With A Population Of 1 Billion In The Third And Fourth Line, What Are Fashion Brands Waiting For?

There are still five people in front of Kate. She has been queuing for 20 minutes. She stood on tiptoe impatiently to look at the store for fear that the eye shadow plate of Master Uchimura, who had been thinking for a long time, would be bought. "It was said online that I liked it at a glance when it went on sale in Japan. It was not easy to wait until it came on the market at home. I must grab it!" she told reporters. It's not surprising that Sephora in Foshan, Guangdong Province sees this scene. For a while, in order to control the flow of people, the store only allowed members to enter.

In recent years, with the popularity of the Internet and the promotion of e-commerce business, the consumption willingness and potential of people in third and fourth tier cities have been greatly released, and there is a tendency to "counter attack" the consumption ability of first and second tier cities.

This trend is particularly prominent in fashion consumption, especially luxury consumption. According to the Deloitte Siku Blue Book for the 2019 Expo, released in early November last year, from September 2018 to September 2019, 27 of the top 30 cities are third tier and fourth tier cities according to the annual consumption frequency; According to the proportion of re purchasers, 29 of the top 30 cities are third tier and fourth tier cities; According to the proportion of people who have purchased three or more orders, the top 30 cities are all third tier and fourth tier cities.

"Many low-end cities contain consumption power that cannot be underestimated. Because the penetration rate of luxury offline stores in low-end cities is low, online luxury e-commerce will become an important channel for luxury consumption in low-end cities. In the next five to 10 years, the number of online luxury consumers and sales growth in low-end cities will have considerable room for growth." Said Li Rixue, founder and CEO of Siku Group.

It is "small town youth" that drives this strong trend. They are between 18 and 35 years old, live in relatively wealthy third and fourth tier cities, only two or three hours' drive from the metropolis by high-speed rail, have received college education, and have a decent job in their hometown (monthly income is concentrated in 2500-6000 yuan). Don't underestimate people in small places. According to the national positioning standards for all tier cities, tier three cities are underdeveloped prefecture level cities (70), and tier four cities are underdeveloped prefecture level cities (90). These 160 cities have a population of more than 1 billion and are extremely large.

　　 Four main reasons for the vigorous development of third and fourth tier cities

In the mass market of third tier and fourth tier cities, on one side are local stores that have been established for a long time, such as Taipingniao, Hailan Home, Anta Sports, Sima, Metersbonway, and on the other side are well-known brands that have become popular in developed regions. "Outsiders" have been eyeing each other for a long time. First, H&M and Zara both failed in offline channels and online stores, and then Uniqlo, Bosiden and others moved forward cautiously and diligently.

What about the high-end market? Burberry, Prada, Dolce&Gabbana and other classic luxury brands are the most favored, and the proportion of consumers who buy luxury goods online is high. There were not a few luxury brands that held up the sinking flag at that time. However, the news of closing down and closing down in the past few years came one after another, evacuating some "acclimatized" markets, and singing loudly all the way. Hangzhou, Chengdu, Xi'an and other second tier cities were among the new "models". Commercial real estate projects led by SKP and Wangfujing Department Store gathered Chanel BottegaVeneta, MiuMiu and other brands attract local people and continue to expand at the same time, attracting consumers from the surrounding third and fourth tier cities as the center.

It is reasonable for Yizhong brands to try to deepen their efforts in the third and fourth tier city markets. Xing Ziqiang, chief economist of Morgan Stanley in China, once predicted that the consumption of residents in the third and fourth tier cities will increase from 15 trillion yuan in 2017 to 45 trillion yuan in 2030, and become the main force of the consumer market in the next decade. Alibaba, JD and Pinduoduo released their performance reports for the second quarter of 2019, which confirmed his words; According to the statistics of the receiving address, the active buyers in the third to sixth tier cities accounted for 50%. The growth of active buyers in lower tier cities was higher than that in the first and second tier cities, and 70% of the new users came from lower tier cities.

3、 Why can the fourth tier cities become more and more prosperous? There are four main reasons: First, the residents' income has continued to increase. According to McKinsey's prediction, the proportion of the middle class in China will increase significantly, and is expected to reach 81% in 2022, becoming the main force in China's consumption upgrading; Among them, the middle class in the third and fourth tier cities will become the fastest growing group in the future, which is expected to reach 40% by 2022. At the same time, other data show that the per capita disposable income of the third, fourth and fifth tier cities is expected to double from $4482 in 2006 to $8261 in 2030.

Second, there is plenty of leisure time. According to the Research Report on the Balance Index of Workers in China, 31~40 hours is the highest proportion of working hours per week (35%) for residents in cities below the third tier, which is lower than that in first tier cities (56%) and second tier cities (47%); In the range of working hours greater than 41 hours, cities below the third tier are also lower than those in the first and second tier cities; On the contrary, the proportion of urban residents below the third tier who work 21 to 30 hours is higher than that in the first and second tier cities.

Third, the structure of consumer groups dominated by the post-80s and post-90s youth has been formed. The post-80s and post-90s young people are in the period of starting their careers and rising rapidly, and have become the main force in the consumer market. Young people in small towns are all in this age range. According to the data from the National Bureau of Statistics, the base number of young people in small towns is up to 227 million, compared with 68 million young people in first tier and second tier cities, and the group of young people in small towns is larger. Moreover, young people in small towns pay more and more attention to quality and service, and pursue personalized, high-quality and experiential consumption. The average monthly expenditure is approaching 2734 yuan, or 2150 yuan, for young people in first tier and second tier cities.

Fourth, the penetration rate of network equipment is constantly improving. With the increase and continuous sinking of Internet coverage, the online entertainment and consumption behavior of low-end urban residents have been guaranteed in hardware. Moreover, based on a large population base, the scale of low-end urban Internet users still has a large growth space, which also indicates the huge potential in the future.

