Source: CBN
Author: Liu Gongrun
[Consumption downgrade is not consumption stagnation, but it forces the enterprise platforms and businesses as the supply side of the market to adjust their business strategies in a timely manner and seek new business opportunities and growth points. The degradation of consumption directly leads to the decline of market demand and sales. In order to maintain market share and profit space, most enterprises will choose to stimulate consumption by means of price reduction. At present, many data in the consumption field point to the consumption scene of "quantity increases and price decreases". Under this consumption scene, "busy but unable to make money" becomes the norm. However, challenges may also mean opportunities. ]
Many data show that the current consumption shift is taking place. This year’s "June 18th", the sales growth rate of Taobao and Ali hit a three-year low, making it the biggest investment but the worst. Compared with the single-digit or even negative growth of Ali and JD.COM, the performance of Pinduoduo, which focuses on the low-price market, has soared. In the first quarter, its revenue directly soared by 60%, and its profit increased by 212% to more than 8 billion yuan. Dragon Boat Festival holiday data shows that compared with 2019 before the epidemic, the number of travelers increased by 13%, but the total consumption decreased by 5%. Considering the rising price, the actual per capita consumption of tourists should drop by about 20%. Haidilao recently issued a profit warning, suggesting that its revenue fell by up to 17% in the first half of the year, with a loss of more than 200 million yuan. Although it has tried every means to make consumers return, the effect is not obvious. People lamented: Everyone can’t afford Haidilao!
Whether online or offline, various consumption scenarios have started an "involution" price war. Ma Yun said that "Ali’s future opportunities are in Taobao instead of Tmall", and JD.COM’s new CEO Xu Ran said that he should "focus on the ultimate low price"; One of the important reasons why the barbecue in Zibo has exploded this year is that it has kept the national barbecue price low and has not increased for a long time, which seems to just cater to the current consumption trend.
This trend of consumption shift is described as "consumption degradation". In the quadrant of consumption degradation, consumers pay more attention to the practicality and cost performance of consumption, and no longer blindly pursue high-end luxury products. From the perspective of motivation, consumption degradation can be divided into "active" and "passive". On the one hand, consumers actively choose to reduce consumption level, reduce consumption behavior and pursue a simple and practical lifestyle; On the other hand, consumers have to tighten their money bags and be forced to "cut back" because of the constraints of income growth.
It should be said that in the current environment of slow economic recovery and severe uncertainty, whether it is active or passive consumption downgrade, as far as consumers are concerned, it is a rational consumption choice. However, individual rationality is likely to lead to collective irrationality. The simple truth is that if everyone doesn’t go or dare to spend, if the consumption rate is far lower than the savings rate, then the kinetic energy of consumption driving the economy will be affected, and the weak economic growth will in turn form consumption inhibition.
An unavoidable practical problem is in front of us. How to further promote consumption under the trend of "consumption degradation"? It is imperative to make use of the situation to boost consumer confidence, enhance consumption power and release consumption kinetic energy.
Supply side force:
Optimize the allocation of resources and cultivate the consumer market
Consumption downgrade is not consumption stagnation, but it forces enterprise platforms and businesses as market suppliers to adjust their business strategies in a timely manner and seek new business opportunities and growth points. The degradation of consumption directly leads to the decline of market demand and sales. In order to maintain market share and profit space, most enterprises will choose to stimulate consumption by means of price reduction. At present, many data in the consumption field point to the consumption scene of "quantity increases and price decreases". Under this consumption scene, "busy but unable to make money" becomes the norm. However, challenges may also mean opportunities. The author found and suggested that in the scene of consumption degradation, we can focus on cultivating and developing the "four major economies":
The first is the "second-hand transaction" economy. In the case of consumption degradation, people pay more attention to the practicality and economy of goods, while the second-hand trading platform can provide cheap but practical goods, attracting more consumers. We can set up offline second-hand commodity trading places in the grassroots community market, and we can also build an online trading platform to provide all kinds of goods, such as home appliances, clothes, books and so on. This kind of "making the best use of everything" is also a low-carbon economy, an environmental protection economy and a fashion economy.
The second is the sharing economy. "Don’t want everything, but use it", sharing economy can obtain shared goods and services at low cost, such as sharing cars, bike-sharing, sharing office space and so on. You can choose to open a sharing economic platform in the city center or business district to provide diversified sharing services.
