What is the way forward for China’s uncertain online fashion market after the 618 Shopping Carnival?

With 520 in the front and 618 in the rear, the first half of 2024 is ending. On the one hand, social financing data released by the PBOC in April showed the first declines in almost 19 years; on the other hand, the first quarter earnings reports of Alibaba, JD and listed Chinese clothing companies came out in May and showed significant growth in the performance of the fashion sector.

How can this gap between actual consumer experiences and actual economic data be interpreted? Where is fashion consumption in China, especially online shopping, going?

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Social financing (i.e. data on total social financing) is a key indicator in the analysis of economic trends in China. Total social financing is high in a favorable economic environment and an active consumer market and vice versa.

Last month, the PBOC revealed that newly added social funding in April was minus $27.4 billion, a rare decline. This was a clear signal of a weak market, raising growing concerns about the future. However, almost at the same time, the significant growth that the e-commerce giants reported in their latest financial results created confidence in the market.

Among them, Alibaba reported total revenue of $30.6 billion in the first quarter, an increase of 7 percent compared to the same period last year, while JD reported revenue of $35.9 billion in the first quarter, which was also an increase of 7 percent compared to the same period. period last year. At the same time, PDD generated revenue of $11.97 billion in the first quarter by focusing on selling domestic brands across multiple channels and platforms, up 131 percent year-over-year. Meituan, a platform specializing in China’s consumer market and local services, achieved revenues of $10.11 billion, up 25 percent year-on-year, with the number of local business users and merchants reaching record highs.

From a macro level, the ‘removal’ of exaggerated data on social finance was the result of the tightening of both policy and market-oriented financing needs, as well as of the regulatory management of the accumulation of idle capital (i.e. the flow of money in the world ). financial system without flowing into the real economy). Data from financial statements of these e-commerce giants provides an ideal perspective for evaluating whether the consumer market is active or not. In the fashion sector, Chinese local apparel companies’ first-quarter financial reports show that most of the 17 A-share listed companies achieved favorable growth, while nearly a third of companies, such as Hodo Group, Septwolves, and Sanfo Outdoor showed a variable decline in turnover.

Uncertain economic trends and the industry’s bleak status quo pose new challenges for companies and brands focusing on online business. A new industry test has just begun.

The fashion sector led by e-commerce giants achieved remarkable growth

Intense competition and layoffs had created controversies and doubts about the e-commerce industry. However, the recently released financial data is undoubtedly reassuring, as on the one hand it endorses the trend towards further growth of these e-commerce giants and on the other hand it reveals the mystery of the consumer market.

Alibaba exceeded market expectations. Among platforms, Taobao and Tmall Group’s quarterly online GMV experienced double-digit year-on-year growth, with the number of quarterly buyers and purchase frequency increasing sharply and the number of quarterly 88VIP members increasing double-digit year-on-year. more than 35 million. And in the biggest highlight of the earnings report, Alibaba’s International Digital Business Group (its overseas operations) achieved quarterly revenue growth of 45 percent year-over-year, and total quarterly orders for its retail platforms grew 20 percent year-over-year. more than a year.

JD Group, whose supply chain infrastructure assets stood at $21.26 billion at the end of the first quarter, posted a 12 percent year-over-year increase. Sales of goods for daily use, which had been experiencing slowing growth for several quarters, registered an 8.6 percent year-on-year sales growth this quarter. In terms of user metrics, the number of quarterly active users has maintained double-digit year-over-year growth for two consecutive quarters, and their shopping frequency, NPS (Net Promoter Score), and the number of users in lower cities are all improving, according to JD- CEO Xu Ran in the financial report.

It is worth mentioning that JD, which has always been strong in logistics, has established the first foreign fashion and luxury warehouse in France during its international operations, enabling faster international logistics and distribution services. Ochama, JD’s omnichannel retail brand in Europe, operates more than 750 self-collection locations, providing consumers with more flexible ways to receive goods.

