Today, we’re diving deep into something way more fascinating and economically significant: the explosive consumer power of China’s smaller cities and rural areas – what we in the know are starting to call the “sinking market.”
For years, when we talked about Chinese consumption, the spotlight was always on Beijing, Shanghai, Guangzhou, and Shenzhen – the Tier 1 cities, the glittering metropolises. But hold up, y’all, because a seismic shift is underway. This past Spring Festival, China’s most important holiday, it wasn’t the usual suspects hogging the limelight. Nope, it was the county-level markets, the smaller cities and towns you might not even find on a map, that were setting the cash registers ringing.
We’re talking about folks in smaller towns snapping up SK-II skincare like it’s going out of style, dropping thousands of yuan on fancy down jackets, and loading up their fruit bowls with cherries and durian – fruits that used to be considered luxury items. Heck, even Sam’s Club goodies, those bulk-sized treasures beloved by urbanites, are now popping up on the shopping lists of young people in these so-called “lower-tier” markets. This Spring Festival was a bonanza for businesses in these areas, a true testament to the vibrant and diverse consumption habits taking root beyond the gleaming skylines of the mega-cities.
It’s a fascinating paradox: while urban youth in the big cities might be tightening their belts and embracing frugality amidst economic uncertainties, their counterparts in smaller towns are on a spending spree. And it’s not just anecdotal. Recent data from QuestMobile, a leading mobile intelligence provider, paints a clear picture. Their “2024 Small Town Youth Consumption Insight Report” reveals that thanks to the robust growth of the county-level economy, “small-town youth” are stepping into the limelight as the driving force behind this consumption upgrade in these areas.
Let’s break down the numbers. This report defines “small-town youth” as the primary consumer group in non-Tier 1 and Tier 2 cities. We’re talking about a massive demographic – 307 million monthly active users, representing nearly half of the total market. And get this: over 80% of them spend more than 1,000 yuan (around $140 USD) online every month. That’s some serious purchasing power and a clear indication of their willingness to spend.
Where are they spending all this moolah? According to the report, integrated e-commerce platforms are their go-to shopping destinations. And guess which platform reigns supreme amongst these “small-town youth”? You got it – Pinduoduo. As of September 2024, Pinduoduo boasts the highest penetration rate among billion-level integrated e-commerce platforms in this demographic. When asked why they choose Pinduoduo, over 80% of these young consumers, without any prompting, pointed to Pinduoduo’s rich user reviews, detailed product descriptions, and other service features that help them make informed purchase decisions efficiently.
Platforms like Pinduoduo are playing a pivotal role in this upward trajectory of material consumption among smaller-town residents. They’re not just marketplaces; they’re catalysts, enabling brands to tap into this previously overlooked demographic and ride the wave of consumption upgrade in the “sinking market.”
Pinduoduo: The Secret Weapon in Reaching County-Level “Ladies Who Lunch” and Returning Graduates
To really understand this phenomenon, let’s zoom in on some real-life examples. Meet Gao Yiyi, a 28-year-old from a county-level city in eastern Henan province. A graduate of Tianjin Normal University, she spent a year teaching in Beijing before returning to her hometown to take up a coveted teaching position at a top local elementary school.
Gao Yiyi has witnessed firsthand the rapid economic development of her hometown and the evolving consumption patterns of its residents. She remembers vividly her first month back home when a high school classmate shared a Pinduoduo group-buying link in their WeChat group. It was for a well-known brand of air fryer, significantly cheaper than retail prices. Coincidentally, she was in the market for one.
Now, Gao Yiyi wasn’t a Pinduoduo newbie. During her university years and time in Beijing, she’d used the platform to buy agricultural products, flowers, and small items like earrings, hair clips, tissues, and kitchenware – usually spending just a few bucks each time. But buying a home appliance, especially a pricier one, on Pinduoduo? That was uncharted territory. She was skeptical. Could a product so cheap really be reliable?
Her doubts led her to question the classmate who shared the link. Turns out, everyone around her was using Pinduoduo as their primary shopping platform. They swore by it, vouching for its “10 Billion Subsidy” program, which not only offered incredibly low prices but also guaranteed authentic products.
This revelation was a major eye-opener for Gao Yiyi. She knew Pinduoduo was huge, especially in non-Tier 1 markets, leveraging China’s vast manufacturing capabilities. But she hadn’t fully grasped the platform’s strategic shift since 2019, when it launched the “10 Billion Subsidy” initiative, attracting a flood of domestic and international brands across categories like smartphones, home appliances, digital products, cosmetics, baby products, apparel, sportswear, jewelry, home goods, pet supplies, and more.
