Less chicanery, clearer discounts: the annual 618 shopping festival attracts brisk spending
Zhang Hangyu, a white collar worker in Shanghai has been participating the "618" online shopping festival since its beginning. This year's event is among the best, she said.
Zhang bought herself a new iPad, some women's hygienic products and skincare packages.
This year the festival began days earlier than the June 18 signature date, allowing more time for discount days. And that's not counting pre-event promotions.
"The biggest change from previous years is that you don't have to do mathematics to figure out discounts," Zhang told China Biz Buzz. "Coupons are so straightforward that you can use them as long as you buy a certain value of things in any particular shop. Before, you had to buy things from shops A, B and C to use a coupon, even if you only wanted things from shop A."
The "618" sales started in 2008 by JD.com to perk up sales, one year before Alibaba created the Singles' Day shopping event. The date was chosen because JD was founded by Liu Qiangdong on June 18, 1998. Other e-commerce players have joined the festival, making it the second-largest shopping extravaganza after November 11 Singles' Day sales.
Despite slower consumer spending, this year's 618 event is being deemed a success. Tmall, Alibaba's premier e-retail platform, said new product launches have resulted in an "explosive increase" in sales, contributing to 153 percent rise overall transaction growth during the promotional period.
This year's 618 event is deemed a succes.
According to Tmall, transactions involving 12 new products in the period through June 12 have surpassed 100 million yuan (US$13.72 million), with another 504 products showing sales exceeding 10 million yuan.
New products were concentrated within three sectors: digital products, beauty and personal care, and home appliances and furnishings.
The decision by e-commerce giants such as Alibaba and JD.com to end complicated promotional gamesmanship reflects a recognition that many consumers are operating on limited budgets and can't be drawn by marketing chicanery.
"When consumers have limited budgets, what truly influences them and leads them to choose more products are cost-effective alternatives," Rachael Lee, general manager of Worldpanel in China, told a recent press seminar. "Consumers now can have more choices on more platforms. They know what they need and it is definitely not complicated calculations that often don't show much discount at all."
The government's trade-in program offering subsidies to people who upgrade household possessions also underlies the more straightforward discount strategies.
The subsidies cover all major platforms, such as JD.com, Tmall and PDD. Millions of products offered in the 618 festival fall under the subsidies.
Take a fridge costing 8,000 yuan on JD.com, for example. The vendor offers a 1,000 yuan coupon, and the platform and state subsidies together offer another 1,400 yuan off. And if consumers trade in an old fridge, they can benefit from another coupon valued at 500 yuan.
Subsidies offered by the government's trade-in program is a major motivation.
Sheng Qiuping, vice minister of Commerce, said earlier that through April, more than 120 million people have taken advantage of state subsidies to trade up on items.
"Facing the current complex and severe international environment, boosting consumption and expanding domestic demand holds special significance," he said.
Meanwhile, shangou, which literally means "flash purchase," has become a popular promotion during the current shopping spree. It's a policy that promises goods will be delivered to the doorstep within 30 minutes of purchase. E-commerce platforms, such as Meituan and Tmall, have even extended the fast delivery service offline for those who don't want to pick up items in person.
Shenzhen-based bicycle brand Xidesheng said its sales under the flash purchase system exceeded 3 million yuan just four days after it began, with daily orders surpassing 1,000. Sports gear brand Decathlon reported average daily in-store pickup orders increase 2.2 times during the festival.
Can shangou service boost offline economics? Probably. At least insiders believe offline channels will have more opportunities in the future.
"We don't believe there will be the kind of rapid growth in online retailing experienced five or 10 years ago, overwhelming offline market share. Rather, we see long-term development as relatively balanced," said Derek Deng, head of Bain & Co's China Consumer Products Practice division.
