GMV of Chinese ecommerce during 6.18 dropped for the first time in 8 years, according to data platform Syntun. This was quickly picked up by international media as the barometer of weak consumer confidence in China.
However, others quickly jumped in to challenge the data, suggesting that ecommerce sales actually grew. So who has the truth?
On the latest episode of the Impulso Podcast by Momentum Works, we examine numbers and other factors from different sources, giving you a clearer picture of what’s happening in the fiercely competitive ecommerce market in China.
Also available on Spotify
[AI-generated transcript]
[00:00:00] Weihan
Hello everyone, welcome to episode 82 of the Impulso podcast by Momentum Works. As you can tell, Sabrina is not here today and is currently enjoying herself in Europe. We miss her by the way, I hope she comes back very soon. I really do miss Sabrina because she’s so good at her job. So, I’m being roped in here by Jianggan.
[00:00:26] Jianggan
This is Weihan for many of you who don’t know her. She leads much of the Insights work at Momentum Works and many of the reports that you have seen, including e-commerce in Southeast Asia, coffee, et cetera, are actually produced by her and her team.
[00:00:45] Jianggan
So as she confessed to us a while ago that she has limited social energy, so let’s see.
[00:00:51] Weihan
Okay, so let’s dive into what we’re going to talk about today. So on today’s episode, we are going to be looking at the 618 e-commerce shopping festival that happens in China. So, Jianggan, can you give us a lowdown on exactly what this festival is and what’s its significance to both users, as well as to many of the platform companies and investors out there?
[00:01:17] Jianggan
I think many of you who have been following e-commerce in China as well as in Southeast Asia will be familiar with things like Double 11, right? The Singles’ Day. So that was created by Alibaba. It was the biggest shopping festival in China. JD dot com, which was the major rival Alibaba created its anniversary sale in the middle of the year.
[00:01:37] Jianggan
It’s because Double 11 is towards the end of the year, right? So they created a sale in the middle of the year. Called 618, which is allegedly the anniversary sale of JD, and other platforms followed suit. So you would have JD Douyin, which is the Chinese version of TikTok, and Alibaba platforms. I think the others actually making major promotions and discounts during this shopping festival.
[00:01:58] Jianggan
And of course, we are in the month of June, which means that this year’s 618 just passed.
[00:02:05] Jianggan
I was in Hangzhou and I bought lots of things this time round.
[00:02:11] Weihan
I heard from our colleague as well that she has 30 parcels waiting to be received by her, so she’s looking forward to it.
[00:02:19] Jianggan
Really? It hasn’t been delivered? It’s already the end of June.
[00:02:22] Weihan
I have no idea, maybe she sent it home. Yep, so actually something’s very different about this since 618. And there’s this e-commerce data tracking platform called Syntun that reported data that suggests that there is actually a drop in the GMV of this year’s 618.
[00:02:41] Weihan
And this has been picked up by many, many news outlets out there.
[00:02:45] Jianggan
Yeah, we showed a few like CNBC and the Financial Times, which pick up this as a headline. And of course, everybody has been watching very closely on this number because this is a sign of consumer confidence in China, which lots of people are having doubts about at the moment.
[00:03:01] Jianggan
As you can see from the headlines it is the first time that there’s actually a decline. Since 2016, when Syntun started tracking the data, which obviously is big news, right, and it’s also negative news.
[00:03:13] Weihan
So speaking about Syntun’s data, I’m pretty sure all of us are actually curious about what exactly has changed.
[00:03:21] Weihan
So if we have to take a look here, we can see that even though there is an increase in the overall GMV growth for live commerce, if you were to look at platforms as a whole, The four different marketplaces, it actually decreased by 6. 9%, which is almost a, or you can say 7 percent decline across all the platforms.
[00:03:42] Weihan
So would you consider this as something that is very significant or something that is very eye-catching for a lot of the people out there?
[00:03:49] Jianggan
It is definitely eye-catching because I think for China’s audience and the external audience, it’s a bit different, right? For external audiences, this is a sign of, okay, maybe the economy is in trouble.
[00:03:58] Jianggan
And maybe so the growth has stopped for the Chinese audience. This is probably even more significant because we know this year that all the platforms have greatly simplified the promotion mechanics, right? I mean, what you see, the discounts are what you get. You don’t have to do a complex like voucher stacking, et cetera, et cetera.
[00:04:16] Jianggan
So even if you make the discounts very, very obvious and very eye-catching, if people still are still buying then that’s a bigger trouble that we’re looking at.
