China’s June 18 online shopping festival, the second most important e-commerce event in the country after Singles’ Day in November, is set for less fanfare this year amid weak consumer spending and disruption to supply chains due to Covid-19 prevention measures.
In a break from tradition, major e-commerce platforms such as Alibaba Group Holding and JD.com have largely refrained from boasts about expected gross sales and stellar year-on-year comparisons. Instead the companies have focused promotional activity for this year’s event on the level of service they can provide to merchants.
The more muted festival, which was started by JD.com in 2004, is still expected to attract bargain-hunters although the change in tone underlines the fact that the days of breakneck e-commerce growth are over, analysts said. Alibaba owns the South China Morning Post.
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“Shopping festivals have grown to such a large extent it was inevitable that the pace would eventually slow,” said James Yang, partner at consulting firm Bain & Company’s consumer products, retail and strategy practice. Yang added that the traditional gross merchandise value (GMV) indicator “is no longer the sole metric to judge the success of a festival”.
Consumer sentiment has been hit by the country’s strict anti-pandemic measures and in March total retail sales – seen as a barometer of broad consumer spending – fell 3.5 per cent followed by a plunge of 11.1 per cent in April. China’s two major cities, Shanghai and Beijing, have both been badly affected by outbreaks of the highly-infectious Omicron strain of Covid-19.
For Alibaba, the June 18 festival is the first major sales event since it merged certain back-end operations of its Taobao Marketplace and Tmall in January this year. Trudy Dai Shan, a member of Alibaba’s co-founding team, is head of Alibaba’s new China digital commerce unit.
“Previously, Taobao and Tmall used two different platform mechanisms,” said Li Jincan, an analyst at research firm LeadLeo. “Now the operation is fully integrated and major brands and SMEs operate under a unified platform mechanism … the rules are simplified, more fair and transparent.”
Bain’s Yang said that Chinese e-commerce players are preparing for harder days ahead as “sales will be challenging this year” in the wake of repeated lockdowns.
Tracy Dai, director of operations at marketing and research firm China Skinny, said this year’s 618 is not a happy festival.
“With Covid still impacting day-to-day life in China, especially in the economic powerhouse cities of Shanghai and Beijing, general shopping fever has cooled,” said Dai. “The situation hasn’t been helped by supply chain and logistics challenges and the consciousness of more rational shopping.”
For example JD.com, which is known for its competitive deliveries thanks to an affiliated service, has struggled this year to get goods to customers on time amid lockdowns and strict quarantine requirements for drivers.
For Alibaba, the disappearance of Taobao’s top streamer Li Jiaqi has added to uncertainties around attracting consumers and will likely drag on Alibaba’s 618 shopping festival performance, analysts said.
Li’s live-streaming show was suspended abruptly on June 3 amid speculation that he had angered Chinese censors by showing an image of a tank-shaped ice cream, which may have been interpreted as highlighting the June 4, 1989 crackdown on pro-democracy demonstrators in Tiananmen Square.
China Skinny’s Dai noted that Li’s first day presale GMV for 618 was estimated to exceed 4.1 billion yuan this year. This was above last year’s first day GMV but well below the 10.65 billion yuan presale GMV on the first day of Double 11 last year.
“As one of the only tier-1 live streamers on Taobao, Li was a go-to KOL [key opinion leader] for this 618 festival. However, with his live-streaming suspension and no clear indication of when he’ll return, it puts a lot of pressure on brands who signed him up, particularly those with an exclusive deal,” said Dai. “There will be a lot of stock pressure based on anticipated high sales from Li’s endorsement, and not moving that stock will fall on the sellers themselves, especially for products with a short shelf life.”
LeadLeo’s Li said that “the era when top live streamers led Taobao’s 618 shopping era may have already gone, merchants are seeking many other ways to sell products through live-streaming [now].”