The ratings agency's forecast is based on an expected high-single-digit growth in total retail sales of goods. Despite the weak consumer confidence, Chinese consumers are making more discretionary purchases, but prefer lower-value items.

Online sales of non-essential or discretionary goods have outperformed essential or staple goods following China's reopening in late 2022, in line with the overall retail trend and reversing patterns observed during the pandemic, as per Fitch Ratings’ ‘China Corporates Snapshot – July 2023: Discretionary Sales Drive E-tail Growth; Prices Fall amid Competition and Trade-downs’ report.

The preference for value-for-money goods over high-value or luxury items persists, even when consumers are spending more on non-essentials. This preference is attributed to the ongoing weak consumer sentiment and employment-income prospects, as indicated by the People's Bank of China's Q2 2023 survey.

Consumers are mostly opting for mid- to low-end brands, which are showing more resilience than high-end brands in many discretionary categories. This trade-down, combined with e-tailers' aggressive subsidies, has significantly reduced the average selling prices (ASP) across most categories on these online retail platforms.

Fibre2Fashion News Desk (DP)