[00:04:27] Weihan
Okay, so I’m sure that because of this drop, people are actually looking, starting to think a bit deeper into exactly what’s going on behind the numbers.
[00:04:35] Jianggan
Or do they trust the numbers?
[00:04:36] Weihan
Yeah, or do they trust the numbers? So we have seen reports from a few analysts from banks. So for example, Citibank analysts here actually question the data collection method and the estimate validity. We also have HSBC analysts suggesting that this decline may be at attributable to changing promotional periods across platforms and poor data collection.
[00:05:02] Weihan
That’s a very, very strong statement right there.
[00:05:05] Jianggan
So, I think that the general public would interpret this as some economic trouble in China, and I think investors would be nervous. Should I adjust my positions and stuff? And I think the banks were under, the admins were under pressure to deliver some kind of notes or updates to tell investors how they think.
[00:05:25] Jianggan
And we see in both these cases, right, HSBC as well as Citibank they gave essentially opinions, like, rebutting, saying that, okay, no, there should not be a decline.
[00:05:36] Weihan
So actually, I think for HSBC, they have also mentioned another data player, Yiguan, which reported very different 618 results. So what Yiguan actually shows is that there is growth instead?
[00:05:49] Weihan
And you can see that even that on average, platforms actually have a 13.6 percent growth with Douyin being the fastest grower at 26.2%, just by GMV.
[00:06:04] Jianggan
And, JD, the original inventor of 618, it seems to, I mean, if this data is to be believed, right, they seem to have the slowest growth.
[00:06:17] Jianggan
But do you know that all the parcels I bought were from JD?
[00:06:21] Weihan
Is it because you bought a lot of electronics?
[00:06:25] Jianggan
Yes, so all the new equipment you see here, the cameras, not the cameras, but additional sort of tripods and set is from JD. And not necessarily because it’s electronics, but because the same goods are sold across different platforms.
[00:06:38] Jianggan
But because JD, I mean, if you order that from a major city, it gets delivered on the same day.
[00:06:45] Jianggan:
that’s very fast.
[00:06:46] Weihan
We would never experience that in Southeast Asia.
[00:06:48] Jianggan
Yeah, so I was in Hangzhou, right, for our, our sort of live commerce immersion, and then Jahntelle sent me a request, and we need to buy this, this, this, this, this, this.
[00:06:56] Jianggan
And I said, okay, if I go to Taobao, and they will guarantee that the goods will be sent out by tomorrow, the next day, so we’ll get it, it’s probably like two, three days down the road. And then you look at JD, okay, if I order by 10 p.m., you can get it the next day. I think by 3 p.m. or something. I placed the order at night or in the morning and then I got it in the afternoon.
[00:07:21] Jianggan
So it’s it’s pretty fast
[00:07:23] Weihan
Would you also attribute the slow growth to them already having achieved very decent results in the past and then this year they’re just not putting as much focus into this area?
[00:07:36] Jianggan
Yeah, I think over the whole year you have been working on finalizing the e-commerce report in Southeast Asia.
[00:07:43] Jianggan
And you will notice that a key trend in China for the last year or so is people are trying to attain low prices, right? Everyone, everyone’s pushing the prices down to attract customers. I think thanks to a certain extent to the pessimism some consumers have about the economy, but also to Pinduoduo which has been very price competitive.
[00:08:03] Jianggan
JD, for the same-day delivery, I didn’t check other platforms, but the price I got is probably higher than what you would get on other platforms, and I’m not sure, like, you know, for this shopping festival, how many consumers were like me, right, who want to get the things on the same day.
[00:08:22] Jianggan
I wouldn’t mind waiting for two or three days to get a much bigger discount.
[00:08:26] Weihan
True. And I guess a lot of consumers are now really valuing cost-effectiveness in terms of all the products they are receiving. Compared to in the past, some people would learn to have it at very cheap prices, but the quality is not so good, or they prioritize quality over everything else.
[00:08:42] Weihan
Yeah. I think just now you mentioned how a lot of the platforms are actually doing to obtain this cost-efficiency. And one big player is actually Alibaba. So for this year’s 618, they have actually held their fort and have. That’s the data from Yiguan as well right? Yes, so they are holding a 49.5% market share just by GMV alone in this time’s shopping festival.
[00:09:07] Weihan
And I think this is kind of like their way to counter the sentiments about the company. Yeah.
[00:09:13] Jianggan
I think we have been talking about Alibaba a lot this year, right? Because since last March, I mean March last year, they started this major transformation, which is painful and not easy. It’s ultimately like a quarter million people organization.
