China’s e-commerce prospects are deteriorating after poor sales during the 618 festival

What is going on here?

The prospects for e-commerce in China are not good, with the 618 festival reporting its first-ever decline turnoverreflecting deeper economic concerns and fluctuations consumer trust.

What does it mean?

The 618 Festival, which falls on the founding anniversary of JD.com on June 18, is the second-largest annual sales event in China. But sales fell for the first time this year amid broader economic problems. Previous events such as Singles’ Day in 2021, which grossed $84.54 billion, demonstrated strong consumer spending. However, constant discounts and year-round sales seem to have diluted the impact of these big events. Even with heavy discounts, Alibaba’s domestic e-commerce income is up only 4% and its shares are down about 5% this year. JD.com is not doing much better, down over 3%.

Why should I care?

For markets: Economic clouds over e-commerce.

The decline in sales during the 618 festival highlights a larger problem in China: weakening consumer sentiment. A Bank of America survey shows that in June, just 45% of respondents planned to spend more in the next six months, down from 55% in April. Additionally, just 31% expect their income to increase, down 10% from April. With economic issues such as the housing market collapse and high youth unemployment making consumers more cautious, the outlook for e-commerce remains uncertain. This change may have an impact warehouse prices and investor confidence in major platforms such as Alibaba and JD.com.

Larger image: The global consequences of cautious consumers in China.

Weak consumer confidence in China could have global implications. With retail sales expected to grow only in the single digits for the rest of the year, China will need to rely more on exports to balance its economy. This shift could change global trade dynamics, especially for countries dependent on Chinese consumption. Alicia Garcia-Herrero of Natixis warns that a slowdown in domestic consumption could reduce its contribution to China’s GDP, forcing global economies to adapt to changing Chinese market behavior.