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2020s start the silver age, understand the full picture of consumption, and look at domestic opportunities.

“In the 1930s, the Great Depression in the United States, but the US President and his advisers were anxious and overwhelmed, mainly because of the lack of the United States. Information on the overall economic situation. They know that railway traffic has plummeted, steel output has fallen, and millions of people have lost their jobs. However, it is difficult to fully understand the overall economic situation, and it is impossible to formulate economic policies. “

In order to solve the above problems, the economist Simon Kuznets developed the national economic account to reflect the overall state of the US economy. Based on this set of accounts, the government was able to comprehensively review the overall picture of the country’s economy and make overall policy guidelines. This set of national economic accounts is the basis of the GDP accounts now adopted by countries.

GDP accounts are also applicable to the field of venture capital. The structure of household consumption (ToC consumption) in GDP represents the overall picture of a country’s consumer market. Developed countries will have their leading consumer market “steps”. Comparing the GDP of residents with developed countries will help to understand the full picture and opportunities of Chinese residents’ consumption (ToC consumption): “Silver age of venture capital”, and consumer demand What are the (inventory) areas and areas with incremental space.

This article will dissect the overall picture of domestic household consumption (ToC) consumption based on the household consumption expenditure in GDP and answer the above questions. The dimensions of the answer include: 1. The overall difference in consumer spending between Chinese and American residents of and changes in domestic consumption structure. Second, the comparison between China and the United States in each of the sub-sectors: which areas of domestic To C consumption have relatively large stock markets? Which areas are relatively low-what are the corresponding incremental markets?

I. To C Consumption (To C Consumption) Comparison between China and the US: There is room for the overall domestic volume to rise, and changes in the consumption structure

Overall volume: there is room for domestic consumption to increase as a proportion of GDP

First, look at the proportion of consumer spending in GDP between China and the United States. In the United States, Residential consumer spending accounts for 69% of GDP in China This percentage is only 39%. The difference in this ratio means that there is room for improvement in the proportion of Chinese residents ’consumption expenditure. As for how to promote household consumption (domestic demand) to achieve economic growth, this is a higher-level economic design issue, and this article will not expand.

In absolute terms, US residents ’total consumer spending (To C consumption) in 2018 was $ 14.14 trillion, and China ’s consumer spending was $ 5.12 trillion (35.11 trillion). According to China’s annual GDP growth rate of 6%, if the proportion of Chinese residents’ consumption is unchanged in 2030, the ToC consumer market has a room for improvement in the country of 56%, and the corresponding household consumption is about $ 8 trillion.

It is worth noting that the total domestic To C consumer market space accounted for here (GDP expenditure method) includes not only the scene and product sides that directly trade with the C side, but also the upstream and downstream production products and services. The entire supply chain. The data to be compared next is the proportion of Chinese and American household consumer spending in various fields.

Overall structure: The proportion of basic consumption of Chinese residents is decreasing, and the proportion of service consumption will increase

Data source: National Bureau of Statistics of China; The balance of financial data website

It is not difficult to see that there is a big difference in the structure of consumer spending between China and the United States: China is still dominated by the basic consumption structure of clothing and food at this stage. Expenditure is high on high-level consumption. For example, in areas where Chinese residents ’consumption expenditure accounts for a relatively high proportion: food (basic consumption), the expenditure accounted for 28%, which is 3.5 times that of the United States.

It is worth mentioning that from the horizontal comparison of countries alone,Fees are generally biased towards the basic level. However, in terms of vertical time, the proportion of Chinese residents’ basic consumption (subsistence and food consumption) has declined: for example, in food consumption, it accounted for 63% in 1978, and is now less than 30%. According to the standards of the United Nations Food and Agriculture Organization, China has passed 50% of food and clothing and 40% of the well-off from the poverty level with Engel coefficient above 60% in 1978, and is entering the richest level below 30%.

This change means that the main body of consumer spending in China is moving from basic to higher levels of consumption structure (such as service consumption). Corresponds to the overall expansion of the domestic service-oriented consumer market space : National Bureau of Statistics latest The data shows that the ratio of service consumption to (residential consumption expenditure) is 50.2% in 2019, an increase of 0.7 percentage point from the previous year.

Also, The decrease in the proportion of food expenditure mentioned here does not necessarily mean that the absolute value declines, because with the increase of the domestic economic volume / GDP, the total consumption corresponding to the decrease in proportion may still rise– The market space for basic consumption has not been reduced due to the upgrading of the consumption structure.

