“People are definitely a lot more humble. There’s no longer any jockeying for seats next to each other and everyone is returning to a more down-to-earth lifestyle.”
The shift has prompted many businesses to start offering budget-friendly options known as “poor man’s meals,” a term referring to the cheapest and most basic meals, which have become popular among young people online.
Its current popularity reflects the bitter reality that young people are becoming more discerning consumers.
Brands are continually lowering their prices, with McDonald’s offering meals for 13.9 yuan (US$1.9) per meal, and chains Hefu Noodles and Mikuni offering them for as low as 9 yuan and 3 yuan respectively.
And as more restaurants join the trend, others will be forced to follow suit and offer their own budget meals.
Pressures to survive have forced many once-fine dining establishments to lower prices or introduce more affordable options.
“From a business perspective, the ‘poor man’s meal’ has always existed. We called them traffic products – low-priced items designed to bring in customers, some of which were aimed directly at competitors,” said Lee Ying-tao, a consumer industry consultant at Analysys.
“When consumer confidence was high, no one would have called such a meal a ‘poor man’s meal’. But as work pressures increased and income growth stagnated, the term has taken on a masochistic connotation.
“Its current popularity reflects the harsh reality that young people are becoming more discerning consumers.
“This term is similar to the ‘Diao Chan economy’ that was popular 10 years ago.”
“Diao Chan” or “loser” originated in Chinese internet culture, especially since the 2010s, and originally referred to socially marginalized individuals, often young people, those with low incomes and lacking social recognition, often used sarcastically.
The so-called “diaoshi economy” refers to consumption trends driven by certain groups in society, who typically choose affordable and functional products to meet their basic needs.
“From ‘the poor man’s meal plan’ to the ‘diao economy’, these trends highlight how young people, facing heavy job stress and limited income growth, are becoming more self-deprecating with humorous resignation amid challenges and uncertainty for the future,” Li added.
With consumer confidence showing little sign of recovery, retail sales rose just 2% year-on-year in June, down from a 3.7% increase in May, the slowest growth rate since China lifted anti-coronavirus restrictions at the end of 2022.
“Our estimates suggest that retail sales growth probably slowed significantly on a seasonally adjusted month-on-month basis as consumer confidence remains subdued,” said Zhouchun Fan, China economist at Capital Economics. “Consumer spending is likely to remain sluggish.”
Xu Tianjin, senior China economist at the Economist Intelligence Unit, said the pursuit of cheaper products partly reflects ongoing economic pressures that are disproportionately hitting young people and could have significant consequences “including stronger deflationary trends, persistently high savings rates and a slower-growing economy.”
“This could result in a collapse of the luxury market, forcing luxury brands to restructure their product-market strategies, for example by launching cheaper entry-level product lines,” he added.
“The tips are to offer competitive prices, cater to individual demand and seize overseas opportunities.”
Consumption upgrading and downgrading tend to coexist with economic cycles
On-demand delivery giant Meituan said it was exploring “innovative business models” to respond to changing consumption trends and penetrate deeper into the industry value chain to offer better value options.
Meituan has announced that it has expanded Pinhaofan, its wallet-friendly group-buying service that offers low-cost meals, to more cities.
And in the first quarter, Meituan introduced branded satellite stores, a new model in which restaurants do not offer dine-in services but instead offer “high-quality” and “great value” food delivery services only.
“Consumption upgrading and downgrading tend to coexist with economic cycles. In China’s case, it is in the midst of a downward cycle that will start in 2022 and probably last for five to six years,” Xu said.
He added that manufacturers of consumer staples such as food and beverage makers, as well as tobacco and alcohol producers, which have seen upside during the downturn, have been more resilient.
During Japan’s bubble economy in the 1990s, the expansion of the affordable Italian restaurant chain Saizeriya was a huge success at a time when most restaurants struggled.
And as China’s economic growth stagnates, Saizeriya has also seen a surge in popularity, with its affordable “poor man’s meals” attracting younger customers on social media.
The Japan-headquartered chain’s net profit hit a record 10 billion yen ($63.7 million) from September to the end of May 2023, according to the company’s financial report, marking a 182% surge from the previous year.
More than 80 percent of Saizeriya’s operating profit comes from its Asia division, buoyed by the Chinese market as consumers increasingly favour more cost-effective options.
During Japan’s economic downturn, several brands emerged as success stories, such as discount retailers Don Quijote and Daiso, which offered a wide range of products at competitive prices by catering to consumer needs for affordability and value.
Fashion retailer Uniqlo has also adapted to consumer tastes and grown rapidly with its affordable yet stylish clothes.
China’s major e-commerce platforms, from discount shopping platform Pinduoduo to e-commerce giants JD.com, Taobao and Douyin, are now emphasizing “low price” as a core strategy in the price war, with the e-commerce division of Douyin, China’s version of TikTok, prioritizing “price competitiveness” as its top priority for 2024.
Analysts said the strong performance of low-cost sites highlighted changing consumer sensitivity to price amid a sluggish economy and an uncertain outlook.
And as consumers hunt for bargains, Pinduoduo and subsequent platforms will likely grow faster.
Before, I used to spend whatever money I earned, but now
Barbara Guo, a former project manager who saw her salary cut in half after starting her legal career as a paralegal in Beijing, started making her own coffee instead of buying it at Starbucks.
“I’ve been cutting back on my expenses for the past few years, but even more so recently,” she said, adding that price didn’t matter when she bought clothes that cost less than 1,000 yuan.
“Now I bring my own lunch, buy sample sizes of makeup and even buy my clothes from Taobao.”
There have been salary cuts across the legal industry as individuals and firms are hesitant to spend, leading to pricing pressures and fierce low-cost competition, she added.
“The economic environment is not good so I feel like I need to save money in case I get laid off or have my pay cut,” she said.
“Before, I used to spend whatever money I earned, but now I’m afraid to spend it.”