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China’s biggest seller, which has generated billions of dollars in sales, finally appears to be losing its grip on the Chinese market.
Marked by deep discounts, these sales see all kinds of retail products, from iPhones to designer bags, sold for a fraction of the retail price — and consumers typically jump on the offer.
This year, they are beginning to hold back on going all-in on big spending.
The 2024 618 sales held by online retailers including e-commerce giant JD.com, Alibaba Group’s Tmall and Pinduoduo saw their sales fall for the first time in eight years. The estimate was provided by retail data provider Syntun.
The shopping festival, which is comparable in size to the Singles’ Day festival on November 11, brought in $102.3 billion in sales this year.
This represents a 7% decrease compared to 2023, when 618 units were sold. Approximately $109 billionData Provider He told CNBC 618 announced in June that this was the first drop in the company’s sales since it began monitoring the event in 2016.
One reason for the decline in sales is that Chinese people are tightening their purse strings.
Chinese e-commerce giants try to lure customers with attractive sales
Historically, e-commerce has made up a large portion of retail spending in China.
By 2023, online retail sales nationwide will reach $2.12 trillion, accounting for 27.6% of all U.S. consumer goods retail sales, according to the National Institute for Economic Research. Office for National Statistics.
But with fewer buyers, China’s e-commerce giants are increasingly using deep discounts to lure customers to their sales.
For example, Alibaba recently offered Lululemon clothing at a 50% discount, JD.com Apple iPhones were on sale with discounts of up to 20%.
Additionally, rather than concentrating sales on Singles’ Day or 618 sale days, these platforms run multiple sales throughout the year, from Lunar New Year through to Christmas.
But the Chinese are just spending less.
China’s slow post-pandemic economic recovery may be due more to internal than external factors.
The country has reported weak domestic demand, Official Purchasing Managers’ Index Gross domestic product (GDP), an index representing large companies and state-owned enterprises, contracted for the second consecutive month in June.
One reason for this is low consumer confidence and people being more cautious about making purchases, Alison Malmsten, director at Daxue Consulting, told Business Insider.
“Consumer confidence is declining and people are becoming more cautious about what they spend their money on, buying what they need rather than flashy discounts,” she said.
Yalin Zhang, the Chinese consumer research expert behind the newsletter, said these annual mega sales were gradually losing their luster amid a glut of sales throughout the year. “Follow the original”
“Excessive sales events that lead to marketing fatigue are nothing new,” she told BI.
But the change in consumer behavior goes deeper than just marketing fatigue, she said, with Chinese people “becoming more rational and placing more emphasis on cost-effectiveness and necessity”.
Economic factors have an impact
And if people are spending less, it’s also because they’re not making a ton of money in China’s post-pandemic economy.
“The economic downturn has made people want to avoid paying insurance premiums as much as possible, and worries about the future have made them want to save for emergencies,” Jiang, the Chinese consumer expert, told BI.
China’s youth unemployment rate was 14.9% as of December. National Bureau of Statistics of China.
And China’s average per capita income in the first quarter of 2024 was $905. Office for National Statistics.
Another reason for low consumer confidence is China’s real estate crisis, which is expected to get worse in the future.
In May, new home prices fell sharply for the first time in nearly a decade. According to statistics from the National Bureau of Statistics, new home prices in China’s 70 major cities fell 1.2%. Down 0.7% from April.
“Traditionally, Chinese consumers have looked to real estate investments as a way to anchor themselves and see it as a great source of security,” Jiang told Business Magazine. “Since the collapse of Evergrande and other giants, sentiment has changed dramatically and there is a widespread perception that real estate values ​​will continue to fall.”