China’s largest shopping season, Singles’ Day on November 11, known as “Double 11,” has already begun its sales activities. However, amidst the economic downturn and consumer downgrading, the market sentiment is pessimistic. Experts have analyzed at least seven major reasons leading to the marketing dilemma of the Singles’ Day event.
Singles’ Day was originally initiated by the Chinese e-commerce giant Alibaba in 2009 with the aim of allowing single individuals to treat themselves during this shopping season created for them, using November 11 as the designated day. Every year leading up to November 11, e-commerce platforms and physical stores nationwide launch advance price reduction and promotional measures to attract consumers.
However, China is facing a deteriorating international trade environment and a severe downturn in the domestic real estate market. Following the lifting of pandemic restrictions over the past three years, China’s economic recovery has been weak, with soaring unemployment rates and a sluggish consumer market. This year’s Double 11 event was met with a prevailing sense of pessimism in the market.
On October 23, a mainland blogger posted a video on Xiaohongshu (Red) app, stating that this year’s Double 11 event felt particularly eerie. On one hand, businesses were recklessly spending money to drive traffic. On the other hand, consumers seemed to have a retaliatory sentiment, wanting to see it fail.
She mentioned a business owner friend who had been investing heavily since the National Day holiday to build momentum for Double 11. However, despite operating at a loss throughout the year, he was counting on this Double 11 to clear out inventory and make a profit. Based on current presale indications, he was feeling a sense of despair. He couldn’t understand why, despite the booming tourism market, people were not spending.
The blogger noted that people now prioritize travel over consumption. The main consumers used to be urban middle-class office workers before 2019, but now the major spenders are younger generations traveling across China. Consumer behavior has shifted, and if marketing strategies continue to rely on outdated approaches, this Double 11 and future events will be futile.
According to data released by the National Bureau of Statistics of the Communist Party of China on October 22, the unemployment rate for the 16-24 age group, excluding students, was 17.6% in September, the second highest of the year. It is noted that these figures are widely criticized for being significantly underreported due to official statistical modifications. Zhang Dandan, a scholar from Peking University, estimated the peak youth unemployment rate in China reached 46.5% in March last year.
Mr. Chen, a freelance worker from mainland China, expressed to Dajiyuan that Chinese youth are currently in an era of low desire. They are less interested in marriage, relationships, having children, buying cars, or purchasing houses. Consumption has shifted towards a minimalist approach, moving away from blind spending and materialistic comparisons seen in the past.
Xu Zhen, a senior capital market expert in mainland China, stated to Dajiyuan that the pressure on people’s livelihoods has resulted in a significant contraction in demand, leading both physical and e-commerce economies to decline to varying degrees.
Xu Zhen analyzed that looking at the top e-commerce enterprises, over the past three years, Pinduoduo’s aggressive pricing strategy had encroached upon Alibaba and JD.com’s market share, dominating the growth. However, with domestic user saturation nearing, Pinduoduo’s growth is reaching its limits. The second-quarter financial report this year indicated a year-on-year decline in both revenue and profit growth, hinting at a plateau.
The second quarter of this year marked a slowdown in Pinduoduo’s revenue growth since Temu’s launch in September 2022. Both major revenue sectors experienced a deceleration. Online marketing service and other service revenue totaled 49.12 billion yuan, a 29% increase year-on-year; transaction service revenue reached 47.944 billion yuan, a 234% increase year-on-year. In contrast, during the first quarter, revenue growth for these sectors stood at 56% and 327%.
The same trend was observed in Douyin’s e-commerce sector. Wei Wenwen, the GM of Douyin e-commerce, stated that over the past year, Douyin’s GMV (Gross Merchandise Volume) grew by 46%. In comparison, in 2022 and 2023, Douyin’s GMV growth rates were 320% and 80%, respectively. The significant decrease in growth rate indicates a challenging outlook.
Xu Zhen believes that this year’s Double 11 event may experience negative growth in e-commerce revenue. Whether it is physical stores offline or the online e-commerce market, it is a period of closure rather than expansion.
An earlier report by Reuters featured Ms. Zheng Li, 46, who used to value Singles’ Day shopping extravagantly, stocking up on clothes and daily essentials. However, that enthusiasm has waned, and she mentioned not feeling any shopping impulse this year, except considering buying a down jacket for her son.
In the past couple of years, as China’s economy has remained sluggish, extensive price reductions have become a crucial strategy for businesses to entice customers. Even e-commerce giants like Alibaba and JD.com, facing competition from platforms like Pinduoduo, are squeezing the profits of thousands of small businesses.
Independent e-commerce expert Lu Zhengwang told Reuters, “Everything is quiet now.” He added that businesses are becoming more rational, focusing on profits rather than the total transaction amount (GMV) on their websites. Obtaining profits has become increasingly challenging due to intense competition, with only discounted products selling well.
Liu Yuanhua, a scholar based in Australia, stated to Dajiyuan that China’s economy is on the brink of collapse, with people being cautious about spending money. Businesses understand that without clearing stocked goods, selling without making a profit is futile. As a result, businesses are becoming more rational, and consumers are also adjusting their spending habits.
David Huang, an economic scholar in the United States, mentioned to Dajiyuan that since 2021, China’s Double 11 shopping festival has been declining in significance. Both Alibaba and JD.com have refrained from engaging in the price wars and discount battles seen in previous years. The hype surrounding the event has decreased over the years, and the situation in 2024 is even less favorable. He outlined seven reasons for this decline:
Firstly, during the rapid economic growth period of the past, the Double 11 event generated massive sales due to aggressive discounts, but this celebratory effect has gradually been replaced by everyday life. Under the pressure of an economic downturn, people are less inclined to shop.
Secondly, while previous Double 11 events set transaction records each year, it was later revealed that many businesses achieved their sales through fraudulent transactions, especially after the introduction of live-streamed sales. Current transaction volumes are inflated, often resulting in businesses operating at a loss.
Thirdly, in the current economic downturn, high unemployment rates have made non-essential consumption irrelevant for many people. The focus has shifted towards employment and how to pay bills for most individuals.
Fourthly, the Communist Party of China’s recent crackdown on companies like Alibaba has left many firms apprehensive, leading to subdued operations. Details on transactions and profit margins are often undisclosed.
Fifthly, many private enterprises in China fell into the trap of competing through low prices in the past, resulting in losses rather than profits. The threshold for supplying goods to e-commerce platforms has increased, intensifying the losses. Additionally, many consumers return goods, causing further financial strain. Consequently, suppliers are less willing to engage.
Sixthly, counterfeiting is prevalent in China, with falsified transaction volumes and product pricing on Double 11. Many products are advertised as having a 50% discount during the event, but their original prices were inflated, providing minimal actual discounts. Such deceptive commercial practices have devalued the event.
Lastly, domestic consumption downgrading is severe in China, where many essential commodities are unaffordable for households. Moreover, the recent trend of individuals taking out loans from online platforms to speculate in stocks poses risks of capital draining, discouraging e-commerce platforms from promoting online shopping loans, further suppressing consumer desire and transaction volumes.