by With 520 in front and 618 behind, the the first half of 2024 coming to an end. On the one hand, the social financing data released by the PBOC in April showed the first reductions in almost 19 years; on the other hand, the first quarter earnings reports of Alibaba, JD and listed Chinese clothing companies came out in May and showed a significant growth in the performance of the fashion sector.
How to interpret this gap between actual consumer experiences and actual economic data? Where is fashion consumption in China, especially online shopping, headed?
More from WWD
Social financing (ie, data on total social financing) is a key indicator in the analysis of China’s economic trends. Total social financing is high in a favorable economic environment and an active consumer market and vice versa.
Last month the PBOC revealed that the newly added social funding in April was minus $27.4 billion, a rare decrease. This was a clear sign of a weak market, prompting more intense concerns about the future. However, almost at the same time, the significant growth reported by the e-commerce giants in their latest financial results boosted confidence in the market.
Among them, Alibaba reported total revenue of $30.6 billion in the first quarter, up 7 percent compared to the same period last year, and JD reported revenue of $35.9 billion in the first quarter, which was also an increase of 7 percent compared to the the same. period last year. At the same time, PDD realized revenue of $11.97 billion in the first quarter by focusing on the sale of domestic brands through multiple channels and platforms, an increase of 131 percent year over year. Meituan, a platform specializing in China’s local consumer and services market, achieved revenue of $10.11 billion, up 25 percent year-on-year, with the number of users and core local business merchants reaching new highs.
From a macro-level perspective, the tightening of policy- and market-oriented funding requirements together with the regulatory governance of idle capital accumulation (ie a financial system without flow to the real economy). The financial statement data of these e-commerce giants provides an ideal perspective to evaluate whether the consumer market is active or not. In terms of the fashion sector, the first quarter financial reports of China’s local listed clothing companies show that most of the 17 listed A-share companies realized benign growth, and nearly a third of the companies, such as Hodo Group, Septwolves, and Sanfo Outdoor, various levels of revenue reductions.
Uncertain economic trends and a bleak industry status quo are new challenges for enterprises and brands focusing on online business. A new industry test has just begun.
The Fashion Sector Under the leadership of the E-commerce Giants Significant Growth has taken place
Fierce competition and rounds of layoffs have fueled controversy and skepticism about the e-commerce industry. However, the recently released financial data are undoubtedly positive, supporting the trend for further growth for these e-commerce giants on the one hand and revealing the mystery of the consumer market on the other.
Alibaba beat market expectations. Among its platforms, online quarterly GMV of Taobao and Tmall Group saw double growth, year on year with the number of quarterly buyers and purchase frequency increasing strongly and the number of 88VIP quarterly members rising double year on year, more than 35 million . And in the biggest highlight of the earnings report, Alibaba’s International Digital Business Group (its overseas business) achieved quarterly revenue growth of 45 percent year-on-year, and overall quarterly orders for its retail platforms grew by 20 percent first year-. over a year.
JD Group, whose supply chain infrastructure assets reached $21.26 billion at the end of the first quarter, realized a 12 percent year-over-year increase. Sales of daily-use goods that have seen growth slow for several quarters registered revenue growth of 8.6 percent year-on-year in this quarter. In terms of user metrics, the number of quarterly active users has maintained double-digit year-on-year growth for two consecutive quarters, while their shopping frequency, NPS (Net Promoter Score), and number of users in cities lower. all improving, JD chief executive officer Xu Ran said in the financial report.
It is worth noting that JD, which has always been strong in logistics, established the first self-owned fashion and luxury warehouse abroad, in France, in its international operations, enabling faster international logistics and distribution services. Ochama, JD’s omnichannel retail brand in Europe, operates more than 750 self-collection sites, providing consumers with more flexible ways to acquire goods.
