The State Statistical Bureau reported that China’s GDP growth in 2017 was 6.9%, the first rebound in the last seven years. However, the good news didn’t last for long. In 2017, we heard a lot about consumption upgrade, but in 2018, consumption downgrade is the focus of discussion. This reflects China’s economic trends and people’s consumption attitudes in the recent two years.
Consumption downgrade is an item derived from consumption upgrade. Let’s first see the three characters of consumption upgrade.
Time is more important: people are willing to pay more to buy time. Dish-washing machines, electric toothbrush and high-speed trains are all examples of consumption upgrade. When people’s income increases, time costs more.
Experiences are more important: people are seeking food experiences instead of merely filling the belly, and hotel experiences instead of casually finding a place to sleep. As an important part of consumption, experience is a factor when consumers make their purchase decisions.
Attitude is more important: people regard what they wear as a way of show off their personality and view their cars as a reflection of their identity. They are more demanding about the brands rather than functions. This is also a reflection of consumption upgrade.
Conversely, consumption downgrade means lowered efficiency, lack of a sense of experience, and less manifestation of personality and tastes, and to realize “cheap and fine” as much as possible. Consumption downgrade results in the following phenomena:
De-branding: many people consider NetEase Yeation to be representative of consumption upgrading. This is not true. Consumption upgrade means branding and personalization. NetEase Yaetion is in fact a platform of de-branding. Maybe the products have similar functions and quality with brand products, but its core idea is de-branding. A brand has its added value besides use functions, indicating the consistent product quality, guaranteeing the services and most importantly, delivering a particular context of aesthetics and lifestyle. Many times, consumers buy certain brands mainly to demonstrate their personalities and attitudes.
Sharing and second-hand economy: the sharing and second-hand economy has exploded in China in recent years. Didi Chuxing, sharing bicycles, online second-hand transaction platforms such as Zhuan Zhuan and Xian Yu are overwhelmingly popular. To some extent, they are targeting the consumption downgrade group. They can never give users the experience and mental satisfaction delivered by a new brand product. But they fulfill the most basic function of a product – usage value. It is good enough for people who don’t care about the added value of a brand. The biggest benefit of the sharing and second-hand economy is that it can provide users with the basic functions of a product at lower prices.
Pursuing “cheap and fine”: consumption upgrade means people not only eat, but eat healthily and happily. But consumption downgrade focuses more on eating cheap and well rather than having a good experience.
Consumption downgrade leads to mentality downgrade
People in less developed cities with low income will not buy brand products at high prices. They emphasize functionality. They will pay a RMB 50 for a pair of shoes at Pin Duo Duo (an online shopping platform offering a lot of discount products) rather than RMB 1,000 at a shopping mall.
Middle class consumers in first and second-tier cities, although having a fair income, will not buy casually either because they may have to repay large sums for house loans, or look after many family members both old and young. They have developed a quite sensitive consumption pattern and no longer yearn for big brands. They prefer products that best suit them and have acceptable quality.
Consumption downgrade is a result of the interaction of the economic slowdown and different social cultures. Nowadays, Chinese people, especially young people, love to label themselves in a self-mockery way with chic expressions such as “zhai” (stay at home), “sang” (lose goal of life), “fo xi” (show no passion). Such mentalities have a direct relationship with their interest in consumption. In a poor economic situation, they struggle to save money in order to survive. There are even some who stop working and just stay at home saying that it’s cheaper to stay at home because working makes them tired yet gives them only a small salary. This is a typical mentality downgrade due to consumption downgrade.
At the root, consumption upgrade is the mainstream cultural mentality of Chinese people. However, as the gap between rich and poor continues to expand, the co-existence of consumption upgrade products and downgrade products will continue. They are two distinctive aspects of society that do not impact on each other. However, take heed that both of them are quality-oriented. Even the consumption downgrade products need a good price/performance ratio to attract consumers.