JD.com’s $34 Billion Gala Haul May Signal Consumer Rebound
(Bloomberg) — JD.com Inc. bagged a record $34 billion of sales during China’s biggest online shopping gala of the post-pandemic era, suggesting the country’s nascent consumer spending recovery has legs.
JD.com and larger rival Alibaba Group Holding Ltd. this month put Chinese consumers to the first major test since Beijing locked down the country in February. China’s largest retailers are hoping the “6.18” summer extravaganza that wraps up Thursday has unleashed pent-up demand, making up for lost sales during a coronavirus-stricken March quarter.
JD.com said it racked up 239.2 billion yuan ($34 billion) of transactions as of mid-afternoon, up 33% from the same time a year earlier and already surpassing the 2019 total. The retailer’s shares rose 3.5% on their Hong Kong debut after raising $3.9 billion in a stock sale designed to appeal to Asian investors.
Global brands and smaller merchants alike stocked up on goods for months in anticipation of the annual summer event, a bargain buffet surpassed in scale only by the Nov. 11 Singles’ Day. It comes down to how willing hundreds of millions of shoppers are to spend after the world’s No. 2 economy contracted for the first time in decades. The stakes couldn’t be higher at the conclusion of an 18-day shopping marathon conceived by JD.com to commemorate its June 18 anniversary.
Initiated in 2014 as a riposte to Alibaba’s Singles’ Day, 6.18 has become yet another annual ritual for e-commerce companies and their offline partners from Walmart Inc. to Suning.com Co. Beyond headline figures, it’s less clear how much it contributes to the bottom line given the enormous discounting involved.
This year’s deals-fest culminates with the biggest bargains Thursday and has so far featured more generous subsidies than ever before, as well as an unprecedented cohort of live-streaming personalities. Competition also intensified with the likes of ByteDance Ltd. and Kuaishou — whose video app now sells JD.com goods — vying for buyers.
“Chinese and foreign brands had sluggish sales due to the pandemic, and 6.18 has become their most important opportunity in the first half,” JD.com Retail Chief Executive Officer Xu Lei said in an interview with Bloomberg Television. For discretionary items like home appliances, “we’ve seen a recovery in consumption.”
Chinese retail suffered a record collapse in the first three months of 2020. While private consumption is on the mend, the latest data shows it’s still sluggish, dashing hopes of a V-shaped recovery as people head back to work. The picture is further complicated as Covid-19 has kept people away from stores and shifted an unknown proportion of retail activity online.
JD.com projected revenue growth of 20%–30% this quarter. Xu says JD.com is on track to meet that goal and isn’t threatened by competitors encroaching upon its turf, as in consumer gadgets. Xu is widely viewed as the front-runner to succeed billionaire founder Richard Liu.
A strong second-quarter sales and profit recovery is likely for Alibaba, JD.com and Pinduoduo as merchant operations and logistics return to normal, said
Vey-Sern Ling and Tiffany Tam, analysts at Bloomberg Intelligence. User reliance on these platforms may also have increased during the coronavirus pandemic.
Based on the first 17 days of June, China’s e-commerce giants are on track for record sums as measured by gross merchandise value, or total value of goods sold. During the first 10 hours of its 6.18 campaign, Alibaba’s Tmall business-to-consumer marketplace logged sales 50% higher than during the same period last year after participating brands doubled. JD.com said sales of imports like HP laptops and Dyson hairdryers soared, and it’s selling more fresh produce in smaller cities.
Alibaba, along with brands on its platforms, committed cash and other coupons worth a total of 14 billion yuan ($2 billion), according to the company. JD.com said it offered 10 billion yuan in subsidies.
Live-streaming is also playing a bigger role during this year’s 6.18 as Covid-19 is fueling an unprecedented boom in online media. Alibaba’s Taobao Live championed the use of influencers to sell products ranging from lipstick to rockets, prompting rivals like JD.com and Pinduoduo Inc. to follow suit.
Social media companies like TikTok-owner ByteDance and Tencent Holdings Ltd.-backed Kuaishou are jumping on the bandwagon. Their mini-video platforms in China have lured a long list of tech chieftains hawking products of their own to live-streaming fans. The latest was NetEase Inc.’s usually reclusive founder, William Ding. Last week, his debut on Kuaishou amassed 72 million yuan of sales in just four hours.
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