Wanlian Securities: 26-year retail industry consumption grading era opens, emotional consumption drives new opportunities for trend-driven, jewelry, and domestic cosmetics industries.

Guojin Securities released a research report stating that Chinese consumption has entered a new stage of "consumption tiering," manifested by the pursuit of cost-effectiveness by mass brands, while being willing to pay a premium for innovative products and services that can provide emotional value. In this context, the trendy toy market is rapidly expanding, industry concentration is expected to increase; the gold and jewelry industry is shifting from channel-driven to product and design-driven; domestic cosmetics are continuing to rise with advantages in research and development and marketing. Related industries are welcoming development opportunities, and leading companies are expected to benefit. Key points from Guojin Securities are as follows: Review and Outlook: The era of consumption tiering is coming, emotional consumption is driving the development of related industries China's consumption situation has gradually transitioned from the previous "consumption upgrade" to a new stage of "consumption tiering," specifically manifested as: 1) a greater emphasis on cost-effectiveness: consumers are showing more rational and cost-effective behavior towards traditional consumer goods with low technological added value and serious product homogenization; 2) willingness to pay a premium for some new products or services. The fast-paced lifestyle and information overload affect the mental health of contemporary people, driving the rise of emotional consumption. With the development of the times, the consumption structure in China is expanding from survival-oriented consumption to enjoyment and spiritual consumption, with industries like trendy toys, traditional gold, and beauty skincare being popular. Trendy Toys: China's trendy toy market is rapidly expanding, with quality companies expected to maintain their leading positions Benefiting from the growth of disposable income per capita, the rise of emotional consumption, and the emergence of domestic trend culture and quality IP, China's trendy toy market has rapidly expanded in recent years, with the size growing from 22.9 billion yuan in 2020 to 76.3 billion yuan in 2024, with a high CAGR of 35.11%. Looking at the development of the trendy toy industry in Japan, the CR3 in 2021 was 45%, indicating a top-heavy industry with leading companies enhancing efficiency by covering the entire industry chain, quickly responding to market demands. Meanwhile, having rich IP resources and excellent IP incubation capabilities, they are able to cater to the needs of consumers at different levels and implement globalization strategies, diversifying market risks. In contrast, China's trendy toy market is relatively fragmented, with a CR5 of 20.8% in 2024. In the future, trendy toy companies that cover the full industry chain, have quality IP resources, and a wide channel layout are expected to maintain their leading positions. It is recommended to focus on leading trendy toy companies. Gold and Jewelry: Shift from channel-driven to product-driven, sector with high dividends has defensive attributes The rapid increase in gold prices has hindered the demand for gold and jewelry, with many companies experiencing slowed expansion of stores or even closures. However, there are still some outstanding companies that have attracted consumers with superb craftsmanship, design, and successful marketing, leading to rapid growth in performance. The global economy remains uncertain, with geopolitical risks persisting, and emerging economies continue to purchase gold to diversify risks, potentially pushing up gold prices further. In the future, with improvements in gold jewelry craftsmanship and the deepening of the consumer concept of "treating oneself," the penetration rate of gold jewelry in non-marriage scenarios is expected to increase. Promising are leading companies in gold and jewelry that focus on product design, strong operational capability, strong brand momentum, high dividends, and high stock yields. Cosmetics: Rising trend of domestic cosmetics, outstanding domestic brands breaking through In the short term, the overall recovery momentum of the cosmetics industry in the second half of the year is good, with some domestic brands maintaining good development momentum during the "Double 11" promotion. On the supply side, domestic beauty companies are increasingly focusing on research and development investment, with many domestic brands standing out with outstanding product capabilities and marketing methods, achieving impressive growth even in a backdrop of weak industry demand. On the demand side, the acceptance of domestic beauty brands by the younger generation of consumers is increasing, and domestic brands are expected to further seize market share from foreign brands, increasing their market share. It is recommended to focus on leading domestic cosmetics companies with strong research and development, excellent product capabilities, and marketing capabilities. Risk factors: Risks of macroeconomic downturn, consumption recovery falling short of expectations, intensified industry competition.