In deflation hit China one store holds flash sales four times a day

BEIJING/HONG KONG – Mr Leo Liu, manager of the sprawling Wankelai store in the Chinese capital of Beijing, spoke into a microphone, announcing progressively steeper discounts in a flash sale, until he finally sold a cotton jacket and a women’s undershirt.

In a symptom of China’s deflationary economy, he eventually found a customer for the jacket at 20 yuan (S$3.70),or less than a tenth of its initial price of 239 yuan, but he ended up giving away the 39 yuan undershirt, for which nobody wanted to pay.

The exercise was one of four each day in the store that sells clothing, snacks and basic household products just outside Beijing’s financial district.

“We do flash sales to reduce inventory pressure,” said Mr Liu. “We run a small-profit, quick-turnover business model.”

While his store was making “thin” profits, it sold some items at a loss, he said, adding:“We serve ordinary people.”

Chinese consumers grappling with uncertainty about jobs and incomes are increasingly turning to discount stores at a time of expanding industrial capacity in the face of sluggish household demand.

But analysts say the success of such businesses is stoking deflationary pressures, which can start to drag on growth as their popularity grows at the expense of other retailers, as Japan experienced in the 1990s.

“The broader shift towards more value-for-money purchases will play a role in deflationary pressures,” said Ms Lynn Song, chief Greater China economist at ING.

“This sort of intense price competition likely adds some pressure on more traditional retail models as well.”

Data on March 9 showed China’s consumer price index missed expectations in February, falling by 0.7 per cent from a year earlier, while producer prices fell by 2.2 per cent, stretching a run of negative readings dating back to September 2022.

While the growing industrial