(Bloomberg) — Chinese buyers are being courted this week like never before.
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The country’s biggest internet companies are pulling out all the stops at the annual ‘618’ shopping festival, aiming to shake off the industry’s post-Covid malaise and return to something like the rah-rah years before 2020 Alibaba Group Holding Ltd. is offering 50% off Lululemon clothing, while competitors like ByteDance Ltd. and PDD Holdings Inc. announce deeper discounts than ever.
Price cuts are just the beginning. Companies hire A-list celebrities to tout their products via live videos and promising no-questions-asked returns. Before assuming her duties as the new face of the J’Adore perfume, Rihanna found the time to concoct “jianbing” pancakes on a Chinese platform. JD.com Inc. even created a digital avatar of founder Richard Liu to sell steak and blueberries.
“This year’s 618 is the fiercest shopping festival ever,” said Sherri He, general manager of Kearney China. “E-commerce platforms are under enormous pressure in terms of performance in a context of deteriorating consumption. »
Shares of JD.com fell 2.3% in Hong Kong on Thursday, their highest level in two weeks, while Alibaba was down about 1% and Kuaishou Technology fell as much as 6.5 %.
This year’s 618 gala – a $100 billion extravaganza several times larger than a typical Black Friday – is being watched more closely than ever. From outgoing leader Alibaba to new entrants such as Bilibili and ByteDance’s Douyin, aggressive discounts and unprecedented marketing underscore the urgency to reignite growth.
Everyone in the ecosystem feels 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 housing crisis, stubborn deflation and uncertain job prospects are discouraging them. expenses. Ultimately, the performance of Alibaba and JD could be key to reviving stock prices that are about a quarter away from their 2020 highs.
“The market is hungry for data proving or disproving China’s consumption recovery,” said Vey-Sern Ling, chief executive of Private Banking Union. “618 this year is important, because this year more than before, investors are trying to spot the inflection.”
The major platforms are not expected to release full sales figures, but initial, independent estimates paint a mixed picture. Overall sales of Alibaba, JD.com, Douyin, PDD and Kuaishou likely increased 10% from a year earlier during the 618 event, according to Bloomberg Intelligence analyst estimates. Still, the festival’s early numbers may have dwindled in its final two weeks, they added.
JD.com said it had accumulated a record gross merchandise value. Alibaba said its platform saw more than 36,000 brands, including Burberry and Ralph Lauren, double their GMV compared to last year’s event, although it did not disclose overall figures.
Total sales on e-commerce platforms fell 7 percent from a year earlier to 742.8 billion yuan ($102 billion), according to market tracker Syntun. This contrasts with data from Analysys, which found that short video platforms dominated growth during the first two weeks of the festival: Douyin increased sales by 30% and Kuaishou improved by 18%, surpassing Alibaba’s 15% and JD.com’s 9.5%. according to this research.
A no-frills increase in yields could help explain some of this gap. Some luxury brands reported return or cancellation rates of up to 75% during the Singles’ Day festival last November, much higher than the industry standard. And this year, they slashed prices by up to 50% amid growing panic over unsold inventory.
Although 618 is key to all e-commerce businesses, this is the first time Alibaba CEO Eddie Wu is leading 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 multi-year cycle of mostly single-digit growth.
With Wu at the helm, Alibaba has spent big money particularly on livestreaming – the fastest-growing segment of e-commerce, but also one in which ByteDance, JD and Kuaishou are increasingly investing. Last year, more than 10% of retail purchases in China were made through influencer feeds, according to iResearch data and national statistics.
“A re-acceleration in Alibaba’s core e-commerce revenue growth is expected to be welcomed by the market,” said Xiadong Bao, fund manager at Edmond de Rothschild Asset Management. “But we will evaluate the quality of that growth, down to margin and sustainability, as investors now view Alibaba more as a value stock than a growth stock.”
JD.com pledged a billion yuan to support live-streaming sellers, even as Alibaba promised billions in cash rewards and experimented with new approaches such as a streaming section exclusively for company CEOs.
But there are signs that consumers are tired of buying from influencers and pitch people online. The 618 festival’s top influencers have lost steam, partly due to stricter content regulations, rising costs and higher return rates, HSBC analysts said in a research note. This could help traditional retailers like Alibaba regain market share, they said.
Jiajia, a Hangzhou-based streamer who promotes beauty and clothing brands for WPIC Marketing + Technologies, is also finding the situation more difficult. His team analyzes minute-by-minute traffic data to understand how best to capture attention and drive sales.
“When e-commerce was still in its infancy, people bought things more easily,” Jiajia said. “Today, everyone is more rational and clearer about what they want to buy.”
Large platforms have also turned to more traditional routes: faster delivery times, automatic coupon collection, delivery cost insurance and lowest price guarantees. For the first time, JD.com and Alibaba have introduced a post-purchase price match promise, so shoppers will be refunded the difference if a product becomes cheaper after purchasing it.
This barrage of incentives may still be insufficient, given the fundamental fact of a volatile economy. At some point before Covid, 618 and Singles’ Day – its counterpart on November 11 – had become online phenomena, almost a community shopping event where people proudly posted their greatest finds on social media. Even Taylor Swift got involved once.
The shocks of the Covid era have largely deflated this enthusiasm, while deep discounts have also alienated traders. More than 50 book publishers in Beijing and Shanghai refused to participate in JD.com’s 618 promotion, which demanded up to 80% off. Other retailers have dropped a total of 618 as discounts have increased in recent years, Kearney China’s He said.
In recent years, slower growth has led e-commerce incumbents to publish selective figures instead of overall GMV figures. In 2022, when JD.com last reported its overall festival sales – 379 billion yuan – this represented more than 10% of its total GMV for the year.
“Ambient music remains lower priced and offers the best value,” said David Hampstead, CEO of Samarkand Global, which helps Western brands sell to Chinese consumers. “But it’s not possible to push brands all the way before China becomes too expensive or not profitable enough to play in. We’re getting to that point.”
–With help from Charlotte Yang, Zheping Huang and Peter Elstrom.
(Updates with analyst estimates and stock price reaction)
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