DALIAN, China -- Younger Chinese consumers are moving away from conspicuous consumption in favor of more modest lifestyles, a trend that some retailers have adapted to better than others.
In mid-July, Dalian Wanda Group Chairman Wang Jianlin told a board meeting that the real estate giant will close half its domestic department stores. The sweeping restructuring plan would have the company shutter 46 of about 90 locations.
A Beijing Wangfujing Department Store location in Wuhan, Hubei Province, has been undergoing rapid remodeling since summer as it transitions to an outlet store offering bargain goods. Wangfujing plans to convert four stores and close others as part of its restructuring plans.
The government's anti-corruption and austerity crusades, along with slumps in the stock and real estate markets, have slammed the brakes on sales of the big-ticket items on which department stores had relied. But the stores are also foundering because they have been unable to fully adapt to young consumers' changing spending habits.
One 28-year-old office worker in Dalian, who got married just last year, is fretting about how to make ends meet. "My pay's not going up, and I have a mortgage and other debt," she said. "I have to do as much as I can to save money."
She cooks her own meals whenever possible and focuses on products with quality commensurate with their cost when buying cosmetics and clothing, rather than seeking out brand names. "I'd rather build up my savings and travel with my husband once in a while than live a life of luxury," she said.
She is part of a frugal cohort, mainly born in the 1980s, that is becoming more influential in China's consumer markets. They tend to buy goods that suit their own lifestyles, rather than expensive items to flaunt.
But that does not mean they do not spend money. While China's restaurant market grew 9.7% to 2.78 trillion yuan ($437 billion) in 2014, its high-end restaurant market contracted about 6%, according to the China Hotel Association. The overall growth was driven by fast-food-style restaurants with a trendy feel, inexpensive food and speedy service, often found in shopping malls. Customers born in the 1980s and '90s flock to these places.
Online retail, with its combination of low prices and broad product lineups, has also fared well among that group. E-commerce sales reached 2.24 trillion yuan in the January-August period, accounting for more than 10% of total retail sales. Companies that can pinpoint shifts in spending trends and offer products that are a good value for the price can get even the younger generation to loosen its purse strings.
Young consumers are not the only ones avoiding traditional retailers with rigid product selections. Foreign markets are capturing some demand from affluent Chinese.
China's balance of payments in the tourism industry -- the amount spent by foreigners on lodging, food and shopping in China minus that spent by Chinese abroad -- came in at a $107.9 billion deficit in 2014, widening 40% from a year earlier, government data shows. Japanese goods such as rice cookers and high-tech toilets are popular among Chinese tourists.
If Chinese companies can flexibly develop products suited to the constantly shifting preferences of consumers and choose the best retail channels to offer them through, consumption in China should see further growth.