II. Comparison of Chinese and American Residents’ Consumption by Segment: Opportunities for Domestic To C Consumption

Returning to the comparison between China and the United States, the differences in China’s consumer spending in various areas. On the one hand, domestic consumption expenditure accounts for a relatively high area, which is the direction in which the current domestic memory market has a large space; on the other hand, it has a relatively low domestic consumption expenditure, and some of them correspond to potential improvement areas.

Chinese residents ’consumption (To C consumption) accounts for a relatively high area: areas and opportunities with a large stock market

Currently, the proportion of Chinese residents ’consumption expenditure is higher than that of the United States. In addition to food, clothing, housing, transportation, communications, and entertainment are also included.

• Clothing

  In terms of clothing, Chinese residents account for 7%, 133% higher than the proportion of consumer spending in the United States. The reasons include, on the one hand, in daily clothing, domestic residents’ clothing costs are relatively high relative to income. Chinese and American clothing cost comparison (based on 100 yuan / medium Brand), the absolute price is not much different , but China ’s per capita GDP is less than 1/6 of the US. The point here is that national consumption power needs to be improved, and the other dimension is the pricing of medium (domestic and foreign) brands / corresponding to the opportunity for upgrading the commercial supply chain.

  

  Comparison of Chinese and American clothing costs, the absolute prices are not much different. But China ’s per capita GDP is less than 1/6 of that of the United States.

  On the other hand, in luxury clothing, domestic consumer preferences far exceed those of developed countries including the United States. The McKinsey report shows that Chinese consumers contributed 1/3 of luxury goods consumption in 2018, reaching 770 billion yuan. The post-80s luxury preferences are the most prominent. They contributed 56% of consumer spending, and the per capita annual expenditure was 41,000 yuan. However, the post-90s luxury apparel preferences declined, and the post-90s spending accounted for 23%. Re-understanding of consumer demand and iteration of new products.

  Furthermore, second-hand clothing with luxury goods in the United States is a $ 50 billion market. U.S. residents have a high acceptance of second-hand clothing, thus reducing the cost of clothing. The second-hand clothing and second-hand luxury platform that first ran out of the unicorn / listed company also came from the United States(Rent the runway, The RealReal).

  • Traffic

    Transportation (car consumption, transportation). The consumption expenditure of Chinese residents accounts for 14%, which is twice that of the United States. This is a difference worthy of attention. The first is the average cost of buying a car between Chinese and American residents: The average US $ 36,000 per vehicle , China $ 26,100 (180,000 yuan ), but corresponding The consumption power is: China’s per capita disposable income in 2018 was $ 41,100, and the United States was $ 36,000.

    This means that US residents only need 1 year of income to buy a new car, while Chinese residents need 6.4 years. This dimension points to similar aspects of clothing: the opportunity for national consumption capacity to be improved and the auto production supply chain to be optimized / reduced. As for why the proportion of residents ’transportation consumption expenditure is not 6.4 times or even higher, this is because China per thousand People own 173 cars, which is only 1/5 of the United States. Among them, we can see that China’s auto market still has a lot of room for activation.

    

    Residents ’Transportation Expenditure in China and the United States: Comparison of Vehicle Purchase Cost and Disposable Income

    Also, the United States The ratio of used car to new car sales has remained at 2.3: 1 for a long time. Used cars have become the choice of more and more young people to own the first car. The relatively low price of used cars reduces the number of US residents. Consumer spending on transportation —— This direction is also the current entry of used car companies and auto finance companies in China. .

    • Culture

      Culture and entertainment consumption, Chinese residents’ consumption expenditure accounts for 11%, which is higher than 9% in the United States. Cultural entertainment includes cultural education, entertainment and leisure. In terms of expenditure on culture and education, domestic consumption willingness is relatively prominent: whether it is quality education / children’s English company vipkid, or k12 stage, international education, domestic education giants have a good future, New Oriental, and the market value / valuation of these companies Much higher than the market value of head companies in the US Space. In terms of entertainment and leisure, The rapid development of the Chinese consumer Internet is driving consumers ’willingness to spend online and offline. Limited to movies, live entertainment, travel, gaming and social services.

