Struggling Middle Class in China: Luxury Items Now Affordable for Less Than a Meal
"Amazingly Affordable High-End Handbag Retails at Just 27 Euros"
China's middle class is battling economic struggles, evidenced by the intense discount battles among domestic companies. The second-hand market, in particular, is thriving, revealing a new cost-consciousness among the hard-hit middle class in China. The warnings bells are ringing loud for the Chinese government, who fear the devastating impact of a general price drop on businesses.
Take Mandy Li, a 28-year-old employee in the energy sector. Once a luxury handbag enthusiast, she's now hunting for bargains in Beijing's recently opened second-hand store, Super Zhuanzhuan. Her state-owned employer slashed her salary by 10 percent, and the decline in her family's real estate value has left them with half of what they once had. "I'm tightening my belt on big expenses," Mandy explains, "The economy definitely isn't doing well."
Fear of Deflation in the Second Largest Economy
As the world's second-largest economy, the risk of deflation is increasing. Consumer behavior is shifting in a way that could drive prices even lower. This economic turmoil is cause for concern among Chinese politicians, who are worried about the potential disastrous consequences on businesses in case of a broad-based price drop.
Consumer prices are only dropping slightly – they fell by 0.1 percent compared to last year in May. Yet, battles for market share are playing out across various sectors, from cars to e-commerce to coffee. An oversupply of goods is meeting sluggish demand from households.
New Companies Target Savvy Shoppers
To attract budget-conscious customers, new businesses are offering breakfast menus for as little as 3 yuan (0.40 Euros). Supermarkets are inviting customers to participate in flash sales, sometimes up to four times a day. However, economic experts are concerned that these price wars could lead to many companies going under, causing increased unemployment and deepening the deflationary problems.
The Second-Hand Luxury Market: A Growing Trend
Since the COVID-19 pandemic, the market for second-hand luxury goods in China has surged, with growth rates sometimes exceeding 20 percent per year, according to the consulting firm Zhiyan Consulting. The rise in popularity of these items has led to a flood of goods on the market and steep discounts.
At Super Zhuanzhuan, a green Christie handbag from New York luxury brand Coach can be purchased for 219 yuan (27 Euros). Its original owner paid 3260 yuan (397 Euros) for it. A Givenchy G-Cube necklace, originally priced at 2200 yuan, is now selling for just 187 yuan.
A Glut of Sellers and Stable Buyers
The number of sellers in this market is growing by roughly 20 percent annually, but the number of buyers remains relatively stable. According to the founder of a luxury business, speaking anonymously, "Middle-class incomes have really decreased. The economy is the main reason we're seeing these trends." While cities like Shanghai and Beijing have a steady stream of buyers, this isn't the case in other parts of the country. "Many of the newly opened businesses, I expect, will have to close," he predicts.
University professor Riley Chang is browsing Super Zhuanzhuan, not to buy, but to see what she could sell from her personal collection and at what price. She's disappointed by the low offers. "I've been to several large secondhand luxury stores, and they all aim to keep the prices as low as possible," she remarks.
Challenges and Opportunities Ahead
The struggling Chinese middle class faces economic challenges but also has opportunities for growth and adaptation in a rapidly evolving consumer market. Economic instability, deflation, high unemployment rates, limited access to luxury goods, are some of the challenges faced by the middle class. On the other hand, the growing digital economy and e-commerce, potential wage growth, and employment stabilization policies, as well as adaptability to changing consumer demands, present opportunities for growth and improvement.
- The Chinese government is concerned about the potential impact of a general price drop on employment policies, as businesses might be forced to lay off employees due to decreased profits.
- In an effort to attract budget-conscious customers, some companies are implementing employment policies that offer cheaper food and services, but economic experts worry these cost-cutting measures could lead to increased unemployment and further deflation.
