The Fifth Consumption Era: The successive rise of PDD, Xiaohongshu, Pop Mart, and Pang Donglai all share a common underlying logic

In the report "Prelude: The Fifth Consumption Era," we reveal for the first time the underlying logic and typical characteristics of the "Fifth Consumption Era." After the "Prelude," we will officially enter the in-depth thematic research of the "Fifth Consumption Era" this year. We hope to form a unique and pragmatic cognitive framework regarding China's large consumption through this series of studies. As the first important theme, our research focuses on: Self-pleasure. This is not a buzzword that has come out of nowhere. In the Japanese consumption market over the past 30 years, and in the Chinese consumption market after 2020, the term "self-pleasure" has become increasingly profound and significant in the consumption field, becoming a keyword of the Fifth Consumption Era. In this context, it is particularly important to compare the internal causes and consumption characteristics of self-pleasure in the Chinese and Japanese markets and clarify the implications of self-pleasure consumption for enterprises. 01 Two Connotations of Self-pleasure Consumption We also need to start with the definition of self-pleasure consumption. According to the "Generation Z Consumption Trend Analysis Report," the number of posts related to "self-pleasure" on mainstream content platforms such as Weibo, Xiaohongshu, and Douyin has increased by 74% year-on-year. "Self-pleasure" has become an important label influencing Generation Z's consumption. Of course, for many people born before 1985, there may be a similar confusion: the term self-pleasure seems a bit inexplicable. In most past contexts, the usage of self-pleasure often had a clear opposite, which is investing wealth and time in oneself rather than externally: for example, giving gifts to curry favor with leaders or clients may be thankless, and it might be better to save that effort to improve one's own abilities. However, in recent years, affordable products can somewhat replace the term self-pleasure: for instance, purchasing traditional brand cars that have a stronger sense of class identity, even though their functionality is not as good as that of affordable domestic new energy vehicles, sacrificing "substance" for "face" is not worth it. From a certain perspective, the logic of the latter seems to be unconvincing because the relationship between pleasing others and self-pleasure is always a bit ambiguous. For luxury goods, in the eyes of some, they are meant to showcase status and identity to others, representing pleasing others. But if I genuinely love the texture and design of a luxury item, and buying it satisfies me, is that not self-pleasure? For example, lipstick is usually considered a lower-tier substitute for cosmetics. If I buy lipstick and feel happy wearing it, but in reality, enhancing my appearance with lipstick is something others see, does that count as pleasing others or self-pleasure? With this question in mind, I try to seek answers from the expressions of two consumption masters: one is Miura Noboru, and the other is the "consumption master" that is more characteristic of China, Xiaohongshu. From Miura Noboru's perspective, self-pleasure consumption in Japanese society is a manifestation of "re-living": Japanese society has never craved authenticity as much as it does today, rather than the illusion of magical inflation. Therefore, self-pleasure has become the most direct and genuine consumption behavior. From the perspective of Japanese society, the definition of self-pleasure consumption is authenticity. And the definition of authenticity is that it possesses practical value and can genuinely change life; only then is it a self-pleasure product. In the "Self-Satisfaction" tag on Xiaohongshu, we received similar yet distinct answers. Most bloggers express that the tag opposing "self-satisfaction" is not entirely "illusory" or "inflated," but more of an emotional expression, such as anti-internal friction, sense of fulfillment, personalization, and learning to say no. Image: Social media content related to self-satisfaction consumption, source: Xiaohongshu Clearly, the self-satisfaction consumption in the Chinese and Japanese versions has similarities but is not completely aligned. The common aspect emphasizes authenticity and personal experience of self-fulfillment (for example, the self-satisfaction lifestyle guide on the far right involves hands-on attempts at something); the difference lies in the fact that the Xiaohongshu version of self-satisfaction is more inclusive, allowing for somewhat abstract consumption (such as exquisite literature, grain economy, etc.) to also be considered self-satisfaction consumption. Therefore, we believe that "self-satisfaction consumption" has both narrow and broad meanings: Narrow self-satisfaction consumption, similar to what Mitsuhiro Miura describes as the pursuit of authenticity, stands in opposition to all illusions, bubbles, and aspirations for the future; satisfying one's tangible experiences is the primary principle. Broad self-satisfaction consumption, while pursuing authenticity, includes any consumption that contributes to positive emotional feedback as self-satisfaction consumption. If we consider the ultimate question of the fifth consumption era, the implications of self-satisfaction consumption for enterprises and investments must be examined in depth to understand the causes of the two versions of self-satisfaction consumption in order to address them effectively. 