A new consumer culture is emerging in China: upgrade driven by downgrade

Inside China Inside China

While the consumption upgrading in China – people are looking for high-end products of premium quality, consumption downgrade is happening at the same time. It is about looking for the most reasonable price, paying for the most appropriate product, spending rationally, and living smartly.

This evolution is especially evident among 2 groups within the population: young consumers with limited financial resources and utility-driven consumers living outside the 1st tier cities. These people tend to buy cellphones from the domestic brand Xiao Mi (小米) with only 1/3 of the price of an iPhone, workout using training APPs such as Keep instead of paying for a personal trainer in an actual gym, and use group shopping APPs such as Pin Duo Duo (拼多多) to get a good bargain by joining more people they know into buying the same product.

Pin Duo Duo (拼多多, “joining more and more”), one of the most popular social network-based group shopping APPs in China. It is used by 0.3 billon of Chinese and sells products at incredibly low prices.

Downgrading one’s consumption can certainly release the financial pressure of living in the mega cities. At the same time, consumption downgrade is facilitated by innovative solutions: websites and APPs for resource sharing, discount finding, and social networking. Most importantly, consumption downgrade can be seen as another type of consumption upgrade: achieving a better life quality through purchasing value-for-money products rather than the high-end ones.

There are 2 major implications regarding this upgrade driven by downgrade:

1. Consumption downgrade ≠ quality degradation. People downgrading their consumptions can be as much demanding as those upgrading their consumption on the level of product quality. What they are looking for is the best price-quality ratio, a better access to the product’s concrete benefits, and an avoidance of resource waste.
2. Non-elite matters. Huang Zheng (黄峥), The CEO of Pin Duo Duo has invented the term “people outside the 5th Ring of Beijing” while explaining their target crowd. He said that 90% of the Chinese population living outside the 1st tier cities such as Beijing are not convinced by most propagandas targeting at the 10% – the elites. This crowd is more likely to be interested by fresher fruits rather than a British afternoon tea party.
Catherine DUPUIS
Head of Strategic planning
Sixia ZHENG
Research Manager