Zhong Hefu, General Manager of iResearch Consulting Center: New consumption is a stage of upgrading and downgrading in parallel.

On August 29, the ANRF 2018 Asia-Pacific New Retail "New Pattern" Summit Forum hosted by Luxianghui was held in Shanghai.

Zhong Hefu, general manager of iResearch Management Consulting Center, attended the meeting and delivered a speech on the theme of "New Retail Trends and Opportunities". He believes that new consumption is a parallel stage of upgrading and downgrading. "Parallel" means there is a wave of upgrades, but there is also a large wave of demand for downgrades. Upgrading means spending less money to buy better quality things; downgrading means spending more money. Spending less money to buy things that can still be used is the potential driving force for Pinduoduo’s explosion.

In addition, Zhong Hefu reminded that the rise of new retail does not mean that brands that originally operated offline and chain stores have strong advantages, because "this wave of return is not a return to the original path, but a return to the original path. It’s a return with new weapons.”

The social background of new retail

First, the growth dividend of urbanization is shrinking. Urbanization brings a large amount of infrastructure construction and investment, a concentration of the population, and a large number of consumer opportunities. China's current population of 70% has completed the process of urbanization, so the dividends are shrinking, but it has also brought about an explosion in consumption.

Second, the demographic dividend is gradually lost. There are 228 million people born in the 1980s, 174 million born in the 1990s, and only 126 million born in the 2000s. This number is so terrifying. Now there are 9 people working in the entire society and 5 people taking a rest. But in 20 years, there will be 5 people working and 9 people taking a rest in China. The general trend in new retail is unmanned and intelligent.

The economic background of new retail

After 2015, the economy has entered a new normal, which means that GDP has entered a stage of low-speed growth, which means that it used to rely on money printing and investment. The model of supply-driven GDP is no longer effective, and we have entered an era of consumption-driven economic growth. This is the era of big consumption.

Consumption upgrading and consumption downgrading

New consumption is a parallel stage of upgrading and downgrading. "Parallel" means there is a wave of upgrades, but there is also a large wave of demand for downgrades. Upgrading means Spending less money to buy better quality things; downgrading is spending less money to buy things that can still be used - the potential driving force for Pinduoduo's explosion.

Upgrade includes three aspects: the first is the upgrade of consumption categories, the second is the upgrade of quality, and the third is the upgrade of experience. Consumption upgrading has brought four opportunities. The first is the new consumption concept, which is that the pursuit of quality is greater than the pursuit of brand; the second is the replacement of the main consumer groups; the third is the reconstruction of the brand pattern, which includes the rise of local brands. There is also the disappearance of traditional counterfeit brands. At least 60 or 70 percent of counterfeit brands in China will disappear. The fourth opportunity is new retail.

Consumption downgrade also includes several aspects. The first is false consumption power. Wages in Beijing, Shanghai and Guangzhou are very high, but housing prices are also very high. A bunch of middle class people have already overdrawn their consumption power due to high mortgage loans. The second is the huge population structure. The gap between rich and poor is increasing. When China has a middle class of 300 million, there are still hundreds of millions of people moving to the other side. Third, regional development is unbalanced, purchasing power is different, and retail infrastructure is different. What do they need when consumption downgrades? Low price, still usable stuff.

The second half of the Internet

First, the dividends of the Internet are disappearing, and the growth rate has dropped to single digits.

Second, traffic costs are increasing. Internet companies represented by Alibaba, Tencent, and JD.com have all moved offline. Therefore, Internet companies moving offline is a core scenario for traffic grabbing.

The second half of the Internet reflects the monopoly pattern, which is the effective use time of users. The average APP usage time per day is 5 hours. At this time, Tencent accounts for 43.5, Alibaba accounts for 10.4, Baidu accounts for 9.5, and top 3 accounts for 60.

From the perspective of the entire capital market, there is a capital winter. Judging from the growth rate of the Internet economy, the growth rate of the Internet economy was very fast before, with a growth rate of 45% from 2005 to 2011. However, in 2017, the entire process slowed down. This round of business changes is also a change for the Internet.

Changes brought about by technology. The application of big data, Internet of Things, and artificial intelligence can all bring direct effects to the sales side, and technology has entered the stage of reducing costs and increasing sales. This trend has prompted companies to invest more in technology, and this wave of technological change may accelerate.

Users are very powerful. The perception of this wave of new retail is that this is a new change brought to retail by the rise of users.

Nowadays, a large number of brands and retailers are looking for ways to build their own traffic pools. Here, the private traffic pool is borrowed from the second half and becomes the key to victory in the second half, which is the proposal of user privatization. The era of hunting is gradually disappearing and has entered the era of farming. Now you have to enclose a piece of land, grow your own crops, and catch prey. This is entering the core of private traffic pools. The core of this change is whether you have your own traffic pool.

There are three major entry points. One is deintermediation. The emergence of Pinduoduo proves that the cost of production and the final retail cost of many categories are dozens of times different, and this exists in many categories. The second is the multi-dimensional reorganization of resources. Hema is the integration of warehouses and stores. The third is value positioning.

New retail emphasizes people-centeredness. All technologies and intelligent means are used to quickly obtain data, open up online and offline digital data, and to conveniently and quickly meet users and needs and obtain goods. All The core of new retail revolves around gaining insight into user data. The experience is to meet user needs, strengthen hardware, and build an ecosystem. Don’t be confused by the flow of technology.

Three steps of new retail

Digitalization. Dataization refers to the comprehensive digitization of all user product scenarios. This is digitization based on data-based decision-making. For example, in stores, all cost processes are digitized with information, so that the person is transparent to you, and all channels and touch points must be connected.

User privatization. It turns out that consumers have two roles, one is the buyer and the other is the user. This kind of transaction is a delivery transaction. But users actually have nine roles: potential customers, followers, buyers, users, communicators, sellers, investors, designers, who rob users of their brains, and finally there is a defender, who robs users of their emotions.

Users not only pay for things, but also use their mouths, social networks, and channels to steal their wallets and emotions, and turn users into die-hard fans and crazy fans. This is what users do Privatization, only when you establish a privatized traffic pool can you be called a truly independent business form! Otherwise, you will live in someone else’s ecosystem in the future.

Ecological. Don't use your spear to confront other people's missiles. Many people are interested in products, categories, scenes, and lifestyles. In fact, these are life transactions. When building an ecosystem and thinking about top-level design, it must be high-dimensional thinking and dimensionality reduction.