How China’s ‘emotional spending’ trend is transforming shopping malls
News Summary
In China, consumer spending patterns are shifting, with shopping malls adapting to a new reality: consumers are spending less overall but are more willing to pay for small, emotionally satisfying purchases. This trend, dubbed 'emotional spending,' is reshaping the landscape of Chinese shopping malls. For instance, in a prime Wuhan mall location, a Pop Mart store specializing in collectible toys has replaced an Air Jordan outlet, now sitting alongside high-end brands like Tiffany & Co and Prada. This isn't an isolated case, as collectible toy makers like Pop Mart, Jellycat, and Top Toy are increasingly occupying premium retail spaces. Jacky Zhu, Head of Retail Research at JLL China, notes that this pursuit of non-functional satisfaction extends to milk tea, perfume, outdoor gear, and climbing gyms, with malls also enhancing experiences through greenery and community spaces. China's economy has faced sluggish consumer demand since the Covid-19 pandemic reversed a period of rapid growth, leading to a slow economy and uncertain job prospects. The country is also in its fifth year of a property downturn, which has impacted household wealth. Retail sales grew by only 3% in September, a significant drop from the over 10% growth seen in most years prior to the pandemic.
Background
Since the Covid-19 pandemic, China's economy has faced multiple challenges, including persistent sluggish consumer demand, uncertain job prospects, and a property market that has entered its fifth year of downturn, significantly impacting household wealth. Amidst these macroeconomic headwinds, retail sales growth in China has decelerated sharply from double-digit levels seen pre-pandemic. For instance, retail sales growth in September 2025 was only 3%, a far cry from the over 10% typical in the prior two decades. This environment has prompted a shift in consumer behavior, emphasizing emotional value over large functional purchases.
In-Depth AI Insights
What are the long-term implications of the 'emotional spending' trend for China's retail real estate and investment in commercial properties? - This trend signals a structural shift in mall formats from traditional luxury and durable goods sales towards experiential and small-ticket, high-frequency consumption. - Mall tenant mixes will fundamentally change, with non-traditional retail (e.g., trendy toys, F&B, entertainment, outdoor gear) occupying more prime locations, putting greater pressure on traditional apparel and jewelry brands and reducing their rental bargaining power. - Malls may need to increase investment in creating immersive environments, community interaction, and 'experience-driven' spaces to attract foot traffic, though per-square-foot revenue and average transaction values might face challenges. Does this shift in consumption patterns represent a structural change in Chinese consumer psychology or a temporary response to current economic uncertainty? - It is likely both. Structural factors include younger generations' greater pursuit of personalization, spiritual satisfaction, and social experiences, alongside the maturation of digital-native spending habits. - Cyclical factors stem from wealth erosion due to the property downturn and job market uncertainties, leading to consumption downgrading and risk aversion, with consumers seeking 'small joys' to alleviate anxiety. - Investors should monitor the persistence of this trend; if economic recovery remains weak, emotional spending may become a long-term mainstream. If the economy rebounds strongly, some spending might revert to larger items and premium durables. How might this evolving consumer landscape influence the investment and operational strategies of both domestic and international brands operating in China? - Brands must re-evaluate their product portfolios, developing more small-ticket, personalized, and emotionally resonant items, and strengthening IP collaborations. - Emphasize the experiential function of physical stores, transforming them into social spaces or brand culture showcases, rather than mere points of sale. - Traditional high-end brands need innovative strategies to integrate into this trend, such as launching co-branded or limited-edition collections, or establishing more interactive stores to attract consumers seeking 'non-functional satisfaction.' - Expect trendy toy, cultural creative, niche fragrance, coffee/tea, and emerging outdoor sports brands to gain more capital interest and market share.