Much needed big numbers from 618 shopping festival

China’s online shopping festivals are usually about racking up the biggest sales, but things were slightly different for this year’s 618 festival, the mid-year shopping frenzy that ended on Thursday of last week. In China, shopping festivals have become landmark events that are used to build a “new normal” for sales volumes and to test e-commerce infrastructure. “This year’s peak volume [for Singles’ Day] will become the norm for the next year,” Alibaba’s Jack Ma once boasted.

Here’s how it went down in 2020.

A showdown moment for e-commerce platforms

Annual shopping events like 618 and Singles’ Day are high-profile showdowns for e-commerce players. Observers use sales totals from shopping holidays to gauge which platforms have pulled ahead and who has fallen behind. Updates on shopping events are often dubbed “battle reports” by both the companies and local media to hype up the competition. 

Alibaba still leads the pack in terms of total sales, but their rival JD is catching up quickly. 

• Alibaba booked RMB 698.2 billion in sales over the 18-day shopping festival. The company didn’t publish overall sales data last year, addressing growth over time by saying only that more than 100 brands enjoyed a higher GMV for 618 this year than they did for Singles’ Day 2019.
• JD, which had its Hong Kong IPO on June 18, racked up a record RMB 269.2 billion in sales from June 1 to June 18, up from RMB 201.5 billion in last year. That’s 33.6% growth compared with last year’s 26.6% uptick. The sales are on par with Alibaba’s RMB 268.4 billion one-day Singles’ Day sales on November 11, 2019.
• Pinduoduo did not publish overall sales figures for 2020. When contacted by TechNode, they said only that their sales of baby formula increased 510% year-on-year—and that their users don’t need to wait for twice-yearly sales to get the best value for their money because they get the best value on Pinduoduo platform “every single day.” 

Subsidized shopping propels post-Covid recovery

This year’s 618 festival comes as Beijing is gradually easing coronavirus lockdowns and encouraging people to go out and spend money again. The state has even launched a new digital coupon program to incentivize consumers to re-open their wallets after a difficult spring. Current sales data does indicate signs of economic recovery as the outbreak recedes.

To incentivize user consumption, subsidized shopping has become the order of the day. For an RMB 327 order that I placed for menswear on Alibaba’s Tmall during the 618 festival, I received a discount of just over RMB 80. That discount comprised RMB 60 from Tmall and RMB 20 from the brand itself—on top of an RMB 2 government consumption coupon. 

• The digital coupons issued by the state and distributed over various platforms—such as Alipay, WeChat, and shopping apps—totaled RMB 5.6 billion by the end of May. Though not issued specifically for the promotion, these digital coupons bolstered the consumption-boosting efforts and will continue beyond the holiday.
• Alibaba says this year’s 618 festival featured the biggest giveaway of consumer coupons and subsidies in the event’s history, totaling over RMB 14 billion in value.
• Pinduoduo claimed they had no upper limit for subsidies for the festival, doing anything they could to sweeten the GMV percentage increase. The company also pledged to make coupon usage easy by removing various pre-sales and deposit payment tricks that are popular on other platforms. (Such tricks are often very complicated, with bargain-seekers often joking that you need a talent for math to get the best deals.)
• JD.com planned to offer RMB 10 billion in subsidies, another RMB 10 billion in coupons, and “hundreds of billions of RMB worth of discounts.”
• China’s omnichannel retailer Suning launched their “J-10%” subsidy plan, targeting household appliances, mobile phones, computers, and groceries. The company pledged the products sold on its platform would be at least “10% lower than other major e-commerce platforms,” evidently benchmarking their rival JD. This is clearly a direct response to JD’s similar subsidy program aimed at Suning in 2012.

Despite the expansive subsidy campaigns, the competition among mainstream e-commerce platforms, during 618 and beyond, is still “rational,” according to Liu Yuan, an analyst at UBS Investment Research. “There’s still sustained revenue and profit growth across platforms,” he said.

The months-long lockdown has turbocharged China’s transition to an online world and propelled a huge leap in online shopping. 

The percentage of online shopping (out of total retail) jumped from 20.4% in December to 24.3% in June, according to data from China’s National Bureau of Statistics. “We expect the figure to jump to nearly 40% within four to five years, although it may drop slightly in the near future because of the gradual recovery of offline businesses,” Liu said. 

“Export companies, factories, and farmers who leverage on online channels to boost their sales may contribute to the growth during the 618 festival,” he added.

Livestreaming is a must-have

Similar to Singles Day, which usually launches with a star-studded countdown gala, 618 is increasingly filled with glitz and glamour, and livestreaming has further blurred the line between shopping and entertainment.

Livestreaming was already a big deal during last year’s Singles’ Day, but the feature is now a must-have for shoppers after livestream e-commerce gained momentum during the pandemic. 

Analysts project that sales achieved through livestream e-commerce will total RMB 961 billion in 2010, compared to 2019’s total of RMB 433.8 billion. Livestream shopping is expected to make up 8.7% of all online purchases. 

• As JD geared up for the 618 promotion, the company entered a partnership with Kuaishou on May 27 in a deal that allows Kuaishou users to purchase JD’s self-run products directly without leaving the short-video app.
• Alibaba’s Taobao Live invited more than 300 performers and celebrities to join livestream sessions during the festival.

To reach a wider audience, livestreamers partnered with e-commerce platforms and attended popular variety shows as part of the 618 campaign. Viya, the “livestreaming queen” with 28 million followers on Taobao Live, joined several of the country’s top reality shows, such as “Go Fighting,” to participate in their livestreams.  

Conclusion

As sales rebound, 618 has basically fulfilled the hopes placed upon it by both e-commerce platforms and the government: to spur post-Covid consumption recovery as the biggest shopping event after a months-long nationwide lockdown. Coming at this critical time, 618 has a chance to step out of the shadow of the more established Singles’ Day.

The strategies adopted by e-commerce platforms have proved effective. Livestream e-commerce will continue to be an important tool to reach increasingly online buyers, while subsidized shopping—either through discounts or coupons—will be key to retaining users in a weak economy, as more price-sensitive users from lower-tier cities become the major growth engine for e-commerce.