China’s annual 618 mid-year e-commerce festival, a significant indicator of consumer spending in the world’s second-largest economy, experienced a decline in sales for the first time in eight years.
This drop, reported by retail data provider Syntun, suggests that the recovery in consumer spending remains sluggish amid ongoing economic challenges.
Sales drop for the first time since 2016
The gross merchandise value (GMV) during the 618 festival fell by 7% compared to the previous year, totaling 742.8 billion yuan ($102.3 billion).
This marks the first decline in sales since Syntun began tracking the event in 2016.
The festival, named after the June 18 founding date of e-commerce giant JD.com, also features significant participation from other major platforms like Alibaba’s Tmall and PDD Holdings’ Pinduoduo, which offer substantial discounts and deals.
Factors contributing to the decline
Several factors have contributed to the decline in sales during this year’s 618 festival. Despite some companies extending their sales periods to boost consumer interest, the overall consumer confidence in China remains low.
The country is grappling with high youth unemployment rates and a prolonged property crisis, which have dampened consumer spending.
Historically, the 618 festival has shown growth, even during the challenging years of the COVID-19 pandemic.
This year’s decline is particularly notable given that retailers, including Tmall, began offering deals earlier than usual, starting on May 20 instead of the typical May 31.
However, these efforts were not sufficient to counteract the broader economic headwinds.
Performance of major e-commerce platforms
Despite the overall decline, some e-commerce platforms reported positive outcomes. JD.com, for instance, announced that its turnover and order volumes reached new highs during the festival, although it did not disclose specific sales figures.
Tmall, which ranked first in sales according to Syntun, reported that 365 brands on its platform surpassed 100 million yuan ($13.8 million) in GMV, and over 36,000 brands doubled their GMV during the event.
Rise of live commerce
One bright spot in this year’s festival was the continued rise of live commerce, where retailers and influencers sell products via live streaming.
This segment generated a GMV of 206.8 billion yuan ($28.4 billion), up from 184.4 billion yuan ($25.4 billion) in 2023.
ByteDance’s Douyin led the way in this segment, highlighting the growing importance of social media platforms in driving e-commerce sales.
Why is the 618 festival sales figure important?
The decline in 618 festival sales underscores the challenges facing China’s economy. Despite a 3.7% year-on-year increase in retail sales in May, which beat analysts’ expectations, other economic indicators such as industrial output and fixed asset investment fell short of forecasts.
These mixed signals reflect the uneven nature of the economic recovery and the ongoing difficulties in boosting consumer confidence and spending.
HSBC’s analysis of the 618 event described it as a “mixed bag,” with strong sales at the beginning of the festival tapering off towards the end.
This pattern suggests that while there is initial enthusiasm for major sales events, sustaining momentum remains challenging in the current economic climate.
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