On her classmate’s enthusiastic recommendation, Gao Yiyi took the plunge and bought that air fryer. And just like that, she was hooked. Her journey from skepticism to becoming a Pinduoduo “true believer” had begun.
From a celebratory iPhone to mark her first year in her new job, to La Mer skincare as a birthday treat, to gold jewelry for her engagement, and finally, to all the appliances and a robot vacuum cleaner for her new marital home – Pinduoduo became her one-stop shop for everything.
Then, in 2023, Gao Yiyi embraced a new role – motherhood. And guess where she turned to for baby supplies? You guessed it, Pinduoduo. Hundreds of yuan for a can of Beingmate baby formula, name-brand Balabala children’s clothing for under 100 yuan, rice cereal for mere pennies, first-birthday decorations – her endless order list on Pinduoduo is like a cherished photo album, documenting her child’s milestones.
Then there’s Liu Lin, a 32-year-old who represents another facet of the “small-town youth” consumer – the local entrepreneur. Unlike Gao Yiyi, who returned from a bigger city, Liu Lin has always called her county-level city home. After graduating from vocational high school with a cosmetology degree, she saved up enough to open her own beauty salon in town, becoming her own boss.
In recent years, the “treat yourself” consumption trend has swept through county-level cities, and Liu Lin’s business is booming. In today’s parlance, she’s a bona fide “county-level tai tai” – a lady of leisure and means, county-style.
Despite her financial comfort, Liu Lin isn’t exactly idle. She’s hands-on with her salon, often doing live-streaming to promote her services. A lot of her personal shopping is done online. As a heavy Pinduoduo user, she spent over 100,000 yuan (around $14,000 USD) on the platform last year alone. Her purchases range from a ten-thousand-yuan refrigerator to a several-thousand-yuan mattress, to Coach handbags and Huawei smartphones for her mother-in-law and mother.
The burgeoning consumption power of county-level markets is drawing businesses to expand beyond Tier 1 and 2 cities. Starbucks, KFC, Heytea, and other chain brands that were once exclusive to larger cities are now making their presence felt in county towns.
However, many brands are still in the exploratory phase, testing the waters with single stores. Expansion takes time, and some brands are still hesitant, adopting a wait-and-see approach. Their store coverage in these areas remains limited.
The QuestMobile report highlights that “small-town youth” primarily rely on e-commerce platforms for brand information and purchase decisions. They show a strong preference for integrated e-commerce apps, with Pinduoduo being the most favored. In terms of user engagement, the report indicates that “small-town youth” spend more time per month on Pinduoduo than on any other e-commerce app – averaging a whopping 323.5 minutes.
The stickiness of Pinduoduo is evident in the shopping habits of Gao Yiyi and Liu Lin. But what’s the secret sauce?
As online shopping becomes deeply ingrained in their lives and their disposable incomes rise, “small-town youth” are displaying formidable purchasing power and a strong desire to consume. However, this doesn’t translate to reckless spending.
The QuestMobile report also reveals that quality and safety are the top concerns for “small-town youth” when buying branded goods online. Specifically, product quality, price, and safety factors all exceed 50% in terms of influence on their purchase decisions.
This aligns perfectly with the experiences of Gao Yiyi and Liu Lin, who both subscribe to the “buy good quality, but not necessarily expensive” consumption upgrade philosophy. And Pinduoduo, with its focus on value and quality, fits that bill perfectly.
Decoding “Small-town Youth”: From Consumption Upgrade 1.0 to 2.0
So, who exactly are these “small-town youth”? Broadly speaking, they are young people living in Tier 3 and lower cities, county towns, and rural townships in China. To put it in perspective, China has 288 Tier 3 and lower cities and 1,335 county-level cities.
For a long time, due to China’s urban-rural divide, this demographic remained largely invisible to mainstream society. Their characteristics and consumption patterns were rarely studied. They were the nameless masses, often relegated to the background, appearing only as characters in movies and literature.
Their emergence into the public consciousness can be traced back to 2015. The movie Monster Hunt became a box office sensation, grossing nearly 2.5 billion yuan and topping the annual charts. It was the first Chinese film to break the 2 billion yuan mark. And here’s the kicker: over 40% of its box office revenue came from young people in Tier 3, 4, and 5 cities.
