Who wants to beat 618 the most: JD, Alibaba, or PDD?

This year's 618 seems particularly quiet, but the three e-commerce giants have all released decent data for 618.

618 did not have the usual overwhelming and ubiquitous advertisements, and people's expectations for 618 were not obvious. The number of packages at the downstairs express station did not increase significantly, with the boss saying, "There is an increase, but not too significant."

JD.com announced decent data for this year's 618, with over 500 million orders, 83 brands achieving cumulative sales exceeding 1 billion RMB, and over 150,000 small and medium-sized merchants experiencing sales growth of over 50%. Alibaba's report shows that 365 brands on Tmall achieved sales exceeding 100 million RMB during 618, with over 36,000 brands doubling their sales. As live streaming e-commerce is a strength of Taobao, relevant information was inevitably disclosed. This year, live streaming e-commerce performed well. After being far surpassed by Pinduoduo in market value, JD.com and Alibaba regained some "ground" in this year's major promotion. During 618, Taobao had 34 live streaming rooms exceeding 100 million RMB in sales, a year-on-year increase of 53%, and 47 stores exceeding 100 million RMB in sales. During the same period, JD.com's live streaming orders increased by over 200% year-on-year.

Pinduoduo, with the highest market value, remained relatively low-key, with almost no data released, only some individual product data. For example, home appliance brands achieved a 103% year-on-year increase in sales during 618. Live streaming e-commerce is not Pinduoduo's strong suit, and the platform did not disclose related data in this regard.

While the top three e-commerce platforms are touting their good performance, the cumulative sales of comprehensive e-commerce platforms and live streaming platforms reached 742.8 billion RMB. Last year, this figure was 798.7 billion RMB, a year-on-year decrease of 7%. Looking at sales channels, the total sales of comprehensive e-commerce platforms reached 571.7 billion RMB, a year-on-year decrease of 6.9%. Since none of the three companies disclosed specific sales figures, according to Xingtu data, Tmall ranked first among comprehensive e-commerce platforms, followed closely by JD.com, with Pinduoduo in third place. This raises the possibility that while the number of orders for all three companies may have increased, prices have decreased, leading to the overall decline in total sales.

It is worth noting that this 618 report, while seemingly satisfactory, actually has a lot of "padding" compared to previous years. This is because this is the longest 618 statistical period in history, with Pinduoduo entering 618 on May 19, Tmall on May 20, and JD.com on May 31. This means that the data for 618 statistics this year included at least 10 more days of sales compared to last year. Taking Tmall and Pinduoduo as examples, the entire 618 promotion lasted for a month. Sales over a month compared to sales over 20 days last year resulted in an overall decrease of about 7%.

This situation has led to skepticism from investors. In the two trading days after 618, the stock prices of the top three e-commerce companies all experienced varying degrees of decline. As of the close on June 20th, JD.com's stock price fell by 1.27%, Pinduoduo by 0.03%, and Alibaba by 0.15%. The previous trading day saw declines of 0.65%, 2.78%, and 0.12% respectively. JD.com's market value is now only $43.79 billion, evaporating $117.6 billion from its peak of $161.4 billion. Alibaba's total market value is $179.8 billion, down $58.6 billion from its peak of $765.8 billion. Currently, Pinduoduo, with the highest market value, is at $200.2 billion, but has also dropped by $95 billion from its peak. Compared to JD.com and Alibaba, Pinduoduo has the smallest decline, making it the highest valued among the top three e-commerce companies now. **It can be seen that "big promotions" like 618 may have stepped down from the altar and cannot be a lifesaving straw for the top three e-commerce platforms.

1

The first decline of 618 in 16 years

618 has special significance for JD.com and Richard Liu.

According to reports, on June 18, 1998, Richard Liu and his first girlfriend Gong Xiaojing started JD.com in Zhongguancun. The official JD.com website also introduces this day when Richard Liu founded JD.com with an initial capital of 12,000 yuan. JD.com was listed on the Hong Kong Stock Exchange on June 18, and even the stock code is 09618.HK.

