Spen­ders or thrifters: As Sin­gles’ Day nears, are China’s shop­pers about to drop?

Gulf Times Business - - BUSINESS -

China is gear­ing up for the big­gest shop­ping event of the year to­mor­row, a day dom­i­nated by e-com­merce gi­ant Alibaba Group Hold­ing Ltd which saw $25bn worth of goods sold on its plat­forms alone in the 24hour pe­riod last year.

Akin to Black Fri­day and Cyber Mon­day in the United States, “Sin­gles’ Day” has be­come some­thing of a lit­mus test for the strength of Chi­nese con­sump­tion, which is com­ing un­der pressure amid ris­ing trade Sino-US ten­sions and a wider eco­nomic slow­down.

Com­pa­nies in China are al­ready see­ing the ef­fect of ris­ing cau­tion among the coun­try’s shop­pers.

Car sales are down sharply this year, box of­fice re­ceipts have slowed and brands are fac­ing pressure to roll out dis­counts to prop up sales.

Alibaba it­self low­ered its full-year sales fore­cast ear­lier this month due to con­cerns about the trade spat, while the firm’s core com­merce busi­ness saw its slow­est quar­terly sales growth since 2016.

As such, China’s lead­ers in Bei­jing, global firms tar­get­ing the mar­ket and e-com­merce gi­ants like Alibaba and ma­jor ri­val JD.com Inc are all pay­ing close at­ten­tion to Sin­gles’ Day for wider signs of con­sumer strength. The fo­cus on Sin­gles’ Day will be Alibaba’s fi­nal trans­ac­tion num­ber, which comes out just af­ter mid­night fol­low­ing a fren­zied day of deal hunt­ing for shop­pers and brands look­ing to bol­ster their sales.

Most an­a­lysts said the num­ber will rise, but the speed of growth will tem­per.

The value of trans­ac­tions, which in­cludes pre­orders made weeks ahead of the event, rose 40% last year from the year ear­lier.

“It’s def­i­nitely one of the barom­e­ters of con­sumer con­fi­dence,” said Ja­son Yu, Shang­hai-based Gen­eral Man­ager of mar­ket re­searcher Kan­tar World­panel, adding Bei­jing pol­i­cy­mak­ers would be keeping a watch­ful eye.

For many brands “this is prob­a­bly the sin­gle big­gest sales con­trib­u­tor for the en­tire year,” he said.

China’s shop­pers, on a tear in 2017, have been spooked this year by fall­ing stock mar­kets, a pro­tracted trade war with the United States and wider eco­nomic malaise.

A range of con­sumer in­dexes, in­clud­ing from the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment (OECD) and bro­ker­age Jef­feries, have shown a drop off in con­fi­dence this year as credit con­di­tions and trade ten­sions have hard­ened.

China’s box of­fice dropped al­most 30% in Oc­to­ber, its steep­est fall in over two years, ac­cord­ing to data from do­mes­tic in­dus­try tracker En­tGroup.

That was also a third straight month of declining sales ver­sus 2017.

“I haven’t been to the cin­ema for over a month,” said Ji Chunzi, 26, a Shang­hai-based trade pub­li­ca­tion edi­tor, who said it was due to a lack of good films and that tick­ets had be­come a bit pricey at 50 yuan to 60 yuan ($7.20 to $8.64) each.

“There also wasn’t re­ally that much worth watch­ing.” China’s auto mar­ket, the world’s largest, posted its steep­est monthly fall in seven years in Septem­ber and is widely ex­pected to an­nounce an­other drop for last month.

The mar­ket is at risk of shrink­ing this year for the first time in decades.

Un­der pressure, deal­ers are slash­ing prices to drum up sales with in­creas­ingly cost-con­scious con­sumers and are push­ing the govern­ment to roll out sup­port mea­sures.

Chi­nese tip­plers are slow­ing pur­chases of fiery, high-end liquor bai­jiu, a po­ten­tially wor­ry­ing sign for global pre­mium brands tar­get­ing the world’s big­gest lux­ury spen­ders.

Chi­nese lux­ury liquor maker Kwe­i­chow Moutai Co Ltd, the world’s big­gest al­co­hol firm by mar­ket value and a bell­wether for China’s big spen­ders, posted its weak­est quar­terly profit growth since 2015 last month.

iPhone maker Ap­ple Inc and South Korea’s Sam­sung Elec­tron­ics Co Ltd are grap­pling with a pro­longed slump in smart­phone ship­ments in China, which are down over 10% so far this year, ac­cord­ing to re­search firm IDC.

The mar­ket is a key bat­tle ground for Ap­ple, though it is fac­ing ris­ing com­pe­ti­tion from lo­cal ri­vals such as Vivo, OPPO and Huawei Tech­nolo­gies Co Ltd.

Women work on sort­ing parcels at a YTO Ex­press lo­gis­tics cen­tre ahead of the Sin­gles’ Day shop­ping fes­ti­val in Changchun, Jilin province. China is gear­ing up for the big­gest shop­ping event of the year to­mor­row, a day dom­i­nated by e-com­merce gi­ant Alibaba Group which saw $25bn worth of goods sold on its plat­forms alone in the 24-hour pe­riod last year.

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