Chongqing - China's retail market is shifting toward services and experience-driven spending, even as subdued consumer confidence and a growing supply of retail space pressure shopping malls, according to a recent report by global real estate services firm Cushman & Wakefield.
The Greater China Retail Supply/Demand Trends 2026 report found that prime retail property stock across 15 major cities in Greater China reached 123.1 million square meters in the second quarter of 2026, while the average vacancy rate rose slightly to 11.2%. Another 18 million square meters of retail space is expected by the end of 2028, adding to market competition.
Meanwhile, retail sales of consumer goods on the Chinese mainland rose 1.3% year on year to 24.9 trillion yuan (about 3.72 trillion U.S. dollars) in the first half of 2026. Service sales grew 5.3%, outpacing the 1.1% increase in goods sales, as consumers increasingly turned to experiences, entertainment, and other services.
The divergence points to a broader change in China's consumption market. Rather than replacing purchases of physical goods, spending on services is becoming an increasingly important part of household consumption. For international brands, this means growth opportunities may depend not only on what they sell, but also on the experiences and services they offer alongside their products.
Experiences and tourism reshape consumer spending
The report identified major trends driving China's retail transformation: resilient consumption in lower-tier cities, growing demand for experiential shopping, expanding commercial performances and tourism-led spending.
Third-tier and lower-tier cities, home to nearly 70% of China's population, are emerging as important consumption markets. From 2022 to 2024, their retail sales growth outpaced the national average, supported by rising disposable incomes and urbanization.
The shift is already shaping international consumer brands' expansion strategies. For example, Starbucks had expanded into more than 1,000 county-level markets in China by early 2025, according to a South China Morning Post report. Its growing presence beyond major metropolitan areas illustrates how smaller cities and counties are becoming part of the competitive landscape for global coffee chains.
Experience-driven spending is also changing how shopping malls operate. China's experience economy reached 18.4 trillion yuan in 2025, growing 22.6% year on year, according to the report.
In Chongqing, the Ring Shopping Park combines retail and dining with an indoor botanical garden, sports facilities and spaces for reading, art and family activities. The development illustrates how malls are incorporating leisure and social experiences into their offerings, giving visitors reasons to visit beyond shopping alone.
Similar experience-focused offerings were also visible during China's National Day holiday. At Teaspira, a local brand in Wuhan, groups of friends gathered over drinks and desserts, chatting and relaxing for hours. The scene reflects a broader shift in consumer behavior, with people increasingly willing to spend not just on products, but also on the experiences and social spaces that come with them.
Moreover, tourism and entertainment are providing additional momentum. China recorded 154.5 million inbound tourist visits in 2025, with visitor spending reaching 131.1 billion U.S. dollars, up 39.2%.
The rise in inbound tourism is creating another route for brands to reach consumers. International visitors spend on accommodation, restaurants, entertainment, and shopping, potentially benefiting both established global brands and local businesses serving tourists. The opportunity is particularly relevant for retailers located near major attractions, transportation hubs, and popular shopping districts.
Customers enjoy an experience-driven dessert outing at Teaspira in Wuhan, central China, during the National Day holiday. (Photo/Chen Zhan)
Major cities see diverging retail performance
The changing market landscape is reflected in differing performances across major Chinese cities.
Shanghai remained attractive to domestic and international brands, with 10 new retail projects adding approximately 1.22 million square meters of space in the first half of 2026. Food and beverage, fashion, collectible toys, sports, and entertainment were among the most active sectors.
In Beijing, urban renewal continued to transform older commercial properties, while Shenzhen's retail market benefited from growing cross-border consumption and tourism. However, both cities faced pressure from cautious consumer spending and new supply.
Chengdu recorded no new prime retail supply between the second half of 2025 and the first half of 2026, helping its vacancy rate fall to 8.5%. Hong Kong showed stronger signs of recovery, with retail sales rising 9.6% year on year in the first half of 2026, supported by increasing tourist arrivals.
Different cities are therefore presenting different opportunities for international brands. For instance, China's first-tier cities remain important locations for flagship stores, product launches and premium experiences. Lower-tier cities offer opportunities to reach consumers beyond the largest metropolitan areas, while tourism-oriented cities and commercial districts can benefit from spending by domestic and international travelers.
"Although the growth of total retail sales of consumer goods has moderated, sales of services have maintained strong resilience, indicating that China's consumption structure is shifting," said Duke Zhen, managing director and head of retail services for China at Cushman & Wakefield.
"The price-quality value and emotional experiences are now the key drivers of consumer purchases, pushing the transformation of the consumer market," Zhen said, emphasizing the need for retailers and brands to adapt to changing consumer demands.
Looking ahead, China's retail sector faces intensifying competition as new commercial properties enter the market. However, shifting consumer preferences toward experiences, services, and tourism are expected to create further growth opportunities.