Table of Contents
Introduction
Welcome to your comprehensive guide to making profitable investments! In this article, we’ll delve into the world of investment, uncovering strategies to help you build wealth and secure your financial future.
The transition from an incremental consumption economy to a stock consumption economy has occurred in other economies around the world. Great national brands are often born in an era when economic consumption enters the stock market. China will usher in an era of hundreds of billions of national brands.
How can local Chinese brands grow into national brands like Uniqlo and Costo?
In fact, I am particularly willing to talk about AI. AI is not only a hot topic but also a trend. I also want to change the investment industry’s misconception that Jiayu Capital can only focus on investing in consumption for 14 years. In 2018, we began to deploy hard technologies and achieved great results. Very good results.
Maybe it’s because today there are fewer and fewer investors who can invest in consumption, and there are also fewer and fewer investors who can invest in consumption and investors who are willing to invest in consumption. We continue to do our part and continue to lay out the layout on the consumption track, taking advantage of investment. The platform will share with you what kind of completely different new logic is required for new consumption in today’s new cycle, whether it is entrepreneurship or investment.
China will usher in an era of hundreds of billions of national brands.
Last year, the overturning incident of Li Jiaqi’s Huaxizi product proved that Internet celebrity brands are rapidly declining in the new consumer field. In fact, Li Jiaqi was quite unjust. When Li Jiaqi started selling the Huaxizi eyebrow pencil more than 4 years ago, it was priced at 79 yuan, and there was no increase in price. But four years ago, consumers had high expectations for future consumption, and they spent money to buy this eyebrow pencil as soon as it was driven by marketing. When consumers’ expectations for future consumption decline, a 79-yuan eyebrow pencil is more expensive than gold per gram.
An undeniable feature of the new cycle is that it moves from an era of incremental consumption to an era of stock consumption.
This thing is not terrible; China is just not used to it. The transition from an incremental consumption economy to a stock consumption economy has happened in other economies around the world. Various reports from our neighboring country, Japan, say that after Japan signed the Plaza Accord in 1985, Japan entered the 30th or even 40th year of its stock market. However, Japan’s national brand, Uniqlo, was born in 1985, which was a major consumer boom in the U.S. economy for more than 20 years after World War II.
When the United States experienced the first world energy crisis in 1973 and the second world energy crisis in 1979, the growth rate of the US economy also became a stock economy. But Costco, the American national brand, was born exactly in 1976, between 1973 and 1979. What is a national brand? Japan, the United States, and China in the future are all the same. They are all brands that wealthy people in relatively first- and second-tier cities find respectable when using them, and young people in small towns in third- and fourth-tier cities find them prestigious.
I also have a Costco card in the United States, and my Mexican aunt also has a Costco card. I don’t stop going to Costco just because my Mexican aunt goes there, and my Mexican aunt doesn’t feel that she can’t afford it just because I can go to Costco. The population of the United States totals approximately 300 million individuals. If you look at Costco’s annual report, there are 123 million annual cards worth $99, covering more than half of the households in the United States. The same goes for Uniqlo.
A few days ago, Buffett held his shareholder meeting again. Countless people in China went on pilgrimage but did not open Buffett’s investment portfolio or analyze how old Buffett started to make money. Buffett said that wealth starts after the age of 50. Earn. Many people think that Buffett has matured after the age of 50. I don’t think so. Subtract 40 or 50 years from today’s 2024, which means that Buffett’s secondary market positions were established in the late 1970s and early 1980s. Open his If you look at the investment portfolio, you will find that Buffett’s investment portfolio has only one portfolio, which is called “investing in American national brands,” including the Costco I mentioned here, which has always been “not for sale,” as Mr. Buffett said. When Apple mobile phones became a national brand in the United States, Balao began to build a national brand position.
Therefore, once the large economies of China, Japan, and the United States enter the era of stock, great national brands are often born when economic consumption enters the era of stock. China will usher in an era of national brands worth hundreds of billions. But a good “national brand” must be a brand that can sink. On May Day, I traveled all over Shanxi Province, and wherever I went, I saw that the companies we invested in could penetrate into third-tier, fourth-tier, and even fifth-tier cities, counties, and even towns in Shanxi.
There are three things you need to do to sink your brand:
- The product sinks.
- The store type sinks.
- Management is sinking.