At the same time, 618 is also the anniversary of the establishment of JD.com. In 2008, JD.com launched the first 618 shopping festival. At that time, JD.com first introduced the "618" mid-year promotion on its website, which was presented in a presale format at that time, combined with flash sales to attract consumers, from flash sales to group buying, from brand discounts to site-wide discounts. It became one of the most important promotion nodes for JD.com throughout the year. At this time, 618 became a real shopping carnival that many consumers must pay attention to.

After 2011, JD.com's 618 gradually evolved into a shopping festival for the e-commerce industry, and other e-commerce platforms began to participate. 618 is no longer just a "big promotion" for JD.com, but a comprehensive "big promotion" for the e-commerce industry. 618 has grown from a simple promotional activity to a landmark event for JD.com and even the entire e-commerce industry.

In 2017, JD.com publicly announced the sales of 618, which was 119.9 billion yuan according to industry standards. It truly "showed its muscles," and the myth of achieving hundreds of billions in one night began to appear. 618 also became the main stage for e-commerce competition, with more and more e-commerce platforms participating and disclosing their performance. At this time, the sales of major mainstream e-commerce platforms were basically in a growth state, and they were willing to show their strength to investors. However, starting from 2022, the slowdown in growth has become a common situation for major e-commerce platforms. Due to the low growth or decline, e-commerce platforms have stopped disclosing specific sales figures.

After 16 years of development, this year's 618 has actually made some innovations. Various platforms have abandoned the previously widely criticized "routine" and canceled the presale system that has been used before. But as of June 20, major e-commerce platforms have still not disclosed specific GMV data, instead opting for more vague growth rates. The intuitive feeling is that this year's 618 is relatively "bleak." For example, on May 19th, during the Tmall Li Jiaqi Beauty Special live broadcast presale, the beauty category achieved a GMV of approximately 2.7 billion yuan, a 46% decrease from nearly 5 billion yuan in the same period last year.

Compared to previous years, this year's 618 "big promotion" lasted longer. Public information shows that the average duration of 618 for 7 mainstream e-commerce platforms exceeded 30 days, with Kuaishou having the longest span of 42 days. JD.com had the shortest duration of 21 days. Alibaba and Pinduoduo both lasted 33 days, with Alibaba extending by 7 days compared to last year and Pinduoduo extending by 4 days, while only JD.com shortened by 8 days.

However, even with the extension of 618 by several days, the overall sales situation has seen the first decline since the establishment of 618, with a 7% decline on both the entire network and comprehensive platforms, marking the first decline in 618 in 16 years. Based on current consumer spending habits, this year's decline in 618 may just be the beginningAgainst this backdrop, it seems that the significance of large-scale e-commerce promotions is fading, and the myth of overnight billions is receding, as consumers' consumption habits gradually become more rational.

2

Consumer Rebound Unrelated to "Big Promotions"

The past three years affected by the epidemic, as well as the uncertainties following the recent relaxation, have led to a relatively turbulent consumption environment in the previous years. However, compared to previous years, the overall consumption environment has improved this year, with consumption in a period of strong rebound. Data from the National Bureau of Statistics shows that in May 2024, the total online retail sales in the country reached 2.0313 trillion yuan, a year-on-year increase of 15%. From January to May 2024, food, clothing, and daily necessities increased by 19.6%, 9.0%, and 10.8% respectively, all in a phase of rapid growth.

At the same time, according to the "618 Consumer Insight Report (2024)", the overall online retail sales from May 31st to June 18th reached 1.14912 trillion yuan, a year-on-year increase of 10.5%. Among them, physical online retail sales were 994.99 billion yuan, a year-on-year increase of 7.8%. However, the total sales of major e-commerce platforms showed a 7% decline, indicating that the consumption environment has improved and consumer willingness has strengthened, but this wave of consumption dividends is unrelated to e-commerce.

