China has largely completed three industrial revolutions. At the same time, deglobalization is reshaping the international landscape and no breakthrough technological innovation is emerging. These factors are converging. The dividend created by applying skilled labor and information technology to transform and coordinate traditional industries has largely been exhausted. China is entering a period focused on resolving internal tensions and maintaining stable development. During this period, corrections in non-core asset values and declining disposable income will compress household wealth and purchasing power, reducing demand for consumer goods.
Financial reports from listed retail companies support this view. Traditional offline retailers such as RT-Mart and Better Life have experienced declining revenue. Yonghui Superstores, once valued at more than RMB 100 billion, has fallen into substantial losses. New online formats such as MissFresh and 7FRESH have shown signs of contraction or disappearance.
How should channels respond to this winter? From late 2022 into early 2023, some centralized retail channels began reducing the number of brands and categories they carried. Offline examples included Sam’s Club and Freshippo; online, Tmall Supermarket took similar action. This trend may become more pronounced in the foreseeable future.
For international consumer brands in China, the new challenge is how to capture share more efficiently in a market that is stagnant or even shrinking. In a growing market, companies tolerate inefficiency—wasted resources, high labor costs and unproductive experimentation. In a zero-sum market, that tolerance falls. Companies reduce investment and demand better returns, leading to smaller Chinese teams, more disciplined spending and more experimentation delegated to distributors.
Future opportunities for SME brands will be concentrated in decentralized channels such as Tmall Flagship Stores, Tmall Global Flagship Stores, JD POP, Pinduoduo and Douyin Shops. Success in these channels depends on identifying market pain points, using people and capital more efficiently, and targeting the right consumers.
In this environment, better use of data and greater delegation to distributors can reduce trial-and-error costs and improve both success rates and resource efficiency. Overseas SME brands should focus on governing and collaborating effectively with distributors, while preserving the flexibility to change partners when results fall short.