In the face of economic uncertainty in China, middle-class consumers are altering their shopping preferences, favoring more budget-friendly options over branded fashion from shopping malls. The renowned Daliushu Guanxin wholesale market in Beijing, traditionally frequented by tourists, students, and retirees seeking affordable goods, is now attracting an influx of shoppers with greater spending capacity.
This shift in consumer behavior reflects the prevailing weakness in household demand, a significant drag on the world’s second-largest economy. Factors such as stagnant wages, uncertain job prospects, and a hesitant job market, where over one in five young Chinese remain unemployed, have contributed to low consumer confidence and reduced spending power.
Unlike most major economies grappling with surging inflation post-COVID-19, China’s consumer prices have risen by a mere 0.1% year-on-year in August. Addressing this confidence issue poses a formidable challenge, with limited viable options available. Stimulating the real estate sector or direct cash infusions to households are potential solutions, but both come with significant hurdles, particularly given the real estate sector’s ongoing debt crisis.
This shift towards thriftiness among the middle class may pose challenges for luxury brands that have long courted this demographic. While companies like LVMH and Kering had hoped to tap into this market in 2023, consumers are now prioritizing cost savings.
The Daliushu market, benefiting from this trend, has experienced a surge in business, with vendors overwhelmed by the demand for budget-friendly products. Some even struggle to manage online orders, as foot traffic within their physical stores continues to grow.
Consumers’ newfound propensity for thriftiness underscores the evolving dynamics of the Chinese market and the need for adaptability among businesses. In a climate of economic uncertainty, cost-consciousness appears to be the prevailing sentiment among consumers.
Source Reuters
