China’s 618 shopping festival, the country’s mid-year online deals event, is coming to a close after a month-long campaign. This year’s 618 is the first major shopping event since China reopened in December, offering some insight into China’s current consumer sentiment.
It’s also an interesting test for Chinese e-commerce giants Alibaba, JD, and Pinduoduo, all of whom have recently undergone management adjustments. Each company continues to face significant growth pressure in the face of fierce competition.
Alibaba, JD competing on lower prices with Pinduoduo
This year’s 618 festival encapsulates the escalating price war in China’s e-commerce industry. With the slowdown in economic growth, consumers are actively seeking cost-effective products. In response, multiple Chinese e-commerce platforms have followed Pinduoduo’s marketing strategy by offering higher discounts to attract buyers.
During the month-long mega promotion, Alibaba customers have received a discount of RMB 50 (about $7) for every RMB 300 spent across Tmall stores. In addition, Taobao has introduced an “RMB 10 billion subsidy” project, adopting a similar approach and bearing the same name as Pinduoduo’s signature campaign. Through this channel, products were directly sold at lower prices without the usually complicated coupon application.
JD, with former CFO Sandy Xu recently taking over as CEO, offered the most generous discounts compared to other platforms. Buyers have been able to get RMB 50 back for every RMB 299 spent. Prior to the festival, Trudy Dai, CEO of Alibaba’s newly independent Taobao Tmall Commerce Group, expressed the platforms’ commitment to making a “historical investment” in this year’s event, while JD announced its intention to undertake “industry-wide investment efforts” during the festival.
Pinduoduo, known for selling ultra-low prices goods, prominently displayed a slogan on its 618 promotion interface that roughly translates to “no need to compare with other platforms because we offer the lowest prices.” Pinduoduo has also been offering RMB 30 off for every RMB 200 spent.
“Encouraging consumption became the priority for the government, the market, and the e-commerce platforms in all aspects,” said Fabian Sinn, a managing partner at e-commerce marketing firm Genuine. “As a result, there were more subsidies and more affordable prices to attract consumers and stimulate the market’s economic recovery.”
Retail sales, as a key figure indicates consumer confidence, rose 12.7% in May, falling short of market expectations and down from 18.4% in April. The recovery in China’s consumption sector is not as strong as it appears.
The rise of Pinduoduo, which has steadily gained market share in an e-commerce industry once dominated by Taobao and JD, has combined with the emergence of live commerce platforms like Douyin and Kuaishou in recent years to have a significant impact on price-sensitive consumers. These consumers now consider the price differentials and after-sales services offered by various shopping outlets when making their purchasing decisions.
Copying from each other’s playbooks
In a heated competition, Chinese e-commerce platforms are copying strategies from each other. Rising content commerce platforms like Douyin and Kuaishou are copying from the majors, trying to offer more serious online shopping experiences like Taobao and JD on their apps, adding new dedicated shopping sections rather than directing people to shop while they are watching content like they used to. While majors like Alibaba and JD are trying to offer more video entertainment and content, making the shopping experience more casual in their apps.
Douyin and Kuaishou, known for stimulating consumption via livestreaming and short videos, have focused on leveraging various promotional activities to drive sales through dedicated shopping channels called “marketplace,” where product listings can be displayed in columns.
Wei Wenwen, president of Douyin’s e-commerce unit, recently highlighted at the TikTok sibling’s ecosystem conference that the GMV generated from the “marketplace” accounted for over 30% of its total sales in 2022.
Douyin and Kuaishou “have been steadily capturing more market share, despite offering similar products to other major platforms,” Jacob Cooke, CEO of WPIC, an e-commerce tech and marketing firm that helps foreign brands sell in China, told TechNode.
“People use these short-video apps for entertainment and knowledge acquisition,” added Cooke, “and the platforms have cleverly integrated e-commerce so that users are exposed to brands and products that relate to their interests, which has been a catalyst for impulse buying and consumer engagement.”
Mainstream shopping sites are adopting a content-driven approach as a defensive strategy to promote sales. The content-based browsing was repeatedly emphasized by Trudy Dai at the 618 Merchant Conference held on May 10. Dai promised that Taobao would provide a wide range of products, short videos, and livestreaming services to enhance user engagement.
Alibaba is investing heavily in its content ecosystem. The e-commerce giant announced at the Merchant Conference that over 50,000 new livestreaming hosts would make their debut during the annual mid-year discounts on Taobao and Tmall.
Notably, on May 31, US tech giant Apple made its first foray into livestreaming on Tmall, an event that drew 1.28 million viewers. Football celebrity Messi also joined Taobao Live for nearly 20 minutes on June 14, as part of his Chinese trip schedule, which drew over 2.5 million viewers and even caused the stuttering of the livestream event when Messi came onto the scene.
JD Live is also leveraging top influencers to attract user transactions. Smartisan Technology founder Luo Yonghao, who previously had an exclusive partnership with Douyin, joined JD’s livestream on May 31 and helped sell goods for more than RMB 150 million.