Summary of Key Points
In the first half of the year, consumption was not neglected; rather, it underwent a drastic structural shift: Although capital flowed towards hard technology and AI, leading to a slump in consumer stocks (such as liquor prices falling by nearly 70%), the underlying demand did not disappear. Essential consumer goods held their ground, with some categories (cosmetics, health drinks) experiencing growth. Niche products like incense saw a surge due to emotional consumption, and the experience economy became a new highlight. Consumer demand has simply changed its form; old approaches have failed, but new scenarios are emerging.
1. Slump in Consumer Stocks Does Not Mean Demand Has Disappeared; Traditional Categories Are Just Aging
Many people think that the decline in liquor stocks and the sluggish performance of home appliances and cars indicate a weak consumer market. However, the reality is that the fundamentals of traditional categories have changed:
- Liquor: Production has decreased, and channel inventory has piled up. The lack of business banquets has led to a triple decline in volume, prices, and profits, with stock prices falling even more sharply than actual data, reflecting the trend in advance.
- Home Appliances: Without government subsidies, there is no new momentum, and consumers are less inclined to upgrade. For cars, joint-venture brands are struggling, and while new growth areas (such as electric vehicles) have not fully offset the decline of traditional brands.
- There are exceptions, however: Cosmetics grew by 6.3% in the first half of the year, with a 12.6% increase in June (the first double-digit growth in nearly 20 months), indicating that the desire for beauty still exists, but consumers are more selective about brands and benefits.
2. The “Scissor Gap” in Essential Consumer Goods: Good Sales at Stores, But Poor Profitability for Manufacturers
For essential goods like drinks, tobacco, and alcohol, retail sales are increasing, yet manufacturers are struggling:
- Drinks: Store sales have risen by 6%, but production has decreased by 0.5%, resulting in a 17.7% drop in profits. This is because people are drinking less, more expensive, and healthier beverages (such as sugar-free tea and electrolyte water), while traditional carbonated drinks and low-end milk products are not selling well. Manufacturers try to offset declining sales by raising prices, but the cost of PET plastics and sugar erodes their profits.
- Tobacco and Alcohol: Retail sales have increased by 13.2%, but liquor profits have also dropped by 17.7%. This is due to the statistic only including large stores (excluding small businesses), price increases, and high inventory levels pressing down on manufacturers’ profits.
In short, consumers are spending more, but the money is not going to manufacturers; it either goes to retailers or is absorbed by costs.
3. The Second-Hand Market as a Mirror of Value
Transactions on platforms like Xianyu reflect the real value of products:
- AI Hardware: Quickly sold (within 1-2 days) at a 25% discount, indicating that people recognize its value and are willing to buy second-hand items.
- Lego: Sold at 70-80% of the original price, showing stability due to its collectible nature and resistance to depreciation.
- Mid-to-high-end Liquor: Unable to be sold even at half price, indicating a decline in the “face value” of traditional consumer goods, as no one wants to buy second-hand liquor.
- Bone-Conduction Headphones: Can only be sold at over 70% of the original price due to intense price competition and cheap new models, making second-hand ones even less desirable.
4. The Surge in Niche Products: Incense from Ritual Item to Emotional Relief
Incense, once used for religious ceremonies, has become a form of emotional consumption among young people:
- Rapid Growth: The market size is expected to reach 22-25.4 billion by 2025, doubling that of traditional aromatherapy products. Sales on platforms like Douyin have increased by over 200% for three years, and on Tmall by 40 times.
- Who Is Buying?: The proportion of buyers aged 18-35 has risen from 17.3% in 2020 to 42.6% in 2024. They buy incense not because of religious beliefs but to relax and aid sleep after a long workday.
- Why the Trend?: First, it serves as an emotional outlet (a few dollars for a box that lasts 25 days provides more ritual significance than perfume). Second, it aligns with national trends and short videos, with brands like Guan Xia and international brands packaging it as part of a lifestyle.
5. The Experience Economy Becomes a New Favorite
Physical consumption is declining, but experience-based consumption is booming:
- Service retail sales grew by 5.3% in the first half of the year, 4.2 percentage points faster than product sales. Tourism consulting, cultural and leisure activities, and immersive experiences (museums, performances) have all seen significant growth.
- Young people spend weekends on hiking, kayaking, or staying in urban resorts, seeking real enjoyment rather than material possessions.
Conclusion
Consumption has not disappeared; it has just changed its form. Capital avoids consumer markets because old profit-making models (like liquor and traditional appliances) are no longer effective. However, consumer demand remains. It has shifted from buying expensive physical items to buying health, emotions, and experiences. The temporary gap in new profit-generating scenarios may make consumption seem inactive, but those who pay attention to emerging trends can seize opportunities.
Consumption will always return, just in ways we cannot predict.
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