02 Driving Internal Factors of Self-Satisfaction Consumption If we consider the implications of self-satisfaction consumption for enterprises and investments, we must delve deeper to understand the causes of the two versions of self-satisfaction consumption to address them effectively. Let’s first discuss the internal factors behind the formation of self-satisfaction consumption in Japan from Mitsuhiro Miura's perspective. We need to continue the thought of generational consumption development—Japanese sociologist Munekata Sosuke divides post-war Japanese society into the "Ideal Era," "Dream Era," and "Fiction Era," which correspond to the first to third consumption eras described by Mitsuhiro Miura. Transitioning from the "Fiction Era" to the "Magic Era" marks the switch between the third and fourth consumption eras. The so-called "magic" actually refers to informatization. After the Great Hanshin Earthquake, Japanese society was rapidly transitioning from a material to an information-based economy. For young people in the information age, not having a car is acceptable, not having material possessions is also acceptable, but not having a virtual world and online social interactions is unacceptable. These seemingly cool digital products and high-tech applications are like magic to the relatively conservative Japanese society. Image: Classification of consumption eras, source: "Lonely Society" From the perspective of Miura Noboru's deconstruction, in the later stages of the pandemic, Japanese society gradually entered the fifth consumption era, which corresponds to the "magical era" and is actually the "re-living" era, or the so-called "real era." Of course, just like the transition between the third and fourth consumption eras, the fifth consumption era is also driven by key events: first, the aftermath of the Fukushima earthquake, and second, the outbreak of the pandemic. These two seemingly incidental events have profoundly influenced the thinking patterns of Japanese society. In Miura Noboru's own words: "Many people have found that they have no right to know about many significant negative events, and thus entrusted their lives and even their existence to others. People have begun to question such a life, and they hope to take control of their own lives." "Never has there been an era like today, where people crave authenticity so much. What people want is life, not magic. Every action is a real life; people create real objects and feel life through real actions, experiencing the charm of real life." From this, we can see that the distrust of others and the pessimistic emotions about the future are the internal factors for Japan's pursuit of authenticity and the emergence of self-indulgent consumption culture. Now, let's talk about how the internal factors of self-indulgent consumption differ from the domestic perspective at this stage. To some extent, our self-indulgent culture is also a product of the bursting of an inflated bubble. However, compared to Japan's consumption bubble, we have not actually experienced a long-term consumption bubble, but rather a "expectation" bubble burst. For example, in traditional social cognition, factors such as employment, housing, marriage, and parenting are the core elements shaping individual social value. However, with rapid development over the past few decades, the driving force has gradually become the pressure that is difficult to achieve in reality, gradually deviating from the range that normal people's short-term purchasing power can bear. Therefore, our self-indulgent consumption does not involve the transition to pessimistic emotions about life and death as frequently as in Japan. Of course, some may argue that it is simply because our economic environment is significantly better than Japan during its depression period, or that our demographic structure has not yet fully entered a similar aging society as Japan. Thus, the current differences are merely temporal, and future consumption development will follow the trajectory of the Japanese consumption market. But we do not believe this. The pessimistic emotions in Japan are largely rooted in national history. As an island nation with limited resources, Japan is filled with "mono no aware" culture, which is filled with a longing for eternity. The emperor, symbolizing eternity, has become a symbol for the Japanese people to depict the era, but this is destined to be unachievable. Whether it is Kawabata Yasunari's notion that "sadness and beauty are interconnected," or Dazai Osamu's expression of "I am sorry for being human," both are concrete expressions of Japan's extreme "mono no aware" and pessimism. Our cultural atmosphere is entirely different. As a civilization that has continued ancient culture, our way of thinking always carries a broader perspective and a longer cycle. Even when facing setbacks, we can casually say, "At worst, we can start over." From the perspective of economic motivation, we and Japan are in the process of transitioning from the fourth consumption era to the fifth consumption era. Therefore, self-indulgence has become the core term in the consumption market, but the underlying cultural differences between the two countries determine that we will not replicate Japan's consumption view one-to-one. ** Therefore, from the perspective of the fifth consumption era, it is not simply a matter of replicating Japan's self-indulgent consumption model; we need to consider the differences. So, specifically in the consumer market, where are the differences? 