In the past two years, a very popular term has emerged in the tourism industry: "special forces tourism," which means experiencing a place in the most cost-effective way, including playing, eating, and experiencing. The director himself does not dare to experience it (the body cannot bear it), but watching other people's special forces tourism videos online is quite refreshing to be honest.

Many influencers like to interpret special forces tourism as a downgrade in consumption. However, the director does not quite agree with this. To be honest, if you really want to downgrade consumption and save money, why travel at all? Staying at home and being honest is even more cost-saving, isn't it?

No matter how much you save on travel, how much can you save? The cost of flights and hotels is a real issue. If you cut this money in half or even less, and just walk around the city in your own city, enjoying food and entertainment, it is cheaper and of higher quality.

Therefore, this cannot be simply explained by a downgrade in consumption.

The director personally believes that a better interpretation should be that everyone is looking for a "substitute."

In other words, people do not want to lower their standard of living. For example, they still need to travel when they go out, and they still need to maintain their dignity. However, while maintaining the standard of living, they want to be cheaper, that is, the price should be cheaper, but the experience should not be discounted. Consumption is more rational and more cost-effective.

Advertisement

With such a perspective, it is easier to understand why brands like Miniso, Xiaomi, Uniqlo, and various domestic substitutes are popular. For example, Alibaba's 1688 has not been very prominent for many years, but it suddenly saw a higher growth in 2023 because it focuses on source factories and substitutes for big brands.

The era of ultimate cost-effectiveness is coming.

Many people believe that the pursuit of substitutes (ultimate cost-effectiveness) in our country is driven by the pressure of the epidemic, and this phenomenon may fade away as the economy recovers in the future.

The director still does not agree with this. The director admits that there are reasons behind the epidemic, but in fact, this is the general trend, and the epidemic is just a booster, that's all.Why do we say that?

Because the emergence and popularity of Xiaomi, Pinduoduo, Miniso, Uniqlo, and Muji in China did not start during the pandemic, but began several years ago. Take a look at the population structure and economic situation in China, and it's about time to enter such a stage.

The current population structure in China is very similar to that of Japan in 1995. The population structure is a very slow variable, but when it accumulates to a certain extent, it will have a huge impact on a country and even the entire society.

China's economy has bid farewell to the high-speed growth period and entered a relatively mature stage.

When the national GDP growth rate is very fast, it means that the country is in a period of rapid development, with opportunities everywhere. There is not much competition among people, basically everyone is doing their own thing, just like money is falling from the sky. Everyone must be thinking about how to pick up more money, rather than thinking about how to snatch money from someone else's pocket.

In other words, during this period, things are relatively easy to do. Sometimes, maybe you haven't done anything particularly special, but you've made money just by lying there.

During this period, the overall population structure in China is also relatively young. Young people are always more energetic, more adventurous, and more willing to consume, even willing to overdraft future income for consumption. They are not very concerned about financial management because they are very confident in themselves, thinking that they will definitely earn more and more money in the future.

Now, as the GDP growth rate slows down to 5%-6%, and may even further drop to 3%-4% in the future, on the one hand, it means that many big opportunities are gone, and people are no longer picking up money from the sky, but need to find ways to snatch money from someone else's pocket. On the other hand, the population structure has also entered the middle-aged stage. The characteristics of middle-aged people are more conservative, more willing to maintain the status quo, more meticulous, less willing to take risks, and more aware of their own abilities, and they will not be blindly optimistic about the future.The current overall trend in the country is a slowdown in economic growth and an aging population structure. When it comes to specific individuals, it means that for the vast majority of people, it will be very difficult to achieve rapid growth or a leap in income. The salaries of most ordinary people may no longer see significant increases.

As people age and income growth slows down, it naturally becomes necessary to start budgeting carefully. However, careful budgeting is one thing, but the quality of life must not be compromised, especially as people get older, they pay more attention to comfort and will try every means to be good to themselves, and spend time and money on things that are useful to themselves.

