By Liangping Gao and Casey Hall
BEIJING/SHANGHAI (Reuters) -Chinese energy sector worker Mandy Li likes to treat herself to a luxury brand handbag once in a while. But since her state-owned employer cut her wage by 10% and the properties her family owns lost half their value, she only buys second-hand ones.
“I’m cutting down on large expenditures,” said 28-year-old Li, while browsing for items in Beijing’s Super Zhuanzhuan second-hand luxury items store that opened in May.
“The economy is definitely in a downturn,” she said, adding: “My family’s wealth has shrunk by a lot” due to the property crisis China has been grappling with since 2021.
As deflationary pressures mount in the world’s second-largest economy, consumer behaviour is changing in ways that could lead to further downward pressure on prices, raising concerns that deflation could become entrenched, posing more headaches for China’s policymakers.
Data showed on Monday that consumer prices fell 0.1% in May from a year earlier, with price wars raging in a number of sectors, from autos to e-commerce to coffee amid concerns about oversupply and sluggish household demand.
“We still think persistent overcapacity will keep China in deflation both this year and next,” Capital Economics said in a research note.
New businesses are seeking success by targeting penny-pinchers, from restaurants selling 3 yuan ($0.40) breakfast menus to supermarkets offering flash sales four times a day. But this trend is worrying economists who see price wars as ultimately unsustainable as losing firms may have to close and people may lose their jobs, fuelling further deflation.
Consumer price sensitivities’ have accelerated growth in the Chinese second-hand luxury market since the pandemic, with annual growth rates surpassing 20% in 2023, according to an industry report by Zhiyan Consulting from last year.
But that growth has also led to a spike in the volumes of such items available for sale – which is noticeable in the level of discounts on offer.
Some new stores, including Super Zhuanzhuan, are offering items at discounts of up to 90% of their original price, compared with industry standards of 30-40% in recent years. Discounts of 70% or more are also now common on large second-hand platforms, such as Xianyu, Feiyu, Ponhu and Plum.
“In the current economic environment we are seeing more existing luxury consumers shifting to the second-hand market,” said Lisa Zhang, an expert with Daxue Consulting, a market research and strategy firm focusing on China.
