CHINA’S shoppers are getting wooed this week like never before.
The country’s biggest Internet firms are pulling out all the stops during the annual “618” shopping festival, in a bid to shake off the industry’s post-Covid malaise and return to something like the rah-rah years before 2020. Alibaba Group Holding is offering 50 per cent off Lululemon apparel, while rivals such as ByteDance and PDD Holdings advertise steeper-than-ever discounts.
Price cuts are just the start. Companies are enlisting A-list celebrities to flog products over live video and promising no-questions-asked returns. Before taking on her duties as the new face of J’Adore fragrance, Rihanna found time to rustle up “jianbing” crepes on one Chinese platform. JD.com even created a digital avatar of founder Richard Liu to hawk steak and blueberries.
“This year’s 618 is the most cutthroat shopping festival ever,” Sherri He, managing director at Kearney China, said. “E-commerce platforms are under huge performance pressure amid a consumption downgrade.”
This year’s 618 gala – a US$100 billion extravaganza several times larger than a typical Black Friday – is more closely watched than ever. From incumbent leader Alibaba to upstarts such as Bilibili and ByteDance’s Douyin, the aggressive discounts and unprecedented marketing underscore an urgency to rekindle growth.
Everyone in the ecosystem is feeling the pressure. For investors, 618 represents the first large-scale test in 2024 of whether the Chinese consumer is finally ready to splurge again – or to what extent a property crisis, stubborn deflation and uncertain job prospects are discouraging spending. When all’s said and done, how Alibaba and JD perform may be key to reviving share prices that are at about a quarter of their 2020 highs.
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“The market is hungry for data points that prove or disprove the consumption recovery story in China,” said Vey-Sern Ling, a managing director at Union Bancaire Privee. “618 this year is important, because this year more than before, investors are trying to spot the inflection.”
It’s unclear when the companies might release final results – or how comprehensive they would be. Initial and independent estimates paint a mixed picture.
JD.com said it racked up record gross merchandise value (GMV). Alibaba said its platform saw more than 36,000 brands, including Burberry and Ralph Lauren, double their GMV from last year’s event, though it didn’t divulge overall figures.
Total sales across e-commerce platforms were down 7 per cent from the previous year, at 742.8 billion yuan (S$138 billion), according to market tracker Syntun. That’s in contrast to data from Analysys, which found short-video platforms led growth over the first two weeks of the festival: Douyin grew sales by 30 per cent and Kuaishou Technology improved by 18 per cent, outpacing Alibaba’s 15 per cent and JD.com’s 9.5 per cent growth, according to that research.
An increase in no-quibble returns may help account for some of the discrepancy. Some luxury brands reported return or cancellation rates as high as 75 per cent during last November’s Singles’ Day festival, far higher than the industry norm. And they’ve slashed prices this year by as much as 50 per cent in a growing panic over unsold inventory.
While 618 is key to all e-commerce firms, it’s the first time that Alibaba chief executive officer Eddie Wu is spearheading the gala. Wu, who took over from Daniel Zhang in September, is trying to refocus Alibaba on its core online retail strengths and escape a years-long cycle of mostly single-digit growth.
With Wu at the helm, Alibaba has spent heavily in particular on livestreaming – the fastest-growing segment of e-commerce, but also one where ByteDance, JD and Kuaishou are increasingly investing. More than 10 per cent of China’s retail purchases last year came via influencer streams, according to data from iResearch and national statistics.
“A re-acceleration of topline growth for Alibaba’s core e-commerce should be well received by the market,” said Xiadong Bao, fund manager at Edmond de Rothschild Asset Management. “But we will gauge the quality of that growth, down to the margin and sustainability, as the investors see Alibaba more as a value stock than a growth one now.”
JD.com has pledged a billion yuan to support livestreaming sellers, even as Alibaba promised billions in cash rewards and experimented with novel approaches such as a streaming section exclusively for company CEOs.
But there are signs that consumers are tired of buying from influencers and online pitch-people.
Jiajia, a Hangzhou-based streamer who promotes beauty and clothing brands for WPIC Marketing + Technologies, also finds it tougher. Her team analyses minute-by-minute traffic data to understand how to best capture attention and drive sales.
“When e-commerce was still in its early days, people bought things more easily,” Jiajia said. “Nowadays, everyone is more rational and clear about what they want to buy.”
The big platforms also turned to more traditional avenues: faster delivery times, automatic coupon collection, delivery fee insurance and lowest-price guarantees. For the first time, JD.com and Alibaba introduced a price-matching promise after purchase – so shoppers get refunded the difference should a product get cheaper after they buy it.
That barrage of incentives may still fall short, given the fundamental fact of a volatile economy. At one point before Covid, 618 and Singles’ Day – its Nov 11 counterpart – had evolved into online phenomena, almost a communal shopping event where people proudly posted their biggest finds on social media. Even Taylor Swift got involved once.
Covid-era shocks have largely deflated that enthusiasm, while heavy discounting has also alienated merchants. More than 50 book publishers in Beijing and Shanghai refused to join JD.com’s 618 promotion, which required as much as 80 per cent discounts. Other merchants have quit 618 altogether as discounts mounted over the past years, Kearney China’s He said.
In recent years, slower growth has seen the e-commerce incumbents report selective figures in lieu of overall GMV numbers. In 2022, when JD.com last reported its overall sales for the festival – 379 billion yuan – that accounted for more than 10 per cent of its total GMV for the year.
“The mood music is still lower pricing and best value,” said David Hampstead, CEO of Samarkand Global, which helps Western brands sell to Chinese consumers. “But there’s only so far you can push brands before China becomes too expensive or not profitable enough to play in. It’s reaching that point.” BLOOMBERG
