6/18 in China
11/11 is a well-known ‘shopping holiday’ in China, while 6/18 is less known outside of China. That said, while the ‘holiday’ does not officially start until the 18th, promotions, particularly on-line promotions, have already begun and will continue through June 20. Alibaba’s (BABA) T-Mall, which has 250,000 brands participating in this year’s holiday promotions is already offering a 20 yuan ($3.13) discount on every 300 yuan purchase ($46.90), with a total of 10b yuan ($1.56b US) in coupons and subsidies so far this holiday. While last year’s holiday followed a 76 day lockdown in China it was a path to growth for many brands after a dismal 1Q, so much focus has been placed on this year’s holiday as a way to gauge the sustainability of the Post COVID consumer recovery in China.
One issue that has already become a focus for the Chinese government’s anti-trust watchdog organizations are practices that damage the rights of consumers, terms not usually regarded as high priorities for the Chinese government. Two major e-tailers have already been censured for listing counterfeit products and pressuring partner companies, and has been said to be part of the general crackdown in China on tech companies. Because these shopping holidays are so competitive, many retailers place very high quotas on their managers, which tends to push them toward abusive practices, which the government says it will not tolerate this year. Shares in the retailers that have already been called to task over their recent practices are down more than 40% from their recent peak.
One point that has been made leading up to the holiday is that TV sales in China, which are usually stimulated by discounts during such holidays, are not expected to be as strong as planned earlier in the year. As the price of LCD TV panels has increased, set prices have also increased and some brands, particularly smaller ones, are reducing their expectations for the 4Q holiday season, as they are having trouble selling current product, even with discounts. This seems to be a bigger problem in China than in the US and Western Europe, where sales seem to have been sustained by government stimulus and the lessening effects of the pandemic, while China’s CE companies have insisted in building inventory more aggressively. Whether this was based on a false sense of optimism earlier in the year or just a desire not to be caught off-guard as component shortages began to appear, if those inventories are not sold through during the holidays, procurement for the 4Q holiday period would be at risk. There is still time for a better CE holiday in China and North America seems to still be holding up, but the risk level keeps increasing and flat TV unit volumes in China for the month and for the year leave a bit to be desired.
One issue that has already become a focus for the Chinese government’s anti-trust watchdog organizations are practices that damage the rights of consumers, terms not usually regarded as high priorities for the Chinese government. Two major e-tailers have already been censured for listing counterfeit products and pressuring partner companies, and has been said to be part of the general crackdown in China on tech companies. Because these shopping holidays are so competitive, many retailers place very high quotas on their managers, which tends to push them toward abusive practices, which the government says it will not tolerate this year. Shares in the retailers that have already been called to task over their recent practices are down more than 40% from their recent peak.
One point that has been made leading up to the holiday is that TV sales in China, which are usually stimulated by discounts during such holidays, are not expected to be as strong as planned earlier in the year. As the price of LCD TV panels has increased, set prices have also increased and some brands, particularly smaller ones, are reducing their expectations for the 4Q holiday season, as they are having trouble selling current product, even with discounts. This seems to be a bigger problem in China than in the US and Western Europe, where sales seem to have been sustained by government stimulus and the lessening effects of the pandemic, while China’s CE companies have insisted in building inventory more aggressively. Whether this was based on a false sense of optimism earlier in the year or just a desire not to be caught off-guard as component shortages began to appear, if those inventories are not sold through during the holidays, procurement for the 4Q holiday period would be at risk. There is still time for a better CE holiday in China and North America seems to still be holding up, but the risk level keeps increasing and flat TV unit volumes in China for the month and for the year leave a bit to be desired.
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