Core Viewpoint - The domestic service consumption market is undergoing structural changes by 2025, with offline retail, AI applications, and experiential consumption becoming the focal points for investment. The overall growth rate of commodity consumption is slowing, while the service consumption sector shows greater resilience and vitality [1]. Group 1: Offline Retail Restructuring - Instant retail and local life platforms are rapidly developing, leading to accelerated industry consolidation. Major platforms like Meituan, Alibaba, and JD.com are heavily investing in offline retail and delivery channels, creating a new ecosystem of online and offline integration. By 2024, Meituan's instant retail orders are expected to exceed 150 million, with both rider volume and revenue experiencing growth [2]. - The restaurant industry's chain rate continues to rise, with leading companies expanding their market share. By 2024, China's restaurant chain rate is projected to reach 23%, with the mass convenience restaurant market size around 4 trillion yuan. The segment with a customer price of 50-100 yuan is expected to surpass 3.4 trillion yuan by 2028 [2]. - The hotel sector is also undergoing a brand reshuffle, with Huazhu Group operating 12,137 stores and Atour Hotels exceeding 1,800 stores. Mid-to-high-end brands are increasing their market share through continuous upgrades and expansion into lower-tier markets [3]. Group 2: Acceleration of AI Applications - The application of artificial intelligence in the social service industry is advancing. For instance, Keri International's "He Wa" platform operated over 37,000 job postings in the first half of the year, with more than 200,000 recommendations, continuously upgrading its AI recruitment functions [4]. - In the education sector, policies are becoming clearer, with Tianli International Education developing AI companion products deployed in 107 schools nationwide, serving over 250,000 teachers and students, thus promoting digital transformation in K12 and vocational education [4]. - The exhibition industry is also benefiting from AI, with companies like Miao Exhibition leading the way with comprehensive AI exhibition solutions, surpassing pre-pandemic levels in terms of the number of countries, exhibitions, and booth sizes [4]. Group 3: High Prosperity of Experiential Consumption - The cultural tourism and sports industries are core beneficiaries of experiential consumption. In the first half of 2025, domestic travel reached 3.285 billion trips, a year-on-year increase of 20.6%, with total tourism expenditure at 3.15 trillion yuan. Scenic spots like Changbai Mountain and Jiuhua Mountain have seen revenues recover and exceed 2019 levels [5]. - The sports industry is experiencing significant spending increases, with high demand for events, training, and fitness services. Companies like Keep, Inpai, and Lisheng Sports are performing exceptionally well. Emerging demands from lower-tier markets and the elderly population are creating new growth points for service-oriented consumption in cultural tourism and sports [5]. - The report highlights three investment lines in the service consumption sector: offline retail restructuring, AI applications enhancing service efficiency, and the high prosperity of experiential consumption, with companies like Meituan, Alibaba, JD.com, Huazhu Group, and Keep being key focuses [5].

Core Viewpoint - The domestic consumption market is entering a new phase characterized by slowing product growth and ongoing prosperity in services, with trends such as value-for-money, emotional value, and overseas expansion emerging as key themes [1] Demand Side - Service consumption is overall prosperous, with value-for-money, emotional value, and overseas expansion becoming new trends. The domestic consumption market is experiencing a slowdown in product growth, while service consumption is being emphasized as a crucial driver for overall market growth [1] - Changes in income expectations and generational shifts among consumers are leading to a heightened focus on cost-effectiveness, while also driving demand towards more segmented offerings [1] - The "Guochao" (national trend) brands, which leverage local creativity, are gaining favor among domestic consumers and are expected to lead in establishing brand recognition in overseas markets [1] Supply Side - Offline consumption is accelerating towards chain operations, with local life and comprehensive e-commerce platforms enhancing fulfillment capabilities and deepening integration with offline consumption scenarios [2] - Leading chain dining enterprises are increasingly focusing on vertical integration within their supply chains, while competition is also driven by product-oriented strategies that emphasize differentiated scenarios, services, and content IP [2] - The application of AI is providing new momentum for product transformation and efficiency improvements in sectors such as enterprise services and education [2] Business Models - Service consumption reflects a deep integration of scenarios and services, leading to the emergence of different business models based on the complexity of service content and scenarios [3] - Three main business models are identified: 1. Chain operations focused on organizational efficiency and overall supply chain efficiency 2. Complex standalone operations centered around scarce scenarios and intricate service content 3. Service distribution and empowerment platforms leveraging traffic, scale, and technological advantages [3] - The industry is expected to undergo a reshuffling, with leading companies emerging that can solidify their barriers and potentially navigate through economic cycles [3]

Group 1 - The report highlights the structural prosperity of service consumption within the overall consumption landscape, indicating that while overall consumption growth is slowing, service-related consumption is on the rise, with service sector PMI consistently outperforming manufacturing PMI [12][20][23] - The demand side is characterized by three new trends: price-performance ratio, emotional value, and overseas expansion, with the price-performance ratio expected to be a key driver in the Chinese consumption sector [20][23][30] - Emotional and experiential consumption is becoming a focal point for consumers, with the emotional economy projected to reach 23.1 trillion yuan in 2024, indicating a strong demand for content and experience-driven products [23][27] Group 2 - The supply side is witnessing accelerated chain store development and integration of supply chains, with offline consumption becoming increasingly standardized and efficient, particularly in the beverage and hotel sectors [36][41] - Instant retail is identified as a significant growth area for consumption internet platforms, with a projected compound annual growth rate (CAGR) exceeding 20% from 2024 to 2026, indicating a shift towards integrating online and offline retail [60][66] - The report emphasizes the importance of supply chain capabilities in the restaurant and beverage sectors, with stronger supply chain management expected to lead to increased market concentration and competitive advantages for leading brands [52][53] Group 3 - The report identifies three main investment themes: the reshaping of offline business models, the application of AI to enhance service efficiency, and the high demand for experiential consumption in tourism and sports [7][8][54] - In the offline business model reshaping, companies like Meituan, Alibaba, and JD.com are recommended for their roles in the rapid growth of instant retail and their strategic expansions into offline retail [8][60][78] - The application of AI is seen as a transformative force across various sectors, enhancing efficiency in human resources, education, and exhibition services, with companies like Keri International recommended for investment [54][54]