The Ignited 618 under the tone of new product introduction

Despite the unsatisfactory data on social financing, a slowdown in capital investment, the increased difficulty of financing and the failure of the once applicable general way of ‘hatching a hit, getting investment, increasing investment in marketing and traffic and continuing to replicating the hit”, there are still ways to create new hits in the online fashion market by using digital innovation tools to enable a shortened development cycle.

Trying to imitate the full cycle method with ‘first release, first show, first creation and first hit’ innovated by “Hey, Box!” from Tmall, leading brands or fast-growing emerging fashion labels placed big bets on the 618 ‘traffic C position’. Relevant statistics show that Tmall has invested more resources in new products this year, with resources for completely new products increasing by three times. In April and May, “Hey, Box!” debuted nearly 400 “super new products,” including four new products with sales of 100 million units, 29 super new products with sales of 10 million units, and more than 120 super new products with sales of one million units.

Moreover, introducing new products has become the main practice of all brands. On the platform side, introducing new products in early summer has become an industry practice. On the consumer side, the 618 shopping carnival has increased demand and emotional value of new products.

This offers sports and outdoor brands the golden opportunity to ‘introduce new’ and ‘create hits’ of the year. But how can the luxury goods companies that have always focused on 520 and other shopping festivals make the most of this “mid-year challenge”?

This year, however, the competition was different. First, the presale was canceled. Five major luxury groups – LVMH Moët Hennessy Louis Vuitton, Kering, Chanel, Hermès and Richemont – brought more than 200 luxury brands and more than 100,000 new products and goods to participate in this year’s 618 shopping carnival. Meanwhile, Tmall Luxury officially launched its ‘trade-in’ service on June 6. Consumers can upload photos and information of their unused luxury goods online through the official Tmall flagships of more than 100 luxury brands, and the service provider will estimate the price to complete the resale. During the 618 period this year, the platform subsidy for ‘trade-in’ amounted to a maximum of $132.50, which could be used to purchase new luxury products from Tmall flagship brands.

According to Tmall Luxury, it did not matter whether the used items intended for resale were purchased on Tmall, as long as they were genuine items that were certified 90 percent new and above through evaluation. Currently, used items from Hermès, Chanel, Dior, Louis Vuitton and other leading luxury brands, including jewelry, watches, bags, shoes, boots and clothing, can be resold as long as they meet the qualifications.

Tmall has launched a resale service for products that are relatively unused.

“To support the case for a green and low-carbon lifestyle, Tmall Luxury has launched a trade-in service. At the same time, we also hope to work with consumers to live a life centered on innovation, without rejecting the old, more environmentally friendly fashion and more sustainable ways of consuming,” said Janet Wang, General Manager of Tmall Luxury.

As of May 31 at 9:00 PM, 185 brands achieved sales of more than 100 million yuan, more than 37,000 brands doubled their sales, and 50 trendy categories exceeded 1 billion yuan in sales. At JD International, four hours after the launch of 618, more than 180 brands achieved year-on-year sales growth of more than 100 percent, with sports shoe and apparel brands Salomon, Nike and Arc’teryx up five times, four times and twice, while Ferragamo doubled growth and Van Cleef & Arpels more than doubled growth.

Previously, Bain Capital pointed out in its “China Luxury Market Report 2024” that luxury sales growth in China is slowing, with an expected growth of 5 percent this year compared to last year’s 12 percent year-on-year increase. In fact, sales of luxury goods in China in the first quarter of this year were indeed unsatisfactory.

Although the 618 festival has given the sector a slight boost, it is not a long-term solution for the medium to long term. As macroeconomic factors put pressure on the sector, growth rates will see continued fluctuations even as leading brands remain enthusiastic about the Chinese market. As Bernard Arnault, founder, chairman and CEO of LVMH, said in an earlier interview with WWD China at the 8th Viva Tech: “In the medium term, I am optimistic about the Chinese market.”

Editor’s Note: China Insight is a monthly article from WWD’s sister publication WWD China, examining trends in that all-important market.

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