As a wave of cost-consciousness sweeps across China, businesses offering quality at a discount have seen earnings surge while their high-end peers struggle.
Quanjude, the restaurant chain known for its gourmet Peking duck, saw revenue shrink 7% on the year during the first quarter through March.
“Consumers are increasingly looking for more mass-market, bargain establishments,” said Zhou Yanlong, general manager of Quanjude.
During that quarter, China’s retail sales grew 4.6% from the year-earlier period to RMB 12.4 trillion (USD 1.7 trillion), far below the roughly 10% growth the country once posted consistently.
Expensive restaurants and shops are taking the brunt of the slowing consumption. Chow Tai Fook Jewellery Group’s sales dropped 12% during the first quarter.
Retail giant Wangfujing Group experienced a 14% decline in revenue at its mainline department store segment. But revenue increased 4% at the company’s outlet store arm.
“Outlets have the same quality as the official stores, but they are much cheaper,” said a 26-year-old female shopper who lives in the northeastern city of Dalian. “I go to [outlets] once every week.”
Luckin Coffee, which rose to become China’s largest coffee chain, reported a 41% jump in sales in the first quarter. The performance dwarfed the 5% gain by Starbucks’ Chinese operations.
While Starbucks sells a cup of coffee for about RMB 30 (USD 4.2) in China, Luckin’s brew generally is less than half the price. Customer reviews suggest little difference in flavor between the two chains.
Going to the movies has caught on as affordable entertainment. Wanda Film Holding, China’s largest cinema operator in terms of ticket sales, grew revenue by 23%, thanks in part to hit films.
“I’d rather go on a trip with a friend, but my pay isn’t going up,” a 23-year-old Zhejiang province man said. “Instead, I go to movie theaters with fully equipped sound equipment.”
Even those who can afford travel are taking cost and performance into account. H World Group, which chiefly manages budget and midrange hotels, reported a 2% increase in revenue for the first quarter.
H World’s key locations maintained high occupancy rates of 76%. The company is rapidly opening more lodgings, with roughly 2,300 new locations planned for this year alone.
Consumer spending accounts for about 40% of China’s GDP, a reality government authorities cannot ignore. During the National People’s Congress in March, the need to boost consumption by stimulating domestic demand “across the board” was the first major task cited by premier Li Qiang in his government work report.
In 2024, the government started offering subsidies for consumers to upgrade old home electronics for new ones. That initiative is bearing fruit.
Appliance retailer Suning.com turned in a net profit for the January-March quarter after four straight years in the red from 2020–2023, thanks partly to the subsidy.
Yet high unemployment among younger generations and the cost of supporting an aging population loom heavy over China’s economy, squeezing consumer sentiment. Concern exists that demand for cheap goods could spur an excessive price war, pushing the Chinese economy into deflation.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.