"Expensive-Label Handbag retailing at a Bargain Basement Price of 27 Euros"
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China's economy is taking a hit, and these days, it's not uncommon to find high-end designer goods going for bargain bin prices. The middle class, reeling from cut salaries and plummeting real estate values, is seeking ways to save money, and the second-hand market is thriving as a result.
Mandy Li, a young energy company employee, used to treat herself to the occasional luxury handbag. But with a 10% salary cut and her family's real estate losing half its value, she's had to reconsider her spending habits. Now, she shops second-hand, and it's a trend that's catching on.
"I'm tightening my belt," says Li as she browses the shelves of Super Zhuanzhuan, a newly opened second-hand store in Beijing. "The economy is definitely in a slump," she explains, citing the real estate crisis that's been plaguing China since 2021.
The risk of deflation in China, the world's second-largest economy, is on the rise. At the same time, consumers are changing the way they spend, opting for frugality over luxury. This development has worried Chinese political leaders, who fear the devastating effects a broad-based price decline could have on businesses.
Consumer prices are only falling slightly: they dropped by 0.1% year-over-year in May. However, price wars are raging in many sectors, from cars to e-commerce to coffee. An oversupply in goods combines with sluggish household demand, causing concern among economists. Price wars could force many companies out of business, leading to rising unemployment and further fueling deflation.
Some new businesses, like Super Zhuanzhuan, are targeting budget-conscious consumers directly. Restaurants offer entire breakfast menus for as little as 3 yuan - under 0.40 euros. Supermarkets host flash sales several times a day. However, many economists are concerned about this trend's impact on businesses.
The second-hand luxury goods market has seen strong growth since the pandemic. The market has grown by more than 20% per year in recent years, according to industry data. As a result, it's become more competitive, with sellers offering much deeper discounts. Discounts of 70% or more are now commonplace on large second-hand platforms.
"In the current economic climate, we're seeing more luxury consumers turning to the secondhand market," says Lisa Zhang of Daxue Consulting, a market research and strategy firm focused on China. "Sellers are offering bigger discounts due to increased competition."
At Super Zhuanzhuan, you can find luxury items going for a fraction of their original prices. A green Christie handbag from Coach, originally retailing for 3,260 yuan, now sells for just 219 yuan. A Givenchy necklace originally priced at 2,200 yuan is now available used for 187 yuan.
The number of sellers is increasing yearly, but the number of buyers remains relatively stable. "Middle-class incomes have really taken a hit," says the founder of a luxury business, speaking on condition of anonymity. "The economy is the main reason we're seeing these trends. There are enough buyers in big cities like Shanghai and Beijing, but not so much elsewhere. I expect that most of the businesses that have opened recently will close."
Professor Riley Chang, browsing Super Zhuanzhuan, isn't sold on the discounts. "I've been to several large second-hand luxury stores in Beijing and Shanghai, and they all try to keep the price as low as possible," she says, lamenting the lackluster offers on her collection.
So while the economic downturn has created a tough environment for luxury brands, there's a silver lining for budget-conscious consumers: it's easier than ever to find high-end items for significantly less.
[1] Economic Downturn and the Luxury Market: Impacts on Household Wealth and Discretionary Spending[2] Consumer Sentiment and the Luxury Market in China: Changes in Spending Habits[3] The Oversupply Trap: Price Wars and Deflationary Forces in China[4] The Second-Hand Luxury Market in China: Growth Amid Economic Challenges[5] Digital Platforms Shape the Landscape of China's Luxury Market
- The economic downturn in China, as indicated by the rising risk of deflation and changes in consumer spending habits, has led to a boom in the second-hand luxury market, with discerning shoppers seeking significant discounts on high-end items, as showcased in Super Zhuanzhuan, a new second-hand store in Beijing.
- Amidst the economic slump, employment policies and community policies have become increasingly crucial in addressing the impacts, as businesses struggle to remain afloat due to price wars and the potential for rising unemployment, while the middle class grapples with reduced income and increasing financial pressure.
