Yahoo Finance China’s Ecommerce Giants Splash Out to Jolt Wary Shoppers
(Bloomberg) -- China’s shoppers are getting wooed this week like never before.
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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 Ltd. is offering 50% off Lululemon apparel, while rivals like ByteDance Ltd. and PDD Holdings Inc. 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 Inc. 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. “Ecommerce platforms are under huge performance pressure amid a consumption downgrade.”
JD.com shares fell by 2.3% in Hong Kong on Thursday, their most in two weeks, while Alibaba was down about 1% and Kuaishou Technology dropped as much as 6.5%.
This year’s 618 gala — a $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.
“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.”
The major platforms are not expected to release full sales figures, but initial and independent estimates paint a mixed picture. Overall sales from Alibaba, JD.com, Douyin, PDD, and Kuaishou likely rose 10% from the year before during the 618 event, according to estimates from Bloomberg Intelligence analysts. Yet early strength in the festival may have shrunk in its final two weeks, they added.
JD.com said it racked up record gross merchandise value. 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 ecommerce platforms were down 7% from the previous year, at 742.8 billion yuan ($102 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% and Kuaishou improved by 18%, outpacing Alibaba’s 15% and JD.com’s 9.5% 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% 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% in a growing panic over unsold inventory.
While 618 is key to all ecommerce 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 ecommerce, but also one where ByteDance, JD and Kuaishou are increasingly investing. More than 10% 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 ecommerce 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 tiring of buying from influencers and online pitch-people. Key influencers during the 618 festival lost steam, in part from stricter content regulations, rising costs, and higher return rates, analysts from HSBC said in a research note. That could offer a boost to traditional retailers like Alibaba in regaining market share, they said.
Jiajia, a Hangzhou-based streamer who promotes beauty and clothing brands for WPIC Marketing + Technologies, also finds it tougher. Her team analyzes minute-by-minute traffic data to understand how to best capture attention and drive sales.
“When ecommerce 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% 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 ecommerce 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% 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.”
--With assistance from Charlotte Yang, Zheping Huang and Peter Elstrom.
(Updates with analyst estimates and share price reaction)
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