun to continue to seek new growth points, targeting this group of people in China who have certain consumption power and pursue quality of life. What followed was the explosion of warehouse membership stores.

However, competition among membership stores is becoming increasingly fierce. After consumers join the membership, how to get them to continue repurchasing membership is the biggest challenge amid intensified competition.

Finally, there is the new vertical e-commerce.

According to incomplete statistics from Yilan Business, there were a total of 28 vertical e-commerce financings in 2022, covering second-hand e-commerce transactions, trendy e-commerce transactions, home cross-border e-commerce platforms, fashion idle trading platforms, and pet lifestyle full-category product sellers, etc.

Compared with the vertical e-commerce in the past, the new vertical e-commerce has some new features.

On the one hand, compared with the material level, more attention is paid to its emotional added value. For example, "wineapp", which just received millions of dollars in investment this year, has the main concept of "enabling wine lovers to have access to high-quality wines from all over the world at a high cost-effectiveness". It also has offline experience centers and professional sommeliers to recommend purchases.

On the other hand, most of the energy is focused on operations and products. This wave of vertical e-commerce rarely has self-built logistics, the overall SKU is not high, and what they do is a small and beautiful business.

With the improvement of economic development level, people's consumption demand pays more attention to satisfying spiritual life. Under the comprehensive development of comprehensive e-commerce platforms, it is difficult to achieve refined operation of subdivided categories.

If new vertical e-commerce platforms can perfect segmented categories, provide more professional services, and give consumers an experience far better than comprehensive e-commerce platforms, there may be certain opportunities in the future.

03 The beauty industry enters a turning point

According to incomplete statistics from Yilan Business, the beauty and personal care sector received a total of 42 financings in 2022, a decrease of 43 compared to 85 in 2021.

Qichacha shows that there are approximately 3.64 million newly registered companies in the beauty and cosmetics sector in 2022, a decrease of 760,000 compared to 4.4 million in 2021.

From January to November 2022, the sales of cosmetics among consumer goods decreased by 3.1% year-on-year, with the growth rate in 7 months being lower than the growth rate of total retail sales of consumer goods. It has been negative for four consecutive months in August, September, October and November, and the growth rate in April this year was even as low as -22.3%.

The entire beauty industry will not have a good year in 2022. International brands have attracted consumers by offering discounts, extra gifts, and price cuts during major promotions. However, some domestic brands have taken their own distinctive path to rise in subcategories such as sensitive skin and repair products.

From a single brand perspective, Chinese brands such as Zhuben and Winona that have been deeply involved in niche categories have already made their mark. During this year's Double 11, Zhuben Cleansing Oil ranked No. 1 in the makeup removal category on both Tmall and Douyin platforms, with 1.764 million units sold on Tmall. In the Tmall Double 11 lotion and cream category, Winona ranked first with an absolute sales advantage of 1.4342 million units, 4.29 times higher than the second-place Estee Lauder.

But most domestic brands are not so lucky. The domestic cosmetics brand YES!IC is scheduled to be delisted this year, celebrity-created brand RAINOLOGY announced its store closure this year, and Perfect Diary’s parent company Yatsen E-Commerce’s revenue has fallen for three consecutive quarters. Most brands are still in a period of transformation and need to continue to delve deeper into their products.

In addition to brands, offline beauty and cosmetics stores have also ushered in a turning point.

At the beginning of 2022, the beauty and cosmetics store Huamai obtained approximately US$200 million in Series D financing. So far, Huamai has completed four rounds of capital support; the beauty and cosmetics store WOW COLOUR also announced at the 2022 strategic launch conference that it had received over 100 million US dollars in Series A+ financing, raising funds three times in just over a year; and as early as last year, THE COLORIST's parent company KK Group had completed seven rounds of financing, with a valuation of US$3 billion.

