The crisis brought about by the COVID-19 pandemic, such as job insecurity, gave rise to the young generation in China to re-examine their consumer desires, a report recently issued by state-owned broadcaster CCTV demonstrated.
Young people who were interviewed for the report said that they will be more cautious and rational, spending-wise.
The more prudent consumption behavior was verified on China's used good trading markets, which just experienced an exponential growth during the past several weeks.
Xianyu, China's largest online resale marketplace owned by Alibaba, said that its daily average transactions and gross merchandise volume in March broke records. New sellers increased by 38.8% and newly listed products by 40% compared to March last year.
The platform also reported that its sales of gaming products surged by 354% and 209% in February and March, respectively.
Shang Yun, an operating specialist at Xianyu, explained that users the growth of new sellers and products is an interesting trend to watch, as the deceleration of the spread of the Covid-19 pandemic did not slow people's need to sell idle goods.
In mid-April, "Leave Beijing" became a trending topic on the Xianyu app, as those who suffered from job losses or pay cut are selling home appliances, in order to leave expensive cities and return to their hometowns. Many of them are even leaving their pets behind, as shown on Xianyu listings.
Second-hand luxury trading platforms in China have also witnessed an increase in users and sales since the pandemic. GoShare2 and Plum, the two most popular platforms, said their monthly active users increased by 82.4% and 40.4% year-on-year in March, respectively.
Xu Wei, CEO and founder of Plum, revealed that sales in March reached an all-time high. "An increasing amount of people was selling second-hand luxury products in exchange for cash. On the other hand, since almost everyone was staying at home to help curb the spread of Covid-19, the time spent on online shopping became more prolonged. Therefore, the transaction volume increased," said Xu.
A recent McKinsey & Co survey showed that between 20% and 30% of respondents in China said they would continue to be cautious, either consuming slightly less or, in a few cases, a lot less.
The pandemic dealt a heavy blow to China, shrinking China's Q1 GDP by 6.8%. Official unemployment data is around 5.9%, though Li Xunlei, director of the research unit at Zhongtai Securities who was punished for saying otherwise, estimated that the real number should be significantly higher at 20.5%.
Despite the fact that China has largely reopened, small and medium-sized enterprises still face a high risk of bankruptcy, according to Chen Long, Deputy Director at the Financial and National Governance Research Center of the Chinese Academy of Fiscal Sciences.
Under the influence of the pandemic, many residents and enterprises are faced with the reality that their incomes are dwindling, and accepting lower-priced used goods may become a late consumption tendency.
The flourishing second-hand industry in Japan proves the possibility of this trend developing in China. From the mid-1950's to the early 70s, Japan experienced a high-growth period, with the purchasing power reaching all-time high thanks to an increasing number of the middle class. Then after the country encountered asset price bubbles and its economy plunged into a contraction in the 80's, shopping behavior gradually returned to rationality and cost-effectiveness, and used goods trading began to thrive.
China has a nascent but fast-growing second-hand market. According to the China Center for Internet Economy Research, a Beijing-based research think tank, the size of that market reached 500 billion RMB ($71.1 billion) in 2017, with the number set to double by the end of this year.
Currently, Alibaba, proficient at e-commerce business, has acquired about 70% of the resale market with Xianyu. Tencent, the arch-rival of Alibaba, is also eyeing the industry by investing in Craiglist-like 58 Group, and e-commerce website JD.com, both of which operate used goods trading businesses, and has obtained the rest of the market.