Last year, consumption accounted for 32.8 per cent of the growth in China’s gross domestic product, down from 54.5 per cent in 2021.
According to Morning Consult, a US company that measures Chinese consumer sentiment, trust among consumers towards their finances and the state of the economy showed improvement in August while still falling short of its 2021 peak.
Online consumers then flocked to dozens of domestic brands, particularly traditional players, as a show of support. The companies in question seized the opportunity by promoting their products as affordable and able to be purchased in generous quantities.
Traditional brands, once adored by the public, gradually lost popularity over the years due to inadequate marketing and a lack of online presence. However, they saw a drastic surge in sales as a result of the controversy, with some even running out of stock.
Fenghua, a shampoo brand established in 1985 that also operates under the name Bee & Flower, has reached a record high in sales since the Li Jiaqi incident. After a marathon 95-hour streaming session, the brand tallied up revenues in excess of 25 million yuan (US$3.42 million) according to live-streaming sales data provider Feigua.
The company sold a conspicuously priced package to take advantage of the heightened attention, with two one-litre bottles of conditioner and one 750-millilitre bottle of shampoo available for 79 yuan.
The trend of home-grown products replacing imported ones is a long-term one, said Zhuang of EqualOcean, adding industries upstream of domestic products are becoming increasingly developed, enabling many to compete with imports in terms of cost, craftsmanship and quality.
“Initially driven by national identity, consumer preferences have shifted towards product identification. Domestic products offer price advantages over imported brands and can adapt faster to market changes, aligning better with Chinese consumption habits,” he said.
According to a survey published by PwC this month, consumer decisions are now influenced more by personal finance in China than any other factor, with 51 per cent of Chinese consumers saying they are holding back on non-essential spending due to the current economic climate.
Even with this relative decline, online consumers showed strong preferences for domestic brands in certain sectors in the first half of this year, according to the August report from EqualOcean. Over 70 per cent said they go local for clothing, while over 90 per cent buy from indigenous companies for snacks and beverages.
According to financial services company Founder Securities, assuming a 20 per cent decrease in market share for Japanese cosmetics brands in China, domestic leaders have the potential to fill the vacuum and capture a market worth 676 million yuan.
China’s cosmetics imports from Japan recorded a year-on-year drop of 30 per cent in July, according to the General Administration of Customs. The decline was only 8.4 per cent back in June.
Although domestic products are becoming more appealing, Hu said, they still have some distance to make up before they can directly compete with international brands.
Patriotism and low prices are not enough, she argued. While consumers currently appreciate the cost-effectiveness and perceived safety of domestic brands, it is crucial, she said, for companies to focus on emotional value and unique features to establish a permanent presence in global markets.