[00:09:26] Jianggan
So I do think that this year, 618, they have been extra aggressive in not only the price setting but also lots of tactics, right? So I think many of the. the initiatives, many of the promotions they do might hurt their bottom line.But I think it’s better they have to fight because otherwise, they will not have the momentum.
[00:09:50] Jianggan
They would keep losing market share to Pinduoduo and Douyin, so they need to do something drastic. And, the co-founders are now in charge, right? So they’re probably the only ones who are able to mount this offensive and sacrifice some of the short-term financials to actually defend their market position in China.
[00:10:08] Weihan
So we have heard a lot about what data providers are actually saying about 618, and we have mentioned JD, we have mentioned Alibaba, so let’s take a look at exactly what each company is saying about their sales for this year’s 618. So you can see here we have JD and they have remotely reported that their live commerce.
[00:10:29] Weihan
volume, order volume actually grew by 200 percent, and they have more than 500 million users actually placing orders on their platform for this year. So this seems to be suggesting that they are, they are still growing quite a fair bit, especially in the area of live commerce, which is, I would say that it’s probably not their strongest suit as compared to other players like Douyin.
[00:10:51] Jianggan
I’m not sure if you watched Richard Liu’s first live show, the JD Founder when he was selling like eggs when he was selling milk, and we’re saying that, okay, he’s because he was using a digital human, a digital copy of himself.
[00:11:05] Jianggan
It looked to us a bit fake, because we’ve been studying live commerce for a long time, but we showed that to our friends, and everyone thought, oh, it’s him. Yeah.
[00:11:13] Weihan
I guess they have been pouring a lot of resources because I think now with so many other new players coming in they have to defend on all ends. So I
[00:11:23] Jianggan
think they also need to send a signal to people that hey, we can do live commerce as well we are not sort of held hostage by all this development by Douyin and Kuaishou, we can defend we can build the technology.
[00:11:35] Jianggan
We can allow merchants to sell on live and we can achieve a lot of orders on live as well. Yeah
[00:11:41] Weihan
So that’s what JD has done, and now we take a look at what Tmall is doing. So,
[00:11:48] Weihan
Alibaba’s Tmall. So I think from here, right, the numbers look impressive. So they have. 365 brands with a GMV of more than 100 million Chinese Yuan.
[00:12:00] Weihan
And they also have more than 36, 000 brands that have obtained, have doubled their GMV doing this 6.18 compared to last year. And they also mentioned Taobao’s live streaming rooms with a 55, 53 percent year-on-year increase for those that have a GMV of more than 100 million Yuan.
[00:12:23] Weihan
I would say that the numbers sound impressive, but this doesn’t seem to be telling me anything much.
[00:12:30] Weihan
Don’t you agree, Jianggan? It feels like what we are most curious about is what are the actual numbers that they are reaching for this year.
[00:12:38] Jianggan
Yeah, it looks like it looks like they are cherry-picking, right? They pick some metrics that are good to share with the audience, but at the same time, shy about what’s the total number.
[00:12:48] Jianggan
I mean, what’s the overall achievement, right? So I do think there’s a reason for that. Because it has been the case since 2020.I think 2021 or 2022 was the first year Alibaba or Taobao, Tmall stopped reporting the aggregate number for double 11. Back then, I think we actually wrote an analysis on our blog.
[00:13:11] Jianggan
So, there’s a reason behind it. So, because since COVID, there’s a bit of a problem with confidence in the economy, a bit of negative consumer sentiment. So if you report your number, which seems to be too good, and people say that, okay, you are detached from reality, and if you, and people are not bit of your numbers.
[00:13:33] Jianggan
If you report numbers which are bad, and of course people interpret it, okay, this is a sign of the economy’s not doing well. So either way when people are not exactly happy, whatever number you report, we’ll get, we’ll get, we’ll get. Interpreted in a negative way. So the results that you might ask was not told not not share the message but to let third parties give the interpretation and let others channel their energy to the third party rather than yourself
[00:13:59] Weihan
True, that’s very true.
[00:14:02] Weihan
Yep, so then the question comes right who actually has the truth What exactly is the truth and why is it so complicated to get the truth?
[00:14:10] Weihan
So I think The one potential reason that people have uncovered is that maybe it’s something to do with the dates that People use to actually calculate when 618 happens. So 618 doesn’t happen on just one day, but it falls Almost like on a whole month
[00:14:27] Weihan
if you have two examples right here, you have Taobao Tmall with their 618 festivals running from 20th May to 28th June.