　　 What problems do fast fashion, mid tier fashion and luxury goods face in the third and fourth tier markets respectively?

The blue ocean of brands active in first tier and second tier cities failing to win in third tier and fourth tier cities is not a case in point. "Local Snakes" can occupy the local market for many years, which certainly has its advantages: local fashion brands have the advantages of deepening the city, second, bottom-up expansion logic, and third, price setting and brand tonality are closer to the needs of local consumers.

Ten years ago, fast fashion brands were introduced by shopping centers; In the past two years, however, they have faced the embarrassing situation of declining performance and withdrawing stores, and consumers' attitudes towards them have also changed. Both H&M and Zara have gone through such a process. The reason is that the brand does not have price advantage in the third and fourth tier cities. It is not in line with the consumption habits of local residents to wear clothes with an average price of hundreds of yuan for only one season. More importantly, local people tend to have cultural and emotional identity in the consumption field, and consumption content supported by personality and interest is more popular.

Then look at the mid tier fashion brands. Their main problem in third tier and fourth tier cities is their low popularity. It was also about 10 years ago that the middle end fashion brands such as Escada, Ports and Pinko followed the pace of fast fashion brands into the sinking market. Unfortunately, not only did they fail to stir up a thousand waves as expected, but they were left behind.

As for luxury brands, consumers in third and fourth tier cities generally have high recognition of such brands. They often buy on Tmall, JD, Vipshop and other local e-commerce, and occasionally through Farfetch, Shopbop and other overseas e-commerce, for the purpose of price comparison and selection of ingredients. On the whole, entry-level products such as lipstick and skin care products are particularly popular, and the growth rate of scarves, bags and watches is also very high. From the perspective of brand division, big brands like Louis Vuitton, Dior and Rolex are more likely to be recognized and understood.

As for the place of purchase, most consumers in lower tier cities will choose to go to the counter in first tier and second tier cities. Zhou Ting, president of VIP Research Institute, once said that in recent years, the whole luxury industry brand is in the form of tightening store opening, so the layout of low-end urban market needs to find another way to do a large number of non store sales systems and activity systems to trigger local customers, such as online festival activity planning, flash stores opening in a limited time, and it is difficult to reach local wealth groups in this process. In addition, most brands need to be launched and promoted. In the process of cooperation with local media, there will be incongruity in tone. Therefore, it is difficult for luxury brands to have a matching media environment to spread their brand image.

Li Rixue also added: "In fact, there are many factors that need to be considered in the future luxury channel sinking, such as the local consumption power of the sinking city, the local competition pattern of luxury brands, and whether the brand is mature for low-end consumers. It is necessary to evaluate more deeply whether specific low-end cities are worth sinking."

Indeed, opening the third and fourth tier markets is far from simply opening stores to sell goods. Brands must be aware of the fact that their population is extremely polarized. For the fashion industry, it is more important for consumers who are young, have cars and houses, and have no worries about life. They have obvious demand for consumption upgrading to be released and pay attention to brand premium. Brands should promote consumption transformation through emotional identification by matching with effect advertisements. This is consistent with the first and second tier cities. The difference is that the third and fourth tier cities emphasize more cultural stickiness. Brands may try to break through the circle and carry out targeted marketing and promotion in social media such as Tiaoyin, Fasthand, WeChat official account, microblog, as well as sinking media such as Baidu Search, by looking for ways to cooperate with celebrities and online celebrities, These effects on the sinking market that attaches importance to interpersonal word-of-mouth communication are immediate.

For example, in 2017, in the months when Diaoyin became popular on the whole network, Michael Kors, as the first luxury brand to deeply cooperate with Diaoyin, launched the # City T Platform, and was not satisfied with the challenge of Diaoyin. He specially invited three fashion experts to demonstrate the brand products in person, and encouraged users to upload personal creative short videos. According to statistics, the Challenge attracted more than 30000 dithering users to spontaneously create short videos within a week of its launch, and received more than 200 million broadcasts and 8.5 million likes. For another example, last year Dior took the lead in publishing Rouge999 ads in TopView mode on the Meitu Xiuxiu App, seamlessly connecting the opening screen ads with the information flow in the app, and realizing the non-stop play of ads, aiming to enhance the sense of immersion and enhance users' interest and interest in advertising. Moreover, this advertising model supports the jump to the brand's e-commerce home page or official website home page, the internal functions and native pages of Meitu Xiuxiu App, which can help the brand build a marketing closed-loop and increase the conversion rate.

The above cases show that more and more young people in small towns are willing to participate in the discussion of fashion brands on social media, and brand awareness, identity and fantasy continue to rise. Of course, there are many cases where the big brands lost their footing due to their haste. It is certain that the vast process of "ruralization" will never stop there.

Amanda bought a Lanc ? me lipstick as her birthday gift in a shopping mall in Zibo, Shandong, but soon she regretted it. "270 yuan can buy many other things, but what can I do after I buy them? I will never buy them again," she said. Indeed, there are too many alternative choices. The new generation of domestic brands such as Perfect Diary, Kazilan, and Mary Dega attach importance to innovation and high quality in product design, and the use experience is not necessarily inferior to that of luxury brands.

This is an interesting era. The channel continues to sink, and Chinese products are strongly pursued. Chinese brands have started to have equal opportunities to compete with western brands on the same platform. The best judges in this competition are really rich and free low-end urban consumers. This is the return of cultural confidence. The domestic brand has already possessed the inherent advantages. It is not difficult to predict that the success or failure of the future sinking war will depend on whether the brand and the values represented by its products can match the ideas of the young people in the town.