Huachuang Securities: Both supply and demand sides exert efforts, ushering in a golden decade for consumer services

Huachuang Major Consumer & Non-Banking & Media

Service Consumption Enters a Golden Decade

China’s macroeconomic development has significantly improved residents’ lives, leading to upgraded consumption demands and shifts in the main themes of the consumer industry. Over the past twenty years, basic physical consumption such as clothing, food, and daily necessities has reached saturation in volume and experienced price upgrades. Around 2015, major categories of consumer goods like alcohol, beverages, air conditioners, and mobile phones saw sales saturation, with growth rates slowing down. In the following decade, the focus shifted to quality improvement, with price increases becoming the dominant logic in consumption. Currently, the slowdown in the growth of product prices indicates that consumption upgrading has matured. Compared to functional and basic survival needs, service consumption’s core focus is on higher-level life experiences (such as emotional resonance and social recognition) and value-driven needs (such as personal development and self-actualization). We believe this will become the main theme of Chinese consumption in the next ten years.

Part 01

Demand Side

Demand Side: The consumer industry is forming two new engines. Currently, experience-based consumption such as dining, entertainment, accommodation, and leisure, as well as development-enhancing consumption like education, health, and elderly care, are booming. Service consumption is gradually becoming the core driver of China’s consumption growth. Meanwhile, the shift from physical goods driven by services is accelerating; physical products are transforming into service carriers—such as in IP-themed toys, offline retail and catering, and pet economy sectors. Additionally, Generation Y and Z, growing amid urbanization, are becoming the main consumer groups. The “spiritual over material” consumption philosophy is expected to drive a golden decade for service consumption. Different generations’ needs are intertwined, creating a highly segmented market with rapidly evolving preferences, continuously fueling innovation and segmentation in service formats.

Part 02

Supply Side

Supply Side: Industry, technology, and talent are evolving in coordination to drive service consumption upgrades. First, industrialization underpins large-scale service supply, enabling cross-regional and multi-scenario expansion. Second, technological advances such as the internet and mobile payments have reshaped the service ecosystem. Currently, the AI wave is sweeping across industries; the rapid development of AI intelligent agents is expected to further disrupt platform economies in the coming years, significantly improving efficiency and experience in service consumption. Third, the popularization of education has improved the quality of service industry personnel—college graduates can earn up to 20,000 yuan per month as nannies. The widespread education has also reshaped human capital in the service sector, shifting from labor-intensive to knowledge- and skill-based work, providing a solid talent foundation for higher-level consumption needs and ushering in an “engineer dividend” in the service industry.

Part 03

Policy Side

Policy Side: Both demand and supply are being strengthened, becoming the main leverage to stimulate domestic demand. Since 2025, central and local governments have issued numerous policies to support service consumption. This is not short-term stimulus but a systematic resource allocation adjustment aligned with the “investment in both goods and people” focus of the 14th Five-Year Plan. On the demand side, the implementation of the school calendar system in Jiangsu, Sichuan, Zhejiang, and other provinces helps smooth tourism seasons and releases long-term travel demand. On the supply side, the central government encourages local state-owned assets to leverage listed companies to integrate high-quality cultural and tourism assets. Provinces like Sichuan and Hubei have proposed trillion-yuan-level development goals for cultural tourism, driving iterative upgrades in cultural and tourism supply.

Part 01

Catering

Catering: The chain wave continues, with supply chain integration and service experience as keys to success. 1) Chain restaurants: The chain expansion of the catering industry is ongoing. Under consumer demand for cost-effectiveness, those with supply chain integration capabilities are consolidating the market. Additionally, “emotional value,” “spatial experience,” and “IP added value” are becoming new engines for brands to transcend cycles and command premium prices. 2) Upstream supply chain: Ingredients like seasonings and frozen foods, which are more manufacturing-oriented, are focusing on upgrading consumer experience and large B2B customization opportunities amid the service consumption wave.

