A fierce price battle between China’s online retailers on the “Singles Day” shopping extravaganza is revealing additional signs of weakness in household consumption and creating anxiety that the second-biggest economy in the world will continue to contract.

Singles Day, named for the digits in the date, began as a 24-hour online shopping event in China on November 11 and has since grown into weeks of promotions, including in physical stores, making it the largest shopping festival in the world.

Since China is flirting with deflation and has determined that increasing household demand is essential to averting lost decades of slow growth, this year’s festival is being studied more intently than ever as an indicator of consumer confidence.

Customers can save 50 yuan ($6.86) on Taobao and Tmall, two sites owned by Alibaba, an e-commerce behemoth, when they purchase 300 yuan. The firm promised to sell 80 million products at their lowest prices this year for the sale, which began in late October, but now it is forcing retailers to deliver absurdly low pricing on Singles Day.

PDD Holdings’ Pinduoduo and JD.com have jointly announced that they will provide billions in cashback offers to customers who shop on their own platforms throughout the sales period.

According to Jason Yu, managing director of Kantar Worldpanel’s greater China market research, “low prices and discounts have been the overarching theme.” Yu pointed out that even the recently debuted iPhone 15 was being sold with a 500 yuan discount.

“It’s a sign that nobody’s going to easily spend 10,000 yuan ($1,371) on a handset right now. Confidence is a bit weak.”

After several months of indications showing growth stabilising, data released on Thursday showing a decline in consumer prices to the lowest level since the COVID-19 pandemic has raised questions about China’s economic recovery.

The major Chinese e-commerce sites withheld their 2022 final sales numbers from the public, citing COVID-19 regulations as a hindrance to customer trust and expenditure. Although it’s uncertain if they would disclose the numbers for this year, realistic expectations are low.

According to research by Bain & Company, 77% of the 3,000 customers it polled said they would either keep or reduce their Singles Day expenditure from the previous year.

“Macroeconomic headwinds are causing consumers to be more value-conscious,” Bain said.

There are indications that Singles Day sales are slowing down. According to data source Syntun, between October 31 and November 3, e-commerce platforms sold 311 billion yuan in goods, a 7.1% decline from the same period last year. However, it was noted that this was somewhat offset by the fact that livestreaming websites like Kuaishou, Diantao, and Douyin sold 10.5% more, or 99 billion yuan.

Some analysts are more optimistic. Co-founder and CEO of e-commerce consulting firm WPIC Marketing+Technologies, Jacob Cooke, says he is “optimistic” about the “stabilisation” of Chinese growth and projects a 14%–18% increase in overall sales.

Consumers have been frugal due to a number of factors, including a decline in the massive property market in China, where the majority of household wealth is invested, indebted local governments reducing expenditure, youth unemployment rates above 20%, and declining earnings in some economic sectors.

Although there was a surprising increase in imports in October, which gave rise to hopes that spending might be improving, the decline in consumer prices indicates that trade was likely affected more by higher commodity prices than by consumer demand.

The consumer price pressures, when combined with the lacklustre manufacturing surveys and the declining foreign demand, suggest that China will lose growth momentum by year’s end.

“We continue to see a serious risk of a triple dip for the economy,” Nomura analysts wrote in a note.

Tan Jiapeng, a 35-year-old Beijing office worker, has only made one Singles Day purchase thus far: a Descente winter jacket that he describes as a “essential purchase” for the upcoming cold weather. He didn’t buy the Moutai wine, body lotion or smartphone games he had been hoping for since he was worried about his job security.

“It’s known how difficult it is to find a job these days, even for the young people who are cheaper,” Tan said. “The economy is moving downhill, I can’t spend as freely as before.”

(Adapted from ThePrint.in)

Categories: Economy & Finance, Strategy, Uncategorized