Affected by the economic environment, "consumption downgrade (trade down)" has become a hot word in recent years.

The so-called consumption degradation means that consumers generally begin to pursue high-quality and inexpensive goods, pay more attention to the practicality and performance-to-price ratio of consumption, and no longer blindly pursue high-end luxury products.

Japan is the best reference for understanding this consumption shift. The reference mentioned here is not the innovation of "business model", but more the development trend of "consumer demand". In terms of business model, China is far ahead in e-commerce, express delivery, code-scanning payment and so on, but in terms of consumer demand, it has long been Japan in developed countries, and consumer demand has the characteristics of highly developed and subdivided.

Of course, there are significant differences between China and Japan in terms of population pattern and industrial structure, and our economic structure is much healthier than that of Japan in 1989. However, the economic development and cultural emotion in East Asia have a certain degree of commonality, so there are also some commonalities in social demand, psychological emotion and even the concept of consumption. The process of changing the concept of Japanese consumers can also bring some enlightenment to the present. It is worth noting that in Japan's "lost 30 years", the total value of required consumer goods has not changed significantly, but the direction of consumer consumption has changed, shifting to consumer goods with lower value, more convenience and longer storage time.

Multi-information feedback, the current shift in our consumption is also taking place.

The concept of "reverse consumption", "second-hand consumption" and "minimalist consumption" has been recognized by some people, and some young people are keen to spend in "ten-yuan stores" such as MINISO Group (09896). During the recession in Japan, low-cost, high-quality enterprises such as MUJI have sprung up, while Chinese consumer brands, including Pinduoduo and MINISO Group, have begun to rush. During the "June 18" period this year, the sales growth rate of BABA and JD.com both declined, the first time since the 20th anniversary that sales growth was not as expected, and the sales growth rate was the slowest in three years. On the other hand, Pinduoduo, who focuses on the low-price market, has seen a sharp increase in performance. in addition to the growth of sinking markets such as fourth-and fifth-tier cities and towns, there is also an increase brought about by the downgrading of consumer demand from users in first-and second-tier cities.

In overseas markets such as Europe and the United States, due to high inflation and the risk of recession, "low prices" also seem to become a "new fashion". In shopping app stores in the United States, Australia, Canada and other countries, Temu, a cross-border e-commerce platform, has been at the top of the download list for many months in a row, SHEIN, a fast-fashion cross-border e-commerce platform with low prices, has also become popular, and Honey Ice City, which is famous for its "extreme cost performance ratio", is also popular in Australia, Japan, South Korea and other markets.

Low prices seem to be at the heart of the global consumer chase again. In the quadrant of consumer downgrade, the demand for non-essential consumer goods is frustrated, while low-end and discount retailers will get more attention, among which the companies that stand out are investment opportunities.

MINISO Group, which started with a 10-yuan store, released unaudited financial reports for the fourth quarter and the whole year of fiscal year 2023 in August, reaching a new high in overall performance and making a historic breakthrough in terms of revenue and profitability. Of this total, revenue in the second quarter of 2023 broke through the 3 billion yuan mark for the first time, reaching 3.25 billion yuan ($449 million), an increase of 40.3% over the same period last year. Gross profit in the second quarter was 1.297 billion yuan ($179 million), an increase of 67.9% over the same period last year, and the gross profit margin was 39.8%. The adjusted net profit exceeded 570 million yuan, an increase of 156% over the same period last year, and the adjusted net profit margin reached 17.6%, up 8 percentage points from 9.6% in the same period last year. "

MINISO Group's success, on the one hand, is excellent quality control, excellent overall commodity quality and design, and rapid iteration of new commodity categories. Through the grasp of market trends and trends, he estimates market demand and constantly adapts to the product quality requirements of the new consumer market. On the other hand, there is an excellent overseas strategy. In overseas markets, MINISO Group has achieved good results by adopting localized product structure and mode of operation, such as the sinking markets in Southeast Asia and Mexico, and high-quality parity substitutes under high inflation in Europe and the United States. Revenue from overseas markets in the second quarter was 1.115 billion yuan (US $154 million), an increase of 42.0% over the same period last year, while revenue from overseas direct markets rose 85% from a year earlier. Finally, as a representative of new consumer brands from China to the world, MINISO Group's success is inseparable from China's strong and high-quality supply chain. Liu Xiaobin, CMO of MINISO Group, said that in the past 10 years, from the initial contract manufacturing trade to the late product delivery period, it has relied on China's strong supply chain capacity. And MINISO Group also through the continuous cost reduction at the end of the supply chain to achieve the improvement of gross profit margin.

As of June 30, 2023, the total balance of cash, cash equivalents, restricted cash, time deposits and other investments held by MINISO Group was 7.3 billion (US $1.007 billion).

Zhang Jingjing, chief financial officer and vice president of MINISO Group, said: "We have recently clarified our future dividend policy and determined that we will pay no less than 50 per cent of the adjusted net profit for the whole year as a dividend. For fiscal year 2023, the board approved a final cash dividend of $0.412 per American depositary share, which is approximately 50% of our adjusted earnings per American depositary share of $0.81, with total cash payments expected to be approximately $128.5 million or $931.7 million. "

Shun'an 's special account products have begun to pay attention to and study the advantages of MINISO Group very early, and gradually began to set up their warehouses as early as February this year. On Sept. 12, Mingchuang quality products rose as much as 2.81%, hitting US $28.92 at one point, and its share price reached its highest level since March 4, 2021. This is since New Oriental Education & Technology Group in 2022, Shun'an once again found the annual gold stock in 2023, creating great returns for investors.

The concept of Shun'an Special account platform Service

In the era of consumption shift, the mode of operation of the whole society will change, and enterprises will also be deeply affected. To invest in such a market, the judgment of the macro trend and the study of the fundamentals of individual stocks need to be grasped, not only from a single point of view. The dedicated account platform service provided by Hong Kong Shun'an Group is an "open, multi-investment manager, multi-strategy" ecosystem to eliminate the weak and retain the strong. The dedicated account platform service can enable customers to get more professional investment services, do not have to spend a lot of energy and time every day to change positions in response to market changes, and reduce the opportunity to miss the best opportunities in the market and increase risks, while fully customized services, more flexibility for customers to tailor investment strategies and risks, for investors to select anti-cycle, long slope and thick snow products.

This article is reproduced from Shun'an Institute of Finance, Zhitong Financial Editor: Yang Wanlin.