China’s Middle-Class Consumption Shift: How Outlets and Warehouse Clubs Are Outpacing Luxury Malls

5 mins read
October 16, 2025

China’s retail sector is undergoing a seismic transformation as the middle class redefines spending priorities, moving away from traditional luxury malls toward more value-oriented formats. This middle-class consumption shift is driven by a desire for better prices, efficiency, and experiential shopping, leading to significant financial declines for established players. Key takeaways include:

  • High-end malls like those operated by 太古地产 (Swire Properties) and 北京SKP (Beijing SKP) are experiencing steep profit drops, with some net profits falling over 70%.
  • Alternative retail models, including 奥莱 (outlets), 山姆 (Sam’s Club), and 免税店 (duty-free shops), are capturing middle-class spending through discounts, membership benefits, and tax-free advantages.
  • Traditional百货 (department stores) such as 王府井 (Wangfujing Group) are struggling to adapt due to outdated business models and slow innovation.
  • This middle-class consumption shift reflects broader economic trends, including increased consumer rationality and the influence of digital platforms on shopping behavior.
  • Investors and retailers must prioritize agility and customer-centric strategies to thrive in this evolving landscape.

The Unraveling of High-End Mall Dominance

Once the cornerstone of urban luxury shopping, high-end malls across China are facing an unprecedented crisis. The middle-class consumption shift is not a temporary fluctuation but a structural change, as consumers prioritize value and practicality over prestige. Data from industry reports underscores this trend, with 73% of百货 (department store) companies reporting sales declines in 2024, and 72% facing net profit pressures. This middle-class consumption shift is reshaping the retail ecosystem, forcing legacy players to reconsider their strategies.

Financial Strain on Industry Leaders

Major mall operators are witnessing alarming financial downturns. 太古地产 (Swire Properties), known for iconic properties like Sanlitun and Chengdu TaiKoo Li, reported modest retail sales growth of just 2% in the first half of 2025, despite maintaining 100% occupancy rates. Similarly, 北京SKP (Beijing SKP), once a global luxury retail leader, saw revenue fall by 11.54% and net profit plummet by 171.83% in H1 2025, according to its parent company 北京华联商厦股份有限公司 (Beijing Hualian Department Store Co., Ltd.). 恒隆地产 (Hang Lung Properties) also experienced a 19% drop in total revenue during the same period, highlighting the widespread nature of this middle-class consumption shift. These figures reveal a critical disconnect: high foot traffic no longer translates to high sales, as consumers browse without buying.

Changing Consumer Priorities

The middle-class consumption shift is rooted in evolving values. Shoppers are increasingly rational, seeking tangible benefits over brand cachet. Where they once indulged in impulse purchases at luxury counters, they now compare prices online, use malls as fitting rooms, and complete transactions through discount channels. This behavior is fueled by economic uncertainties and greater access to information, making consumers more discerning. The phrase ‘花得值才是硬道理’ (spending wisely is what matters) encapsulates this new mindset, driving the exodus from high-end retail spaces.

The Ascendancy of Value-Driven Retail Formats

As high-end malls falter, alternative retail models are thriving by aligning with the middle-class consumption shift. Outlets, membership clubs, and duty-free shops offer the perfect blend of affordability, convenience, and perceived quality, capturing a growing share of consumer wallets. These formats address key pain points: the need for discounts without sacrificing brand appeal, efficiency in shopping trips, and access to luxury goods at lower prices. This middle-class consumption shift is not about spending less but spending smarter, and these retailers are cashing in.

Outlets: The Epitome of Smart Shopping

奥莱 (Outlets) have become a preferred destination for middle-class shoppers, with sales reaching 1800 billion yuan across 205 quality outlets in the year to June 2025, an 8.9% increase year-over-year. Foot traffic surged to nearly 9 billion visits, up 12.5%, according to 北京商报 (Beijing Business Today). Outlets succeed by offering authentic brands at discounted prices, satisfying the desire for both economy and status. For example, a consumer might purchase a 阿迪达斯 (Adidas) jacket at a fraction of the mall price, reinforcing the mantra ‘钱包要省,但面子不能丢’ (save money, but don’t lose face). This middle-class consumption shift toward outlets underscores a broader rejection of overpriced retail in favor of calculated value.

Warehouse Clubs and Duty-Free: Efficiency and Exclusivity

山姆 (Sam’s Club) leverages a membership model to appeal to time-pressed middle-class families. With eight stores in China generating over $500 million in annual sales each and membership jumping 35% during the 2025 Spring Festival, it exemplifies the middle-class consumption shift toward efficiency. Members pay a 268 yuan fee for curated, bulk products that reduce decision fatigue and shopping time. Similarly, 免税店 (duty-free shops) in locations like Hainan recorded 309.4 billion yuan in sales in 2024, with 1.3 billion yuan on New Year’s Day 2025 alone, per 央视新闻 (CCTV News). These venues provide luxury items at tax-free prices, blending indulgence with savings. This middle-class consumption shift highlights a preference for experiences that offer both practical and emotional rewards.

