Price wars during Chinese shopping fest expose consumer woes

Kuaishou Technology

10/11/2023 08:29

By Sophie Yu and Casey Hall
       BEIJING, Nov 10 (Reuters) - A ferocious price war among
China's e-commerce retailers during the "Singles Day" shopping
event is exposing further weakness in household consumption and
raising concerns that the world's second-largest economy will
resume its slowdown.
    Originally a 24-hour online shopping event in China held on
Nov. 11, Singles Day, a nod to the digits in the date, has
expanded into weeks of promotions, including in brick-and-mortar
stores, making it the world's largest shopping festival.
    This year's festival is being more closely watched than ever
as a gauge of consumer confidence as China flirts with deflation
and has identified boosting household demand as key to avoiding
lost decades of sluggish growth. 
    On Taobao and Tmall, platforms owned by e-commerce giant
Alibaba  9988.HK , consumers can receive a 50 yuan ($6.86)
discount when they spend 300 yuan. The company is pressuring
merchants to offer rock-bottom prices during Singles Day after
promising it will offer 80 million products at their lowest
prices this year for the sale, which started in late October.
    PDD Holdings'  PDD.O  Pinduoduo and JD.com have between them
indicated they would offer billions in cashback deals over the
sales period for people shopping on their respective platforms. 
    "Low prices and discounts has been the overarching theme,"
said Jason Yu, greater China managing director of market
research firm Kantar Worldpanel, noting that even the
newly-released iPhone 15 was selling with a 500 yuan discount. 
    "It's a sign that nobody's going to easily spend 10,000 yuan
 ($1,371) on a handset right now. Confidence is a bit weak."
    Data released on Thursday showing a drop in consumer prices
to their lowest since the COVID-19 pandemic has increased the
doubts in China's economic rebound after some months of
indicators showing growth stabilising.
    China's big online shopping platforms did not release final
sales figures for 2022, when analysts said COVID-19 restrictions
inhibited spending and consumer confidence. It is unclear
whether they will release figures for this year, but
expectations are subdued, and for good reason.
    Bain and Company found that 77% of the 3,000 consumers it
surveyed plan to cut or maintain their level of spending on
Singles Day compared with last year. 
    "Macroeconomic headwinds are causing consumers to be more
value-conscious," Bain said.
    Some indicators point to a slowdown in Singles Day sales.
Data provider Syntun estimated e-commerce platforms sold 311
billion yuan of products from Oct. 31 to Nov. 3, a 7.1% decrease
year-on-year. But it said that was partly mitigated by
livestreaming platforms such as Douyin, Diantao and Kuaishou
selling 10.5% more, at 99 billion yuan.
    Other analysts are more upbeat. Jacob Cooke, co-founder and
CEO of e-commerce consultancy WPIC Marketing+Technologies,
expects total sales growth of 14%-18%, saying he is "optimistic"
that Chinese growth is "stabilising."
    
    TRIPLE DIP
    A downturn in China's giant property sector, where most of
the household wealth is parked, indebted local governments
cutting spending, youth unemployment rates surpassing 20%, and
falling wages in some sectors of the economy have been keeping
consumers in a thrifty mood.
    A surprise rise in imports in October had raised hopes that
spending might be turning a corner, but the fall in consumer
prices suggests that higher commodity prices probably had more
impact on trade than consumer demand.
    Coupled with weak manufacturing surveys and waning external
demand, the consumer price pressures point to China losing
growth momentum into year-end.
    "We continue to see a serious risk of a triple dip for the
economy," Nomura analysts wrote in a note.
    For Tan Jiapeng, a 35-year-old office worker in Beijing, his
 only Singles Day purchase so far has been a Descente winter
jacket, an "essential purchase" for the winter. Worried about
job stability, he abstained from buying Pokemon smartphone
games, body lotion, and some Moutai liquor, all things he wished
for.
    "It's known how difficult it is to find a job these days,
even for the young people who are cheaper," Tan said. "The
economy is moving downhill, I can't spend as freely as before."

($1 = 7.2931 Chinese yuan renminbi)

 (Reporting by Casey Hall, Sophie Yu; Editing by Marius Zaharia
and Christian Schmollinger)
 ((Sophie.Yu@thomsonreuters.com; 861056692136;))