The Ignited 618 Under the Tone to introduce New Products
Despite the unsatisfactory data on social financing, the cooling of capital investment, the increasing difficulty of financing and the failure of the general method that was once applicable, “hit, get investment, increase investment in marketing and traffic, and continue to replicate the hit,” there are still ways to create new hits in the online fashion market by leveraging digital innovation tools to enable a shorter development cycle.
Seeking to emulate the full-cycle approach of “first release, first show, first creation and first win,” innovators at “Hey, Box!” from Tmall, leading brands or fast-growing emerging fashion labels placed big bets on the 618 “C traffic sites.” Relevant statistics show that Tmall has invested more resources in new products this year, with a threefold increase in resources devoted entirely to new products. In April and May, “Hey, Box!” nearly 400 “new super products” debuted, hatching four new products with 100 million unit sales, 29 new super products with 10 million unit sales and more than 120 new super products with million unit sales.
In addition, the introduction of new products is the main practice of all brands. On the platform end, the introduction of new products in the early summer is an industry habit. From the consumer’s point of view, the 618 shopping carnival has increased the demand and emotional value of new products.
This provides a great opportunity for sports and outdoor brands to introduce “new hits” and “create hits” of the year. But for the luxury goods companies that have always focused on 520 and other shopping festivals, how can they make the most of this “mid-year challenge”?
However, the game was different this year. First, pre-sale was cancelled. Five major luxury groups – LVMH Moët Hennessy Louis Vuitton, Kering, Chanel, Hermès and Richemont – brought more than 200 luxury brands and more than 100,000 new products and items to participate in this year’s 618 shopping carnival. Meanwhile, Tmall Luxury officially launched the “trade-in” service on June 6. Consumers can upload photos and information of their unused luxury goods online through the official Tmall flagships of more than 100 luxury brands, and the service provider will estimate the price to date. complete the resale. During the 618 period this year, the platform subsidy for “trade in” reached up to $132.50, which could be used to buy new luxury products from brands in the Tmall flagship.
According to Tmall Luxury, it did not matter whether Tmall bought the pre-owned items intended for resale, as long as they were genuine items certified as 90 percent new and higher by evaluation. Currently, items used by Hermès, Chanel, Dior, Louis Vuitton and other leading luxury brands, including jewelry, watches, bags, shoes, boots and clothing, can be resold as long as they meet the qualifications.
Tmall has launched a resale service for relatively useless products.
“To support a green and low-carbon lifestyle, Tmall Luxury has launched a trade-in service. At the same time, we also hope to work with consumers to live a life with an upgrade without giving up the old fashion that is more environmentally friendly, and a more sustainable way of consumption,” said Janet Wang, general manager of Tmall Luxury.
As of 9 pm on May 31, 185 brands realized a turnover of more than 100 million yuan, more than 37,000 brands doubled their turnover, and 50 trendy categories exceeded the turnover of 1 billion yuan. On JD International, four hours after the launch of 618, more than 180 brands realized year-on-year revenue growth of more than 100 percent, of which sports shoes and clothing brands Salomon, Nike, and Arc’teryx were up five times . , four times, and two times, respectively, while Ferragamo doubled its growth and Van Cleef & Arpels more than doubled its growth.
Previously, Bain Capital indicated in its “2024 China Luxury Market Report” that luxury sales growth in China is slowing, with growth expected to be 5 percent this year compared to a 12 percent increase year-on-year of last year. As a matter of fact, sales of luxury goods in China in the first quarter of this year were indeed unsatisfactory.
Although the 618 festival gave a small boost to the sector, it is not a long-term solution for the medium and long term. As macroeconomic factors put pressure on the industry, growth rates will see continued fluctuations even as leading brands remain enthusiastic about the Chinese market. As Bernard Arnault, founder, chairman and CEO of LVMH, said in a previous interview with WWD China at the 8th Viva Tech, “In the medium term, I am optimistic about the Chinese market.”
Editor’s Note: China Insight is a monthly feature from WWD’s joint publication WWD China that looks at trends in that vital market.
The best of WWD
