Consumption Upgrade: Which Sectors Are Changing?

On September 23, GLG Beijing hosted a Theme Event: Consumption Upgrade—Which Sectors Are Changing, in partnership with Pintu. Leading experts from several major consumer goods sectors were invited to decipher for the audience the trends of consumption upgrade in their respective sectors and how, under the circumstances, companies should make business model innovations and allocate their resources.

Industry experts who shared their insights at the seminar include:

• Liu Wanlan, CEO of Pintu360.com
• Meng Fan, founder of Heidie Capital
• Xu Lei, CEO of Blatrip.com
• Ling Yun, founder and CEO of FitTime
• Wu Wenye, CEO of Thejoyrun.com
• Li Rujia, General Manager of Secoo Auction
• Wang Sijing, co-founder of Gmei.com
• Tang Peng, co-founder of Yongche.com
• Ding Rui, CEO of Y1s.cn

Ms. Liu Wanlan, CEO of Pintu360.com and a GLG Network Member, pointed out that China’s consumption upgrade means identifying more consumer experiences and needs during the entire consumption process, on the premise that they are willing to pay for your service or product. The key is to go back to the nature of business: creating more value and providing better experience for your customers. According to Ms. Liu, the segmentation of consumers—whether they are classified as “losers”, a hot topic a few years ago, or the middle class, the center of attention in recent years—is not important; what’s important is to precisely identify your target customers, i.e., those who love and are willing to pay more for certain product or service, and consider how to serve these customers well.

Following that, leading experts from some of the hottest consumer sectors shared their insights towards the consumption upgrade trend respectively:

Mid- to High-end Travel/Vacation Sector

The consumption trend of the mid- to high-end travel/vacation sector, according to Mr. Xu Lei, founder and CEO of Blatrip.com, is that customers have higher demand for the quality and personalization of travel products, and that the demand for the use of mobile apps keeps growing. Xu Lei put forward two key terms for understanding consumption upgrade in the travel industry: one is the “new middle class”, which is characterized by female-dominated decision-making, more emphasis on quality and higher frequency of travel; the other is “non-sightseeing”, i.e., travel nowadays is mainly for leisure and vacation, so the development of travel products should focus on providing selective vacation services. As to how to go straight for the pain point of the sector and give the last push to convince the customer to place the order, Xu Lei believes there are two keys: one is to improve cost-effectiveness, making sure that quality is enhanced while cost is still controllable; the other is to provide personalized, customized services.

Sports/Fitness Sector

In terms of the relationship between the Internet and sports, Ling Yun, founder and CEO of FitTime, believes the Internet will always play a supporting role to fitness. Nevertheless, although it cannot do exercise for humans, it can help this sector break some bottlenecks in China; more specifically, the Internet can significantly reduce the cost of getting fit, enable the sharing of excellent trainer resources, and help break the time and space restrictions of physical exercise. According to Ling Yun, even if online fitness videos cannot completely replace offline gyms, it can at least meet 70-80% of the short-term needs of some specific consumer groups at lower cost. While profitable business models are still being explored, Ling Yun believes content-generated revenue is one of the feasible models.

Similarly, in the field of running, enhancing customers’ sense of participation, sense of objective and sense of fulfillment is the key in development products. According to Mr. Wu Wenye, founder and CEO of Thejoyrun.com, sport is a slow business at close proximity to money, and paying for physical exercise is a widely accepted concept. When an offline model is realized online and some of customers’ needs are truly met, profit can be made. For example, duplicating the mechanism of offline events where people run together and are awarded medals and are certified, online Marathon has expanded the market and created a new business model.

Luxury Goods Sector

Regarding the high-end luxury goods sector, Li Rujia, General Manager of Secoo Auction, pointed out that, to ensure consumption upgrade in the high-end market, there must be good solutions for information, cash flow, logistics and service, i.e., to be able to provide “service for non-standard goods transaction”. Among them, the concept of service is an important factor that has an impact on whether a company can succeed in market upgrade because it has to do with cost, such as high cost of learning about customer needs, high cost of online editing for selling non-standard goods, and high cost of acquiring supply chain information. Mr. Li shared with us that in the process of consumption upgrade, we should find and focus on the equilibrium point between cost and profit.

Medical Cosmetic Market

According to Wang Sijing, co-founder of Gmei.com, the growth rate of the medical cosmetic market is above 50%. In this market, while surgery has lower growth rate, scar-free microsurgery has witnessed a growth rate of over 100%. Treatments were associated with high cost due to information asymmetry, opacity and a small customer base in the past, but the advent of online medical cosmetic platforms and the social media have ended this situation and increased rewards for both merchants and customers. Thanks to the emergence of more and more such platforms, and the fact that doctors who have built their own personal brands have better access to customers and can get support from supply chain finance, Wang Sijing believes that there will be more and more doctors in the medical cosmetic market who start their own business, and that supply information, quality and prices will become more and more transparent—it’s possible that a rich, complete database be established within 3-5 years, just like what’s happened in the OTA sector, enabling a more dynamic consumer decision-making.

Travel Market

According to Tang Peng, the CTO of Yongche.com, although the chauffeured car-on-demand service has developed for 5-6 years, during which period two major strategic M&As occurred, but current major market players combined account for only a few percentage points in the offline travel market. The development of the chauffeured car market as a whole is far from its real end, and its growth potential and advantage are still huge. In Tang Peng’s opinion, for the travel market, the national car parc of 200 million (which is soon to be reached) will be an important watershed. The sharing economy has greatly reduced car owners’ ownership cost and passengers’ travel cost and will still be the trend in the future; the question is how to enter this market and how to allocate one’s resources across the entire automobile ecosystem. Tang Peng also pointed out that it’s not necessarily the best to cover a wide and complete market, focusing on vertical niches also works. Thanks to the high value of the mid- to high-end customers, a company can focus on developing more valuable products and services by taking advantage of the trend of consumption upgrade.