China’s ‘618’ Shopping Festival Disappoints, Reveals Dropping Consumer Confidence

Workers sort packages for delivery at a JD.com warehouse in Beijing in a file photo. Jade Gao/AFP via Getty Images

China’s annual midyear e-commerce festival, or the “618,” failed to drive a much-needed sales boost, signaling that China’s once-mighty shoppers are still reluctant to spend as the economy sputters.

The gross merchandise value (GMV) of companies, or sales, during the shopping festival dropped by 7 percent from last year to 742.8 billion yuan ($102.3 billion), which was the first decline in eight years, as revealed by retail data provider Syntun in a report on June 19.

Expectations had been high for this year’s landmark event, which was a much-needed opportunity for e-tailers to revive their sales, but revenue fell, despite aggressive promotion, at the blowout sales gala that closed on June 18, according to the third-party data tracker.

This is significant because, according to Syntun, the GMV in 618 grew even throughout the epidemic, peaking at about 800 billion yuan ($110 billion) in 2023.

“[While] ongoing consumption downgrade and higher return rate may have weighed on 618 performances,” said HCBC Global Research in a note on June 20, both higher return rate and falling sales indicate “conservative consumer behavior.”

The festival, whose name was initially coined by e-commerce giant JD.com and has since been adopted by all platforms, is now China’s second-largest annual sales event after Singles Day in November. It is also viewed as an important gauge of household spending.

Analysts are worried because strong consumer spending is critical to China’s immediate recovery and long-term economic well-being.

China’s latest economic data paint a grim picture, with weak domestic demand stalling recovery from property market troubles and indicating a sharp growth slowdown.

National Bureau of Statistics numbers revealed this week that month-over-month industrial production (IP) growth slowed to 0.3 percent in May from 1 percent in April.

That weakness was driven by a decline in property-related IP, with cement output deeply contracted year to date following three years of declines, from 2021 to 2023.

In addition, auto IP growth more than halved to 7.6 percent year over year from 16.3 percent the previous month, and IP growth for rubber and plastic, ferrous-metal smelting, and processing also eased in May.

In May, with average prices dropping by 0.7 percent from the previous month, China also witnessed the steepest drop in new home prices in more than 9 1/2 years, despite government measures to stabilize the property market by addressing oversupply and supporting heavily indebted developers.

Aggressive Wooing

Syntun’s analysis, spanning more than 20 platforms, revealed weak sales this year despite companies extending their 618 sales period. Tmall, for example, began its 618 promotions as early as May 20, a departure from its usual start date of May 31.

This year, key players including JD.com, Alibaba, and Taobao also stopped the customary presale period, which allowed customers to make deposits on products and complete their orders later. Instead, they stretched the sale period.

The competition was cutthroat, too.

For example, during this year’s 618 festival, select Apple iPhone models were discounted by up to 20 percent on Chinese marketplaces such as JD.com and Tmall, according to reports.

Industry players pulled out all the stops, as well, to revive the market from its post-COVID slump and return to its pre-2020 glory days. ByteDance and PDD Holdings, for instance, advertised unprecedented discounts on Lululemon gear, while Alibaba Group offered 50 percent off.

Besides, “livestreaming platforms [had] become one of the few highlights of this year’s promotion,” Syntun noted.

The online platforms leveraged live video and no-questions-asked refunds, enlisting A-list celebrities to promote their products. Rihanna, for example, whipped up jianbing crepes on a Chinese platform before becoming the new face of J'Adore fragrance.

In addition, JD.com Inc. created a digital avatar of founder Richard Liu to promote steak and blueberries.

Yet, budget-conscious Chinese households are reluctant to loosen their purse strings or take out more loans to spend more money, analysts note. “We see a greater desire to save,” Barclays FICC Research said in a note on June 24.

Global Worry

Chinese consumers’ reluctance to spend can significantly affect both domestic and international markets, potentially sending ripples through the global economic system. The United States and other countries fear an influx of Chinese exports as the country seeks to drive its economic growth by generating export surpluses, sometimes using other markets as intermediaries to redirect excess capacity.

In a report issued on June 14, the Alliance for American Manufacturing, for example, underscored these concerns, cautioning that the influx of subsidized and inexpensive Chinese exports jeopardizes U.S. jobs, while advocating for prompt action to confront the issue.

During her visit to China in April, U.S. Treasury Secretary Janet Yellen also emphasized the issue of manufacturing overcapacity, specifically in electric vehicles (EVs) and solar panels—sectors that U.S. officials are actively working to develop domestically.

On June 12, the European Union announced new tariffs of up to 38.1 percent on EVs imported from China, starting next month. This move is a response to what the EU described as unfair subsidies from the Chinese regime, which have led to an influx of Chinese imports flooding the EU markets.

“China’s overcapacity is exporting deflation to the rest of the world,” Lynn Song, chief economist at ING, wrote in a note in May. “China’s excess capacity ends up being exported at lower prices than similar goods in other markets, which in theory causes a deflationary impact.”