Domestic UNIQLO And MUJI Will Produce &#34 If Consumers Downgrade; Downgrade " Brand.

How should we discuss consumer demotion?

In the article published in Wall Street, "put aside the class structure to talk about consumption escalation / demotion is all playing gangsters", the author believes that talking about consumption upgrading and consumer demotion is inseparable from the stratum and structure. At present, consumption demotion and consumption upgrading occur at the same time, more simply indicating the polarization of wealth.

Indeed, after all, China has become the fastest growing market for luxury goods. McKinsey also predicts that by 2018, the number of millionaires will rank first in the world, and these real "middle class" will still happily live in the five rings.

However, just as luxury brands represent the level of consumption at the top level, what kind of products will be accepted by consumers who are downgraded? We are going to discuss the downgrade "new middle class".

The "new middle class" of consumer demotion

In 2015, Wu Xiaobo put forward the concept of "new middle class". But in 2015, the price of housing began to rise, and the rate of increase was more than that of most people. To exaggerate, the rise in house prices has emptied the wealth of three generations, and the result has shown that the leverage of the people has risen sharply.

according to

In the first tier cities, the leverage ratio is 96.07%, the second line is 80.17%, and the three line is 48.56%.

In some front-line and new front-line cities, the leverage ratio of residents has been higher than the horizon.

Source: China Index Institute

The price of housing has made some "new middle class" become a "highly indebted middle class" - such assets as real estate and so on.

The annual average growth rate of disposable income of residents is about 9%.

There is not much money left in hand.

Focusing on the analysis of 34 cities, it was found that during the four years from 2014 to 2017, the leverage of the 34 urban households increased from 46% to 63%, while the corresponding total retail sales of social consumer goods increased from 12% to 9%, and leverage also had the effect of "anti chop hands".

This is also our biggest argument about the downgrade of consumption. The most common and basic consumption in life is nothing more than food, clothing and shelter. When the proportion of "living" expenditure rises, other kinds of consumption will decrease correspondingly.

Let's take a closer look at the recent situation.

In the first half of this year, the contribution rate of consumption to economic growth was 78.5%, an increase of 14.2 percentage points over the same period last year.

In the first half of 2018, GDP grew by 6.8% year-on-year, of which the final consumption expenditure was 5.3 percentage points, 1.2 percentage points higher than that in 2017.

However, the total retail sales of consumer goods increased by 9.4% year-on-year, but 0.8 percentage points lower than that in 2017.

Where is the difference? On the one hand, apart from catering services, education, health care, culture, art, services, financial intermediaries, insurance and residents' own housing services and other service consumption are not counted in the size of the total retail sales of consumption, and money is spent on service consumption.

On the other hand, Li Xunlei believes that, as the two main force of retail sales, automobile and real estate related consumption occupy a higher proportion.

It is already a typical representative of the stock economy. It is difficult for the industry as a whole to maintain a higher growth rate, which will inevitably lead to a downward trend in consumption growth.

Consumer demotion exists, especially in clothing, food and daily necessities. There is indeed a "downgrade" phenomenon.

One of the anxieties of the middle class is how to keep their children in the middle class, even if they want to raise their children.

Characteristics of "downgrade" brand

What are the characteristics of a "highly indebted middle class" with a downgrade?

The economist has written that more and more middle income groups are no longer just hanging around.

They tend to move up and down, and sometimes close down, that is, they will spend a lot of money on goods that are deemed to be worth higher prices, while in other basic products, consumption is more rational and frugal.

The combination of these two consumption trends, as we can see, is a "highly indebted middle class" which not only tends to lower consumption, but also "consumes better".

They spend money on housing, education and medical care, but consume less in clothing, food and daily consumption.

But low consumption does not mean that low price is everything. Judging from the rational judgment, the "price performance" product is the first choice. But from a perceptual point of view, products should represent their own "lifestyle", do they satisfy the two brands at the same time? UNIQLO should be considered one.

In the text of "what company is millet," the investor said that Xiaomi and UNIQLO are very similar. "High quality and low price" is the product concept of UNIQLO. There are many people who want to do so, but these two words are contradictory. I really only see the UNIQLO family.

Think about it. It seems that every income class can accept UNIQLO.

From the distribution of stores, in the four major international fast fashion brands, UNIQLO is the fastest way to sink the low level cities. To make an inappropriate analogy, UNIQLO is the bottom line of the consumption of second tier cities, and the high speed of three or four line urban consumption.

Historically, UNIQLO's rise in Japan's "ten years of recession", the bubble economy burst, and the poor economic ability of the Japanese began to pick up money, and UNIQLO became their first choice. UNIQLO's "high quality and low price" is essentially a consumer demotion.

The same is true for MUJI in the same period, by selling "no brand" products, simplifying the packaging of products, and reducing the cost of products, thus giving them the value of "value for money".

The key point of "high quality and low price" is in management. The gross profit margin of UNIQLO is around 50%, which is medium level in the industry. However, a small amount of SKU exploding money, regular adjustment of organizational structure, decentralization of decision-making power, whole process control of products, and analysis of Central big data make it very much like a Internet Co, which can achieve meticulous management, guarantee quality control and control costs.