Their astonishing consumption power continued to fuel box office hits like Ex-File 3: The Return of the Exes and Wolf Warrior 2. By the 2018 Spring Festival film season, box office takings from Tier 3 and lower cities accounted for 54.7% of the national total, with cinema visits reaching 55.4% – a decade-high peak at the time.
This unique phenomenon in Chinese cinema history gave rise to the term “small-town youth” – a name that resonated and captured their growing cultural and economic influence.
But even before their cinematic breakthrough in 2015, “small-town youth” were already reshaping the e-commerce landscape.
In that year, while major e-commerce platforms were locked in fierce competition for market share in Tier 1 and 2 cities, Pinduoduo shrewdly recognized the untapped potential of the “Fifth Ring Road and beyond” market (a Chinese internet slang referring to areas outside of Beijing’s Fifth Ring Road, symbolizing lower-tier cities and rural areas). They focused their attention on the vast “small-town youth” demographic, offering a wide range of goods and pioneering a “more savings, more fun” social group-buying model. This opened the door to “Consumption Upgrade 1.0” for these consumers.
Back then, the prevailing narrative of “consumption upgrade” was centered around brands, premium prices, and Tier 1 cities. Pinduoduo, with its focus on value and lower prices, was often seen as a counter-trend, even labeled as a symbol of “consumption downgrade.”
In response to these criticisms, Pinduoduo offered its now-famous definition of “consumption upgrade”: “Consumption upgrade is not about making Shanghai residents live like Parisians. It’s about making people in Anqing, Anhui province, have access to kitchen paper towels and good quality fruit.”
And this poignant statement: “Regarding consumption downgrade, especially in material consumption, no one actively chooses to downgrade. It’s about ‘not having a flush toilet, but wanting a flush toilet.’”
For elites in Tier 1 cities, who already have kitchen towels and flush toilets, this kind of “consumption upgrade” might seem trivial. But for someone like Zhang Di, a “small-town youth” who experienced the convenience of these everyday items for the first time, it was a tangible improvement in their quality of life, bringing them closer to the living standards of their urban counterparts.
To this day, Zhang Di vividly remembers his first purchase on Pinduoduo – a box of dental floss for less than two yuan. It was a revelation, introducing him to a better alternative to toothpicks.
Through Pinduoduo, Zhang Di has bought Xinjiang white apricots, Menglian avocados, and Hainan pineapples for his 70-year-old grandfather – fruits he had never tasted before. His grandfather often praises his grandson’s filial piety, remarking, “My life hasn’t been in vain.”
The proliferation of mobile internet has given ordinary people the same access to information as those in Tier 1 cities, effectively flattening the once-hierarchical world of information access. However, a significant gap remained in the availability and affordability of goods between Tier 4-5 cities and metropolises like Beijing and Shanghai. Pinduoduo bridged this gap by leveraging factory-to-consumer (C2M) direct sales to improve price-performance ratios, providing ordinary consumers with affordable, upgraded lifestyle products, fulfilling both material and spiritual needs.
When “small-town youth” completed “Consumption Upgrade 1.0” through Pinduoduo, the platform’s core value of “inclusive benefit” – 普惠 (pǔ huì) – became tangible.
In 2018, Pinduoduo went public on NASDAQ, achieving the fastest IPO for a Chinese internet company in just 2 years and 11 months. This happened when many believed the Chinese e-commerce landscape was already set in stone, history written. It was the collective action of countless “small-town youth,” voting with their wallets, that made it possible.
In June 2019, Pinduoduo launched its “10 Billion Subsidy” program, declaring that it wasn’t just a slogan, but a genuine investment of every penny. The program’s debut during the “Double 11” shopping festival was a massive success, selling 400,000 iPhones 11s and 1,000 domestically produced cars. The daily active users accessing the “10 Billion Subsidy” portal surpassed 100 million.
Outsiders saw this move as Pinduoduo’s strategic push to expand beyond the “Fifth Ring Road” and into the urban centers. Zhang Di, the “small-town youth,” may not grasp the intricacies of the business world, but he understood that brands represent better quality and greater safety.
As the “10 Billion Subsidy” program gained momentum, more and more branded products became available on Pinduoduo. Zhang Di started buying Adidas shoes, Bananain underwear, and other branded items. From initially satisfying basic needs with generic products, he was now enjoying a quality lifestyle with branded goods, thanks to the “10 Billion Subsidy.” Zhang Di had successfully transitioned from “Consumption Upgrade 1.0” to “2.0” on Pinduoduo.