[00:14:34] Weihan
So that’s about 33 days as compared to Douyin which has a much shorter festival, which is around 26 days. So why does this make it difficult? For us to actually understand the actual 618 numbers. Because
[00:14:50] Jianggan
you’re not comparing apples to apples, right? So for example, here, right, ifTaobaot starts off on 20th May to 20th June and Douyin has a different date, how do you factor in, I mean, I mean, how do you compare, compare effectively?
[00:15:07] Jianggan
Because do you think that, okay, the promotion period between 20, I mean, the period of 20th to 26th of May? Do you have an account for Douyin or do you not Douyin is not running the promotions as Taobao would So that’s actually complicated. I do think that For the data platforms like Yiguan they would pick a few days saying that okay, we are trying to compare apples to apples But does it capture the full picture?
[00:15:32] Jianggan
So it’s it’s it’s it’s less nuanced, right?
[00:15:35] Weihan
Especially if they have different promotions running on different dates for each of the platforms, right? So the discounts might be more. They say have free shipping.
[00:15:44] Jianggan
Yeah, and also this year, there are a few changes. So last few years, I think the major marketplace is like Taobao Tmall or JD would have the pre-sale, right?
[00:15:52] Jianggan
So people can pre-order things. And actually doing the promotion itself, they actually make the payment and complete the order. So initially, the objective was to officially get merchants ready and dispatched to the warehouse because you know that many of these pre-orders would likely translate into real orders, but it’s also a way to boost up the numbers, right?
[00:16:14] Jianggan
Because it’s giving people a longer period of time to make the orders. But this year, I think most platforms canceled this policy, so it also makes it difficult to compare exactly the mechanisms this year compared to the previous years.
[00:16:27] Weihan
So I think we have mentioned a fair bit about third-party data, and platform data, but we also do have some data from government sources that might give us a glimpse of what might be happening on the ground.
[00:16:39] Weihan
Okay, so the State Post Bureau, which actually regulates the express delivery industry in China, actually showed a 20% year-on-year parcel volume growth between, for this period of time. So
[00:16:51] Jianggan
that’s between 20th of May to 16th of June, which covers most of 6.18 for the platforms. Yes, so, so they showed a growth in parcels, and I do think this year the platforms made it easier for people to cancel the orders. So, which means that maybe some of the orders were canceled before the parcels were dispatched. But here what we see is the actual increase in the number of parcels.
[00:17:15] Jianggan
But of course you can also argue that this year, because people are pushing for low lower cost items, the average. The value of the parcel might be going down But still I mean from parcel volume point of view at least that you you see you see a fairly decent growth right
[00:17:29] Weihan
Yeah, definitely and I think you can see that actually during the busiest day of this period.
[00:17:33] Weihan
There are actually more than 580 million parcels processed So you can imagine how busy the logistics and fulfillment 80
[00:17:41] Jianggan
million parcels a day. That’s like Wow, okay. It’s insane. Yeah, a big number, yeah.
[00:17:48] Weihan
Yeah, it’s very big. Feels like almost everyone has a parcel coming.
[00:17:51] Jianggan
Yes, that’s almost the population of Southeast Asia.
[00:17:54] Jianggan
Yeah. Okay, so
[00:17:54] Weihan
I think there’s also another data point. But I ordered like
[00:17:57] Jianggan
six parcels that day, so
[00:18:00] Weihan
you’re contributing. Yep. so I think there’s another data point from the National Bureau of Statistics, and this one actually looks at the online retail growth from January to May this year, and you can see that there is actually 11.5% growth in terms of the physical goods, while the total online retail goods actually grew by 12.4%. So it feels like these two numbers from the government sources suggest that actually 618 has experienced growth this year rather than a decline, which is slightly different from what Syntun actually mentioned.
[00:18:36] Jianggan
So it seems to support the Yiguan narrative that the 618 number actually grew. So I’ve been following the sort of numbers from the National Bureau of Statistics fairly regularly. They, announce numbers every month. And I think the overall consumer consumption is lukewarm.
[00:18:54] Jianggan
But there are two areas. I think one is what you showed here, which is the online retail, which continued to grow, which means that the penetration of online versus, the total retail is still growing at a smaller pace compared to what you would expect in the past. Another area that has been growing oddly is F& B.
[00:19:14] Jianggan
So like F&B sector is growing every month, year, year on year. So I don’t know that, I mean, the population is definitely not growing. It’s actually declining. So, so, so which means that people, people are probably eating out more or people are spending more on, on sort of food services.
[00:19:32] Weihan
Okay, so I think Regardless of what the real truth behind the 618 numbers is, one thing we know for sure is that competition between e-commerce players is still very fierce and very cutthroat.
