Chinese consumers have traditionally been known for their extravagant spending on luxury brands. However, recent economic challenges have dampened their desire to splurge on high-end handbags, clothes, and accessories. Instead, they are turning to smaller luxuries in life. Artisanal food and drinks, as well as trendy appliances, have caught their attention.
This shifting trend in buying behavior has led to new opportunities for brands in China. For example, Kweichow Moutai, famous for its expensive baijiu spirits, introduced baijiu-infused ice cream priced at $10 a cup. This unique offering generated 2.5 million yuan ($350,000) in sales on the first day alone. Budweiser Brewing Asia-Pacific, listed on the Hong Kong stock exchange, has also seen unexpected success with premium and craft beer sales, as well as specially packaged gift boxes priced at hundreds of dollars.
In addition to food and drinks, the demand for gaming gear and home devices has surged among Chinese consumers. During JD.com’s mid-year 618 shopping festival, sales of products such as water-saving shower heads, smart toothbrushes, and printers reached up to four times the levels of the previous year.
This shift in consumer trends is driven by the Chinese population’s desire for novelty and indulgence. Mark Tanner, founder of marketing agency China Skinny, believes that consumers are treating themselves with these smaller pleasures. This change comes at a time when China is facing economic challenges caused by the country’s COVID-zero policy, frequent lockdowns, a property sector crisis, and regulatory crackdowns on industries like tech and private tutoring.
Western luxury brands have been significantly impacted by this shift in consumer behavior. Burberry and Kering, for example, reported a decline of 35% in sales in China during the April-June quarter. Chinese consumers like Lucy Lu, a 31-year-old marketing professional, have started questioning their purchasing decisions and opting for more affordable treats. Dining out has become a primary indulgence for Lu and many others.
However, this shift in consumer behavior has also brought opportunities for artisanal food and drink sellers. Gerard Low, founder of Shanghai-based ice cream brand Dal Cuore, plans to open a fifth store in the city due to the quick return of footfall after the lifting of a two-month lockdown. Low has also noticed a change in his customer demographic, with more families, not just young people, visiting his shops.
In times of economic uncertainty, people seek comfort and pleasure in guilty pleasures like ice cream. As Chinese consumers continue to prioritize the smaller luxuries in life, brands that cater to their changing preferences have a chance to thrive in this evolving market.
Useful links:
1. https://www.jingdaily.com/chinese-consumers-continue-to-indulge-in-small-luxuries/
2. https://www.scmp.com/business/article/3141671/chinese-spending-habits-change-amid-covid-19-pandemic-and-economic
