Sat, July 13

Changes in Chinese Consumers Reflected in Sales of Porsche and Uniqlo

A Porsche salesperson in Qingdao sold 170 cars last year, receiving an average of three groups of customers per day. The highest conversion rate reached 40%. It is worth noting that the total sales of Porsche in Qingdao last year were only 1000 cars. This individual alone accounted for nearly 1/5 of the total sales, showcasing the individual’s strength amidst the brand’s decline.

Porsche announced its sales figures for last year, selling 320,000 vehicles globally, a 3% year-on-year increase. In Europe, they sold 70,000 vehicles, a 12% increase, while in North America, they sold over 80,000 vehicles, a 9% increase. However, in China, Porsche’s largest single market for years, they sold 79,283 vehicles, a significant 15% decrease in sales, making it the only region globally where sales declined.

Porsche reached its sales peak in China in 2021, selling up to 95,700 units. At one point, Porsche was so popular that it was nearly impossible to buy one even at a premium. In the automotive industry, it was like the Moutai of cars. With a 3-year-old car, the resale value reached an astonishing 97.3%. There is a joke that the starting price of a Porsche only includes one engine, while everything else depends on the optional tires. Each tire hair is worth 1000 RMB. As a leader in bare metal cars, Porsche does not deceive the poor. It also has a strong social presence. Even if you drive a Porsche wearing a white tank top and flip-flops, others will still think it’s a limited edition. Surprisingly, despite the popularity of new energy vehicles in recent years, from hybrid to pure electric, from Cayenne to Panamera, Porsche continues to provide inspiration and shine for many models with its so-called original designs. Perhaps we have misunderstood Porsche. Excessive imitation ahead of its time is called plagiarism, while following the trend is called reference. Can we really call it copying in terms of design?

In terms of sales volume, Porsche couldn’t keep up in the third quarter of last year, only selling 16,900 units, a sharp 4% decline. Several key models started offering discounts at the retail end, with fewer customization options, no waiting times, and no loan requirements. From being in high demand to a sales avalanche, what happened? It could be a combination of product issues and economic cycles. The models are too outdated, with the Cayenne and Panamera unchanged for many years, while new players keep introducing fresh models. The frequent updates in the sub-million-dollar SUV segment, along with regular OTA updates, have made Porsche’s offerings seem stale in comparison. Porsche’s previous success was due to its positioning above the BBA brands in the super luxury segment and below in the entry-level luxury segment, with few direct competitors at the same price point. However, the problem lies precisely in this positioning now. Some salespeople say that those who used to buy Porsches were first-generation entrepreneurs with wealth, but now, most Porsche buyers are internet celebrities, social media influencers, or those in the beauty and wellness industry.

According to official figures released up to 2022, Porsche owners in China are generally women with an average age of under 40, and their average annual household income is around 3 million RMB. These individuals, who are often speculators riding the waves of the times, tend to splurge after sudden wealth accumulation but lack preparedness for rapidly changing environments. They are more susceptible to economic cycles, and their willingness to purchase cars is more fragile.

Luxury Bentley and Rolls-Royce cars can be found online, with top billionaires supporting the market. In the lower price range, there are a variety of new energy vehicles priced between 300,000 to 500,000 RMB. Last year, sales of high-end cars exceeding 300,000 RMB reached 2.942 million units, with a staggering year-on-year growth rate of 32.6%. Luxury car sales remain stable, attracting the newly rich who want to save money while maintaining their image by opting for BBA brands.

For those looking to save money while keeping up appearances, purchasing a Porsche, positioned above luxury but below extravagance, may be a suitable choice. However, this group is more likely to be among the newly affluent who are at risk of sudden downturns. Influencers in the fields of online celebrity and medical aesthetics are moving away from this trend, possibly indicating a shift in society from making quick money to earning it steadily. This transition serves as a microcosm of the contrasting dynamics between different consumer goods.

Two financial reports were released at the same time. Porsche saw a nearly 20% decline over the past two years, while Uniqlo experienced a significant 20% increase. Uniqlo’s parent company recently announced its financial results for the first quarter of the 2024 fiscal year, ending in late November last year. Both revenue and profits showed double-digit growth. More than 40% of the overseas revenue came from the Chinese market. Same-store sales increased by 20%, far surpassing the 0.2% growth in the Japanese market.

Looking back further, from September 2022 to August 2023, over the course of a year, revenue increased by 15% to 620.2 billion Japanese yen, approximately 30.3 billion Chinese yuan. Operating income reached 104.3 billion yen, showing a 25% year-on-year growth. While other fast fashion brands are closing stores, in the 24 shopping centers nationwide with an area of over 50,000 square meters each, ZARA did not open any new stores throughout the year and closed eight stores. H&M closed 24 stores, resulting in a net decrease of 21 stores.

