Price wars: China's middle class 'cuts down on large expenditures' as deflation deepens; shifts to second-hand luxury stores
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Chinese shoppers are shifting their spending habits as economic pressures grow. Mandy Li, who works in the energy sector, stopped buying new luxury handbags after a 10% pay cut and a big drop in her family's property value.
She now shops at second-hand luxury stores instead.
"I'm cutting down on large expenditures," 28-year-old Li told Reuters, while exploring Beijing's Super Zhuanzhuan second-hand luxury items store that opened in May.
"The economy is definitely in a downturn," she continued. "My family's wealth has shrunk by a lot" due to the property crisis China has been grappling with since 2021," she added.
The shift in spending habits reflects deeper economic troubles.
Consumer prices in China fell 0.1% in May compared to a year ago, raising fears that deflation may become entrenched.
Price wars have broken out across sectors like cars, coffee, and e-commerce amid weak demand and overcapacity.
New enterprises target budget-conscious consumers, offering 3 yuan breakfast deals and frequent supermarket sales. However, economists worry about the sustainability of price wars, as business closures and job losses could intensify deflation.
The second-hand luxury sector grew over 20% in 2023, according to an industry report by Zhiyan Consulting from last year.
This expansion has increased available items, reflected in substantial discounts. New establishments like Super Zhuanzhuan offer up to 90% reductions, compared to previous industry standards of 30-40%.
The major second-hand marketplaces, including Xianyu, Feiyu, Ponhu and Plum, have also begun offering steep markdowns of 70% or higher on their merchandise.
"In the current economic environment we are seeing more existing luxury consumers shifting to the second-hand market," Lisa Zhang, an expert with Daxue Consulting, a market research and strategy firm focusing on China told Reuters.
At Super Zhuanzhuan, a Coach Christie handbag originally priced at 3,260 yuan sells for 219 yuan, whilst a Givenchy G Cube necklace's price dropped from 2,200 yuan to 187 yuan.
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