First launched in 2010 by China’s e-commerce giant JD, the 618 shopping event has evolved into a major mid-year shopping event that has driven online consumer spending over the decade. However, consumers are becoming more cautious during a pandemic-hit economic downturn and growing tired of more frequent shopping events stimulation over the past decade.
The event was originally created as a competition for the Alibaba-backed Singles’ Day shopping event (on November 11). Both events chose dates carefully. 618 is a nod to JD’s founding date of June 18, while Singles’ Day is an unofficial day that the Chinese internet uses to take jabs at people who are not in a relationship.
Similar to Singles’ Day, the 618 shopping festival has grown out of its founding platform and become a promotional event across all major Chinese e-commerce platforms. The event is also considered a barometer for consumer spending capacity and new shopping trends in China.
2022 might be the toughest 618
For those who are taking a close look at the country’s second-largest shopping extravaganza, this year’s edition of 618 might seem like 2020 all over again, yet if anything the situation is even more austere. Lots of local media outlets have dubbed this year’s edition of 618 as the “toughest” in history.
When the pandemic first spread across China two years ago in early 2020, the 618 festival that year largely delivered, thanks to government stimulus and the country ending large-scale lockdown two months ahead of the event. It achieved much-needed big sales numbers and signaled a gradual return to economic normalcy at the time. However, the circumstances for this year put the success of the shopping bonanza in some doubt.
In both years, China was just coming out of lockdowns which had taken a toll on the country’s faltering economy and led to subdued consumer sentiment. But the timing is different. In 2020, Covid-19 broke out in January and most pandemic-related lockdowns were removed in early April. By the time 618 arrived in June, the state had already stepped in to boost consumption by launching a series of digital subsidy programs over April and May. On top of that, the two-month gap allowed more time for manufacturing and logistics companies to recover from the lockdowns ahead of the shopping festival.
This year, however, there’s less time for the market – either consumer sentiment, merchants, or logistics companies – to react since the months-long lockdowns to control new Covid-19 outbreaks in cities like Beijing and Shanghai were only lifted on June 1, just as many retailers were gearing up for the 618 shopping festival with pre-promotion and early deals. Moreover, recent trends make it obvious that Chinese consumers will be even more cautious in 2022 than they were near the start of the pandemic.
For example, as a working mom with two primary school kids in Beijing, Liu Chunying didn’t pay much attention to this year’s 618 promotion until later as she was busy living under a partial lockdown. She used to rely on the festival’s deals to stock up on as much as 70% of her purchases. This year, she only started making a shopping list after Beijing lifted most of the lockdowns in June. Liu added that she will only buy necessities and refrain from impulse buys this year.
In terms of size, the 618 festival achieved a gross merchandise value (GMV) of RMB 578.5 billion ($89.6 billion) across all platforms in the eighteen days from June 1 to June 18 in 2021, according to data from Syntun. The figure is second only to the GMV of Singles’ Day in terms of shopping festivals in China. The 2021 GMV for 618 represented a yearly growth of 26.5%, but also a slowing from the 43.8% surge recorded in 2020 and driven by pent-up post-lockdown consumption.
Although post-Covid consumption proved to be an effective driver for 618 sales in 2020, market watchers aren’t optimistic about a repeat this year. Data and analytics company GlobalData projects that China’s retail channel will lose steam in 2022 after a stellar run in 2020 and 2021. The downward trend will have a spillover effect into 2023 with the home retail category bearing the brunt of consumer fiscal austerity, the firm said.
Covid-19 prevention measures are major headwinds, according to Bobby Verghese, a consumer analyst at GlobalData. “The stringent Omicron lockdowns in Beijing and Shanghai had a debilitating impact on consumer livelihoods and the economy. Bereft of workers, factories and businesses came to a standstill. With people confined to their homes, the customer footfall in physical retail stores waned, while online retailers were unable to make deliveries due to supply chain disruptions,” he said in a press release sent to TechNode.
Promotion deals in the pandemic era
China’s top online sellers such as JD, Alibaba, Pinduoduo, Douyin, and Kuaishou, have launched a series of efforts to revive consumption for 618 since mid-May. The enhanced promotion efforts come as e-commerce giants such as Alibaba, JD, and Pinduoduo have recorded historically-low revenue growth in the first quarter of this year, as the companies have been hit by both Covid lockdowns and tighter reins from regulators since last year.
JD, Alibaba, and Pinduoduo are offering an immediate RMB 50 ($7.50) discount for every purchase of around RMB 300 across their platforms. This is the largest discount in recent years compared with the more standard RMB 20 to RMB 30 discount on RMB 200 orders.
They have also rolled out merchant support plans, from offering immediate payment transfers for merchants joining 618 promotions to ensuring liquidity to cut service fees to lower costs. The moves are also in line with the state’s call for platform companies to assist struggling small- and medium-sized businesses.
Alibaba’s Taobao marketplace has launched a “metaverse mall” for this year’s 618 to create a virtual shopping venue for customers, tapping into the rising metaverse boom.
Are shopping holidays losing their shine?
618 and Singles’ Day are far from the only shopping carnivals in China. To draw customers and drive sales, e-commerce platforms have established a list of festivals that span all year round. Chinese consumers are increasingly overwhelmed by a dazzling array of shopping festivals celebrating nearly every major holiday, from Spring Festival to Children’s Day.
Even Singles’ Day experienced a lackluster year in 2021. Although still recording new highs in GMV, the shopping bonanza posted the slowest growth in its history: just 9%, compared with up to three-digit growth in its heyday.
After more than a decade of development focused on big promotional activities and skyrocketing sales numbers, the market is adapting to a new definition of “success” for such festivals, focusing on achieving brand awareness and turning those drawn in by short-term promotional campaigns into long-term loyal customers. Against this backdrop, this year’s 618 may see considerably slower growth than usual for reasons other than just disruptive Covid lockdowns.