Post 6/18 Holiday Optimism?
On 6/21 we indicated that little data had been reported about the 6/18 shopping holiday in China, other than that sales at JD.com (JD), the originator of the holiday, saw sales increase by 10.3% y/y. While this sounds like a successful holiday shopping period, typically sales are up between 25% and 35% y/y, which makes this a rather weak holiday, although the reasons for such weakness, COVID-19 lockdowns and inflation, are obvious. We have gathered a bit more data to put the 2022 6/18 holiday in better perspective, albeit a product category that has been problematic for China over the last few quarters.
Data fro Strategy Analytics indicates that smartphone sales during the holiday were 14m units, down 25% y/y, after a small gain in 2021 (~1%) and a large gain (~41%) in 2020. The good news is that on-line sales were up 13% y/y based on value, as the relatively high priced iPhone sold well, but overall sales revenue fell 16% y/y to ~$9.5b US. Roughly 49% of smartphones sold went through JD.com, with Tmall (BABA) and Taobao (BABA) representing another 30% (combined), although live streaming platforms, grew to 14%, up from 5% last year. All in, while expectations for the holiday are always optimistic in the Chinese press, there has been little said this year, and we expect the weakness to continue until China’s COVID-19 policies become more amenable to the population and the economy, which we had expected (in a tacit way) by the end of Q3 or in early 4Q. While we still believe that inventory levels remain high in China, we have seen some indications that the Chinese government is a bit more willing to relax its heavy-handed lockdown stance going forward. It could just be a reaction to the weakening economic situation in China, or a better understanding of the county’s ability to control the virus through such lockdowns, but it’s a bit too early to tell if it is just for show or a real change in stance.
Data fro Strategy Analytics indicates that smartphone sales during the holiday were 14m units, down 25% y/y, after a small gain in 2021 (~1%) and a large gain (~41%) in 2020. The good news is that on-line sales were up 13% y/y based on value, as the relatively high priced iPhone sold well, but overall sales revenue fell 16% y/y to ~$9.5b US. Roughly 49% of smartphones sold went through JD.com, with Tmall (BABA) and Taobao (BABA) representing another 30% (combined), although live streaming platforms, grew to 14%, up from 5% last year. All in, while expectations for the holiday are always optimistic in the Chinese press, there has been little said this year, and we expect the weakness to continue until China’s COVID-19 policies become more amenable to the population and the economy, which we had expected (in a tacit way) by the end of Q3 or in early 4Q. While we still believe that inventory levels remain high in China, we have seen some indications that the Chinese government is a bit more willing to relax its heavy-handed lockdown stance going forward. It could just be a reaction to the weakening economic situation in China, or a better understanding of the county’s ability to control the virus through such lockdowns, but it’s a bit too early to tell if it is just for show or a real change in stance.
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