Wanlian Securities: The 26-year retail consumption classification era opens new opportunities for emotional consumption to drive fashion, gold, jewelry, and domestic beauty industries

The Zhitong Finance App learned that Wanlian Securities released a research report saying that Chinese consumers have entered a new stage of “consumer classification,” which shows that popular products pursue cost performance while being willing to pay premiums for innovative products and services that can provide emotional value. In this context, the trendy game market is rapidly expanding, and industry concentration is expected to increase; the gold and jewelry industry is shifting from being channel-driven to product-driven and design-driven; and domestic cosmetics continue to rise with R&D and marketing advantages. Related industries have ushered in development opportunities, and leading enterprises are expected to benefit.

The main views of Wanlian Securities are as follows:

Review and outlook: The era of consumption classification has arrived, and the rise of emotional consumption has sparked the development of related industries

The current state of consumption in China has gradually moved from “consumption upgrading” in the past to a new stage of “consumption classification”, which is reflected in: 1) more pursuit of cost performance: for traditional consumer goods with low added value of technology and serious product homogenization, consumers show more rational and cost-effective behavior; 2) they are willing to pay a certain premium for some new products or services. Factors such as a fast-paced lifestyle and information overload affect the mental health of contemporary people and drive the rise of emotional consumption. In addition, with the development of the times, China's consumption structure has expanded from subsistence consumption to enjoyable and spiritual consumption, and related industries such as trendy games, ancient gold, and beauty and skin care are sought after.

Trendy game: China's trendy game market is rapidly expanding, and high-quality enterprises are expected to become strong

Benefiting from the increase in per capita disposable income, the rise of emotional consumption, and the rise of domestic trendy culture and high-quality IP, China's trendy game market has expanded rapidly in recent years. The scale grew from 22.9 billion yuan to 76.3 billion yuan in 2020-2024, with a CAGR of 35.11%. Judging from the development of the trendy game industry in Japan, CR3 was 45% in 2021. The industry has a leading effect, and leaders improve efficiency and respond quickly to market demand through the layout of the entire industry chain. At the same time, they have rich IP resources and excellent IP incubation capabilities, which can well cover the needs of consumers at all levels and implement a global strategy to spread single market risks with diversified markets. Looking at China, on the other hand, China's trendy game market is relatively scattered. CR5 in 2024 is 20.8%. In the future, trendy games companies that cover the entire industry chain, have high-quality IP resources, and a wide range of channel layouts are expected to become strong and strong. It is recommended to focus on leading Trendy Fun companies.

Gold jewelry: channel-driven transformation to product-driven, high sector dividends have defensive properties

The rapid rise in gold prices has curtailed consumer demand for gold and jewelry. Many gold and jewelry companies' store expansion has slowed down or even closed. However, at the same time, there are still some excellent companies that have successfully attracted consumers with exquisite craftsmanship and marketing, and achieved rapid growth in performance. Currently, global economic uncertainty and geopolitical risks still exist, and emerging economies continue to buy gold to spread risk, and the price of gold may continue to rise. In the future, with the improvement of the gold jewelry process and the deepening of the “happy self” consumption concept, the penetration rate of gold jewelry in the non-wedding scene is expected to further increase. I am optimistic about leading gold and jewelry companies that focus on product design, strong operational capabilities, strong brand potential, and high dividends+high dividends.

Cosmetics: The rise of the national trend is obvious, and excellent domestic brands are breaking through

In the short term, the cosmetics industry's overall recovery momentum was good in the second half of the year, and the “Double 11" promotion has maintained a good development momentum for some domestic brands. On the supply side, domestic beauty companies are paying more and more attention to R&D investment. Many domestic brands stand out with their outstanding product power and marketing methods, and have achieved impressive growth even against the backdrop of weak industry demand. On the demand side, the younger generation's acceptance of domestic beauty brands is increasing, and domestic brands are expected to further seize the share of foreign brands and achieve an increase in market share. It is recommended to focus on leading domestic cosmetics companies with strong R&D, product strength and marketing capabilities.

Risk factors: macroeconomic downturn risk, risk of consumption recovery falling short of expectations, risk of increased industry competition.