Chinese retailers face weak demand, price wars, omni-channel shift

Against this backdrop, PwC Hong Kong has released two reports offering in-depth insights into China’s evolving consumer market. ‘Strategic imperatives to advance category management and private brands’ highlights the growing importance of category management and private brand development, while ‘PwC’s Voice of the Consumer 2025 global survey—China: The new Chinese consumer: food, health, and sustainability’ examine shifting consumer priorities amid intense competition.

Despite near-term pressures, PwC maintains a positive long-term outlook. The firm identifies four factors expected to shape the future of China’s consumer market, led by the rapid expansion of the upper middle-income population.

Households with annual disposable income above $25,000 rose to 64 million in 2024 and are projected to nearly double by 2029. China ranked second globally in 2024, with 26.8 million households earning over $35,000 annually, presenting strong opportunities for premium and luxury brands, according to the EIU estimates cited in the report.

At the same time, with 33 per cent of households expected to earn $10,000 or less by 2029, PwC sees significant scope for private brands offering affordable, good-quality products.

PwC noted that leading players have embraced category management and private brand strategies, setting benchmarks for peers and helping unlock consumer spending through more compelling product and service offerings.

Chinese consumers are outpacing global peers in their focus on health, sustainability and openness to international products, creating opportunities for new categories and innovation.

Finally, expectations of a stronger Chinese yuan by 2026, combined with a stabilising housing market, could lift consumer confidence and stimulate domestic consumption.

PwC underscored the untapped potential of private brands and category management. It found that private brand penetration in China stands at just 4.4 per cent, compared with 20.7 per cent in the US and an average of 38 per cent across the EU.

The report also stated that Chinese retailers lag Western peers in category management maturity, particularly in supplier collaboration, private brand development and the strategic use of category captains.

Professor Ananth Raman of Harvard Business School said Chinese retailers have made ‘tremendous progress’ over recent decades, but the next phase will require continued innovation in both products and business practices to improve performance and better serve consumers.

Carrie Yu, PwC China consumer markets industry leader said China’s growing middle-income population, combined with a rising focus on health and sustainability, presents major opportunities for retailers.

Jasper Xu, PwC China consulting markets leader, added that turning data into shared category management assets is key to closing maturity gaps and driving collaborative innovation.

Jenny Tsao, PwC Hong Kong consumer markets tax leader, noted that new tax incentives and opening-up policies are creating fresh opportunities, while also increasing compliance and governance requirements for businesses operating in China.

ALCHEMPro News Desk (SG)