China’s 618 shopping event brought in sales, but perhaps not profits
China’s second-biggest online shopping event of the year generated big sales, but not necessarily the windfall that retailers have come to expect, analysts say. E-commerce giants like Alibaba Group and JD.com have historically used the weekslong 618 shopping festival to get customers to open their wallets, offering promotions on everything from Coach handbags to iPads.
This time around, JD said it posted record gross merchandise value, the total value of goods sold on its platform. A person familiar with Alibaba’s sales said the company’s GMV beat last year’s tally.
But given the unusually steep discounts this year—the product of cautious Chinese consumers and rising competition from fast-growing low-cost leader PDD Holdings—analysts are skeptical that companies significantly boosted their bottom lines. “We believe GMV may have slowed down" during the second half of the 618 event, HSBC analysts wrote in a research note after sales wrapped up last week.
They cited official data showing that on-year parcel volume growth slowed from a percentage in the high 20s at the start of the sales event to the high teens in the final week. Margins at Alibaba’s major e-commerce platforms Taobao and Tmall, they added, “could see a drag." Citi analysts led by Alicia Yap said one of the key takeaways of the event this year was that merchants appeared to be facing more intense competition and pressure on margins.
“A very obvious trend this year is low-price competition," as companies like Alibaba and JD learn from PDD’s method of capturing market share via low prices, added Shawn Yang, senior research analyst at Arete Research. “Profitability might be affected, but it’s hard to quantify it at this point." Analysts stopped short of calling
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