      • Living

        In terms of housing, including self-occupation and housing leasing, there is not much difference in the proportion of consumer spending between China and the United States, with China accounting for 23% and the United States accounting for 20%. The common feature is that residents of the two countries have a relatively large proportion of spending on living compared to other areas, which is second only to food for Chinese residents and the highest consumer spending area for US residents. In terms of housing, from the current situation of China-US real estate (owner housing producers), the concentration of domestic leading companies is relatively high, which is related to the nature of domestic land. In China’s relatively emerging leasing market, The domestic market share of long-term rental apartments in 2017 was 5%, lagging behind the United States (30% ) , there is still a lot of room for expansion in this direction-including the higher market share of long-term rental apartment brands compared to the current head, and the market opportunities of new brands.

        Sectors with a relatively low proportion of Chinese residents’ consumption: from the basic consumption structure to the rise, which consumption areas have incremental markets

        The areas where China ’s consumer spending accounts for a relatively low proportion: health care, finance, other supplies and services (non-basic consumer goods). In these areas, as domestic consumption rises from the basic consumption structure, there is room for incremental market.

        • Healthcare

          Health care, including outpatient + hospital and nursing home services. Consumption expenditure of Chinese residents accounts for 7%, and consumption expenditure of US residents accounts for 14%. Among them, the United States spends 9% of its expenditure on hospital and nursing home services-part of this expenditure contribution comes from the increase of the elderly population. While China ’s main consumer spending is still in the basic illness treatment category, aging consumer demand for medical care is rising , With the first generation of surplus and capable consumers in China entering the middle-aged and elderly market , domestic healthcare consumption services need to be further explored.

          • Financial Insurance

            Finance, including financial services consumption and insurance services. US residents ’consumption expenditures have set up independent item accounting, with consumption expenditures accounting for 7%. In China, for the time being, there is no independent accounting project, which is relatively short. Not only do U.S. residents have a high percentage of consumer spending on financial services, their sources of income are also more diversified because of investment in financial products / services, In the United States, 16% of income comes from property (interest income, dividends and other asset income, and housing rental income), second only to wage income. This direction points to the further popularization and market penetration of domestic consumer financial services.

            • Other consumer goods and services

              Other consumer goods and services are similar to cultural and entertainment consumption, and they point to relatively non-essential demand. Such as pet consumption, personal care, consumer electronics, home appliances and other consumers with wealthy properties, based on personal preferences to expand consumer willingness and demand. In the United States, non-rigid demand consumption has reached 29% and in China it is 8%. For the domestic consumer market, as the consumption structure rises, the proportion of non-rigid demand consumption expenditure will increase.The overall market space will also expand.

              Last

              From the perspective of the venture capital circle in 2019, capital is returning to rationality, upstream investment institutions have raised the threshold for raising funds, the total investment has fallen sharply year-on-year, and downstream entrepreneurs have difficulty in financing. However, from the perspective of ToC consumer consumption volume (resident consumption expenditure), the downstream Consumption is the main driver of domestic economic growth for a long time and its volume will rise with the overall GDP growth: This means that ToC consumption (residential consumption) and its upstream and downstream production and services (ToB manufacturers) still have room for growth This corresponds to the optimistic market of 2020s. This article is based on GDP household consumption (ToC consumption) expenditures in various fields. We see areas with large stocks (markets) in each area and areas where there is a large increase in national memory, as well as domestic opportunities based on the differences in Chinese and US residents’ consumption. When large companies and startups choose industries and products to enter the field, they can be used as a reference from a top-down perspective.

              * The various ratios mentioned in this article, for example, China ’s food consumption expenditure accounts for 28%, and its corresponding total consumption is: 28% * 5.12 trillion US dollars (total domestic consumption expenditure) = 2.4 trillion US dollars. Others need to be calculated by the reader.

              * This article uses the perspective of expenditure method to calculate GDP. GDP calculated by expenditure method includes government consumption expenditure and net investment export in addition to household consumption expenditure. The full picture of consumption described in this article refers only to the full picture of consumer spending (ToC consumption and ToB business in its upstream and downstream supply chain).

              —–

              This article disassembles the overall differences in ToC consumption between China and the United States and domestic opportunities in various fields from relatively macroeconomic data. Next, I will do a series of meso-level combing at the industry level. The meso dimension will help further understand: the market data and opportunities of Chinese and American residents and upstream and downstream ToB in various industries.

              The above is the beginning of my re-learning business series in 2020 ~ Welcome front-line practitioners and entrepreneurs to communicate. WeChat: Danbchpk