Summary of Key Points
County-level consumption is no longer seen as a low-end label for "underdeveloped markets"; rather, it has become an emerging blue ocean that brands are competing for and that the state is focusing on as a key area for growth. In the first five months of this year, county and rural consumption accounted for nearly 40% of the nation's total retail sales, indicating significant potential for growth in the future. The government has introduced 18 policies to promote county-level consumption. However, different counties need to be categorized into two types based on their distance from central cities: "small satellites" (located near large cities) and "small stars" (with distinctive industries in remote areas), each requiring different strategies to seize these opportunities. "Small satellites" should aim to attract traffic from the cities, while "small stars" should leverage their unique industries to create compelling consumer experiences, making it worth the consumer's while to visit.
1. Brands Moving to the Countryside: Not Charity, but Following the Money
In the past, county-level consumption was associated with low prices and knock-offs. But now, brands like Sam's Club, Starbucks, and Luckin Coffee are all eager to enter these markets. Why?
- Data speaks for itself: County and rural consumption accounts for 39.3% of the national retail sales, and McKinsey predicts that 66% of future consumption growth will come from these areas. Business brands are not engaging in unprofitable ventures; they are simply following the growing market trends.
- The logic of the situation has changed: In the past, central cities drew away people and money from the countryside. However, four factors have reversed this trend:
1. Urban consumption has peaked: Retail sales in Beijing and Shanghai are declining, while rural consumption has outperformed urban areas for 55 consecutive months.
2. Transportation has shortened distances: High-speed railways have made commuting across provinces as convenient as taking the subway, allowing people to earn money in the city and spend it in the countryside.
3. Returning youths are not compromising on quality: 63% of youths from third- and fourth-tier cities have lived in first- and second-tier cities and are accustomed to high-quality brands; local offerings cannot deceive them.
4. Urban residents are moving to the countryside: Travel bookings to counties have surged during the May Day holiday. For example, Pingtan, with a population of 400,000, received 810,000 visitors, showing that city dwellers enjoy spending their weekends in the countryside.
2. The Three Core Elements of the 18 Policies: Keeping Consumption Local, Attracting Visitors, and Building Confidence
These policies are not empty slogans; they provide clear directions for county development:
1. Upgrading existing resources: Instead of building new shopping malls, focus on utilizing existing assets. For instance, Yiwu has transformed its commerce into a "shopping tourism" experience, where visitors can shop with their luggage in tow.
2. Creating unique attractions: Use local scenarios and services to attract city dwellers. For example, integrate commerce, agriculture, culture, and tourism to create experiences that make visitors want to stay longer.
3. Enhancing support: Ensure that locals have the means to spend money. Stable employment and support for small businesses (78 million nationwide) will increase residents' willingness to consume in their hometowns.
3. Identifying Your Own Position: Small Satellite or Small Star?
Counties should not blindly copy others' models but need to consider their distance from central cities:
- Small satellite counties: Located near large cities (within a few minutes' drive), such as Kunshan near Shanghai. Their advantage is proximity, which allows them to tap into the urban consumer flow.
- Small star counties: Far from central cities but with distinctive industries, such as Changyuan in Henan, known for its medical supplies. Their advantage is their industries, which can attract visitors from afar.
4. Small Satellite Counties: Turning Passersby into Consumers
The key for small satellite counties is to turn traffic into sales opportunities:
- Turning necessary stops into shopping hubs: The renovation of the Tonglu service area doubled the number of charging spots and added a garden mall, increasing visitor stay time from 20 to 40 minutes and boosting revenue by 91%. This strategy targets the need of new energy vehicle owners to charge, turning passing motorists into customers.
- Building a consumer network: Wenling has a three-tier approach: transforming old markets into comprehensive centers, creating unique rural attractions (such as stone-house homestays and village cafes), and covering daily consumer needs at both the county and village levels.
5. Small Star Counties: Making Industries into Consumption Attractions
The focus for small star counties is to turn their industries into engaging consumer experiences:
- Caoxian Hanfu: They not only sell Hanfu but also offer "shopping tourism" experiences, attracting Hanfu enthusiasts from across the country. The Hanfu production base also serves as a social venue for young people, retaining both visitors and local residents.
- Xuyi Lobster: They have transformed lobster production into a year-round and festive activity, with a lobster festival and specialized night markets that keep locals and visitors engaged.
- Dehua White Porcelain: They converted an old porcelain factory into a cultural and tourism park, allowing visitors to see the porcelain-making process and purchase products, combining industrial tourism with regular shopping.
In Conclusion
The opportunity in county-level consumption lies in providing consumers with a reason to visit. Small satellite counties should offer convenient shopping experiences, while small star counties should create unique attractions that make visits essential. The 18 policies provide the necessary guidance. The success of these efforts will depend on whether counties can effectively implement these strategies and transform them into tangible benefits for their local economies.