10 thriving consumer sectors amid China's "Consumption Downgrade" worries - Charts of the Week

China consumer market insights from Morgan Stanley's annual Asia Pacific Summit

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Consumption downgrade or K-shaped recovery?

In the first half of 2023, concerns have emerged about a "consumption downgrade" occurring in China. There is evidence of reduced discretionary spending, particularly on computer & office products and home appliances. Consumers are prioritizing price-for-value and turning to platforms like Pinduoduo, as well as live-streaming e-commerce platforms such as Douyin and Kuaishou, which offer more competitive pricing. (We have discussed some general observations of the consumption downgrade in our previous post.)

Live-streaming e-commerce platforms Douyin and Kuaishou continue to seize market shares. Data source: Tmall, JD, Douyin, Kuaishou; Data collected and curated by BigOne Lab

Our latest data shows that consumer sentiment continues to improve. There has been a notable uplift in discretionary categories such as jewelry & gifts and digital electronics. These categories have shown significant growth in both gross merchandise value (GMV) and average selling price (ASP) in October.

Furthermore, we are still witnessing a notable K-shaped recovery, which is a trend we previously observed in the luxury sector back in May. Despite the macroeconomic slowdown, JD.com continues to observe strong usage habits among high-income users (monthly income > 20k Yuan, or ~2817 USD). However, users from other income groups are increasingly shifting their spending towards Pinduoduo, which provides more cost-effective options.

Data source: BigOne Lab obtains data on operator channels, app usage behavior, and user profiles, covering over 300 million devices.

In today's post, we are excited to share 10 key consumer trends and thriving sectors within China's current economic landscape. These insights were gathered from presentations at the Morgan Stanley Twenty-Second Annual Asia Pacific Summit, which took place on November 15-16 in Singapore. Baiguan's

Robert Wu

participated in the summit as a speaker and shared these insights with global institutional investors. We have distilled the key points from these discussions to provide our Baiguan readers with timely updates on the latest opportunities in China's consumer markets.

No. 1: Tea & Coffee chains are expanding in China, and brands with a lower average selling price (ASP) are gaining favor

The Meituan delivery orders reveal that consumers are displaying a stronger preference for beverages compared to food and grocery items. Low-priced beverage brands (<15 Yuan), in particular, have consistently experienced growth in delivery orders, while high-end brands (>25 Yuan) have notably decelerated in recent months.

Data source: Meituan. Data collected and curated by BigOne Lab.

Note: Due to Starbucks' focus on delivery services, it is not included in this statistical calculation. Establishments with an average price below 15 yuan (Mixue Bingcheng and Cotti Coffee) are classified as low-price. Establishments with prices ranging from 15 to 25 yuan (Luckin Coffee, Tea 100, and Shanghai Auntie) are considered mid-price. Establishments with prices above 25 yuan (Manner, Heytea, and Nayuki) are classified as high prices.

No. 2: K-shaped recovery in the clothing sector

The sportswear and outdoor footwear market, which has been experiencing significant growth throughout 2023, is witnessing a noteworthy trend known as the K-trend. Premium and value brands such as FILA, ARC’TERYX, and Lululemon have outperformed the average market in terms of GMV (Gross Merchandise Value) growth.

Data source: The e-commerce sales volume includes sales on Tmall, JD, Douyin, and Kuaishou; Data collected and curated by BigOne Lab.

ANTA Sports (2020.HK) implemented a multi-brand strategy by acquiring high-end brands like ARC'TERYX, FILA, DESCENTE, and KOLON Sport. This strategic move resulted in a substantial rise in both average price and sales volume for ANTA.

Read our full analysis of Lululemon’s China strategies:

China's economy struggles, but Lululemon is having a shopping Fiesta!

No. 3: China's Baijiu consumption experiences K-shaped growth

Continue reading to unlock Baiguan's observations of key consumer trends and sectors that are thriving in 2023. To get a sense of what is offered, you are welcome to check out this older post in the same series: Charts of the Week

Baijiu, a traditional Chinese liquor frequently consumed on social and professional occasions, serves as a barometer for overall beverage consumption and consumer sentiments.