Deflation fuels price wars in China as luxury goods hit bargain prices

China’s deepening deflation is reshaping consumer habits and forcing dramatic price cuts, with luxury goods now selling for as little as $30, and second-hand markets booming as economic pressures weigh on household spending.

A Coach handbag once sold for ¥3,260 ($454) can now be picked up at Beijing’s newly opened Super Zhuanzhuan store for just ¥219 ($30), as demand slumps and sellers flood the market.

Driving the trend is a combination of falling incomes, collapsing property values, and growing overcapacity in multiple industries, from autos to coffee. Consumer prices dropped 0.1% year-on-year in May, according to official data released Monday, reinforcing fears that deflation may become entrenched.

"The economy is definitely in a downturn," said 28-year-old Mandy Li, whose wage was cut by 10%. "My family's wealth has shrunk by a lot."

Luxury buyers like Li are increasingly turning to second-hand goods, a segment growing over 20% annually, but now oversupplied, leading to deep discounts well beyond the usual 30–40% markdowns.

Zhuanzhuan and other platforms — including Xianyu, Feiyu, Ponhu, and Plum — now commonly offer 70–90% off original prices on branded items. Some sellers say they are being pushed to the edge.

“It’s 20% more sellers every year, but buyers haven’t increased,” said one business owner anonymously. “Outside of Shanghai and Beijing, there’s no room for growth — many new stores will shut down.”

Experts warn these price wars are unsustainable, threatening the survival of businesses and possibly accelerating job losses — which could deepen the deflation spiral.

“The middle class — their salary has really decreased,” the second-hand store founder said. “That’s the number one reason we’re seeing these trends.”

Even luxury owners like Professor Riley Chang are considering selling but find the market unwelcoming.

“They push your price as low as possible,” she said. “It’s not worth it.”

Economists caution that while flash sales and ultra-cheap menus may seem good for consumers in the short term, the long-term effect could be harmful if business closures and job losses mount, further stifling economic recovery.

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