By Liangping Gao and Casey Hall
Beijing/Shanghai (Reuters) – Mandy Li, a Chinese energy worker, likes to treat luxury brand handbags occasionally. But because her state-owned employer cuts her wages by 10% and her family owns property lost half of its value, she only bought a second-hand phone.
“I'm reducing a lot of spending,” said Lee, 28, who browsed second-hand luxury stores in Super Gyeongju, Beijing, who opened in May.
“The economy is definitely down,” she said, as China's property crisis has been working hard since 2021.
As communication pressures in the world’s second-largest economy grow, consumer behavior is changing, which could lead to further price drop pressures, raising concerns that deflation may become entrenched and bringing more headaches to Chinese policymakers.
Data on Monday showed that consumer prices fell 0.1% a year ago in May, with many sectors in the price war suffering from many industries, from cars to e-commerce to coffee, due to concerns about oversupply and dull demand from households.
“We still believe that the ongoing overcapacity will keep China buckling this year and the next,” Capital Economics said in a research note.
The new business seeks success by targeting penny eavesdroppers, from restaurants selling a 3-yuan ($0.40) breakfast menu to supermarkets, offering four flash sales per day. However, this trend is worrying for economists who believe the Price War is ultimately unsustainable because failed companies may have to close and people may lose their jobs, exacerbating further deflation.
Consumer price sensitivity has accelerated growth in China's second-hand luxury goods market, with annual growth rate exceeding 20% in 2023, according to an industry report from Zhiyan Consulting last year.
However, this increase has also led to a surge in the number of such items available for sale – which is evident at the discount level offered.
Some new stores, including Super Zhuanzhuan, offer merchandise at a 90% discount on their original price, compared with the industry standard in recent years 30-40%. Nowadays, it is also common to discount 70% or more on large used platforms such as Xianyu, Feiyu, Ponhu and Plum.
“In the current economic environment, we are seeing more existing luxury consumers move to the second-hand market,” said Lisa Zhang, an expert at Daxue Consulting, a market research and strategy firm focused on China.
