China’s major e-commerce platforms posted better-than-expected financial results in the second quarter of the year, driven chiefly by improved consumer sentiment and increased demand for multiple products, experts said. The country’s consumer market is recovering gradually and gaining growth momentum, highlighting the economy’s strong vitality and resilience, they said. Alibaba Group Holding’s total revenue rose 14% year-on-year to reach CNY234.16 billion for the quarter ended June 30, while net income attributable to ordinary shareholders came in at CNY34.33 billion, an increase of 50.98% on a yearly basis. Its non-GAAP net income reached CNY44.92 billion, up 48% from a year earlier, Alibaba said. During the April-June period, revenue from Alibaba’s core e-commerce businesses – the Taobao and Tmall platforms – grew 13% year-on-year to CNY109.83 billion, while the number of Taobao’s average daily active users increased 6.5% year-on-year. The June 18 shopping carnival saw higher purchasing demand from a broader range of consumers, while generating solid growth in order volume and average order value, Dai Shan, CEO of Alibaba’s Taobao and Tmall Group, said.
Beijing-based e-commerce firm JD also posted a rise in both revenue and profit in the second quarter. Net revenue stood at CNY287.9 billion in the April-June period, an increase of 7.6% year-on-year. Its non-GAAP net income reached CNY8.6 billion, up 31.9% year-on-year. The number of the company’s third-party merchants more than doubled year-on-year and hit a record during the second quarter, said Xu Ran, CEO of JD. JD is doubling down on its low-price strategy to woo price-sensitive consumers amid intensified competition from domestic rivals. “By constantly enhancing supply chain capabilities, we have ensured a more reliable product supply at lower costs and with high-quality services during the promotional season, resulting in further market share expansion in our core advantages categories,” Xu said.
Consumption has become a major driver of China’s economic growth. The country’s retail sales – a significant indicator of consumption strength – increased by 2.5% year-on-year to CNY3.68 trillion in July, according to the National Bureau of Statistics (NBS). In the January-July period, China’s retail sales increased 7.3% year-on-year to CNY26.43 trillion, the NBS said.
Online retail sales rose 12.5% to CNY8.3 trillion on a yearly basis in the first seven months. Chinese online discounter PDD Holdings said revenue jumped 66% from a year earlier to CNY52.28 billion during the April-June period, as the company continued to attract price-conscious customers in China and its cross-border e-commerce site Temu witnessed rapid growth. “Over the recent quarter, we saw a positive shift in consumer sentiment, leading to a rise in demand across various product sectors,” said Zhao Jiazhen, Executive Director and co-CEO of PDD Holdings. Its non-GAAP net income attributable to ordinary shareholders stood at CNY15.27 billion in the second quarter, an increase of 42% from the same period last year. Spending during the June 18 shopping festival also lifted sales. “During the June 18 event, we increased promotions and also invested billions in coupons to give back to consumers, and this helped stimulate demand for all merchandise categories,” Zhao told analysts. “As consumption recovers and consumers show stronger demand, it’s not surprising to see peers stepping up subsidies,” Zhao said, underlining that “more savings” would remain an important priority for Pinduoduo.
Mo Daiqing, Senior Analyst at the Internet Economy Institute, said major Chinese e-commerce platforms posted strong growth in both revenue and net profit during the April-June period as China’s economy has continued to recover despite external uncertainties. “Enhancing user stickiness and cultivating high-quality users are crucial for Chinese online retailers, which have ramped up efforts to offer discounts and subsidies to lure price-conscious customers,” Mo said, adding that the focus on low-cost products will be key to obtaining new users, improving user loyalty and repurchase rates, and bolstering sales.
With the optimization of Covid-19 response measures, the confidence of both consumers as well as market entities has been further boosted, said Wang Yun, Researcher at the Academy of Macroeconomic Research, which is affiliated with the National Development and Reform Commission (NDRC). China’s consumer market has maintained growth momentum, with the overall growth rate expected to reach more than 7% this year, Wang said.
Pan Helin, Co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University’s International Business School, said more stimulus measures are needed to stabilize employment, improve household incomes, boost people’s ability and willingness to spend, and stimulate the purchase of big-ticket items such as automobiles and home appliances, so as to further unleash consumer spending, the China Daily reports.