Let's take Japan in the 1990s as a comparison. As we mentioned earlier, the current demographic structure in our country is very similar to that of Japan in the 1990s, and the per capita GDP is also quite consistent (China's per capita GDP in 2022 is 12,700 US dollars, equivalent to Japan's level in 1985). In other words, the current environment in our country is similar to that of Japan in the 1990s.

So, the consumption trends in Japan in the 1990s are very instructive for us.

The question is, what has been the overall trend in consumer spending in Japanese society over the past 10 to 20 years since the 1990s?

The answer is five words: ultimate cost-effectiveness.

Learning from others

After entering the 1990s, the business model in Japanese society has shown the following major trends:1. Companies that advocate simplicity and high cost-effectiveness such as Uniqlo and MUJI have rapidly risen to prominence. From 1997 to 2019, over a span of 20 years, Uniqlo's revenue has increased more than tenfold. Even without considering their overseas expansion, looking only at the decade from 1990 to 2000, Uniqlo's annual revenue growth in Japan was 46.1%, and the number of stores grew at an annual rate of 33.0%.

It is necessary to correct a common misconception here: products from Uniqlo, which are claimed to have "ultimate cost-effectiveness," are by no means a downgrade in consumption. There are many Uniqlo stores in China, and to be fair, are their prices really low? A T-shirt for 100 yuan, a coat for 500 yuan, and a down jacket for 800 yuan—are they really cheap?

Pinduoduo and Taobao's white-label brands would probably be the first to say no. When the director walks around the streets (older streets), he often sees clothing stores with signs like "50% off clearance," "rock-bottom prices," and "boss has run away." Their clothes are likely to be much cheaper than Uniqlo by an order of magnitude.

Although compared to other brands in shopping malls, Uniqlo does have a certain price advantage, its success cannot be simply attributed to "consumption downgrading." On the contrary, the director believes that Uniqlo may be a beneficiary of consumption upgrading.

In fact, Uniqlo is allowing you to buy decent products at the lowest price. Although their products are not particularly expensive or luxurious, they cannot add much face to you, but at least they can ensure that you do not lose face and can wear them out.

In other words, people who wear Uniqlo and use Miniso products want to be cheap, but they also want to be decent. Decency itself is a form of consumption upgrade. When you are still worried about having enough to eat and wear, would you care about decency? Quality is the first priority, and having quality while also being affordable is the ultimate weapon.

2. Convenience stores, drugstores, and other retail formats that cater to the demand for miniaturization and convenience have emerged. Popular domestic brands such as 7-Eleven, Lawson, and FamilyMart all come from Japan. Currently, the business model of Japanese convenience stores has already accounted for more than 50% of the entire retail market share, and the retail sales of Japanese drugstores in 2022 have also exceeded 16.3 trillion yen (780 billion yuan).

3. Comprehensive stores where all products are priced at 100 yen have rapidly risen. According to a survey by the Imperial Database, in 2022, the scale of Japanese 100-yen stores broke through 1 trillion yen, and the number of stores has exceeded 9,000. The four major companies (Daiso, Seria, Cando, and Watts) have a market share of over 50%. These 100-yen stores are somewhat similar to domestic Miniso (where the vast majority of products are within 40 yuan), achieving lower prices for the same quality products by enhancing supply chain efficiency.Understanding Japan can actually help us understand many current trends in China, such as the emergence of supermarket-owned brands, Miniso, Xiaomi, snack bulk stores, and discount stores for near-expiry products, as well as the popularity of Alibaba's 1688, Pinduoduo's factory direct sales, and live-streaming e-commerce. Additionally, there are instances like Dongpeng Special Drink taking over Red Bull's market share and companies like Huaxia Biology/Pechoin taking over L'Oréal's market share.

Apart from the top tier of the pyramid, the overall trend in Chinese consumption is to return to rationality and pursue cost-effective value, increasingly aligning with Japan.