Min Li rarely visits shopping centres. When she arrives, however, she makes a beeline for the basement, slipping past the first floor, which is surrounded by upscale stores like Gucci, Chanel, Louis Vuitton, and others, according to a report by CNBC..

The 26-year-old claims that the first floor is excessively costly. She has partners in this belief.

The “B1B2” economy refers to the growing practise of Chinese youth dining and shopping in mall basement spaces, which has been dubbed by social media.

The grocery, cheap gift and tourist shops, clothing businesses, and other reasonably priced consumer product retailers like Miniso and Luckin Coffee are usually located on the basement floors (B1, B2).

“Landlords try to put anchor tenants like LV, Apple or Starbucks on pricier real estate on the ground or first floor,” says Shaun Rein, managing director of China Market Research Group. Historically, higher-end shops have attracted more footfall, but China’s weak economy means the cheaper brands are now drawing the crowds, he adds.

For young Chinese people in 2024, trading down is the name of the game. Young people are purchasing Luckin coffee instead of Starbucks.

On the Chinese social media site Weibo, the hashtag “#Young people only go shopping at B1B2″” has been popular recently.

The sentiment of Chinese millennials is encapsulated in the response to a Weibo user’s post on how she and her friends typically shop exclusively on the basement floors: “Everything we can afford is underground!”

Anything that isn’t located in the basement levels is regarded as being “in heaven,” denoting that it is inaccessible.

“The name of the game for Chinese youth in 2024 is trading down. Instead of Starbucks, youth are buying Luckin coffee,” Rein says.

China’s economy has not recovered quickly from the Covid pandemic, and Moody’s downgraded the nation’s credit outlook to “negative” on Tuesday. Insufficient spending has propelled the “B1B2” trend.

“A lot of China’s youths are struggling to find a stable job, or earning sufficient money to support a decent life for themselves,” says Jia Miao, an assistant professor of sociology at the New York University Shanghai. They are compelled to save more, she adds.

According to a poll conducted in June, people with college degrees will make an average monthly wage of 5,990 Chinese yuan ($845.04) in 2022.

Only 6.9% of respondents to the MyCOS Research study, which was funded by Citic Industrial, a state-owned investment corporation, reported receiving a starting monthly wage of more than 10,000 yuan ($1,410.76).

China has not released youth unemployment data since August, following a run of historically high readings.

“Before, young people [could] afford to buy some luxuries by using six months of their salary. But now even if they want to use [that] six months, they cannot buy the thing they want anymore,” says Chung Chi Nien, a chair professor at Hong Kong Polytechnic University.

According to a McKinsey analysis, China’s retail sales have been dismal since the start of the Covid epidemic in 2020, and the country’s consumer expenditure growth is predicted to slow down much more.

Massive online retailers For the second year in a row, Alibaba and JD.com declined to provide the total sales data for Singles Day, China’s largest annual shopping event.

According to Miao, an increasing number of Chinese people are choosing to be single, which also implies that more people are dining alone. Frequently, this means forgoing gourmet dining at establishments located six or seven stories up in a mall.

While shopping malls in suburban areas are often the place to get discount basements, several tier-1 cities, including Shanghai and Guangzhou, have pricey retailers located in their basement floors, she said.

Wanda Group, the primary mall operator in China, did not reply to a request for comment from CNBC.

People simply have a sense that the future is unpredictable. According to Miao, young people would likely need to adapt to the current economic climate for a number of years.

According to Min, she and her friends sometimes visit malls’ third and fourth floors, which are home to other, comparatively less expensive apparel businesses. There, they will try on the clothing, spin it around, and then return it to the rack while searching the internet for less expensive options.

“I think the future isn’t that hopeful, but we still work very hard to get what we want,” she says.

“In China here, most of us, and to be honest, everyone, feel the pressure caused by the economy, Covid, and the large amount of aged population,” she adds.

(Adapted from CNBC.com)

Categories: Economy & Finance, Strategy