China retail stays tough as price wars, weak demand persist: report

It reported private brand penetration of 4.4% in China across the four categories studied.

China’s retail market remains challenging, marked by weak consumer sentiment, intense price competition, and a continued shift from brick-and-mortar formats toward omni-channel models, according to PwC.

The firm also said retailers are seeking to reduce reliance on “slotting fee” income models, under which brands pay for product placement in physical and online channels.

PwC identified four factors it said will shape China’s consumer market. It pointed first to the growth of upper-middle-income households.

Citing estimates from the Economist Intelligence Unit, PwC said households with annual disposable income above $25,000 rose to 64 million in 2024 and are projected to nearly double by 2029.

It also said China ranked second globally in 2024, with 26.8 million households, or about 77 million individuals, earning more than $35,000 a year.

PwC said this underpins demand for higher-quality, differentiated food and non-food products and services, whilst also creating scope for affordable private brands, noting projections that 33% of households may earn $10,000 or less by 2029.

The second factor highlighted was the expansion of successful international and domestic grocery retailers, which PwC described as a signal of confidence in the market. It said these retailers illustrate how category management and private brand development can be used to support growth.

Third, PwC said Chinese consumers are ahead of global peers in embracing health, sustainability, and international products, creating opportunities for new categories and offerings.

Fourth, it noted that financial markets expect a stronger renminbi by 2026, and said a firmer currency combined with a stabilised housing market could help boost consumer confidence and domestic consumption.

Furthermore, PwC defined category management as category-level decision-making covering supplier relationships, pricing, assortment planning, merchandising, and private brand management, aimed at delivering the right product at the right price across online and offline channels using data-driven pricing.

PwC said Chinese retailers lag Western counterparts in category-management maturity, particularly in manufacturer relationships, the development of mature private brands, and the strategic use of “category captains”.

It reported private brand penetration of 4.4% in China across the four categories studied, compared with 20.7% in the United States and an average of 38% across European Union countries.

However, PwC highlighted stronger health and sustainability preferences among Mainland Chinese consumers. It said 34% prioritised nutritional benefits, compared with 27% globally, whilst 23% cited diet-specific needs versus 11% globally.

PwC also said 25% prioritised organic products, compared with 13% globally, and 63% were willing to pay a premium for sustainable food, versus 44% worldwide.