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More worries for China, sales at big e-commerce festival drop for first time

Published 2024-06-19, 01:19 a/m
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By Casey Hall and Sophie Yu

SHANGHAI (Reuters) -Sales fell for the first time ever at China's blowout mid-year e-commerce sales festival as consumers remain cautious about spending as the economy sputters, according to third-party data estimates released on Wednesday.

Combined gross merchandise volume (GMV), a widely used proxy for e-commerce sales, reached 742.8 billion yuan ($102.36 billion) across China's major online platforms during the so called "618" shopping event, 7% lower than the same period last year, digital retail data provider Syntun said.

Sales in 618 had grown even during the pandemic, according to Syntun, and peaked in 2023 at nearly 800 billion yuan.

This year the shopping festival failed to stir up much excitement among shoppers, industry experts said, even as major platforms extended offers to a weeks-long period to woo consumers who have been tightening their belts amid a gloomy economic outlook.

The festival, named after the June 18 founding date of e-commerce provider JD.com but embraced by all platforms, is China's second-biggest annual sales event after Singles Day in November and is seen as a key test of household consumption.

The world's second-biggest economy is being weighed down by a prolonged property crisis and high unemployment, weighing heavily on consumer confidence.

"With discounts available year-round, buzz around 618 has diminished," said Jacob Cooke, CEO of e-commerce consultancy WPIC Marketing + Technologies.

JD.com said on Wednesday its turnover and order volumes reached a new high over the festival period, which ran from the end of May to June 18 this year. It did not elaborate on the exact growth rate of its orders or sales during the festival, which was first launched in 2010 as just a one-day sale.

Major players such as JD.com and Alibaba (NYSE:BABA)'s Tmall and Taobao platforms this year cancelled a traditional pre-sale period in which shoppers could place deposits on products and complete their purchases later. Instead, the sales period itself was extended.

Sluggish demand also is pushing retailers to constantly focus on low prices and lower profit margins, analysts said, adding to disinflationary pressures.

An analysis by consultancy Re-Hub of luxury brands' discounting strategies during this year's 618 festival found nearly half of the brands they tracked either maintained or reduced their average discounts from the previous year, while 20% increased their average discounts.

HOME APPLIANCES AND BEAUTY PRODUCTS

Alibaba had previously flagged in a mid-618 season update that sectors such as home appliances were outperforming on its platforms, led by brands such as Haier and Xiaomi.

The e-commerce giant said on Wednesday that sales of international brands including Nike (NYSE:NKE), L'Oreal, Lancome and Adidas (ETR:ADSGN) surpassed 1 billion yuan ($137.82 million) on Tmall during the period.

Apple (NASDAQ:AAPL) offered discounts of up to 2,300 yuan ($318) on select iPhone models via its Tmall flagship store in a bid to keep pace with domestic competitor Huawei.

Within the first hours of sales, Alibaba said Apple had sold more than 200 million yuan of merchandise.

Rival PDD Holdings' Pinduoduo, which does not traditionally disclose 618 sales data, did not respond immediately to a request for information.

Given low prices are now such a common feature of China's consumer landscape, it is becoming more difficult for e-commerce platforms to keep customers engaged - even with traditionally successful sales festivals.

"I haven't been paying constant attention to 618, to be honest, because there are just so many (shopping festivals)," said Anita Meng, a university student from Hangzhou.

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"Even if these festivals are still going strong, my wallet is already exhausted," she said, adding she only made one purchase this 618 - a gaming chair for her older brother that was reduced from more than 1,200 yuan to 1,000 yuan.

($1 = 7.2570 Chinese yuan renminbi)

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