Alibaba, JD test virus recovery with online sales extravaganza

[SHANGHAI] Alibaba Group Holding and JD.com will put China's nascent consumer spending recovery to its first major test, as the twin e-commerce giants on Thursday wrap up the country's biggest online shopping gala of the post-pandemic era.

China's largest retailers are hoping the "6.18" or June 18 extravaganza that began this month unleashed pent-up demand, making up for lost sales during a coronavirus-stricken March quarter. Global brands and smaller merchants alike stocked up on goods for months in anticipation of the summer event, a bargains buffet surpassed only by the Nov 11 Singles' Day in scale. On Thursday, JD will also gauge investor appetites when the US-listed company debuts in Hong Kong after a US$3.9 billion share sale.

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 to commemorate its anniversary. This year's deals-fest culminates with the biggest bargains on 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 and Kuaishou - whose video app now sells JD goods - vying for buyers.

JD and Alibaba are expected to release final results of their haul after midnight.

A strong Q2 sales and profit recovery is likely for Alibaba, JD.com and Pinduoduo, as merchant operations and logistics return to normal. User reliance on these platforms may also have increased during the coronavirus pandemic, said Ling Vey-Sern and Tiffany Tam, Bloomberg Intelligence analysts.

Chinese retail suffered a record collapse in the first three months of 2020. While it's on the mend, latest data shows private consumption still sluggish, dashing hopes of a V-shaped recovery as people head back to work. JD has projected revenue growth of 20 per cent to 30 per cent this quarter.

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Based on the first 17 days of June, JD and its rivals 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 per cent higher than during the same period last year, after participating brands doubled. JD has said sales of imports like HP laptops and Dyson hairdryers soared, while it's selling more fresh produce in smaller cities.

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 to Suning.com. Beyond headline figures, it's less clear how much it contributes to the bottom line given the enormous discounting involved.

"My lens for this year is competition, not consumer confidence," said Michael Norris, researcher with Shanghai-based marketing firm AgencyChina. "After the pandemic, the frequency of flash sales and e-commerce shopping events has increased. This boosts GMV but does little for margin expansion. Each platform's monetisation rate - how much revenue it generates per unit of GMV - is the best indication of relative strength and staying power."

Alibaba, along with brands on its platforms, committed cash and other coupons worth a total of 14 billion yuan (S$2.75 billion), according to the company. JD said it offered 10 billion yuan in subsidies.

"User growth and retention, and the digitisation of brands and merchants are key considerations" when Alibaba pushes subsidies during promotions like 6.18, said Alibaba vice-president Mike Gu, who heads Tmall's fashion and consumer goods businesses.

Sales of fast-moving consumer goods on the Tmall and Taobao marketplaces in the June quarter has so far exceeded the pace of 2019's final quarter, Mr Gu said in an interview. Thanks to 6.18, apparel growth this month has also climbed back to pre-Covid-19 levels, he added.

Live-streaming is also playing a bigger role during this year's 6.18, at a time Covid-19 is fuelling an unprecedented boom in online media. Alibaba's Taobao Live championed the use of influencers to sell everything from lipstick to rockets, prompting rivals like JD and Pinduoduo to follow suit.

Social media companies like TikTok-owner ByteDance and Tencent-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's usually reclusive founder, William Ding. Last week, his debut on Kuaishou amassed 72 million yuan of sales in just four hours.

"I've never eaten beef jerky as tasty as this in the last twenty years," the billionaire said during the livestream.

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