Chinese discount store operator HotMaxx is winning over bargain hunters by offering branded goods well below their original prices, as an economic slowdown has consumers growing more cautious about spending.
Managed by Shanghai-based Xinguo Technology, HotMaxx’s “super warehouse” outlet in a Nanjing shopping mall has become its biggest draw since opening in December 2024, showcasing racks of discounted Nike clothes, Doritos chips, and even Hermes bags.
“Wow, this is cheap even though it’s imported,” a local man said as he placed a RMB 4.5 (USD 0.6) bottle of Perrier sparkling water into his shopping cart. The suggested retail price is RMB 7.9 (USD 1.1).
The outlet in the eastern Chinese city has over 10,000 square meters of floor space, and is the company’s biggest. A typical HotMaxx is around 200 square meters. The company also recently opened a similar super warehouse outlet in Beijing.
Concerns over a real estate downturn, job security and the tariff war with the US have stirred Chinese consumers’ appetite for bargains. HotMaxx’s expansion shows how growing demand for “value for money,” a popular term in the country these days, is creating new opportunities for retailers.
“Pricing typically involves production cost plus [sales] channel margins before eventually reaching the consumer,” co-founder Zhang Ning said at a recent conference in Shanghai. “But for HotMaxx, pricing is usually based on what a first-time buyer would be willing to pay on impulse.”
HotMaxx opened its first store in 2020, at a high-end Shanghai shopping mall, selling discounted snacks and drinks close to their expiration dates at a time when supply chains were disrupted by the Covid-19 pandemic. It now has more than 900 stores nationwide, mostly in major cities, that are increasingly stocked with cosmetics, clothes and shoes. Many of these products are new items that failed to gain traction at traditional retailers.
The company, which brands itself as the “discount king,” said it has a large procurement team that cuts deals with suppliers looking to offload excess inventory. Thanks to its growing size, HotMaxx now sources products directly from manufacturers or top-tier distributors, according to a Shanghai-based supplier who has worked with the company.
In its stores, staff are often seen busily stocking shelves with new products. The company uses algorithms to optimize pricing so that goods sell out within 20 days.
“If you haven’t visited the store for a month, it will feel almost like a completely new store because most of the items on the shelves will be things you haven’t seen before,” Zhang said.
The unpredictability of what products are on offer, and at what prices, creates a sense of “treasure hunting,” according to Jason Yu, managing director of CTR Market Research, making HotMaxx popular among younger consumers. This feeling is further stoked by receipts comparing the original retail prices of purchased items with how much the customer has saved.
Analysts say downtrading, the practice of switching to a less expensive alternative, intensified after China ended its tight Covid-19 policy in late 2022, as the economic rebound was weaker than expected. In an effort to stimulate consumption, the government has rolled out subsidies for cars, electronics, and home appliances. While the policy has helped boost overall spending, the consumer price index fell year-on-year (YoY) for four consecutive months to May.
The value of fast-moving consumer goods rose 2.7% YoY in the first quarter, according to a report by Bain & Company and Worldpanel. A 5.3% increase in volume was offset by a 2.5% drop in average selling prices. The report found that opting for cheaper products was the biggest factor in suppressing household spending across categories such as packaged food and beverages, as well as home and personal care products.
“People are no longer ashamed of buying products at a discount price, as long as the quality is good,” CTR’s Yu said. He noted parallels with developed markets, where discount retail “grew in a time of economic difficulties.”
Foreign players are also taking note. German supermarket chain Aldi has opened 65 stores in China as of last year, driven by the popularity of its affordable private label products. A carton of Aldi-branded fresh milk, for example, costs RMB 7.9, less than half of domestic peer Bright Dairy.
Privately held HotMaxx counts Chinese venture capital firms such as GSR Ventures and Grandway Capital among its backers. The company does not disclose its earnings, but its annual gross merchandise value reportedly stood at RMB 4 billion (USD 560 million), according to local media.
Signaling its growing ambitions, HotMaxx’s Zhang has even joked that the company could sell electric vehicles if there is excess stock. The company has also begun to venture outside the mainland, opening stores in Hong Kong and announcing plans to enter the Japanese market.
Part of its expansion strategy is in response to intensifying competition. Busy Ming Group, a retailer based in Hunan, has rolled out more than 14,000 outlets across China, primarily selling low-priced snacks and drinks. In April, the company filed for an IPO in Hong Kong.
CTR’s Yu noted that major retailers like Sam’s Club, a membership-based retail chain owned by Walmart, and Chinese supermarket chain Yonghui are also “getting more aggressive in their pricing.” Still, he said replicating HotMaxx’s treasure hunt experience across categories like clothing and footwear could help it become a truly distinctive brand.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.