Due to the continued weakness of the Chinese economy and consumers tightening their wallets, major e-commerce platforms in China have been offering steep discounts during the 618 Shopping Festival in an effort to attract consumers. Some analysts even say that this year’s 618 event is the “most brutal” shopping festival in history.
In China, 618 is the second-largest annual sales event after “Double 11.” JD.com launched the 618 Shopping Festival on June 18, 2010, with just a one-day promotional event. Soon after, other e-commerce platforms in China joined in, with most platforms starting weeks-long promotional activities.
This year’s 618 Shopping Festival started with price cuts, with Alibaba offering a 50% discount on Lululemon clothing, while competitors like ByteDance and Pinduoduo also offered unprecedented discounts. Companies also invited A-list celebrities to promote products through live streaming videos, with some companies even promising unconditional returns.
Sherri He, Managing Director of Cohn China, was quoted by Bloomberg as saying, “This year’s 618 is the most brutal shopping festival ever.”
“Against the backdrop of consumption downgrade, e-commerce platforms are under immense performance pressure,” she said.
Everyone in this ecosystem has felt the pressure. For investors, 618 represents the first large-scale test in 2024 to see if Chinese consumers are finally ready to open their wallets, and to what extent the real estate crisis, ongoing currency tightening, and uncertain employment prospects have suppressed consumption.
Bloomberg reported that Vey-Sern Ling, Managing Director of Union Bancaire Privee, said, “The market is eager for data points to prove or refute the story of China’s consumer recovery.”
Since the reinforcement of online shopping habits due to the pandemic, the growth of sales during the 618 Shopping Festival in China has slowed down. According to third-party data released this week, sales on the 618 shopping street saw a decline for the first time.
According to data provider Syntun, during the festival ending on Thursday (June 20th), the total transaction volume (GMV) decreased by 7% compared to the same period last year, amounting to 743 billion yuan (102 billion US dollars). Syntun has been monitoring the 618 shopping event since 2016.
Although the growth of leading traditional e-commerce companies such as Alibaba and JD.com has slowed down, possibly due to competition from rivals like ByteDance and Pinduoduo vying for market share, the overall decrease in sales indicates that consumer confidence, which was low during the pandemic, has not fully recovered.
The three major e-commerce groups Alibaba, JD.com, and Pinduoduo have refused to disclose official total transaction volume figures this year, instead providing limited data points to show growth. For example, Alibaba stated that the GMV of over 36,000 brands doubled.
Analysts say that the lengthening promotion periods on platforms and new channels offering discounts to users throughout the year have diluted the novelty of the 618 event.
Pinduoduo was the first to launch the “10 billion yuan subsidy” channel within its app, offering discounted iPhones and Maotai liquor to shoppers. JD.com and Alibaba later adopted similar marketing strategies to promote their best prices.
“The promotion period is too long, and all the marketing efforts are confusing,” said 31-year-old shopper Constance Zhou to the Financial Times. “Platforms are constantly running promotions, leaving regular customers with no incentive to participate.”
618 is crucial for all e-commerce companies, with Alibaba investing heavily in live streaming – the fastest-growing area in e-commerce, also focused on by ByteDance, JD.com, and Kuaishou, with JD.com pledging 1 billion yuan to support live stream sellers. According to data from iResearch and the National Bureau of Statistics of China, over 10% of retail purchases in China last year came from live streamers.
But now, influencers are facing the impact of numerous imitators. Data from research firm Feiguawang showed that in the second half of May, sales of well-known influencer Li Jiaqi dropped by 46% year-on-year. Feiguawang stated that skincare promoter Luo Wangyu’s sales plummeted by 68%.
There are also signs that consumers are starting to shun buying products from influencers and online salespeople. Analysts from HSBC mentioned in a research report that during the 618 festival, key influencers lost momentum, partially due to stricter content regulations, rising costs, and increasing return rates.
Jia Jia, a Hangzhou anchor promoting beauty and fashion brands, also found the situation more challenging. Her team analyzed traffic data per minute to better understand how to attract attention and drive sales.
“When e-commerce was in its early stages, people were more willing to buy things,” Jia Jia told Bloomberg. “Now, everyone is more rational and knows exactly what they want to buy.”
On the other hand, “low prices” have become a common feature of the Chinese consumer market. E-commerce platforms are finding it increasingly difficult to retain customers, even during traditionally successful sales events.
After analyzing the discount strategies of luxury brands during this year’s 618 period, consulting firm Re-Hub found that among the brands they tracked, 20% increased their average discount, while nearly half maintained or reduced last year’s average discount.
Li Chengdong, founder of the Piggy Think Tank and e-commerce analyst, told the Financial Times, “The fierce competition among the three major platforms is affecting merchants, making them less willing to offer further discounts during 618.”
He gave an example of platforms hurting merchants by setting more generous return policies, allowing shoppers to keep their items and get their money back to a greater extent.
Zhang Xuezi, 36, told the Financial Times that many of the online stores she frequented did not participate in 618 at all this year. “I didn’t buy anything special during the festival period,” she said.
Bloomberg also reported that steep discounts have alienated merchants. More than 50 book publishers in Beijing and Shanghai refused to participate in the 618 promotional activities, which demanded up to an 80% discount. Sherri He of Cohn China mentioned that with the increasing discounts in recent years, other merchants have completely withdrawn from 618.