First: product
Starbucks is a national brand in the United States, but when the price of Starbucks is brought to China, it is no longer a national brand. Luckin Coffee is the coffee that looks most like a Chinese national brand in the coffee field to me. But Luckin Coffee is not the cheapest coffee. A certain brand has been selling coffee for 9.9 yuan, but it has not been successful. The core of product sinking is to change a concept, not cost-effectiveness but “price-performance ratio.” It is not a word game.
What is the price-performance ratio? With the same performance, the price keeps rising. This is not a good national brand. Uniqlo and Costco are never the cheapest.
What is the price-performance ratio? It’s a bit like the positioning of Li Auto. Li Auto’s asking price is more than 400,000 yuan. The price is not that cheap, but it has led to the word “stack” in the new energy vehicle industry. I have spent more than 400,000 miles building large sofas, large color TVs, and large refrigerators and have continuously improved their performance through stacking materials. Why do this? Today’s basic costs of marketing, logistics, rent, and labor are there. If prices continue to drop, the business model and financial model will not be established. So be brave with pricing.
But consumers are becoming more and more rational. At this time, on the premise of daring to set prices, I encourage all walks of life to dare to stack materials and improve performance like Li Auto. As the scale of the materials you pile up increases, you have the opportunity to further reduce costs and realize your own profit margins.
The core of product sinking is to move from cost-effectiveness to price-performance ratio.
Second: store type
Store types need to be lowered. The previous generation of Internet celebrity brands in China designed their stores based on first-tier cities in Beijing, Shanghai, Guangzhou, and Shenzhen. They were designed according to shopping malls and the busiest neighborhoods. In fact, shopping malls and the busiest neighborhoods, or “Tiegongji” stores, high-speed railway stations, highway rest stops, and airport waiting rooms are all “Tiegongji” stores that serve the floating population. But in China, it is impossible to realize a chain of thousands of stores if you only work as a floating population. There are no more than 600 “Tiegongji” stores that can be opened. There are 6,000 or 7,000 malls in China, and there are only more than 2,000 worth opening.
First, it is impossible to realize a chain of thousands of stores by only being a migrant worker. Second, when you move down to third-, fourth-, and fifth-tier cities, there are not that many floating populations. In store design, we must consider whether there is a store type for the floating population and whether there is a store type for the permanent population. The Guoquan Shihui we invested in must be 100% permanent, and it soon became a chain of thousands of stores. It is a community store.
Whether it is Luckin Coffee or the Shanghai aunts we invested in, we have long asked them whether it will be difficult for them to achieve a chain of thousands of stores if they only operate as a floating population like Starbucks. They must be able to take root in the community and learn to do regular business. Only a store type with a large resident population can realize the sinking of the store type.
Third: Management
The most difficult thing is that management is sinking. Even when Luckin was in the most difficult times and had the most twists and turns, I would bring a pair of white gloves to Luckin’s stores and like to touch them. They were spotless. This kind of management level is the highest.
There is also Bull Electric, which now has a market value of 120 billion. Bull has 1.2 million terminals. The founder told me confidently, “Mr. Wei, you travel all over the country, and whenever you see a Bull trademark that is dirty or with words missing, take a picture for me, and I will send you one worth 10,000 yuan.” “I haven’t received a penny in the past seven years. I often take advantage of this opportunity to give it to myself. If you see it and send it to me through winning, I will give you a red envelope worth 5,000 yuan. After four years of hands-on experience and seven years of dedicated service, not a single cent has come my way. I have been distributing on various occasions for four years.
I have not sent out a red envelope, nor have I earned a red envelope from the Bulls by earning the price difference. What is this? With absolute confidence in sinking management and 1.2 million terminals, the founder has such confidence. On what? One relies on technology, and the other relies on efficient organization. It is necessary to do three sinkings well to make yourself a national brand.
The battlegrounds for military strategists are no longer Beijing, Shanghai, Guangzhou, and Shenzhen
Another change in logic is that the core of internet celebrity brands is to target Beijing, Shanghai, Guangzhou, and Shenzhen, because Beijing, Shanghai, Guangzhou, and Shenzhen are the commanding heights of Chinese brands. Penetrating Beijing, Shanghai, Guangzhou, and Shenzhen will cause a traffic overflow, but in the new era, what needs to be done well is not Beijing, Shanghai, Guangzhou, and Shenzhen. Deep, but the four provinces of mountains and rivers—that is, those who win the Central Plains will continue to win the world. The four provinces of Shanhe are Shandong, Shanxi, Henan, and Hebei. These four provinces have a population of 3.4 billion, and their consumption power is not as good as that of Beijing, Shanghai, Guangzhou, and Shenzhen. However, if we want to build a national brand covering half of China’s population, these four provinces are battlegrounds for military strategists. .
