China's biggest shopping event of the year exceeds low expectations

BEIJING – During China's Singles' Day shopping festival, consumers spent more than expected in what otherwise had been a tepid shopping environment, consulting executives told CNBC.

The national version of Black Friday started on October 14 this year, more than a week earlier than in 2023, and ended on Monday. Major e-commerce companies used to report gross merchandise value, an industry measure of sales over time, but failed to do so for the third year in a row due to weak consumer confidence.

“I think for a lot of brands it's probably been a little bit better than they thought, but at a low level. Probably no one would say we made it outside the margin,” said Chris Reitermann, CEO of Ogilvy APAC and Greater China. . He is also chairman of WPP China.

Many multinational companies that sell consumer products in China are being more cautious in the market, if not already struggling, Reitermann said. But he pointed out that many of the country's companies are still “highly profitable,” even though their growth has slowed to low single digits rather than high double digits.

For this year's Singles Day, Alibaba.com claimed “robust growth” in GMV and a “record number of active buyers,” while JD.com said the number of shoppers on its platform has increased by more than 20% year-over-year.

The shopping season celebrating singles, also known as Double 11, came as the Chinese government has announced a series of stimulus measures since late September, fueling a rally in stock markets.

“There appears to be an uptick in consumer confidence over the past six weeks,” said Daniel Zipser, senior partner at McKinsey and leader of Asia Pacific's consumer and retail division. It's “hard to predict what that means going forward.”

Singles Day exceeded expectations for most brands, Zipser said. But instead of sales rising across the board, he pointed to growth in categories like outdoors, pet care and “blind box” toys — in which consumers buy uniformly marked boxes for a chance to win a new collectible.

He noted that the blind box category is one that has gone from $0 before Covid-19 to a more than $2 billion industry, reflecting the potential speed of consumer adoption in China.

Chinese retail sales are expected to rise 3.8% in October from a year ago, according to a Reuters poll. That would be an improvement compared to the 3.2% growth in September.

“We saw people spending more this year,” Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, told CNBC on Tuesday. The company helps foreign brands – such as Vitamix and IS Clinical – sell online in China and other parts of Asia.

He estimated 16% growth in GMV for last year's shopping festival, likely the strongest performance in years. Cooke added that brands didn't have to cut prices that much.

Research firm Syntun said on Tuesday it estimated annual sales growth during the Singles Day period of 20.1% at 1.11 trillion ($150 billion) for Alibaba's Tmall, JD.com and PDD.

Investors can get more details on Chinese consumption later this week. JD.com will publish its quarterly results on Thursday, followed by Alibaba on Friday.

“We've seen consumers who, if you will, have been saving for a rainy day, and they've bought something at this Double 11 shopping festival,” Deborah Weinswig, founder and CEO of Coresight Research, said Tuesday on CNBC's “Squawk Box Asia.” “

She said the company's weekly survey showed some “differences” in consumer sentiment over the past month.

Chinese consumer spending has come under pressure since the Covid-19 pandemic as households grapple with economic uncertainty. A slump in the real estate sector has reduced household wealth while economic growth has slowed.

While premium and mid-range brands are “disappearing very quickly”, high-end brands such as Lululemon can do well, Reitermann said. In general, he noted, local brands are often cheaper and can get to market faster.

He expects consumer confidence to recover somewhat in the second half of next year, after additional stimulus measures are likely to be announced in the first half.

The Chinese Ministry of Finance indicated last week that more budget support could be provided in 2025. Although China did not hand out cash to consumers during the pandemic, the country did launch a trade-in program this year to subsidize some auto and home appliances. purchases.

— CNBC's Sonia Heng contributed to this report.