With the help of capital and the popularity among young people, beauty stores have expanded rapidly. At its peak, the valuation of Huamei, which had only five stores, was reported to have reached 5 billion yuan; THE COLORIST opened more than 300 directly-operated stores in less than two years; WOW COLOUR opened nearly 300 stores in first-tier core business districts in 30 provinces and 89 cities across the country, and signed contracts with nearly 600 stores.

However, in just two years, beauty and cosmetics stores have undergone tremendous changes.

According to incomplete statistics from Yilan Business, after January, no beauty and cosmetics stores received financing throughout 2022.

In addition, after WOW COLOUR closed 60 stores in 2021, in June this year, THE COLORIST was reported to have closed most of its stores in Beijing, and its parent company KK Group was caught up in scandals such as failed listing and selling counterfeit goods; Black Hole’s two stores in Hangzhou and Xi’an also officially closed in 2022.

Whether on the capital side or the consumer side, beauty and cosmetics stores have fallen into a trough, but this does not seem surprising.

On the one hand, beauty and cosmetics stores are highly homogenized. "Beautiful storefront", "good photo taking", "no interruptions from store clerks", and "rich products" are labels given to these beauty and cosmetics stores. In the economic upswing, young people who are willing to try and accept new things are also willing to pay for the "Internet celebrity decoration style".

However, this type of beauty and cosmetics store has no core competitiveness and can only attract consumers temporarily with its beautiful decoration. As the market becomes increasingly crowded and offline consumption decreases due to the epidemic, the first wave of survival of the fittest has occurred.

On the other hand, online sales channels have also squeezed beauty and cosmetics stores. Serious homogeneity has directly weakened the voice of beauty and cosmetics stores, and has led to the loss of control over products and pricing power. In contrast, e-commerce companies have promotions almost every month, and they also offer discounts and promotions in live broadcast rooms on a daily basis. Therefore, many people try on makeup offline and feel that it is suitable, and then turn to online purchases because it is more cost-effective.

Although good-looking decoration can attract users temporarily, it will eventually return to the business model itself. In the long run, beauty and cosmetics stores need to check from multiple aspects such as procurement channels, brand guarantee, and service guarantee.

04 Projectors and educational robots grew against the trend

In 2022, consumer electronics experienced a recession.

According to incomplete statistics from Yilan Business, there were 6 events in which the consumer electronics sector received financing in 2022, including multiple fields such as mobile phones, projectors and smart robots.

Data released by the China Academy of Information and Communications Technology showed that from January to November 2022, the domestic mobile phone shipments totaled 244 million units, a year-on-year decrease of 23.2%; 381 new models were launched, a year-on-year decrease of 10.8%.

According to data released by market research firm IDC, the top three shipments in the Chinese market in the third quarter of 2022 were vivo (14.2 million units), Honor (12.7 million units), and OPPO (11.6 million units), a year-on-year decrease of 20.5%, 9.1%, and 27.9%, respectively.

The mobile phone market is not an isolated case. The shipments of consumer electronics including computers, cameras, speakers, and televisions have all declined to varying degrees. According to data released by a statistics agency on November 12 this year, the sales volume of smart speakers in my country in the first half of this year was 14.83 million units, down 27.1% and 16.2% respectively. The sales volume of smart speakers in the third quarter was 5.75 million units, down 26.2% year-on-year.

Although the overall consumer electronics market is sluggish, there are still new growth opportunities in the industry.

The first is the projector.

According to Qichacha, 27,667 projector-related companies were registered in 2022, 3,001 more than last year.

Smart projection equipment developer "JMGO" also received RMB 1 billion in Pre-IPO round financing in March this year, and received an undisclosed amount of strategic financing in April.

Public data shows that in 2021, the total shipments of domestic projectors reached 4.7 million units, a year-on-year increase of 12.6%, and sales exceeded 21.4 billion yuan, a year-on-year increase of 15.5%. RUNTO's latest "China Smart Projection Retail Market Monthly Tracking" report shows that in the third quarter of 2022, domestic projector sales were 1.282 million units, a year-on-year increase of 35%.

