Let’s start by looking at the market environment. We’ve moved from a market of “plentiful water and abundant fish” to one where “the water is drying up, and fish are few.” This is a harsh but real truth — one we must acknowledge and confront.

1. Less capital available

In 2023, there were just over 600 investment deals in the primary consumer market, with total funding around 30 billion RMB — nearly a 50% drop compared to 2022. A large amount of capital has exited the consumer sector.

Nearly half of the companies that received funding were at the startup stage. This means that capital allocated to mid-to-late-stage growth companies has largely left the space — in part due to limited exit channels under current policies.

As a result, capital is increasingly concentrated in ultra-large funds or among firms who have chosen to stay the course. These investors have raised the bar, and that creates a greater challenge for companies that haven’t yet developed a distinct competitive advantage.

For decades, financial leverage has been a major driver of enterprise growth. But now, deleveraging has begun. Entrepreneurs must be prepared with ample self-funded reserves.

2. Fewer active users

We analyzed online growth data across 30+ consumer categories. Nearly 10 showed no growth or even decline; a dozen or so grew by just 0–10%, and only a few exceeded 10% growth.

E-commerce has been the key engine behind China’s consumer market growth in recent years. Once that engine stalls, the overall market shrinks.

Traffic and users will increasingly concentrate around brands with strong operational capabilities and platforms that dominate user attention. This leads to higher traffic costs, which ultimately compress profit margins.

3. Less talent available

This isn’t to say there’s a lack of people in the job market, but rather that the number of “just-right” talents for your business has declined.

While there’s a healthy supply of high-quality talent overall, do they truly understand your company's vision and model? Can they build upon that understanding to innovate? That’s the challenge.

If your company has a robust talent acquisition and retention system, this is actually a prime opportunity to upgrade your organization.

4. Shrinking profits

Profit contraction may seem like just a financial issue, but it often leads to internal anxiety and strategic confusion. Many companies respond by doubling down on operational efficiency in their existing businesses to protect margins.

However, true profit growth often comes from looking outward, and from actively innovating. Stable profits are a result of strategic exploration and creation.

When profits shrink, companies often lose the will to explore — but those that retreat into low-quality operations and strategic paralysis are bound to be eliminated in this phase.

We’ve entered an era not of absolute growth, but of localized and structural growth. New categories are rare; instead, we’re seeing intra-category migration. Many of our portfolio companies have benefited from these shifts:

Harvest seized the trend of packaging and online retail in rice; Yeswood capitalized on the rise of health-conscious furniture and direct sales channels; Ripe Fruit leveraged sugar-free vs. sugary snack substitution trend.

Previously, consumer opportunities were like floodwaters — they poured into the market and everyone grew. Now, we’re in the era of tributaries — growth depends on deliberate choice.

If your tributary doesn’t align with where the current is flowing, it may be hard to receive growth dividends. That’s why it’s essential to ask is your product on the new side of the curve, or still stuck on the old side?

Because product innovation is the root of all growth.

So how do we drive sustainable enterprise growth?

Future growth will be powered by the combination of strong products and compelling content, driving full-funnel, omnichannel growth. Our analysis of last year’s e-commerce data shows that growth has shifted from shelf-driven and keyword-search-driven models to content-driven growth. Shelf-based e-commerce is migrating toward content e-commerce. Brands that fail to tap into platforms like TikTok risk falling behind.

At the same time, product competition is becoming more multidimensional. It’s no longer enough to explain features, attributes, and pricing through images and text. Products must now be multi-sensory and scenario-specific. They need to align with your brand’s tone and storytelling, and engage users through effective dialogue. This raises the entry barriers for many brands.

China’s channel structure can be visualized as a pyramid. The more surface area you can cover, the larger your potential growth.

At the top of the pyramid, you have online DTC channels like flagship stores. These are relatively stable — not driven purely by traffic. Many users come searching for your brand or product category, and these channels are a major source of profit.

However, this model is being disrupted: price comparisons are now universal across platforms, so brands must standardize pricing across all touchpoints.

Content e-commerce is becoming the main engine for generating future traffic. If your company lacks content operation capabilities, you may miss out on surplus traffic spillover and future visibility.

O2O channels (community group buying, dark stores, etc.) act as bridges from online to offline — helping your brand reach physical touchpoints. But this demands a complete overhaul of your product lineup — adjusting format, pricing, and margins to fit very different consumption scenarios and audience profiles.

Beyond the domestic pyramid, Chinese brands are now entering a new era of global expansion. The last wave of outbound growth was mostly channel-driven: Chinese brands supplying local retailers — effectively becoming channel brands. But now, content e-commerce has gone global. Brands can now tell their story directly to global consumers — through values, positioning, and richer product systems. One example is ZH Plant Protection, a portfolio company of ours. Its products are now sold in Africa and are very popular in Southeast Asia — showing that there's huge untapped potential overseas.

Take Botare as an example — the brand started out selling basic tissue paper. During the era of shelf-based e-commerce, it relied on extreme cost-performance to secure high-traffic product placements and drive sales. But in the content e-commerce era, Botare made a major transformation: it diversified its packaging into various formats and colors. While this may sound trivial, in a content-driven context, anything that can carry "visual storytelling" becomes a sales opportunity. On this foundation, Botare further innovated with a hanging tissue pack, allowing tissues to be hung on walls as part of home decor. This product alone quickly surpassed 100 million RMB in monthly sales, with demand consistently outpacing supply. Many competitors attempted to replicate the idea, but Botare had already pioneered a billion-level new product category, driven by great products and great content.

Content e-commerce is not only a low-cost channel for product testing, but also helps brands set smarter pricing structures. Since brands must reserve a substantial budget to cover traffic acquisition costs, they need to justify premiums to users — encouraging better product development in the process.

This pricing flexibility also makes it easier to extend across offline and distribution channels. Previously, Botare had difficulty expanding offline. But with new product categories, pricing tiers, and margins, it now has the room to distribute across broader channels, making offline growth possible.

Brands that emerge from platforms like TikTok tend to have much clearer and sharper selling points compared to the shelf-e-commerce era. In the past, a product on a shelf might just show a static image with a long scrollable product detail page. Now, short videos must convey the core selling point in seconds.

This forces companies to constantly refine their product messaging:

What’s the unique value proposition?

Who exactly is the target user?

What is the most compelling way to communicate it?

This process trains the brand to build a strong mental position in the user’s mind.

Livestreaming isn't just someone shouting into a camera — it’s an end-to-end marketing system and brand narrative. It builds daily, cyclical engagement with core users, presenting and reinforcing the brand story. This direct-to-user channel also creates a rapid feedback loop within the organization. If sales dip, the team can immediately analyze whether it was the wrong messaging, wrong audience, or ineffective content. A strong operations team will quickly iterate and adjust. Over time, the brand gains deeper insight into what actually drives sales.

Make no mistake — content e-commerce is 10x harder to manage than traditional models. Despite the skepticism or misunderstanding some may have about platforms like TikTok, it remains a major engine for traffic and growth. As entrepreneurs, the mindset should be: how to embrace it, how to collaborate, even though the platforms change rapidly. There’s no fixed playbook — success depends on continuous experimentation and an organization that is agile in both decision-making and internal communication. Once you've built a "champion team" within content e-commerce, those operational capabilities will also help you win across other channels.