In the past, 618 was a national shopping festival, and even due to the pre-sale system, consumers used to stay up all night, waiting for limited-time discounts. But now, with the emergence of platforms like PDD offering low prices, consumers no longer need to wait for 618 to enjoy special discounts; it's almost like every day is 618, naturally reducing consumers' expectations for 618. After more than 10 years of development, 618 has evolved from a traditional e-commerce festival to a national carnival, permeating into various industries. Offline supermarkets, local life, and other areas are gradually transitioning to online. The old e-commerce strategy of "limited-time discounts" has lost its appeal.

According to data from the Ministry of Communications of Qualcomm, the parcel volume during this year's 618 period actually showed a significant increase. From May 20th to May 26th, the first week of the 618 promotion, the national express collection volume was approximately 3.593 billion pieces, a 7.29% increase compared to the previous period, with a daily average business volume of 513 million pieces. However, in the third week of the 618 event, the cumulative collection volume of postal express decreased by 3.31% compared to the previous period, and the cumulative delivery volume decreased by 0.73%. Nevertheless, even with a decrease in parcel volume compared to the previous period, there was a considerable increase compared to the same period last year. In 2023, the daily parcel volume was 400 million pieces, representing a 25% increase compared to the same period last year.

Despite the significant increase in parcel volume, the overall sales revenue has declined, indicating a sharp decline in the average order value of major e-commerce platforms, prompting platforms to engage in price wars simultaneously. For example, the "618 Consumer Insight Report (2024)" shows that during the promotional period, the average prices of men's shoes, women's clothing, men's clothing, and women's shoes decreased by 18.4%, 9.6%, 9.5%, and 2.8% respectively. The average price drop for men's shoes was particularly remarkable. And this is only a partial list of products with price decreases; overall, there are more products with price decreases, while price increases are few.

Wang Bao, an e-commerce practitioner, did not participate in the 618 promotion this year. He originally planned to participate, but the platform required him to reduce prices by 5%, which he found difficult to accept. "We rely on volume and operate on thin margins, with profits around 3%. If we reduce prices by another 5%, I would be losing money just to attract attention. In this case, it's better not to participate"For consumers, no longer enthusiastic about big promotions like 618, Wang Bao believes that various e-commerce platforms are already engaged in price wars, with prices being pushed to the extreme. In fact, for consumers, every day is like 618 now, and interest in such so-called big promotions is waning." Businesses like Wang Bao's that do not participate in 618 are not uncommon, as many merchants find it unprofitable and time-consuming, and therefore choose not to participate directly.

In reality, the low-price strategy is eroding the interests of merchants. Many merchants, under the influence of the low-price strategy, are facing increasing pressure, and there is even a possibility of operating at a loss. Some merchants have reflected that platforms disrupt the market by monopolizing resources and forcing price reductions, leading to merchants being unable to set prices independently and their profit margins being severely compressed. In addition, the promotional offers required by platforms such as discounts and free shipping not only benefit the platforms but also significantly increase the operating costs for merchants. Some netizens have complained online that a friend's women's clothing online store had sales of nearly 10 million RMB during 618, which seemed good at first glance, but upon closer inspection, it was shocking. After deducting refunds of 3.5 million RMB, returns and refunds of 3.8 million RMB, and other various costs and expenses, the estimated loss is around 600,000 RMB.

3

E-commerce Three Kingdoms, Who is the Most Injured?

Currently, the mainstream e-commerce platforms are mainly dominated by Alibaba, JD.com, and PDD. Among them, two of them have experienced changes in senior management. After the 2023 Double Eleven, JD.com's retail CEO, Xin Lijun, stepped down, and JD.com's group CEO, Xu Ran, took over the position. Shortly after, a similar change occurred at Alibaba, with Alibaba's group CEO, Eddie Wu, replacing Trudy Dai as the CEO of Taotian Group. Both companies have their group CEOs personally overseeing the e-commerce business, indicating the importance attached to this business.