[00:19:45] Weihan
So I think we mentioned just now that Alibaba has done pretty well in securing its market share for 618, and I think it’s a reflection of the the types of pressure it has been facing. As you can see, it has been losing a lot of market share in recent years to newcomers like Pinduoduo, doing, as well as Kuaishou.
I feel like even though we say that Southeast Asia’s e-commerce, it’s already competitive enough. If we take a step back to China, it’s on another level, I have to say.
[00:20:20] Jianggan
I mean, there are like 58 million parcels delivered in one day, and everyone tries to have a bigger piece of that pie.
[00:20:29] Jianggan
So, this is what we have put into this year’s e-commerce and sales report. Last year, I think we had a sort of estimation of what was expected, right? This year, we have the actual numbers to compare the market share. I do think that the Taobao and Tmall Alibaba platforms have been quite aggressive in defending.
[00:20:47] Jianggan
If you can look, you can, you can, you can see that in this year’s 618 numbers, what I think would be interesting to watch is if Taobao and Temu really want to sacrifice their bottom line and mount a very, very strong defense, how would that impact Pinduoduo or Temu specifically, because we know that, I mean, almost like more than two-thirds of the Pinduoduo management is actually focused on Temu.
[00:21:14] Jianggan
So if domestically they face a bigger challenge to try to halt their growth momentum in China Alibaba, would they have to divert some of the resources and some of the management attention back to China? So this is something interesting to watch. We don’t see that yet, but it might, it might happen if the competition heats up in China.
[00:21:34] Weihan
Okay. So speaking of Temu, we are also seeing a lot of e-commerce, Chinese e-commerce platform players trying to venture abroad in order to, in a sense, get more, slightly more leverage on top of whatever they have been experiencing in China. As you can see from here, China’s cross-border e-commerce imports and export volumes have been increasing steadily over the years.
[00:22:00] Weihan
So these are the numbers from the customs, right? Yes, Chinese customs. And would you, would you attribute this a lot to, let’s say, there is a lot of commotion over, let’s say, Temu, back then there’s Shein, there’s a lot of AliExpress, Lazada, whatsoever, that contributes to this.
[00:22:18] Jianggan
I wouldn’t think that people want to do, people want to do promotions per se.
[00:22:21] Jianggan
I mean, if I were Temu, if I could grow my market share globally without doing a promotion, I would prefer that way. But of course, when you start from scratch, Temu started in, September 2022. We start from scratch. Nobody knows about you and you need some aggressive tactics to, make yourself into critical mass.
[00:22:41] Jianggan
And afterward, you can optimize things and you can make things work. I do think there are many factors which contributed to I mean, this is the important export volume because the customer doesn’t really break down. But we do think that the vast majority of this is probably export export.
[00:22:56] Jianggan:
So there that many factors, right? I mean, high interest rates, which means that the middle class in almost all countries have reduced spending power and the value for money becomes more important for many of them. So I did remember, like one of the team of managers was telling their merchants that that most of their consumers in the US are people above 35 years old.
[00:23:17] Jianggan
I mean, people actually have to. To care for their household right have to plan their money and stuff. So I also think that the excessive not excessive, but the lack of growth, lack of high growth in China and force them to start looking at markets elsewhere, I do think that if they keep sending like lots of parcels across the border directly to consumers that’s causing political problems in other countries, right?
[00:23:48] Jianggan
So, because, the ecosystem in those countries, namely the retailers, the distributors, et cetera, are not benefiting from this. I do think that they will probably need to sort of adjust their models a little bit. Like so for instance, SHEIN has been building a supply chain in Brazil.
[00:24:06] Jianggan
And I think since March, Temu has been allowing sellers in the U. S. to use the platform to sell to merchants while reducing their reliance on cross-border. So I do think that I’m not sure whether the cross border will continue to grow, but these platforms have ambitions to be global players and they will continue to be aggressive with one another.
[00:24:26] Weihan
Okay, so I think that sums up what we have to share for today’s podcast. But do stay tuned for our launch of e-commerce in Southeast Asia in 2024. And it will come out somewhere in July, I believe. We are in the midst of preparing it. Yes, we are, it’s a lot of effort.
[00:24:46] Weihan
Yes, okay. So thank you so much for tuning in to another episode of the Impulso podcast.
[00:24:51] Weihan
We hope you enjoyed today’s episode. If you do, Like our podcast and subscribe on YouTube, Spotify, Apple Podcasts, or your preferred podcast platform to stay up to date on the latest happenings in, and trends in tech, new retail, and the broader digital economy. See you in the next one. Bye bye.