A subset of Gen Z consumers in China is responding to the country’s economic woes with a new lifestyle approach — exquisite poverty (精致穷) refers to living an elegant life, even at the cost of going broke. Think of it as eating pot noodles while wearing Dior.
The trend involves cutting back on everyday expenses, for example, through group buying groceries or shopping at discount supermarkets, so money is available to splurge more on luxuries.
Lanmao, a blogger on the WeChat public account Laika, says, “We must ensure our quality of life. We need to save money and be refined at the same time.”
“Discount shopping lets me save some household expenses, so I have extra money to purchase slightly more expensive goods in other categories,” says Shanghai-based Gen Z consumer Maria Liu.
Buffeted by economic headwinds, middle-class Chinese consumers are not only turning to OEM shopping and group buying to save money but also to enjoy life’s luxuries.
What is OEM shopping?
OEM shopping (original equipment manufacturer, 代工厂) has gained traction due to China’s economic slowdown and ensuing decrease in the population’s spending power. It enables consumers to bypass brand premiums by directly purchasing products from the factories that make them. BBC has previously reported on shoppers buying directly from artisans in Spain, where many of the top fashion brands source their leather goods.
China, after all, accounted for 28 percent of the world’s manufacturing in 2021, nearly as much as the US, Japan, and Germany combined.
Xiao Zhu, an avid 20-something OEM shopper, says: “Many internet celebrities have their own popular brands. Their production model is usually OEM production. They get the product and brand it themselves, but the product is the same. So, I can go directly to the OEM.”
Platforms like Xiaohongshu serve as repositories of information on big-name OEMs, with a particular emphasis on women’s clothing, facilitating a consumer subculture that balances cost with quality.
Some Xiaohongshu posts share the names of prominent OEMs for makeup brands like Mac and Canmake as well as fashion labels like Dior, Zara, and Gap. They encourage users to shop at the OEM, as they can receive products of the same quality but without the premium price.
Group buying moves to luxury
Group buying in China, facilitated by apps like Pinduoduo, marries the allure of discounted shopping with a communal purchasing experience. The growth rates of the country’s three leading e-commerce platforms, Alibaba, JD.com, and Pinduoduo, all rebounded significantly in the three months ended June 30, 2023, compared with previous quarters.
Among them, Alibaba and JD.com recorded revenue growth of 14 percent and 7.6 percent, respectively, in Q2 2023. Pinduoduo achieved revenue of $7 billion, an increase of 66 percent over the same period last year, far exceeding market expectations. The stock jumped 15 percent on the earnings beat.
Pinduoduo enables users to share information about their purchases, invite other users to buy together, and unlock deeper discounts on reaching predefined buyer targets. Plus, its interface is designed to foster a sense of community. This group-buying function not only drives down prices but also engenders a social shopping experience, akin to a virtual mall bustling with friends. Discounts can reach up to 90 per cent.
Previously dominated by household items such as towels or teapots, group buying platforms are slowly expanding to other categories, including beauty and fashion. During the 618 shopping festival in June this year, Pinduoduo’s beauty brand subdivision sales soared by over 790 percent.
The juxtaposition of “exquisite poverty” among China’s Gen Z is a testament to their resilience and adaptability in the face of economic uncertainties. By strategically balancing spending between necessities and luxuries, this demographic is navigating a complex economic landscape.
The rise of OEM shopping and the expansion of group buying into luxury sectors are both symptomatic of and a response to China’s economic slowdown. These strategies allow consumers to maintain a semblance of their aspirational lifestyles without compromising too strongly on quality.
As the country’s economic climate continues to evolve, consumers’ habits will further shape the future of retail in China.