China’s e-commerce faces headwinds as sales growth slows

What is going on here?

China’s once-thriving e-commerce sector faces slowdown turnover growth and fierce competition, which makes life difficult for giants such as Alibaba and JD.com.

What does it mean?

China’s e-commerce industry, famous for its big shopping events and celebrity endorsements, is going through a tough time. As the economy cools, consumers are becoming more cautious about spending, which is affecting the sector’s profitability. Mega-discounts, influencer campaigns and lenient return policies initially fueled growth but are now squeezing margins. Both large platforms and small businesses are feeling the effects. According to Euromonitor, growth rates that were once soaring in double digits are now expected to fall to single digits. Notably, Singles Day fervor is waning due to unpredictable sales and large warehouse requirements. The generous returns policy that came into effect from Pinduoduo in 2021 doubled the number of returns to 60%, burdening suppliers with additional costs.

Why should I care?

For markets: E-commerce giants face a more challenging retail landscape.

Slowing growth and rising returns are changing the landscape of Chinese e-commerce. Platforms like Alibaba, JD.com, and Pinduoduo are having to adapt to maintain their market positions. This shift is affecting investor sentiment and the overall competitive dynamics. Vendors are feeling the pressure of high traffic acquisition costs and the costs associated with working with influencers. E-commerce operators report that intense competition without commensurate sales growth is leading to the “Neijuan” effect—working harder for diminishing returns. As retail growth slows, the e-commerce sector must prepare for a tougher, more competitive environment.

Bigger picture: Broader economic reflection.

The slowdown in China’s e-commerce reflects the country’s broader economic challenges. Reduced consumer spending, growing competition and uncertain economic conditions are stifling growth. Merchants on platforms like Pinduoduo are sometimes forced to sell at a loss to avoid closing factories. As average incomes stagnate and the pool of new customers shrinks, the sector must innovate to survive. The current trajectory suggests that China’s e-commerce retail sector must evolve rapidly to navigate economic headwinds and sustain growth in the years ahead.