The QuestMobile report confirms this trend, showing that “small-town youth” are increasingly buying branded goods frequently. Over 90% of consumers purchase branded products at least once or twice a month. Compared to 2023, 43.1% of consumers have increased their frequency of branded goods purchases. Furthermore, while 16.5% of “small-town youth” are still primarily buying generic brands, they are gradually upgrading to branded consumption. These new brand demands are mainly met through integrated e-commerce channels, and a significant proportion of consumers plan to increase their purchase frequency of branded goods in the coming year.
Changes in lifestyle and increased brand awareness are the key drivers behind this growing frequency of branded consumption among “small-town youth.” For those still buying generic brands, platform and brand promotional activities play a crucial role in encouraging them to increase their branded consumption.
In September last year, Pinduoduo launched the “New Quality Merchant Support Plan,” investing 10 billion yuan in resources to provide comprehensive support across product development, marketing, operations, and supply chain for innovative and high-quality merchants and brands. This means even more “new quality supply” will be available on the platform.
And with Pinduoduo’s continued support, the consumption upgrade of “small-town youth” is poised for even more dramatic and transformative changes.
“Get Small-town Youth, Get the Future”: The Strategic Imperative
Business follows the flow of people.
If in the past, many brands were obsessed with targeting urban middle-class consumers, today, “small-town youth” with their robust spending power are becoming the new engine for growth.
To win over “small-town youth,” you have to understand their preferences.
The QuestMobile report points out that compared to celebrity endorsements or social media influencer recommendations, recommendations from family and friends carry more weight with “small-town youth” in their purchase decisions. In other words, higher penetration rates and e-commerce models that integrate social elements are more effective for brands to quickly build influence among this demographic. The report data also shows that 70.5% of “small-town youth” get brand information through e-commerce platforms.
On Pinduoduo, domestic brands like Anta, Yili, 心相印 (Xinxiangyin – a household paper brand), and 小天鹅 (Little Swan – a home appliance brand) have garnered significant attention from “small-town youth.” In the 3C (computer, communication, consumer electronics) category, domestic smartphone brands like OPPO, Huawei, vivo, Honor, and Xiaomi are highly favored.
Why? These domestic brands were among the early adopters of Pinduoduo. Fueled by Pinduoduo’s “10 Billion Subsidy” and massive traffic, they directly connected with the vast “small-town youth” consumer base and established brand recognition early on.
For “small-town youth,” Pinduoduo is more than just a shopping platform; it’s a brand amplifier. Based on their trust in Pinduoduo, they are more likely to develop a positive perception of brands featured on the platform.
Here’s an interesting anecdote: before the renowned fast-fashion brand H&M officially joined Pinduoduo in October last year, Liu Lin and Zhang Di, among others, were vaguely familiar with the brand. It wasn’t until they saw it on Pinduoduo that they thought, “Oh, this must be a decent brand.”
Gao Yiyi has become accustomed to this perception. Once, while traveling abroad, she bought a cosmetics product as a souvenir for a close friend. Later, she learned that her friend couldn’t find the brand on Pinduoduo’s “10 Billion Subsidy” section and assumed it was an “unknown brand.”
Initially, Gao Yiyi felt a bit uncomfortable with this, but now, she fully understands. In her hometown, Pinduoduo is the benchmark of credibility.
From initial skepticism to “actively joining,” brands’ attitudes towards Pinduoduo have also succumbed to the “true fragrance law” – a Chinese internet slang for something initially disliked but later found to be surprisingly good or appealing.
The founder of a new consumer brand that once focused heavily on Tier 1 cities revealed that before expanding into county-level offline channels last year, they first opened an official flagship store on Pinduoduo to test the waters. By participating in “10 Billion Subsidy” and “flash sale” events, they quickly gained brand awareness among “small-town youth,” bolstering their confidence to deploy offline in non-Tier 1 markets.
This industry insider noted that while other traditional e-commerce platforms can also reach “small-town youth,” fierce competition for traffic has driven up customer acquisition costs, making it increasingly difficult and less cost-effective to acquire new users.
In contrast, Pinduoduo, with its extensive reach into county-level markets and simple yet effective operational tools, is becoming a key channel for brands to penetrate these markets.
As Tier 1 and 2 cities face growth bottlenecks, “get small-town youth, get the future” and “get Pinduoduo, get small-town youth” have become the guiding principles for businesses seeking upward momentum. The “sinking market” is no longer sinking; it’s rising, and it’s reshaping the future of consumption in China.
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