Weekly Review June 27: E-Commerce sales records means economic recovery...?

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Jun 27, 2020

At the beginning of this week, we were able to take a look at the results from China’s second biggest online shopping event, the 618 Festival that took place on June 18.

To quote KrAsia, the festival “broke previous sales records, fuelled by e-tailers’ attractive deals and video-sharing platforms’ aggressive entry into the livestreaming e-commerce segment.”

On Taobao’s livestreaming service, sales increased 250% year-on-year.

The 618 Festival in China should be a very good test to see how online consumption will recover from Covid. Consumer confidence looks like it has returned in China, both in terms of macroeconomic indicators and also micro-level consumer behaviour.

Here are some slides from an internal report from JD.com, China’s second biggest online retailer: *Send me a message if you would like to see the full deck*

It’s hard to extrapolate whether these Chinese trends are uniquely Chinese, or applicable to the rest of the world. But in my opinion, three macro trends are most notable:

Subsidies, Discounts, and Coupons. To encourage consumer spend, many companies are giving out aggressive financial incentives to customers, which is a marketing expense that many people around the world might need this year in order to feel more comfortable with spending their disposable income.
Shifting Geographies of Growth. In China, the biggest growth areas come from lower-tier cities, where you find the biggest increases in e-commerce penetration, income levels, and desired quality of consumer goods. Outside of China, and especially in the West, many people are predicting consumers will migrate out of urban areas to live in more suburban and rural areas.
Retail’s Shift from Offline to Online. China’s percentage of retail sales that take place online is around 40%. For reference, the percentage of US retail sales that take place online is around 11%. That percentage will likely grow rapidly in all countries around the world this year because of the coronavirus.

At the same time, let’s not forget that Beijing experienced a second coronavirus outbreak earlier this month that poses the biggest threat to any economic recovery.

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