Pan Jie, General Manager of 1688 Yanxuan: In the acceleratingly stratified consumer market, find those users who have the demand for both excellent value and good appearance. | WISE2024 Future Consumption Conference

On November 29, the WISE2024 Future Consumption Conference was officially held in Beijing. This conference is hosted by 36Kr Future Consumption, with the theme of "Always with You", focusing on hot topics in the consumption industry. It invites more than 20 investment institutions, platform sides, brand sides, and service provider executives to jointly explore new trends and opportunities in the consumption industry.

In recent years, with the wave of affordability sweeping in, a large number of consumers, especially young people, have begun to flock to 1688. They discuss on social media such as Xiaohongshu how to buy cheap and good goods on 1688. Pan Jie, the general manager of 1688 Yanxuan, believes that Sam's is a typical success of an "innovative supply chain". Although this model is not applicable to online platforms, the underlying logic is the same: Who exactly are we going to serve, and what demands of these users can be met on the platform. The mainstream users of 1688 are the new middle class and the "Generation Z", who have a strong demand for brand OEMs and high-quality alternatives to big brands. In addition, unlike in the past, on the basis of returning to rationality, many young people are emotional consumers and self-pleasing consumers, and they will also buy small earrings and small necklaces on 1688 that are not practical but cheap "beautiful little junk". Therefore, in the coming year, the development direction of 1688 Yanxuan is value for money + good appearance. Value for money is the characteristic of the 1688 platform, and good appearance is always pursued by young and mainstream consumers.

Pan Jie, General Manager of 1688 Yanxuan

The following is the speech record of Mr. Pan Jie, edited and sorted out by 36Kr:

Hello everyone, I'm Pan Jie from 1688. Many of the contents mentioned by Mr. He from Black Ant Capital are very consistent with the development concept of our platform. The first is supply chain innovation; the second is white-label supply; the third is service-oriented and experience-oriented consumption.

Since 2021, a large number of consumers, especially young people, have flocked to 1688. They discuss how to consume on 1688 on Xiaohongshu, Bilibili, Douban, and Zhihu. Behind this represents the consumption trend of the younger generation. Today, I will have an exchange with you based on the consumption phenomena, consumption concepts, and consumption data of young people seen on 1688.

The currently much-discussed consumption model is Sam's Club. Sam's serves the richest group of people in China with extreme cost and extreme efficiency. The underlying logic behind it is the supply chain. If we add an attributive, it is an "innovative and high-quality supply chain".

The Sam's model may not be very applicable to online platforms, but the underlying logic is the same, that is, who exactly are we going to serve, and what demands of these users can occur on the platform, which is the key. Sam's choice of people and demands is very precise.

A very popular TV series this year, "Song of Mortals", tells the story of the fragile middle class, which resonates with many people. The new middle class and the "Generation Z" represented by those born after 1995 and 2000 are the mainstream users of 1688 at present. From these users, we have seen three returns in consumption: returning to first- and second-tier cities, returning to mainstream young users, and returning to the "double-high" group (high income and high consumption).

First of all, in terms of consumption categories, brand OEMs and high-quality alternatives to big brands are sought after by young people.

Young people have shared more than 5 million self-initiated posts on Xiaohongshu about digging for treasures on 1688. How to consume smartly on 1688 has become a hot topic among young people. For example, many of my friends around me bought or renovated old houses or renovated rental houses, and the entire decoration materials were purchased on 1688. The large decoration market, especially the online home decoration market, has declined due to the impact of the real estate market, but the consumption of decoration-related categories of 1688 Yanxuan is growing against the trend.

What consumers are pursuing at present is the "cost-performance ratio", and behind it is the white-label factory goods. White-label was originally a supply chain language, but now it is becoming a consumer language. There are more than 1 million source manufacturers and chain leaders in China gathered on 1688, and they are mainly factories with brand OEM, foreign trade, product research and development, design, and innovation. Currently, more than 70% of brand OEMs are on 1688, and many self-initiated users on Xiaohongshu are sharing these OEM lists.

