Chinese eCommerce Giants Embrace Lower-Priced Goods

Alibaba Group

Consumers in China have started trading down, and the country’s eCommerce giants are acting accordingly.

Companies like Alibaba and have launched campaigns to promote lower-priced items, The Wall Street Journal (WSJ) reported Monday (Aug. 21).

“We try to give users an experience that good merchandise doesn’t have to be expensive,” Trudy Dai, CEO of Taobao and Tmall Group, Alibaba’s China commerce unit, told analysts on a conference call earlier this month, per the report.

She added that the company’s platforms had seen a jump in the amount of price-conscious shoppers from smaller cities, along with younger people and seniors.

Both companies have seen their shift toward discounted goods pay off, reporting sharp jumps in revenue in recent weeks, the report said.

This trend is happening as China’s economic recovery is slowing, with the country skirting the edge of deflation last month.

Consumers’ embrace of lower-priced goods in China mirrors the situation in the United States, where consumers have been trading down thanks to ongoing inflation.

Data from the May edition of PYMNTS Consumer Inflation Sentiment series, “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” found that 47% of grocery shoppers traded down to merchants with reduced prices, while 57% cut back on spending for nonessential items.

In addition, research from January’s edition of the report, which focused specifically on reducing the quality of items purchased, showed that 35% of grocery shoppers cut back on item quality to save money amid inflation.

Even with inflation easing, 82% of consumers still worry about high prices.

“In terms of consumer sentiment, inflation is right up top as far as their concerns for the economy, so this still is a very significant issue for them,” Alex Weinstein, chief digital officer of online grocer Hungryroot, told PYMNTS in a July interview.

Price concerns have led many consumers to embrace private labels, which has caused a headache for brands such as snack company Utz.

“I think it’s very normal in this environment that we start to see private label come back into the conversation,” Utz CEO Howard Friedman said during an earnings call this month, noting that, while these brands represent just 5% of potato chip sales, they remain a source of competition.

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