03 Insights from Self-Indulgent Consumption in China and Japan At this point in the discussion, we can finally briefly answer how we should understand self-indulgent consumption under the backdrop of the fifth consumption era and where the opportunities lie. First, traditional mass consumer goods, whether in China or Japan, celebrate pragmatism and punish nihilism. This is the backdrop of the fifth consumption era, and self-indulgent consumption is no exception. From purchasing nearly 70% of the world's luxury goods, with logos plastered across streets and alleys, to the rise of Fast Retailing and Muji, Japan's consumer pragmatism has intensified. A 2023 survey by Miura Nobuyuki shows that in recent years, Japan's consumer pragmatism has further increased, with a 20.7% growth in consumption preferences, ranking first. Figure: Japan's Consumption Preference Survey, Source: "Lonely Society" In the past two years, we have also experienced a shift towards consumer pragmatism, with affordable alternatives becoming the hottest consumption label. The essence of supply and channel competition is the consumer pragmatism on the demand side. Correspondingly, the new consumption trend that was hot in the past two years is gradually receding, and nihilistic symbolism is temporarily exiting the consumer market. Even brands that expanded and went public through the new consumption wave (such as new tea drinks) are now launching lightweight, affordable products that meet the most basic needs of the public. In the fifth consumption era, pragmatism is the most typical label for the vast majority of consumer goods. Second, whether the internal driving force of self-indulgent consumption is the pursuit of authenticity or the rebellious spirit of escaping social pressure, there will be a pursuit of immediate feedback, and leveraged consumption will increasingly decline. After the Fukushima earthquake, the demand for immediacy in the Japanese consumer market significantly increased. Most companies and individuals are no longer telling long-term stories. For example, in Japan's smart car market, analysts can identify various reasons for Japan's lag in electric vehicles. However, they often overlook one point: Japanese consumers are unwilling to believe in companies' future technological promises, such as how many charging stations will be built or how many software updates will occur. The domestic consumer market is similar; not accepting empty promises has become the core of self-indulgent ideology. Labels like "brave people enjoy the world first" and "those who spend money will make money" are actually reflections of the immediacy of consumption. Of course, our tolerance for long-termism is much higher than that of Japan; otherwise, new energy vehicles would not create miracles. This is akin to the confusion about the future experienced in childhood and old age as described by Shi Tiesheng. The former is confused about an uncertain future, while the latter is confused about how to accept a singular path, having seen the future that remains invisible to others. So, is there a specific indicator to understand this immediacy? In our view, all consumption with "leveraged" characteristics will increasingly decline. This "leverage" does not refer to absolute loans, but rather to expenditures that exceed purchasing power, such as spending 90% of one's salary on electronic products. Although there is no borrowing involved, it affects daily life and can also be considered leverage. Such pre-spending of future consumption will decrease, and startup consumer companies should avoid creating such products. Again, the biggest misconception about self-satisfying consumption at this stage is that affordability equals self-satisfaction. The inherent impression that affordability equals self-satisfaction mainly stems from the pragmatic characteristics of the self-satisfaction label. However, the core of pragmatism is not merely affordability, but the ability to meet long-tail demand through supply. A typical Japanese company often thought to have benefited from the affordability dividend is Fast Retailing (the parent company of Uniqlo), but this is not the case. The growth rate of household consumption in Japan did not show significant negative growth until the mid-1990s. Uniqlo opened its first store in 1984 and went public by 1994, not because of absolute affordability, but due to other factors. As expressed in Tadashi Yanai's "One Win, Nine Losses," Fast Retailing's success in casual wear is due to the insufficient supply for men in their twenties beyond suits. Casual wear meets demand while also having high turnover characteristics, which is the key to success, rather than simply being low-priced. Another typical example is Akihabara, which transformed from Japan's "Huaqiangbei" into a paradise for anime and manga, becoming a typical label of the fifth consumption era. To borrow a phrase from a user on Hupu, Akihabara's success does not rely on absolute low prices, but on an extremely rich product supply. Image: Comments from Hupu users about Akihabara, source: Hupu Therefore, what companies need to do is to seek to meet the emotional value while discovering prices to satisfy the needs of the majority of users. For example, we have always believed that PDD's success is not solely due to low prices, but more about splitting demands to satisfy more consumers, thus achieving more trade; low prices are merely a result of price discovery. Take the example of needing an S-sized wrench to repair a computer. Typically, one would need to buy a full toolbox for a single repair. Can you say that a toolbox priced at 19.9 is not affordable? But your actual need is simply for someone to sell you a wrench for 1.99, and PDD has achieved this. Moreover, many people believe that it is difficult to open new tracks in the fourth and fifth consumption eras, yet Luckin Coffee