Chinese online shoppers tempted with discounts and payment plans as spending zest declines

Hong Kong: In an effort to reignite consumer spending, Chinese online merchants offered deep discounts, new product releases, and payment plans during China's first major online shopping festival following the easing of zero-COVID policies.

This year, e-commerce retailer JD.com chose not to disclose the results of its 618 shopping festival, which concluded on Sunday, making it difficult to assess the total spending. In comparison, the Singles' Day shopping festival held on November 11 annually generates billions of dollars.

Analysts noted that Chinese consumers have become increasingly price-conscious and cautious about spending due to the sluggish economy.

Shaun Rein, founder and managing director of the China Market Research Group in Shanghai, stated, "Chinese consumer confidence remains weak due to a mix of geopolitics, continued weakness from COVID-19, and domestic Chinese politics." Rein also mentioned that consumers were already focused on seeking deals and trading down across various product categories.

Retail sales, a vital indicator of consumption, fell short of growth forecasts in May, recording a 12.7% increase from the previous year, down from an 18.4% surge in April, as reported by the National Bureau of Statistics.

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Chinese leaders have been attempting to shift the economy from investment-driven to consumer spending-driven, aligning it with the model seen in advanced economies such as the US.

However, the recovery from pandemic-related disruptions has been faltering, and consumers are yet to resume their pre-pandemic spending habits.

To stimulate customer interest and boost spending, e-commerce platforms have invested billions of yuan in incentives and subsidies for both customers and merchants.

JD.com launched a "10 billion yuan subsidies" program in March to compete with Pinduoduo, renowned for its affordable goods. Trudy Dai, CEO of Alibaba's e-commerce business unit, has also promised substantial investments to attract users to their platforms.

Despite overall weak consumption, categories like cosmetics and luxury goods experienced significant sales growth. Many luxury brands participated in the online festival, with some witnessing up to a tenfold increase in sales compared to the previous year.

High-end brands such as Bulgari and Celine reported strong sales during the festival, according to early results. JD.com data at the beginning of the festival indicated a twentyfold increase in sales for upscale brands like Max Mara, Valentino, and Maison Margiela compared to the previous year.

Luxury brands such as Burberry, Chloe, and Miu Miu surpassed their total sales from the previous year within the first 30 minutes of the 618 festival, according to Tmall data.

This year, more luxury brands participated in the festival to bolster their sales in China following the first decline in five years, caused by China's stringent "zero-COVID" policies and subsequent lockdowns that impacted retail spending.

Numerous brands, including Moncler and Lemaire, joined Tmall for the first time.

Moreover, the festival served as an opportunity for launching new products online, with some brands offering rare discounts and incentives such as interest-free installment payments over 12 months. Coach, for instance, offered a 75% discount on select handbags, while Jimmy Choo sold its signature Romy heels at a 50% discount.

High-value items like air conditioners and electric vehicles also performed well. Household appliance manufacturers Midea and Haier surpassed 100 million yuan (USD 13.97 million) in sales within minutes on JD.com at the beginning of the festival.

With inputs from PTI

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