The third is the self-help economy. For example, cafeteria, community canteen and self-help fitness are good business models. At present, people are more convenient, independent and affordable. Self-help economy can give consumers more independent space, at the same time, it can also reduce unnecessary bundled sales and help attract more consumers. You can choose to set up a self-help economic platform around the community, business district or school to provide diversified personalized services.
The fourth is the brand economy. Consumers now pay more attention to the quality and use experience of products. If brand merchants seize the "opportunity" of consumption degradation, launch products with higher practicality and cost performance, and cooperate with brand marketing and user service, they may win a large number of long-tail customers and their brand reputation will also stand out.
Demand side force:
Stabilize employment, increase income and improve consumption power
"Increasing the income of urban and rural residents through multiple channels" has always been the fundamental driving force for consumption recovery. The income of ordinary people will be affected, and the foundation of confidence will not be solid, which will lead to the fear of consumption. There are several ways to better expand consumer demand:
The first is to establish the expectation of steady growth of residents’ income. Encourage more income distribution to front-line workers and increase the wage level of basic posts; Establish and improve the normal wage growth mechanism, broaden the channels of residents’ labor income and property income, and continuously expand middle-income groups.
Secondly, boost consumption power through precision drip irrigation mechanism. It is suggested to create a new tool of direct financial transfer payment to residents’ departments, especially to give some subsidies to those groups who have suffered losses due to the epidemic, employees in specific service industries and low-and middle-income groups, or to urge them to enter the consumer market by directly issuing consumption vouchers, which will bring great direct help to stabilize the fundamentals of consumption in the short term.
Furthermore, release the head effect to activate the consumer market. For relatively wealthy groups or relatively developed first-and second-tier urban areas such as "North, Shanghai, Guangzhou and Shenzhen", consumer guide-style measures can be introduced to break through certain consumption restrictions, such as appropriately relaxing the "purchase restriction" policy of real estate, releasing the group effect of consumption heads as much as possible and activating the main consumer market.
In addition, financial assistance is needed to release consumer demand. Structural monetary policy tools can be used in the field of consumer credit to help residents consume in bulk and release core consumer demand, such as housing loans and student loans. We will steadily develop consumer finance and give play to the leading role of financial living water in the consumer market.
Comprehensive supporting optimization to enhance medium and long-term consumption kinetic energy
The government is a comprehensive service provider for policies. Starting from the underlying logic of promoting consumption growth, the government should actively increase investment in the field of people’s livelihood, encourage innovation, stimulate the vitality of market players, meet the long-term "consumption upgrading" needs of residents, and provide a continuous source of power for economic growth.
First, continue to increase investment in housing, education, medical care, and old-age care, improve preferential tax policies, and effectively reduce the burden on residents. In particular, it is necessary to improve the debt structure of households, such as resolutely implementing the "double reduction" policy in view of the heavy educational burden. In addition, we should focus on improving employment and improve the income level of low-and middle-income people by optimizing employment policies and providing more professional vocational education.
Second, create a safe, high-quality and efficient consumption scene and service environment. Optimize the basic environment, further increase investment in transportation, logistics, information and other facilities, establish a convenient transportation system, build a modern logistics system, improve an efficient information service system, and promote the continuous increase of online consumption; Stabilize consumer prices, further standardize the market order, effectively curb the illegal acts of sharp price increases in scenic spots and tourist hotels during the holiday season, strengthen the price monitoring of household appliances, communication equipment and other daily necessities, and curb the excessive rise in consumer goods prices; Improve the service experience, promote the consumption upgrading of services such as culture, sports, education, leisure and entertainment, and health care for the elderly, encourage and support social forces to participate in the construction of relevant supporting facilities, and continuously increase the supply of high-quality services.
Third, advocate healthy, rational and green consumption. Encourage green consumption, establish a diversified supply system of green products, enrich the production of green consumer goods, establish and improve preferential policies for green products consumption, and guide residents to develop green consumption habits; Advocate healthy and rational consumption, encourage moderate, civilized and healthy lifestyles and consumption patterns, refrain from extravagant and wasteful consumption and unreasonable consumption, and promote sustainable consumption.
(The author is the vice president and researcher of China-Europe Lujiazui Institute of International Finance)