can still drive growth in the coffee market with a price of 9.9. The core logic is that Luckin matches the most essential demand for caffeine at a lower price, rather than providing a quiet office atmosphere. Such examples are countless today, with Xiaohongshu's practical silent shoes and Mixue Bingcheng's affordable dopamine supply shaping commercial myths. Finally, self-satisfying consumption celebrates the small and beautiful, rather than the large and comprehensive. Small refers to brands being sufficiently niche, while beautiful means meeting consumers' emotional values. The mainstream narrative of Japan's manufacturing industry over the past two decades has been small and refined, with the "craftsmanship spirit" revolving around product sophistication and miniaturization. However, Japanese companies have always pursued a model that is large and comprehensive. From consumer electronics to chemical pharmaceuticals to emerging media and cultural industries, well-known Japanese companies are constantly seeking industrial integration and corporate diversification. There are numerous examples of beverage companies investing in pharmaceuticals and pharmaceutical companies investing in semiconductors (such as the Japan Automobile Manufacturers Association and Sony's acquisition of Columbia Pictures, etc.). The narrative logic of being large and comprehensive is actually a symbolic brand value from an era of supply scarcity, using the image of a large and comprehensive company to endorse products. At that time, consumers did not have high professional demands, so they often trusted large companies when selecting products. However, in recent years, Japanese companies have been narrowing their investment scope and returning to their main lines (such as Sanrio and Suntory that we discussed earlier), because most consumers no longer trust symbolism but have developed basic product discernment abilities. Looking at the domestic market in recent years, the brands that have gained popularity, from lululemon to Pop Mart, share a common characteristic: their products and users are relatively fixed in a specific track, focusing on deepening their expertise in their respective industries. The concept of emotional value is relatively abstract, but we have summarized two major categories that intuitively hit the core elements of emotion: transparency and low profile. Transparency corresponds to the authenticity that consumers crave in the fifth consumption era. A typical example is Pang Donglai, which has formed an emotional resonance with consumers through overwhelming employee care and has once again gained popularity through transparent pricing labels. Figure: Pang Donglai price label illustration, source: New Marketing Pang Donglai's products may not be particularly cheap, but the transparency of the pricing system completely transfers the choice of consumption to the consumers, once again satisfying emotional value. Low profile corresponds to the age-old product logic—never educate consumers. Products with high learning costs simply do not sell, while products that cater to diverse consumer emotions provide sufficient emotional value. Pop Mart is a perfect example of a brand that is sufficiently niche and has high emotional value. Most of Pop Mart's products do not express emotions (refer to the designer Molly in "Trendy Toys: Happiness and Justice," who intentionally flattens the corners of the dolls' mouths). When users are happy, the dolls they see are happy; when they are troubled, the dolls they see reflect their troubles. This is the lowest-cost emotional resonance. Looking back, the companies that truly achieved "small and beautiful" this year have indeed been rewarded by the market. 05 Conclusion In conclusion, our current basic viewpoint on "self-satisfying consumption" is: The definition of self-satisfying consumption can be divided into two types: in a narrow sense, it pursues authenticity and personal relevance; in a broad sense, it includes any consumption behavior that can bring positive emotional feedback · In the fifth consumption era, the intrinsic drivers of self-indulgent consumption in Japan and China are different. Japan's is rooted in a long-standing "mono no aware" culture, catalyzed by short-term sporadic events; China's is a release of social pressure and expression of dissatisfaction, with the former being more profound and the latter less so. · For consumer goods businesses, the consumption psychology that needs to be followed in the fifth consumption era includes: first, pragmatism; second, immediacy without empty promises; third, companies should pursue a broader supply; and fourth, brands should aim to be small and beautiful rather than large and comprehensive. By achieving these four points, self-indulgent consumption will reward companies with recognition in this era. Of course, as Miura Noboru elaborates in the postscript of the Chinese edition of "Lonely Society": Over the past thirty years, people have experienced bubbles and disillusionment, and they seek authenticity. If future young people continue to live simply, will they yearn for the lifestyle of the bubble economy period? Finally, it must be pointed out that consumer culture is always in constant flux with changes in the economy, population, and education, and there is no immutable standard answer. Therefore, the above views are for reference only. Author of this article: Yao Hua, Source: Jin Duan, Original title: "The Fifth Consumption Era: The Rise of PDD, Xiaohongshu, Pop Mart, and Pang Donglai, All Share a Common Underlying Logic" Risk Warning and Disclaimer The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk