CN E-commerce Industry Resilient During 618, but Growth of Content E-commerce SlowsFinancial News

CICC noted in a report that this year’s 618 shopping festival in China has concluded, and e-commerce has remained resilient so far this year. Platforms other than JD-SW (09618.HK) are no longer disclosing their 618 performance.

In the first five months, total online retail sales of physical goods grew 11.5% YoY to RMB4.8 trillion, a growth rate that significantly outperformed total retail sales of social consumer goods. This was mainly due to e-commerce platforms becoming more consumer-focused, proactively adjusting their own strategies to cater for user choices, and further enhancing their competitiveness in terms of price power, user experience and services. The broker determined that the GMV performance of major shelf e-commerce platforms in 2Q24 may have exceeded expectations.

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According to the broker, as traffic and GMV increase of content e-commerce platforms slow down and the number of incremental channels becomes smaller, sellers are expected to be less motivated to subsidize incremental channels with profits from existing channels. When content e-commerce platforms try to transform into the shelf model, they enter the innate domain of advantage of existing shelf e-commerce platforms. The latter’s investment in price power, consumer experience and services further consolidated their advantage.

Going forward, some e-commerce platforms will increase merchant screening and filter for the fittest. The traditional model of subsidizing incremental channels with profits from stock channels may be difficult to continue, and merchants that lack competitiveness in quality, price and service may face challenges.

CICC maintained its earnings forecasts, target prices and ratings for the relevant platform companies. Of which, BABA-SW (09988.HK) and KUAISHOU-W (01024.HK) are both rated Outperform, with target prices of $109 and $75 respectively.

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