Case Study: Wangfujing Group’s Downfall

王府井 (Wangfujing Group), once hailed as ‘新中国第一店’ (New China’s First Store), epitomizes the struggles of traditional retailers amid the middle-class consumption shift. Its H1 2025 financials reveal a 6.74 billion yuan revenue contraction and a 72.33% nosedive in net profit, signaling deeper operational issues. The group’s reliance on联营 (joint operations) and租赁 (leasing) models leaves it vulnerable to market shifts, as it lacks control over pricing and product selection. This middle-class consumption shift has exposed the limitations of its ‘二房东’ (sublandlord) approach, where it depends on tenant brands rather than building its own competitive advantages.

Inadequate Adaptation Efforts

王府井 (Wangfujing Group) has attempted reforms, such as venturing into免税 (duty-free) business after securing a license in 2020, but these initiatives contribute minimally to overall revenue. In H1 2025, duty-free operations accounted for just 2.52% of total sales, failing to offset declines in core segments. Store renovations have been sporadic, with only a few locations upgraded to modern standards. The middle-class consumption shift demands rapid innovation, yet 王府井 (Wangfujing Group) remains tethered to outdated practices, such as homogeneous store layouts and limited digital integration. Without a compelling value proposition, it cannot recapture the middle-class audience it has lost.

Implications for Investors and the Broader Economy

The middle-class consumption shift carries significant ramifications for China’s equity markets and economic health. Retail stocks tied to traditional malls may face continued volatility, while companies embracing value-centric models could see growth. Regulatory factors, such as policies promoting domestic consumption and digital commerce, will influence this transition. Investors should monitor consumer sentiment indices and retail sales data for signals of further middle-class consumption shift, adjusting portfolios to include agile retailers and omnichannel platforms.

Economic Indicators and Market Dynamics

Macroeconomic pressures, including slower GDP growth and inflationary trends, are accelerating the middle-class consumption shift. The中国人民银行 (People’s Bank of China) has implemented measures to stimulate spending, but consumers remain cautious. In this environment, retailers that offer transparency, customization, and community engagement are gaining traction. For instance, the success of奥莱 (outlets) and山姆 (Sam’s Club) underscores the importance of aligning with the middle-class consumption shift toward rationalism. Investors can leverage resources like the National Bureau of Statistics for up-to-date retail metrics to inform decisions.

Strategies for Navigating the New Retail Landscape

To capitalize on the middle-class consumption shift, retailers and investors must adopt proactive approaches. Traditional malls can learn from disruptors by enhancing customer experiences, developing private labels, and integrating technology. For example, implementing AI-driven personalization or hosting exclusive events can recreate the ’emotional value’ that middle-class shoppers seek. This middle-class consumption shift is an opportunity for innovation, not just a threat to legacy models.

Actionable Recommendations

  • Embrace Omnichannel Retailing: Blend online and offline touchpoints to meet consumers where they are, offering seamless options like buy-online-pick-up-in-store.
  • Develop Exclusive Products: Launch自有品牌 (private labels) to differentiate offerings and build loyalty, as seen with山姆 (Sam’s Club)’s Member’s Mark line.
  • Enhance Experiential Elements: Transform stores into destinations with cafes, workshops, and digital installations to encourage dwell time and social sharing.
  • Optimize Pricing Strategies: Use dynamic pricing and membership tiers to appeal to value-conscious shoppers without eroding brand equity.
  • Leverage Data Analytics: Monitor consumer behavior trends to anticipate shifts and tailor marketing efforts accordingly.

Embracing the Future of Retail

The middle-class consumption shift is a definitive moment for China’s retail sector, signaling a move from ostentation to optimization. High-end malls must evolve beyond their role as mere landlords and become curators of lifestyle experiences. By focusing on authenticity, value, and engagement, they can reconnect with the middle class. For investors, this middle-class consumption shift presents chances to back innovative companies that understand modern consumer psyche. The path forward requires agility and a commitment to meeting the nuanced demands of today’s shopper. Act now by reevaluating retail investments and supporting businesses that prioritize customer-centric growth in this new era.

Eliza Wong

Eliza Wong

Eliza Wong fervently explores China’s ancient intellectual legacy as a cornerstone of global civilization, driven by a deep patriotic commitment to showcasing the nation’s enduring cultural greatness.