If one were to attribute this trend to a decrease in consumer spending, it is worth noting that Uniqlo is not necessarily cheap. From last autumn until now, what stands out the most to me is the price increase in outerwear and down jackets. It is rare to find outerwear priced below 200 yuan, with prices of 399 yuan and 599 yuan being quite common. Down jackets start at 699 yuan, and thicker ones can easily reach over 1,000 yuan. In my impression, only basic shirts and hoodies have maintained normal prices.

36Kr’s report reveals that internal sources have bluntly stated that Uniqlo is reducing its frequency of discounts. This aligns with the observations over the past two years, as Uniqlo has been increasing its prices more frequently. Despite the abundance of online discount rules and summaries, many find that the discounts are no longer valid when they visit the stores. The issue lies in the fact that while other industries were engaging in price wars last year, the clothing and footwear sector, as optional consumer goods, faced more significant impacts. Not only could fast fashion brands not withstand the competition from mass-market leisure brands like Meters/bonwe, but also brands like Semir experienced a situation in 2022 similar to that of 13 years ago, with the closure of thousands of stores. Men no longer view Heilan Home as a go-to brand for their wardrobes. Uniqlo relies on price increases, live streaming, and events to achieve annual sales of 30 billion RMB. Why do consumers still make purchases? There are various reasons cited, such as the versatility of basic items, a robust supply chain, comfortable and wearable fabrics, and the appeal of collaborations. Therefore, young people are willing to make purchases. I believe that the consumption habits of different income groups have changed.

Both the decline of the first-tier brands like LV and Porsche, and the rise of UNIQLO as a replacement for luxury brands, have led to a shift in consumer behavior. People who used to buy luxury brands such as LV, Ralph Lauren, and Canada Goose, are now opting for UNIQLO due to the uncertainty of the future. They are willing to set aside their pride and choose simple, casual, and affordable clothing made from comfortable fabrics.

For those who want to save money while still caring about their style, the fact that UNIQLO has raised its prices is a disappointment. However, they are willing to accept the price increase and turn to UNIQLO for their clothing needs. The phenomenon of UNIQLO replacing luxury brands has been a hot topic on social media platforms such as Xiaohongshu, Douyin, and Bilibili. Many users have shared strategies for finding UNIQLO alternatives, as the prices of clothing ranging from 399 to 499 yuan are becoming less affordable.

Internet users have shown impressive investigative skills by tracing the sources of these UNIQLO alternatives, revealing that the styles are quite similar to the original brand. On other platforms, these alternatives are priced at only half or even a quarter of UNIQLO’s prices. When people first come across this trending topic, they may be surprised to learn that even UNIQLO is being replaced. However, upon closer inspection, it is not so surprising. The wealthy are seeking value for money, while the less affluent are also looking for cost-effective options.

Similarly, in live streaming rooms, the hosts shout out about pants linked to Article 69 and shoes with hooks from Putian for 100 yuan. Many people buy them, even though they don’t buy from Uniqlo or Nike. Choosing a middle ground is also a way of benchmarking upwards. The changes in sales of Porsche and Uniqlo represent a two-way movement between high-income and low-income earners. According to a report from the Yangtze River Macro Research Institute, in 2022, the monthly disposable income per capita for the high-income group is around 7500 yuan, and for the upper-middle income group it is around 4000 yuan. Together, they contribute 70% of the newly saved income.

Unjustified grievances, don’t waste money in vain, the true joy lies in saving money. Money can be spent, but it should be spent wisely and transparently, with clear reasons for each expenditure. The tearful eyebrow pencil from brand X costing consumers 70 yuan, only to be criticized for not working hard enough, serves them right. Apple’s so-called innovation is dull and uninteresting, with prices plummeting at record speed. Both official and third-party channels are reducing prices, even Apple itself acknowledges this. Bargaining for quantity over price is the way to go. Once, joint venture car companies like Toyota and Honda, as well as Volkswagen, had customers queuing up and paying extra for their cars. Arrogant sales consultants, outdated car systems, and shabby configurations have now led to plummeting resale values, factory layoffs, and market trades. Helplessly, they now proclaim that being a joint venture does not mean being outdated. This also includes Uniqlo, which is reducing its discount frequency. If prices continue to rise, they will also experience what it means to dominate all kinds of dissent. Automobiles, electronic products, cosmetics, and clothing are typical optional consumer goods. In the face of an environment where everyone is worried about job security, regardless of income level or the cost of goods, the psychological satisfaction of spending money is irreplaceable. Whether it’s domestic or foreign goods, in the face of your wallet, choose wisely.