With the two CEOs at the helm of the e-commerce business, there is actually no good solution. Competing on prices has become a common and helpless move. Price warfare is an open secret. According to media reports, in early June, searching for "cheaper than JD.com" on the Taobao App would redirect users to a prominent page stating "how to compare prices to be lower," with specific price comparisons for different product categories below. Similarly, JD.com also "refused to fall behind," as searching for "cheaper than Tmall" would redirect users to a comparison page stating "cheaper than Tmall, buy more expensive and get double compensation." However, both the Taobao and JD.com pages have since been taken offline.

Apart from price comparisons, the emerging e-commerce platform Douyin, with a GMV of 2.6 trillion RMB in 2023, cannot be overlooked. In May, Douyin announced the testing of an e-commerce price adjustment system on a small scale. This system adjusts prices based on pricing across the entire network and provides a price adjustment range through intelligent analysis, marking another milestone in e-commerce price comparisons. Following suit, PDD introduced an automatic price adjustment system. As e-commerce users reach a plateau and the era of high growth is gone, as seen with Alibaba, with revenue growth rates of 18.93%, 1.72%, and 8.34% in the past three years. The growth rates from 2019 to 2021 were 50.58%, 35.26%, and 40.72%, showing a significant decline. Similarly, JD.com's revenue growth rates in the past three years were 18.29%, 13.95%, and 8.59%, showing a continuous downward trend. Even in the three years prior, the lowest growth rate was 28%Revenue growth slows down, reaching the user ceiling. Whether it's the traditional top three of Alibaba, JD.com, PDD, or emerging e-commerce platforms like Douyin, Kuaishou, and Xiaohongshu, they have all actively or passively joined the "price war".

Zhang Fei, the head of a brand online store in Shanghai, expressed concerns about the price war, "Currently, prices are already at a low level, and there will soon be no room for further reduction. For some brands with insufficient strength, engaging in a price war will harm their own interests. Falling into a dilemma where not engaging in a price war means no traffic, while engaging in a price war leads to no profit or even losses, is unhealthy and unsustainable in the long run." Regarding the competition among the top three Alibaba, PDD, and JD.com, Zhang Fei believes that this is more advantageous for PDD, while Alibaba is the most vulnerable. "PDD itself focuses on low prices, JD.com focuses on the timeliness of shopping experience. Alibaba may not be able to compete with PDD in terms of prices, nor can it match JD.com in terms of shopping experience. Although Alibaba performed well and ranked first in this year's 618, in the long run, Alibaba may be the most affected. Of course, JD.com also faces challenges, as the rise of new e-commerce platforms like Meituan gradually erodes their timeliness advantage."

Perhaps as Zhang Fei mentioned, Alibaba is currently the e-commerce giant with the most evaporated market value in the US stock market, with a decline of $586 billion from its peak, while PDD, known for its low prices, has become the highest-valued company. In the overall environment where Chinese concept stocks are collectively cooling down, PDD's market value decline is the least among e-commerce companies.

As the 618 shopping festival has come to an end, there are mixed feelings. The positive aspect is that various e-commerce platforms have eliminated the routine of "raising prices before lowering them" and various hidden algorithm tricks, and have started the most direct price "knife fight", making it easier for consumers to decide which is more cost-effective without having to spend mental effort. The downside is that despite pushing "low prices" to the extreme, there is still an embarrassing situation of overall sales decline. The enthusiasm of consumers for 618 may have faded, making this the worst 618 in the past 16 years, but it could potentially be the best 618 in the future. With the interests of many businesses at stake, how many businesses will be willing to participate in 618 in the future is unknown. Apart from the head-on price competition, are there any other paths in the market competition? These are all challenges that Alibaba and others must pay attention to and solve.

Source: BT Finance