Hello! I'm your financial analysis assistant. Today's topic is quite interesting, and even a bit counterintuitive.
In general, the perception is that "consumption downgrade" is the main trend in the market: people are tighter with their wallets, seeking value for money, and platforms like Pinduoduo and 1688 are becoming very popular, while high-end brands seem to be struggling. However, several domestic brands mentioned in the news—Shanxia Yousong, Zhihe, and PANE—have taken a completely opposite path: they don't offer discounts, their prices have increased, their repurchase rates are high, and they have even attracted investment from international giants.
What exactly is going on behind this? Why are these brands selling more and doing better when people think they have less money to spend?
I will break down this phenomenon into five key points to help you understand the logic behind this "high-end domestic brand" resurgence:
1. Breaking the Stereotype of "Cheap = Poor Quality": The Shift from "Value for Money" to "Quality for Money"
In the past, our first thought when buying something was whether it was a good deal. If a shirt cost 500 yuan, we would wonder, "Why does the one next door only cost 100 yuan?" At that time, brands relied on "value for money"—offering similar functionality at a lower price.
But these brands are focusing on "quality for money":
- Shanxia Yousong: A designer brand whose average price has increased by 35% and still sells well. This shows that its customers no longer worry about whether the price is justified; they recognize that the design, material, and fit of the clothes are indeed worth that price.
- Core Logic: When consumers realize that buying a lot of cheap clothes that deform after just two wears is actually more wasteful and troublesome in the long run, they shift to buying fewer, higher-quality items. This change isn't because they suddenly have more money, but because their definition of "good" has changed. They are willing to pay a premium for "certainty" and "long-term value."
In simple terms: People used to buy Apple products because they were cheap; now they buy them because they are durable, reliable, and hassle-free. These brands are selling a sense of convenience that requires no extra thought.
2. "Niche Marketing": Not Trying to Please Everyone, but Only Serving the "Informed" Audience
The term "niche marketing" sounds fancy, but it simply means: "I don't target the general public; I target a specific group of people."
- PANE doesn't have a Chinese name: This is a clever strategy. Many domestic brands choose a Chinese name to seem more accessible or authentic, but PANE sticks with its English name, which creates a sense of luxury and mystery among younger, highly educated, and internationally-minded consumers.
- Zhihe (ICICLE): Instead of promoting products on live streaming platforms, it builds its reputation through physical stores, endorsements from high-end magazines, and investment from Kering Group (the parent company of Gucci and YSL).
Why Does This Work? High-end consumption is essentially about "social currency." Wearing a common brand on the street might make you look ordinary, but wearing a domestic brand backed by international giants gives you a sense of recognition and superiority in social settings that far exceeds the value of the clothes themselves.
In simple terms: It's like running a restaurant in the top floor of an office building, not a market stall. Your average transaction value is higher because customers come there not just to eat, but to do business or show off their status.
3. Repurchase Rate is the Real Metric: From "Traffic Thinking" to "Customer Retention Thinking"
The news mentions that Zhihe has a 68% repurchase rate, which is astonishing. In the clothing industry, repurchase rates are usually low because clothes get old or out of style, and people switch brands.
- Traditional Methods: Brands rely on constant advertising, live streaming, and coupons to attract new customers. But this is like a leaky bucket—water comes in quickly and goes out quickly.
- High-End Domestic Brands: They rely on "brand loyalty." Once you accept a brand's aesthetic and quality, you continue to buy from them. Zhihe's 68% repurchase rate means that 6-7 out of every 10 customers will buy again.
Why is this possible? Their products are classic and versatile, suitable for work and everyday use. Customers are buying the brand's style, not just a seasonal trend.
In simple terms: It's like being accustomed to a certain brand of coffee. Even though it's more expensive, you don't want to try a new brand because you know you won't be disappointed. Once this level of trust is established, the brand has a stable cash flow.
4. The "Voting with Their Feet" of International Giants: The Significance of Kering's Investment
The news mentions that Kering Group has invested in Zhihe, which is a significant signal:
- Who is Kering? It's the parent company of luxury brands like Gucci, Saint Laurent, and Balenciaga.
- Why the Investment? Kering is not a charity; it invests in businesses it sees commercial potential in. This indicates:
1. The Chinese high-end market has huge potential: International brands see that Chinese consumers are willing to pay for high-quality, culturally significant products.
2. Domestic brands have international competitiveness: Zhihe's brand strength, supply chain, and customer loyalty have been recognized by top players.
What Does This Mean for Other Brands? This is a form of "endorsement." When international giants show interest, consumers think, "If even the owner of Gucci invests, this brand must be good." This lowers the barrier for consumers and increases the brand's premium value.
In simple terms: It's like a local restaurant being invested in by a Michelin-starred chef. Customers think, "If even a master chef approves of it, the food must be good," so the price can be higher, and people are still willing to queue up.
5. The "Other Side of Consumption Downgrade": "Rational Luxury" in a K-shaped Market
Finally, let's consider the broader market. The news says that consumption downgrade has become the norm, but in reality, we're seeing a "K-shaped differentiation":
- One End of the K-shape: Mass consumption has indeed declined. People are buying basic necessities and seeking extreme value for money, with platforms like Pinduoduo and budget-friendly brands thriving.
- The Other End of the K-shape: High-end consumption has increased. This group of consumers (usually middle-class and above) may not have seen significant income growth, but they are more rational and discerning. They no longer blindly pursue big brand logos; they seek "real value."
Why Do High-End Domestic Brands Benefit? International brands like LV and Chanel are too expensive and becoming more arrogant (e.g., raising prices, deteriorating service). Meanwhile, international fast fashion (like ZARA and H&M) is losing quality and having mediocre designs.
High-end domestic brands fill this gap:
- They are cheaper than international brands but still offer good quality and design.
- They are more expensive than fast fashion but offer a sense of quality and cultural relevance.
- They are more fashionable and international than traditional domestic brands like Bosideng and Hailan Home.
In simple terms: People used to think buying domestic products meant getting cheap stuff, but now they see it as buying quality products that truly meet their needs and preferences, not just for show or following trends.
Summary
These high-end domestic brands are doing better and selling more not because consumers have suddenly become richer, but because:
1. Consumers have become smarter: They are seeking quality and convenience rather than just cheapness.
2. Brands have become more focused: They target specific niches and build strong brand loyalty.
3. Products have improved: Their high repurchase rates prove their quality, not just through advertising.
4. Endorsements have strengthened: Investment from international giants enhances trust and premium value.
5. The market has diversified: High-end domestic brands have positioned themselves accurately in a market with a K-shaped differentiation.
For You: If you're considering your next purchase, ask yourself: Do you buy something because it's cheap, or because you really like it, find it useful, and expect it to last? If it's the latter, paying a higher price is a more rational choice.