By Sophie Yu and Casey Hall
BEIJING (Reuters) - A ferocious price war among China's e-commerce retailers during the "Singles Day" shopping event is exposing further weakness in household consumption and raising concerns that the world's second-largest economy will resume its slowdown.
Originally a 24-hour online shopping event in China held on Nov. 11, Singles Day, a nod to the digits in the date, has expanded into weeks of promotions, including in brick-and-mortar stores, making it the world's largest shopping festival.
This year's festival is being more closely watched than ever as a gauge of consumer confidence as China flirts with deflation and has identified boosting household demand as key to avoiding lost decades of sluggish growth.
On Taobao and Tmall, platforms owned by e-commerce giant Alibaba (NYSE:BABA), consumers can receive a 50 yuan ($6.86) discount when they spend 300 yuan. The company is pressuring merchants to offer rock-bottom prices during Singles Day after promising it will offer 80 million products at their lowest prices this year for the sale, which started in late October.
PDD Holdings' Pinduoduo (NASDAQ:PDD) and JD (NASDAQ:JD).com have between them indicated they would offer billions in cashback deals over the sales period for people shopping on their respective platforms.
"Low prices and discounts has been the overarching theme," said Jason Yu, greater China managing director of market research firm Kantar Worldpanel, noting that even the newly-released iPhone 15 was selling with a 500 yuan discount.
"It's a sign that nobody's going to easily spend 10,000 yuan ($1,371) on a handset right now. Confidence is a bit weak."
Data released on Thursday showing a drop in consumer prices to their lowest since the COVID-19 pandemic has increased the doubts in China's economic rebound after some months of indicators showing growth stabilising.
China's big online shopping platforms did not release final sales figures for 2022, when analysts said COVID-19 restrictions inhibited spending and consumer confidence. It is unclear whether they will release figures for this year, but expectations are subdued, and for good reason.
Bain and Company found that 77% of the 3,000 consumers it surveyed plan to cut or maintain their level of spending on Singles Day compared with last year.
"Macroeconomic headwinds are causing consumers to be more value-conscious," Bain said.
Some indicators point to a slowdown in Singles Day sales. Data provider Syntun estimated e-commerce platforms sold 311 billion yuan of products from Oct. 31 to Nov. 3, a 7.1% decrease year-on-year. But it said that was partly mitigated by livestreaming platforms such as Douyin, Diantao and Kuaishou selling 10.5% more, at 99 billion yuan.
Other analysts are more upbeat. Jacob Cooke, co-founder and CEO of e-commerce consultancy WPIC Marketing+Technologies, expects total sales growth of 14%-18%, saying he is "optimistic" that Chinese growth is "stabilising."
TRIPLE DIP
A downturn in China's giant property sector, where most of the household wealth is parked, indebted local governments cutting spending, youth unemployment rates surpassing 20%, and falling wages in some sectors of the economy have been keeping consumers in a thrifty mood.
A surprise rise in imports in October had raised hopes that spending might be turning a corner, but the fall in consumer prices suggests that higher commodity prices probably had more impact on trade than consumer demand.
Coupled with weak manufacturing surveys and waning external demand, the consumer price pressures point to China losing growth momentum into year-end.
"We continue to see a serious risk of a triple dip for the economy," Nomura analysts wrote in a note.
For Tan Jiapeng, a 35-year-old office worker in Beijing, his only Singles Day purchase so far has been a Descente winter jacket, an "essential purchase" for the winter. Worried about job stability, he abstained from buying Pokemon smartphone games, body lotion, and some Moutai liquor, all things he wished for.
"It's known how difficult it is to find a job these days, even for the young people who are cheaper," Tan said. "The economy is moving downhill, I can't spend as freely as before."
($1 = 7.2931 Chinese yuan renminbi)