Secondly, there have also been great changes in consumption psychology. The emotional consumption mentioned by Chief Editor Qiao Qian is also becoming more and more obvious on our platform. It's okay to buy things as long as you are happy. Young people often say that it's hard to buy what I want with a lot of money, which is not just the previous complete pragmatism. For example, many girls will spend forty or fifty yuan to buy a bunch of small earrings and small necklaces and other small accessories on 1688. Because they are often lost, they often buy them, and they will spend several hundred yuan every month. Many people are willing to buy some seemingly useless things on 1688, which are called "beautiful little junk". They are very beautiful, exquisite, and have many functions, which has stimulated the consumption enthusiasm of many young women.

The self-pleasing consumption emotion is particularly obvious in the group of family managers. These family managers are worrying people. They not only buy for themselves, but also for their husbands, children, and the elderly, as well as for the bedroom, the kitchen, and the bathroom. When she buys for herself, she is stingy, but when she buys for her husband, children, and the elderly, she will buy things with better quality. The width of her consumption categories and the business opportunities behind the concentration of consumption categories are very large, and at the same time, there are also very great opportunities for demand mining and demand satisfaction behind it.

In addition, the emotional consumption trend brought about by the return of national self-confidence is still very obvious. However, what they discuss is no longer simply the national trend and domestic products, but the white-label alternatives, which is also a manifestation of smart consumption behind it.

Finally, we believe that the current consumption is not a complete downgrade, but an accelerated classification. In fact, the entire consumption enthusiasm has not decreased much, but people's consumption choices have changed greatly. More and more people are beginning to buy high-quality alternatives to big brands, especially in the field of sports and outdoor activities.

After we have made iterative upgrades to the supply chain based on the demands of these consumers, we have found that the growth of products based on the emotional value, self-pleasing value, and "beautiful little junk" of young consumers is very fast.

The consumption in the past few years was price-oriented, but now it is returning to a more rational consumption, which is rational in practical and necessary needs. Self-pleasing and emotional consumption are actually also rational. It's just that she likes it, and she will spend more time studying consumption.

Not long ago, I chatted with an industry veteran who has invested in more than 80 emerging consumer brand companies. When investing, he only looks at one point, that is, whether there is a very clear and penetrating consumer demand and whether there is product innovation in the supply chain. If there is, he will invest. His judgment is that there will be a large number of small brands with more segmented types and segmented demands.

We also believe that whoever can better meet the procurement and consumption needs of family managers will seize greater business and industrial opportunities.

Today, through the digital supply chain and AI capabilities, we make the efficiency of 1688 Yanxuan facing consumers higher and the path shorter.

In the past three years, 1688 Yanxuan has grown rapidly, and its share in the overall market is also rising rapidly. Currently, it is focusing on the procurement needs of family managers.

Our development direction in the coming year is value for money + good appearance. Value for money is the characteristic of our platform, and good appearance is always pursued by young and mainstream consumers.

Some things are very mysterious. They suddenly become popular for no reason. Some things seem reasonable, but they can't be promoted successfully. How to grasp the inner experience, value recognition, and emotional satisfaction of consumers are what we need to study, learn, and invest in.

This year, we are also forming a team and will launch 1688's own OEM products, temporarily named 1688 Yuanxuan. We will experience the entire brand development process from beginning to end, including the supply chain, product innovation, industrial design, and product promotion. But we are not going to build our own brand. It's just that many factories currently do not have a brand, so we use our own brand to endorse the cooperative products between them and us.

For the products that our OEM business is currently working on, good appearance design and product innovation are the top priorities. We do not do the thing of removing the label and then applying a new label, as this has no industrial value. Our insistence is to do product innovation, and based on our understanding of the demand, we consider what the product should look like and what functions it should have. Who stipulates that a bottle of mineral water can only look like this? Who stipulates that a hair dryer cannot be used as a tool to dry clothes?

As we all know, the usage scenarios and time of a hair dryer are very short. Except for the 10 minutes of blowing hair, it is usually idle, but in fact, there are many segmented demands. We jointly developed with a factory in Shenzhen to make the hair dryer can be hung on the sink and become an automatic hand dryer. In the south, it is often the plum rain season, and it is difficult for clothes to dry in winter. We provide a drying rack, and the hair dryer can continuously and safely dry for 3 hours under the rack.

For another example, people who keep pets know that after washing clothes, they will find a lot of pet hair. We collaborated with a factory to develop a laundry detergent pod that can dissolve pet hair without damaging the clothes.

The theme of today's conference is very good: Future Consumption, how to create value in future-oriented consumption, which is the gene engraved in Alibaba's bones.

Thank you for your time.