China's biggest shopping event of the year exceeds low expectations

BEIJING – China's Singles' Day shopping festival saw consumers spend more than expected in a tepid retail environment, consulting executives told CNBC.

The country's version of Black Friday this year kicked off on October 14, more than a week before 2023, and ended on Monday. Major e-commerce companies used to report gross merchandise value, an industry measure of sales over time, but have not done so for the third year in a row amid weak consumer sentiment.

“I think for a lot of brands, it may have ended a little better than they thought, but on the low end,” said Chris Reiterman, Ogilvy's CEO for Asia Pacific and Greater China. “Maybe no one would say we're out of the woods.” . . He is also the President of WPP China.

Reiterman said many multinational companies that sell consumer products in China are more cautious in the market, if not suffering. But he noted that many companies remain “very profitable” in the country, even if their growth has slowed to low single digits, rather than high double digits.

On the occasion of Singles' Day this year, Alibaba He claimed “strong growth” in GMV and a “record number of active buyers” while JD.com It said the number of shoppers on its platform rose more than 20% year-on-year.

The shopping season celebrating singles, also known as Double 11, came as the Chinese government announced a series of stimulus measures since late September, sending the stock market soaring.

“There appears to be an uptick” in consumer sentiment over the past six weeks, said Daniel Zipser, a senior partner at McKinsey and head of consumer and retail in Asia Pacific. “It's hard to predict what that means going forward.”

Singles' Day exceeded expectations for most brands, Zipser said. But instead of rising sales across the board, he pointed to pockets of growth in categories like outdoor toys, pet care, and “blind box” toys — where consumers buy uniformly labeled boxes for a chance to win new collectible items.

He noted that the blind box category is one that has risen from $0 pre-Covid-19 to a $2 billion-plus industry, reflecting the potential speed of consumer adoption in China.

Retail sales in China for October are expected to rise 3.8% from a year ago, according to a Reuters poll. That would be an improvement from 3.2% growth in September.

“We've seen people spend more this year,” Jacob Cook, co-founder and CEO of WPIC Marketing + Technologies, told CNBC on Tuesday. The company helps foreign brands – such as Vitamix and IS Clinical – sell online in China and other parts of Asia.

He estimated a 16% growth in GMV for the shopping festival compared to last year, likely the strongest performance in years. Cook added that brands have not had to cut prices as much.

Research firm Syntun said on Tuesday it estimates sales grew 20.1% year-on-year during the Singles' Day period to 1.11 trillion ($150 billion) for Alibaba's Tmall, JD.com and PDD.

Investors can get more details on Chinese consumption later this week. JD.com is scheduled to release its quarterly results on Thursday, followed by Alibaba on Friday.

“We've seen consumers who have, if you will, saved for a rainy day, and made purchases at this Double 11 shopping festival,” Deborah Weinswig, founder and CEO of Coresight Research, said Tuesday on CNBC's Squawk Box Asia. “.

She said the company's weekly survey indicated some “differences” in consumer sentiment over the past month.

Consumer spending in China has been under pressure since the outbreak of the Covid-19 pandemic, as families face economic uncertainty. The real estate recession reduced household wealth, while economic growth slowed.

While premium or mid-range brands “disappear very quickly”, high-end brands e.g Lululemon “He could do a good job,” Reiterman said. In general, he noted, local brands are often cheaper and able to go to market faster.

Some recovery in consumer confidence is expected in the second half of next year, likely after additional stimulus is announced in the first half.

China's Ministry of Finance indicated last week that more financial support could be provided in 2025. While China has not provided cash to consumers during the pandemic, this year the country launched a trade-in program to subsidize a portion of cars and household appliances. purchases.

— CNBC's Sonia Heng contributed to this report.