In the past, I liked to make tea from south to north, but now I have to learn to make it from north to south. The four seasons in the north are distinct, so you will consider how to make the four seasons in terms of products and store types. Many milk teas rising in the south have never thought about how to make them in the north. For many types of clothing, shoes, and hats, boots are already worn in the north, but sandals are still worn in Guangdong. In all Chinese dynasties, success has always been achieved when fighting from the north to the south. Successful fights from the south to the north are rare or even nonexistent.
In the past, when it came to consumption, either the product was king or the channel was king. You can see that Uniqlo and Costco can basically integrate product channels. Uniqlo controls all its own channels. Costco is a channel company, but its own brands account for more than 80%. Therefore, today we need to integrate products and channels into one to be the king of kings. It is not enough to be the king of kings. We even have to enter the upstream industry ourselves and realize the trinity of trade, industry, and technology.
They are all in the investment circle, and many people said, “You are right, can we still invest under today’s consumer exit system? What to invest in?” On a platform like Investment, I share our best knowledge.
You can cast in three directions:
First, cross-border e-commerce brands go overseas.
Have you noticed that the working meeting of the Political Bureau of the Central Committee on April 30 announced the date of the Third Plenary Session of the 20th Central Committee of the Communist Party of China and also proposed the outline for discussion at the Third Plenary Session of the 20th Central Committee of the Communist Party of China? Perhaps the most talked about in the media is Another new word is “patient capital,” but please take another look at what we have seen. It mentions vigorously supporting cross-border e-commerce.
The outline in the work report will definitely turn one sentence of the outline into a paragraph at the Third Plenary Session of the 20th Central Committee of the Communist Party of China. Erhai General Investment’s Green Rice was launched just three weeks ago and can still complete its IPO in the current environment. Registration is a very clear signal. Cross-border e-commerce is a national policy to ensure foreign trade. Chinese brands going overseas and Chinese consumer brands going overseas will definitely continue to receive policy support on the exit channel.
Second, the understanding of new productivity in the field of consumption is consumer technology.
The Magnificent Seven in the U.S. stock market, the seven most miraculous companies, are essentially technologies oriented towards ToC consumption. Even Nvidia, which was at its peak, was a company that supported consumer-grade game graphics cards, so it is not that consumption cannot be invested in, but that we must invest in consumption with technological content.
We are now focusing on four consumer technologies: food technology, fabric fashion technology, beauty technology, and health technology. Although it is consumption, it follows the path of technology. Investors who have invested in consumption in the past should all understand these four types of consumer technology.
Third, Wandian Chain, a company that does not have the integration of product channels with the first two characteristics, can still be listed on the Hong Kong stock market. The premise is that you are large enough, and you must be above 10 billion Hong Kong dollars in IPO. Secondly, when investing, since Hong Kong stocks are discounted, you must strictly abide by valuation discipline when investing at valuation.
The valuation discipline of Hong Kong stocks is that the price-to-earnings ratio in the first full year after investment must be reduced to less than 10 times, and the market value of Hong Kong stocks must be more than 10 billion after two or three years of IPO. For Hong Kong stocks with such characteristics, the general trend of Hong Kong stocks has not been completely reversed.
Under the circumstances, we have also seen excellent individual stocks: Juzi Biotech maintains a market value of 54 billion, and Guoquan Shihui has a market value of 156 billion. The liquidity is also very good, although it cannot change the overall situation of the Hong Kong stock market. As long as high-quality stocks communicate well with the capital market, I believe they can still bring sufficient returns to investors.
Under the new cycle, there are still opportunities for new consumption, which lie in national brands that integrate product channels and balance trade, industry, and technology, in the Wandian chain, and in the four major consumer technologies. We also hope that other consumer investors can continue to maintain their focus like us. The enthusiasm for new consumption continues to be rational and optimistic about China’s new consumption track under the new cycle in the long term.
Conclusion: Securing Your Investments Future
In conclusion, investing is a powerful tool for building wealth and achieving financial independence. By following the strategies outlined in this guide, you can navigate the complexities of the financial markets with confidence and pave the way for a brighter financial future.