Part 02

Retail

Retail: Offline supermarkets are undergoing transformation, and chain convenience stores are creating new “good shopping, good browsing” experiences. 1) Supermarkets: They are shifting from “sublessors” to “consumer agents,” with companies like Yonghui actively promoting reforms—transforming supply chains from key account models to direct procurement, optimizing product selection, developing private labels, and upgrading store layouts to enhance shopping experience. 2) Snack wholesale: Moving from “selling snacks” to “selling experiences,” with richer SKUs, efficient product updates, and continuous store upgrades, leveraging IP collaborations and event marketing to meet “enjoyable browsing” needs. 3) Ingredient retail: Led by Guoquan, focusing on hotpot and barbecue ingredients, expanding categories and scenarios, and continuously iterating new store formats.

Part 03

Cultural Tourism and Scenic Spots

Cultural tourism and scenic spots: Upgrading from sightseeing to experience economy. Domestic tourism rebounded strongly after the pandemic in 2023 and continued growth in 2024/2025, driven by macro growth expectations and the release of demand from young people, seniors, and inbound travelers. The shift from sightseeing to leisure and experiential consumption is a clear development trend. Policies are now promoting leaner supply through capital markets and REITs, driving a new round of refined cultural tourism project development.

Part 04

Education

Education: AI reshapes educational experiences, and the service industry is driving new developments in vocational education. Overall demand in education is stabilizing. AI technology is beginning to transform experiences and improve efficiency in this vertical, becoming a key investment focus for major education companies. The employment structure is also being reshaped by the shift toward service consumption, creating new structural growth opportunities for vocational education firms.

Part 05

IP and Trendy Toys

IP and trendy toys: A paradigm shift from “toys” to “emotional assets,” with broad overseas growth potential. Pop Mart’s spillover demand and IP operation models are increasingly influencing the industry. Leading companies in various niches, such as Buluo (building blocks), Chuangyuan Shares (self-owned brands and cultural IP), and TNT Space (soft vinyl plush toys), are making breakthroughs. Besides the booming domestic market, Chinese trendy toys are entering a golden era of overseas expansion, with companies focusing on cultural adaptation—signing local artists and deeply integrating core IPs with local cultural symbols to achieve cross-cultural emotional resonance.

Part 06

Pet Hospitals

Pet hospitals: From growth to value-added, demand upgrading and supply enhancement jointly driving the second half of the pet healthcare industry. The essence of pet healthcare is comprehensive health management across a pet’s lifecycle, offering systemic health solutions. On the demand side, aging pets and more scientific, family-oriented pet care are creating genuine needs for precise medical services. On the supply side, significant CAPEX investments have empowered equipment and technology, and ongoing innovation continues to meet unmet needs. Future trends point to specialization and chain development as key solutions.

Part 07

Gaming

Gaming: Focus on new markets, new users, and new channel opportunities. Overseas casual gaming has large penetration potential; domestic manufacturers are emerging, with prospects to recreate a “global SLG market.” Young and female users are driving new category opportunities. The growth of the domestic PC and console markets, along with cross-platform gaming, is opening up global markets.

Part 08

Health and Elderly Care

Health and elderly care: Service-driven transformation promoting “Insurance +”. Traditional insurance products are product-centric, especially those with obvious consumption attributes like protection insurance, with after-sales interactions limited to claims, leading to poor customer experience and low stickiness. With accelerating aging and rising awareness of healthcare, demand for health and elderly care has surged. Traditional insurance struggles to meet these needs, giving rise to “Insurance + Medical” and “Insurance + Elderly Care” models. Leading insurers are actively building “Insurance+” service ecosystems, leveraging brand and comprehensive service advantages, and are expected to benefit first.

Part 09

Physical Goods Consumption

Physical goods consumption: From selling products to selling lifestyles, creating demand for service-driven physical goods. 1) Home appliances: Historically focused on single-product sales, recent years have seen companies like Haier and Midea leveraging smart home and connected vehicle-home systems to generate service needs such as AI cooking assistance, smart housekeeping, and security, increasing user engagement. 2) Baijiu: Moutai uses cultural experience centers to elevate from sales to social interaction, expanding online with wide-reaching Moutai platforms, and developing cultural IP products like zodiac-themed bottles, scattered flowers, and dinner sets, reconstructing value matrices. Other brands like Langjiu, Zhenjiu, and Jinjui are following suit, innovating marketing models and expanding into food, cultural tourism, and health services to broaden their service boundaries.

Risk Warning: Macroeconomic demand recovery falling short of expectations, deviations in macro and micro business perspectives, etc.

(Source: Huachuang Securities)