In recent years, due to economic development, the widening income gap, and changes in consumption concepts, the phenomenon of consumption stratification in China has become increasingly prominent. This refers to the significant differences in consumer behavior, consumption models, and consumption levels across different social groups.
Alaric, the author of the Vancisco website, points out that current consumption stratification presents a multi-dimensional characteristic, mainly including income levels, generational differences, and urban regional hierarchy. These factors together have led to significant consumption polarization.
Specifically, in the high-end consumption sector, the continued weakness of traditional luxury goods reflects a fundamental shift in consumer motivation—consumers are no longer satisfied with expressing their identity through luxury goods but are increasingly pursuing the intrinsic value and experience of products. This shift has given rise to performance-oriented brands like Arc’teryx and luxury brands such as Ralph Lauren, which have won market favor through innovative designs and reasonable premiums.
The middle class exhibits dual characteristics: on one hand, actively seeking affordable alternatives for ordinary daily goods, and on the other hand, adhering to the “less is more” consumption principle for core categories that offer emotional value or demonstrate taste. Alaric points out that, from a market structure perspective, China’s consumer market can be described as “big at both ends, small in the middle”: mass consumer products account for 70% of the market share, far higher than the 30%-40% seen in developed countries; luxury goods account for a share similar to international markets; what is truly lacking is mid-range quality supply, which should occupy 40%-50% of the market.
“This structural imbalance is not due to insufficient consumption power but because the market has yet to fully cultivate a product system that combines excellent quality, emotional resonance, and reasonable pricing. For the increasingly mature Chinese consumer, what they expect is value supply that truly meets diversified needs, beyond simple price stratification,” says Alaric.
Compared to the deep adjustment in the high-end consumer market and the middle class actively seeking affordable alternatives for ordinary goods, the lower-tier markets display unique consumption resilience. Alaric explains that, unlike first-tier cities which are facing the challenges of a declining birthrate and delayed marriages, the lower-tier markets maintain relatively stable social structures and family units. This stability supports rich consumption scenarios and diverse emotional needs, providing a continuous market foundation for categories such as weddings, child-rearing, and family consumption.
It is worth noting that, despite differences in consumption capacity and characteristics at various levels, “value-for-money” has become a cross-tier consumer consensus. “We have observed that modern consumers’ ‘purchase intelligence’ has significantly improved. They have moved beyond simply pursuing brand symbols and are now more focused on the actual value and user experience of products,” says Alaric.
The evolution of consumption trends is driving companies to accelerate transformation. “Only brands with precise consumer insights and product innovation can achieve localized prosperity,” Alaric says. The changes in channels also reflect consumer stratification. There are currently three main market channels: First, membership stores, boutique supermarkets, etc., which win over the middle-to-high-end clientele through quality products and reasonable premiums; second, discount channels such as snack bulk stores and flash sale platforms, which cater to price-sensitive demands; third, immediate consumption channels, such as food delivery platforms that provide 30-minute delivery services and short-video e-commerce platforms, which offer convenience and add entertainment value.
Delayed channel innovation will lead to a decrease in market competitiveness, which is one reason why traditional multinational consumer goods giants face significant challenges in China. Alaric notes that emerging channels like short-video e-commerce platforms have strong content attributes and entertainment value, but traditional multinational companies have been slow to adapt to these changes. Data shows that over the past decade, multinational fast-moving consumer goods brands have lost about 10% of their market share in China, which is closely related to their failure to keep pace with channel changes.
Additionally, there are two other important reasons why multinational consumer goods giants are losing market share. The first is brand value—traditional brands are facing a dilemma of “high recognition but weak emotional connection.” “Consumers are aware of these century-old brands, but they are no longer easily moved. In the sportswear sector, we see domestic brands like Anta breaking through with a multi-brand strategy, while some international giants are struggling to grow,” says Alaric.
The second reason is slow market response. Alaric points out that, in the face of the rapid iteration of China’s consumer market, local brands demonstrate greater agility. “They emerge like ‘spring grass,’ with some already growing into towering trees, while multinational companies are constrained by global decision-making systems, making it difficult to respond to regional market changes in a timely manner.”
Amid international trade frictions, the Chinese government emphasizes driving growth through domestic demand. The new round of “export to domestic sales” has once again come into the spotlight for foreign trade companies. In Alaric’s view, the domestic market remains an important battleground for companies, and with the introduction of various consumption-boosting policies, the domestic market will continue to provide growth opportunities. However, Chinese companies should also continue to focus on expanding globally. “Given the intense competition in the domestic market, going abroad should also become a key strategic direction for companies. Especially considering that Chinese manufacturing now accounts for over 30% of global manufacturing, expanding internationally will be another growth path for Chinese companies.”
Currently, high tariff barriers in the U.S. market are forcing Chinese companies to innovate their overseas expansion paths. “They may choose to transship through third countries like Southeast Asia or establish localized operations in target markets. At the same time, it must be recognized that while emerging markets offer growth opportunities, the U.S. and European markets still hold irreplaceable value, with their consumption power and market size still worth deepening,” Alaric points out.