The counter-trend growth of projectors is not surprising. According to the user portraits of Tmall and JD.com, the main buyers of projectors are people under 35 years old, especially those born after 1995 in first- and second-tier cities. The main scene for projectors is in the bedroom, providing large-screen entertainment content. For young people who own or rent houses, it is a good choice.

Compared to TVs that also provide large-screen entertainment content, projectors are portable, lightweight, and easy to move. Moreover, if you open major social platforms, whether you are renting a house for exquisite renovation or creating a weekend vlog atmosphere, you can’t do without a projector. This fully caters to the preferences and current situation of young people, and is one of the reasons why projectors are becoming more and more popular.

The second is intelligent robots.

Qichacha shows that 89,440 intelligent robot-related companies were registered in 2022, 6,673 more than last year.

Public data shows that my country's intelligent robot market size reached 99.4 billion yuan in 2021, and it is expected that its market size will reach 121.8 billion yuan in 2022.

Lan Zhou, a provider of STEAM education products and laboratories, also received an undisclosed amount of strategic financing in September this year.

From the current market perspective, education and companionship are the two major pain points of the robot children's market. Currently, there are many intelligent robots for children on the market. For example, Lanzhou's painting robot simulates the real pen-holding posture through a simulated mechanical arm, truly integrating AI and robot technology with painting, while accompanying children's growth, breaking the traditional way of children learning to paint.

It can not only teach children to study and draw, but also solve the problem of lack of companionship from parents.

Overall, consumer electronics are in decline, but the projector market and the robot market still have room for growth in the future.

05 The rise of the “IT economy”

In 2022, more and more people will join the ranks of pet owners.

According to incomplete statistics from Yilan Business, there were a total of 27 events in the pet sector that received financing in 2022, with a disclosed amount of approximately 2.215 billion yuan. The fields involved included pet food, pet medical care, pet travel, pet cleaning, pet funeral, pet insurance, pet supplies and other directions.

Qichacha shows that there are 970,000 new companies in the pet industry this year, an increase of 170,000 from 800,000 last year.

According to the "White Paper on China's Pet Industry in 2021", the total number of pet dogs and cats in urban areas across the country exceeded 112 million in 2021. According to the iMedia Research report, the scale of China's pet economy industry has nearly tripled from 2017 to 2021, approaching the 400 billion yuan mark; it is expected that this scale will reach 493.6 billion yuan in 2022, a year-on-year increase of 25.2%, and will increase to 811.4 billion yuan by 2025.

According to statistics from China Merchants Securities, during the Double 11 shopping festival this year, sales of pet food reached 1.909 billion yuan, up 38% year-on-year, while cat and dog snacks also achieved rapid growth, with cat snacks reaching 362 million yuan, up 32.73% year-on-year, and dog snacks reaching 121 million yuan, up 31.43% year-on-year. During this Double 11 shopping festival, the pet economy was one of the few sectors that achieved outstanding results.

On the surface, the growth rate of young people's consumption on pets is constantly expanding. This generation of young people is willing to spend money on pets. For many young people living alone in cities, cats and dogs provide a simpler and purer emotional value.

Open the life vlogs on major social networking sites, and you will find that most of the exquisite houses are equipped with one or more cute pets. The lonelier a person is, the more he or she needs companionship. At a time when the marriage rate continues to decline, pets have become an important substitute for urban youth to relieve loneliness.

In the process of raising pets, people's attitude towards pet raising has changed from casual raising to sophisticated raising. Pet-related sub-sectors are also emerging, ranging from food, clothing and travel to beauty, insurance, funeral services and other pet services, as well as pet schools that cost more than 10,000 yuan a month. Young people in first- and second-tier cities are also willing to pay for them.

As more and more people join the ranks of pet owners, pet consumption has naturally entered a diversified stage, and the era of "pet economy" has arrived.

Author: Cheng Rumeng

Source: Yilan Business (ID: yilanshangye), a professional consumer service platform