How Gen Z consumers are shaping the future of China’s retail sector
As Chinese consumer behavior shifts, one demographic wields unprecedented influence — Generation Z. With digital nativism and a steadfast belief in meaningful consumption, China’s Gen Z, comprised of 260 million individuals, are at the forefront of a retail revolution being felt across the world.
Who are China’s Gen Z?
Estimated to be the largest consumer economy in purchasing power parity (PPP) terms, China’s economic clout is enormous. Even its post-Covid economic recovery is outpacing even the most optimistic forecasting.
Retail consumption has become a primary force in driving this economic recovery. And as Chinese sales of consumer goods reach 22.8 trillion yuan ($3 trillion) in the first half of 2023, the government is promoting consumption as the key to expanding domestic demand.
But across China, spending is not only rising, but diversifying, with reverberations for the entire global economy.
“China’s consumers are at the forefront of technology adoption, demographic shifts, and new behaviors,” says Daniel Zipser, Senior Partner, McKinsey. “Their evolution has the potential to reshape the entire global consumer market.”
At the heart of this consumer evolution is the extraordinary rise of China’s Gen Z, who embody shifting consumer attitudes. Born between 1995 and 2009, they represent 19 percent of the nation’s population and are the lifeblood of China’s changing retail sector.
Seamlessly straddling the digital and physical worlds, and embracing a new kind of ethical consumerism, their spending capacity and staying power cannot be underestimated. A recent study by RISE uncovered that the average disposable income of Gen Z surpasses the national average by nearly 50 percent. Meanwhile, research by Roland Berger reveals that 61 percent of Gen Z see their future consumption in a positive light, with over a third anticipating a spending increase of over 20 percent in the next two years.
Behind the trends
Gen Z consumer habits have diverged greatly from previous generations, forming new retail trends that are impacting the Chinese economy and beyond.
As digital natives who juggle multiple identities, social connection is instrumental in shaping interests, hobbies, and in turn, consumption choices. Unlike their parents, who prioritized utility, Gen Z are focused on quality, experience, and aesthetics. As Zhu Yuan, Deputy General Manager of Beijing’s THE BOX Youth Energy Center notes, “Gen Z are more focused on consumption scenarios that allow them to showcase their individuality and personality.”
This reflects the generation’s wider inclination to connect authentically with their values, experimenting with different products and services. Coined the “sustainable generation” in a recent study by First Insight, 62% prefer to buy from sustainable brands, and 73% are willing to pay more for sustainable products, demonstrating the strength of values in spending habits. Values-based exploration has also led Gen Z to strongly favor offerings aligned with their well-being, making them critical players in the sports, food, and beverage sectors.
Gen Z and the pet revolution
One sector that sheds light on the influence of China’s Gen Z is the pet industry. As the number of pet owners in China continues to grow, it is the younger population, aged between 19-30, who have become the primary pet-keeping population.
According to Wang Jingqi, co-founder of Marsmart pet stores in Beijing, the surge in pet ownership among young people living alone has fuelled this change, with pets offering emotional support and help with work-life balance.
The Asia Pet Alliance Institute argues that this demographic shift has led to more owners “regarding pets as members of the family,” changing the way they spend their money in the retail sector. Jingqi has felt the impact, putting Marsmart stores’ impressive 2 million yuan ($250,000) monthly turnover down to Gen Z’s deep desire for companionship and engagement.
Masmart has also strengthened its environmental credentials, partly as a response to Gen Z’s strong preference for eco-friendly and sustainable products. As such, the popularity of its green pet food and biodegradable waste products continues to show considerable growth.
Meanwhile, a shift towards domestically produced goods mirrors a broader trend in Chinese consumer behavior, with McKinsey research indicating that quality and provenance are now prioritized over imports. With this trend in mind, Jingqi and her team have designed various products with distinct Chinese characteristics. Pet spoons, for example, are crafted in auspicious cloud shapes, drawing inspiration from traditional Chinese mythology.
“Young pet owners increasingly favor high-quality domestic products,” says Jinqi. “Aligning with the growing appreciation for Chinese culture and home-made products.”
The future of consumerism
The impact of China’s Gen Z is unmistakable. With a value-led, environmentally conscious, and quality-seeking approach, retailers are being given a blueprint for how they can adjust to shifting consumer behavior and capitalize on both a new wave of domestic demand and a more vibrant and dynamic consumer landscape.
