Tencent’s earliest product QQ was actually grown up in a very sinking market in China.
Editor’s note: This article is from WeChat public account “Tencent Investment” (ID: TencentInvestment ).
When the fast-handed “old iron double-click 666” has become an Internet buzzword that has been passed down by white-collar workers, Huang Yi said, “The people in the five rings don’t know how to fight a lot” but once again let people ask themselves, we are a vast China. How much do you know about the complexity and diversity of the earth?
Tencent investment management partner Li Zhaohui said at the 2019 WOCC-China Subversive Innovation Summit held on September 11th that Tencent’s earliest product QQ was originally grown up in China’s sinking market, and now Tencent has invested again. Companies such as fast-handed, multi-tasking, fun headlines, and high-quality products have been deeply plunged into the market in various industries, and continue to help the development of ecological partners to provide better products and services for the sinking market.
In the process of continuous exploration and investment layout sinking the market, through the methods of macro analysis and micro survey, we have gradually formed a clearer understanding of this market, and with some of our independent thinking and insights, This is shared with you. We also welcome different opinions and look forward to communicating with you.
The following is a speech of Ten Zhao Investment Management Partner Li Zhaohui at the summit.
Tencent Group Vice President / Tencent Investment Management Partner Li Zhaohui at 2019 WOCC-China Subversive Innovation Summit
My topic of sharing today is “Innovation and Investment in the Sinking Market.”
First we define what a sinking market is, and here we make a clearer distinction.
The concept of “city” that we generally refer to is probably at the level of prefecture-level cities. There are more than 300 in the country, but this span has covered cities from first-tier to fourth-tier. Then, what we mean by “sinking market” refers to markets other than the first- and second-tier cities (including the new first-tier cities), that is, the third- and fourth-tier cities and below, which account for 70% of the total.
In fact, China’s first-tier and ultra-first-tier cities are highly developed even on a global scale.And a city with a high concentration of people. As the city level continues to move down, it presents a rich diversity, which is unique to the entire Chinese market. The thinking caused by such differences is that China is a unified market. Still a differentiated market? We have done some exploration in this direction. How did this difference come from? In what direction will you go?
The important source of this difference is the economic development factors caused by regional imbalances and industrial imbalances. On the other hand, apart from the differences in market conditions, we also try to analyze them from the perspective of demography. The above information is mixed together. Finally, we conclude that the overall conclusion is that China is a very multi-layered and in-depth market, and the differences between urban and rural markets will exist for a long time.
After finishing the definition, let’s look at what characteristics the sinking market has. Overall it is two points, longer leisure time and higher price sensitivity.
Specifically, the leisure time of the sinking market workday is 9 hours according to the survey, while the corresponding duration of the first- and second-tier cities is 5 hours. After work at 6 o’clock in the evening, buy food, walk, and go to the park… This is the daily life of people in the sinking market. The rest day is dominated by family activities, but this part of the time is far more than the first- and second-tier cities. The self-charging behavior of the urban population driven by work pressure and workplace competition occupies a relatively important part. On the whole, the sinking market has more leisure time and a more relaxed and enjoyable life mentality. This is also a typical consumer group in China, or a representative day for young people in the town.
From the perspective of consumption characteristics, the absolute value of the sinking market is quite different from that of first- and second-tier cities. Therefore, they have stronger selectivity for price and brand. Interestingly, the loyalty of brands in first- and second-tier cities is much higher than in low-tier cities. To a certain extent, it also reflects that one or two urban populations need brand loyalty to reduce their choice costs. In the low-line urban population, there is more time to “walk around” and choose different brands.
In combination with the above characteristics, we believe that the potential opportunities in the sinking market mainly come from three aspects.
The first category, refer to the consumption upgrade opportunities of the development track of the first and second tier cities. We believe that most cities in China will eventually reach the level of the current third- and fourth-tier cities. In the process, the lifestyle of high-line cities, including consumption habits and brand selection, will gradually penetrate low-tier cities. E-commerce has accelerated the narrowing of this regional consumption difference. On the one hand, there are integration opportunities brought about by channel maturity, and supply chain opportunities born with channel development.
Second category, syncing service opportunities in first- and second-tier cities. This refers to the just-needed service of food, clothing, housing and transportation, but the service providers, brands and service prices in various regions.There will be a big difference in the grid.
The third category, which is unique to third- and fourth-tier cities, offers opportunities for differentiated services and products. This type of opportunity may be completely different from the model of the first-tier cities, and it runs out of its own characteristics.
The following ten companies that I want to introduce are largely representative of how to seize the last category of opportunities. They are also very distinctive and representative companies in the entire sinking market.
The first company is a lot of work. In the past three years, the company has achieved 480 million active purchases. This has been almost a completely unimaginable number in the past. On the one hand, it combines the traffic bonus brought by WeChat, and quickly acquires users with low-cost grouping. But more importantly, it solves a basic user need in China, that is, products that everyone wants to get better value for money. From the definition of economics, one thing to do is to make an absolute cost advantage.
China is a huge production-oriented and export-oriented country. In the past, there was a large supply of idle productivity, which was actually transmitted from low-line cities to high-line cities. However, due to the lack of channels, the final consumers did not enjoy it. To the best price/performance ratio. The fight has broken all the links and directly connected the production resources to the consumers at the lowest price.
The second company is fast. We just said that people in low-end cities are relatively leisurely lives. They have a big need to prove their sense of existence, to know more friends and to get More recognition. Fast hand is to meet such needs, it is not a media content promotion platform, more is the platform that UGC itself shows. The huge business opportunities generated by such a weak relationship chain of users are established through daily chat, live broadcast, etc., and there is almost no trust link under the line.
The old iron economy was born on the fast hand. Maybe you don’t know who this person is, but they are very concerned and can bring goods. On such a platform, we have seen a large number of business opportunities arising from the weak relationship chain between users and the precipitation of interesting social relationships. This is what the fast-handers have been doing in the 3rd, 4th and 5th lines since 2016.
I want to talk about education here too. Education is a very pressing issue for low-tier cities in China. What Feibai Education is doing now, in addition to the more popular online courses, it also sinks through the mode of joining the third- and fourth-line campus and the second-line single-player live broadcast, which enhances the educational service experience on the one hand and eases the big city on the other hand. There is a mismatch between teachers and small and medium-sized cities, as well as the capacity bottleneck of offline training teachers.
At the end, I want to say that Tencent’s earliest product QQ was actually grown up in a very sinking market in China. I still remember that I used MSN in my early days of school and work. Tencent has always been sinking the market and has a strong sense of identity with the people. We have beenIn the continuous exploration and investment layout of the sinking market, there are a large number of investments in cultural entertainment, e-commerce, retail, and consumer services.
We have seen that many of the partner companies invested by Tencent have indeed brought good products and services to the sinking market. At the same time, Tencent also provides investment companies and business partners with a wide range of tools and methods for entering and deepening the market. At present, the most effective traffic portal in the sinking market is still WeChat. On the WeChat ecosystem, there are a large number of business models related to food, clothing, housing and e-commerce, which are constantly being built, grown and risen.
Tencent is also combining its online and offline components through its own technical solutions to give entrepreneurs, merchants and consumers a better experience. We hope to help develop the sinking market in China and continuously improve the living standards and quality of life of people in the sinking market.
Thank you all.