But how does UNIQLO create a sense of lifestyle at low prices? The key lies in the contrast.

As we often say, the price performance ratio is a relative concept. If there is no similar product as the basis of comparison, the price performance obtained is meaningless. The key lies in the anchor point.

First of all, UNIQLO, as a Japanese brand, is contrasted with the local clothing brand. In the early twentieth Century, Chinese clothing enterprises could say that they were not worried about selling, and the mode of affiliation + order would expand rapidly. This resulted in the separation of ownership in the circulation process, and the quality control and brand image management were relatively extensive, and UNIQLO was better at the details, compared with the local brands.

Secondly, in terms of location and external image, UNIQLO learned Zara.

In the early days of Zara, shops were set up next to the big ones.

UNIQLO also uses this method to pull up its own level. In short, it is "mixed circles", and Muji is also pulling itself into the middle class in the same way.

The most important thing is UNIQLO hidden in product design routines.

From the perspective of product design, UNIQLO also has its competitive targets: the first outdoor brand such as the original bird, mammoth and Patagonia.

UNIQLO draws on the product design of these brands, but the difference between the two is not large as long as the degree of functional downgrading is enough for urban life and less than the real outdoor scene.

Travel, outdoor adventure and sports are very "middle-class" labels.

Also started in 2015, UNIQLO became a double eleven women's wear brand. Due to the lack of income level in China and Japan, UNIQLO was a consumer demotion and consumer upgrade in China, but it also covered more income classes and more consumers.

If we compare the year-on-year growth rate of retail sales and the growth of per capita disposable income of urban residents, we will find that the growth rate of retail sales continues to be higher than that of per capita disposable income.

If the growth rate of China's commodity retailing is closer to the growth of per capita disposable income, the consumption of Chinese people may continue to decline.

If our consumption demotion may continue for several years or even longer, what kind of products can survive in the future? UNIQLO should be one of them.

Demotion trend of consumer goods

Economists linked the economy to the skirt of women because the stockings belonged to luxury goods, and women in the economy could not afford stockings to wear long skirts.

Though stockings are now very cheap, similarly, when the economy is in recession, the design of clothing brands will usually return to the classic styles which are not so outdated. Women will also tend to buy more low-key durable clothing.

The success of UNIQLO is attributed to the downgrade of consumption, which is indeed a decline in consumption, as similar brands are increasing.

The first is the emergence of the strict election of the NetEase in 2016.

Through the concept of big suppliers, the slogan of "good life, not so expensive" is put into the "new middle class".

As for why MUJI, because MUJI built itself into a "middle class standard" at that time, the price of MUJI products is high, even selling the taste of "faith", which is a ready target.

The domestic e-commerce platform is also a "time to live" brand. On the one hand, the turning point of online dividends is coming. On the other hand, the brand premium is removed. On the other hand, it is easier to highlight the performance price ratio with the brand products on the platform, such as Jingdong's Beijing construction, and is also committed to achieving "better prices for high-end goods" and "better quality of public goods".

Alibaba, also known as a self - employed Ali, has also made Taobao's heart election. It is also a concept of "high quality and low price".

Domestic electricity providers, to Ali Jingdong, down to the gathering of social networking providers, almost all of the electronic business platform, have begun to emphasize the "no brand concept", from the factory end, to launch their own proprietary products.

Who has the consumer who is the boss, now the channel's right to speak is strengthened, the electronic business platform also has the ability to bargain, and further shorten the supply chain.

As to why they are all "cool" style, from the point of view of sales, product design is simple, the more it can cover more consumers, this is the advantage of the electricity supplier. First, run out of scale; from the production point of view, reduce costs and reduce inventory risk, and the larger the production volume and the lower the cost, the strategy of UNIQLO is to use the limited commodities to catch the head, like Zara to catch the long tail, and have high requirements for design, supply chain and distribution, and there is stock risk.

"Spring River heating duck prophet", the production follows the demand, the channel contacts a large number of terminal consumers, has launched the concept of "cost performance" to do its own brand, perhaps also shows that consumer demand is changing, "new middle class" needs "cost performance".

On the other hand, the consumption power of the second tier and three or four tier cities is being levelled off, just like UNIQLO, "high quality and low price" is covering more people.

From the debt ratio perspective, the lower debt ratio of the three tier cities has a larger proportion of consumption for consumption, while the total population growth of the three line cities is significantly faster than that of the first and second tier cities, and has doubled in the past ten years. The population of the three line cities is about 6 times that of the first tier cities.

In 2015, the housing reform and monetization resettlement, besides raising income, created a group of new rich classes in the three or four line cities.

Although he did not know how long this external increment could bring to consumption, most analysts believed that the wealth effect of the three or four tier cities was greater than the crowding out effect, which is expected to promote three or four line consumption.

These consumers may not have enough spending power, but if they can use the three or four line of consumption level to experience the consumption life of "new middle class", they will certainly be willing to try it. This is their "consumption upgrading".

Changes in the economic situation will affect people's consumption preferences, and then new consumer demand, perhaps from the pformation of the supply side, the domestic "UNIQLO" "MUJI" will appear.

But consumption is functional and not fashion oriented. Will we enter the low desire society just like Japan?