The COVID-19 pandemic continues, and China's economy faces the triple pressure of "contracting demand, supply shocks, and weakening expectations." On one hand, boosting consumer spending remains challenging: with the resurgence of a new wave of the pandemic and strict containment measures, offline dining, retail, and service industries, which were just recovering, are once again under pressure.

On the other hand, the pandemic has accelerated the transformation of traditional consumption channels and sales models. The focus is shifting rapidly from offline to online, and a series of internet-rooted new consumer brands have emerged. These brands understand the preferences of "Generation Z" consumers, excel in various clever marketing activities, and emphasize new conceptual products linked to health, trends, and culture, gaining significant popularity.

However, the controversy over whether the "new consumption" is a necessity or an intellectual tax has never ceased. Since the end of 2021, investment in new consumption has rapidly cooled, and the rapid expansion's "aftermath" has begun to show: many companies are experiencing increased losses and extensive layoffs, including some top brands in the industry.

"New consumption relies on marketing and traffic and cannot be sustainable. The important thing is how to become a 'mindful' brand that truly benefits people's lives," said Song Xiangqian, Chairman of Harvest Capital, who has many years of experience investing in the consumer sector.

Founded by him, Harvest  Capital currently manages a total fund size of over 25 billion yuan, with a mission to "support Chinese consumption and empower national brands." The firm has a long-term focus on China's large consumption and modern service industries. Its investment portfolio includes traditional consumer companies such as Dongpeng Beverage, Qiaqia Food, Aimer Group, and Juran Furniture, as well as emerging consumer brands like Wenheyou and Laiyifen.

Recently, Mr. Song Xiangqian, Chairman of Harvest  Capital, was a guest on Caixin's "Business Travel Dialogue" program, where he shared his observations on China's economic development and consumption environment during the pandemic, delved into the transformation path of traditional consumer industries, and explored the foundation for new consumer brands – how to genuinely meet people's needs and contribute to social progress.

What impact has the pandemic had on China's economy and consumer market?

Song Xiangqian: It should be said that this is the best of times and possibly the worst of times. The Economic Work Conference also mentioned the impact of supply-side shocks, weak demand, and weakening expectations, the impact of the pandemic, geopolitical conflicts, and other endogenous problems that need to be resolved. So, I think everyone may have underestimated the impact of the pandemic and underestimated the structural pressures faced by the economy in the next ten years.

In terms of consumption, indeed, the pandemic has changed consumption venues and habits. Even wealthy individuals cannot go out, so the consumption capacity that was spread globally is suddenly confined. For example, in the high-end dining industry, the overall industry is not doing well, but the high-end (dining) is exceptionally good, and it's difficult to get a reservation. The reason is that the supply-demand relationship has been disrupted, and all the consumption power is fully expressed within a limited space, vividly showcasing this phenomenon.

How do you view the recent trend of new consumption over the past two years? What are the differences from traditional consumption?

Song Xiangqian: Essentially, consumption is consumption; how can there be new and old?

But I think there is a difference between innovative consumption and traditional consumption. The difference lies in market respect. People engaged in new consumption, innovative consumption, understand market observation; they know that it's the era of "Post-00s," the era of "Generation Z" consumers.

Second, they understand how to utilize the convenience created by the infrastructure dividend. We have so many traffic platforms; our social e-commerce, our mobile internet development is very sufficient, so we have full expression of the commodity monetization attribute.

So, what is traditional consumption? In the era of manufacturers, producing products, building channels, advertising, and pushing products to consumers through this large circulation method. Now, young people do not accept this method; they need demand to reshape the supply. Their rights are rising, and consumer sovereignty is rising; they need me to take charge. I'll tell you what products I like, learn to listen to my voice, create consumer surplus, create consumer welfare. So, there will be some games in this process.

New consumer brands seem to be better at marketing various concepts and utilizing traffic. How do you view this?

Song Xiangqian: This phenomenon is very common. Using traffic, using mobile social, the Internet, applying the commodity monetization attribute, creating a great brand sensation – does this represent success? Not necessarily.

Many new consumer internet brands grasp some human weaknesses. I think what Zhang Weiying said is very important. Doing business to make money by exploiting human nature is acceptable, but it cannot be done by exploiting human weaknesses. Making money by exploiting weaknesses, in essence, establishes a relationship with traffic and creates a short-term gap. For example, "zero sugar, zero calories" – in fact, it is not zero sugar, just a different type of sugar; it may be zero calories but definitely not zero sugar.

So, creating these concepts is marketing. So, many people have learned the 4P theory and Kotler's theory very well, but no one has learned Drucker, let alone Wang Yangming.

So how can consumer companies go further?

Song Xiangqian: I think a great company essentially has to have very correct values. The three views must be very correct, not only in terms of having the right three views but also in creating good products and services, delivering them to society, and allowing consumers to have "consumer surplus" – this is an economic term, meaning that the enjoyment you get is multiple times the money you spend, giving value for money.

An even more critical question is what? It is essential to lead social progress. Therefore, Bezos once said that many people are looking for that change, but often that unchanging thing is ignored. What is that unchanging thing? It is cultivating the lifelong value of consumers.

I think up to now, Chinese companies are generally profitable advanced economic animals, and we want to make money if we have money, without high or low. Once, an entrepreneur said to me, "There is no clean money." I immediately blocked him. I think indeed in this world, including the existence of Harvest , it is the same principle – being a good person can make money, and doing business steadily can also achieve success.