Since my last China Brief, consumption has gained momentum, particularly with the unveiling of a series of economic stimulus measures since September 24. The highly anticipated annual Double 11 Shopping Festival, which ended on November 11, well exceeded industry expectations, further fueling excitement among industry executives around the pickup in consumption.
Despite this momentum, the uncertainty that has hovered over the Chinese economy and consumption over the past year, driven by persistently low business and consumer confidence, continues to linger. Many economists question whether the magnitude of the government’s stimulus measures will be sufficient to spur growth by boosting liquidity and re-igniting the slumping real estate market.
Yet, as we wait to see how the stimulus measures eventually play out, consumer and business sentiment appear to have improved since then, as evidenced by several indicators. The stock market has recovered, with the CSI 300 Index rising by around 20 percent over the last two months. And more importantly, property transactions in October and the first half of November rose a modest two percent, the first time this key indicator has shown positive growth this year, based on an analysis of daily transaction data of 30 major cities. (Exhibit 1)
Retail sales grew by 5 percent in October, compared to just 3 percent in prior months of the year. The early start of this year’s online shopping festival, Double 11, partially explains this uplift, as evidenced by strong growth in categories such as cosmetics and home appliances. We will gain a fuller picture when October and November data are available next month.
However, it is fair to say that October has seen an uptick in consumption, creating positive momentum. This is further supported by overall car sales, which grew by double digits in October, driven by electric vehicle sales increasing by more than 50 percent. (Exhibit 2)
Travel remains a strong growth story this year. National holiday travel performed strongly again, with domestic travel visits up 5.9 percent and travel spending rising 6.3 percent compared to 2023.
Both metrics exceeded the same period in 2019 by 10.2 percent and 7.9 percent, respectively. The recovery rate of overseas travel continues to improve each month, and it is expected to soon exceed pre- COVID-19 levels. (Exhibit 3)
Insights from the Double 11 Shopping Festival
Double 11, the world’s largest online shopping festival, remains a significant event in China, albeit with some changes. The days of celebrating hundreds of billions of dollars on a single day are over, but it still represents a month of promotion at scale, with major platforms and offline retailers joining in. This year marked the longest Double 11 ever, with pre-sales starting as early as October 8, stretching this once-a-year shopping spree to as many as 31 days across some platforms.
This year’s Double 11 also witnessed a return to strong growth. Ecommerce data provider Syntun estimates this year’s growth at 26.6 percent. While this number is somewhat inflated as it does not adjust for the longer promotion season, it is nonetheless another indicator of the more meaningful growth in gross merchandise value (GMV) compared to last year’s modest growth of 2.1 percent.While platforms no longer publish GMV numbers, Alibaba’s platforms announced robust growth and a historic high in customer engagement. JD announced a 20 percent increase in shoppers. Livestreaming continued to expand, growing from 19 percent of total GMV in 2023 to 23 percent of GMV this year. On Alibaba’s platforms, 589 brands surpassed RMB 100 million in GMV compared to just 402 last year, a 46.5 increase, with 45 brands delivering more than RMB 1 billion in GMV.
Granular Strategies: Consumer Segments
Getting more granular has been a key theme during this year’s Double 11 shopping festival, and curating direct one-to-one experiences with consumers that have the biggest spending power has become increasingly critical for brands. For example, orders placed by Alibaba’s 88VIP members increased by 50 percent year-on-year, and comprised over 90 percent of sales for some brands through their member-exclusive sales events. Today, 42 million people pay for 88VIP membership, with their average spend reaching nine times that of non-members.
Brands need to drive consumer engagement both offline and online across all platforms to best target increasingly diverse consumer segmentsthat matter the most to them. One-size-fits-all no longer works, if it ever had.
Granular Strategies: Emerging Growth Categories
The same need for granularity holds true for categories. New subcategories are turning into multi-billion-dollar industries. For example, sales of blind box collectible toys, which barely existed before 2019, may exceed $2 billion this year. This trend is driven by young Chinese consumers’ desire for joyful moments and the opportunity to express themselves. Brands can leverage this hobby-driven trend to launch new products and expand into new categories. Often, these categories are built digital-first, with ecommerce and Double 11 uniquely supporting the “product drop” business model, where highly anticipated, limited-edition products are released in short supply to drive demand and excitement. For example, one collection from PaperPresented alone delivered RMB 200 million GMV on the first day of sales on Tmall. This collection of products was based on the popular dating game Love and Deepspace. In addition to PaperPresented, three toy brands including miHoYo, Jellycat, and Pop Mart exceeded the RMB 100 million GMV milestone on Alibaba. (Exhibit 4)
Other high-growth categories include low-sugar and sugar-free teas, outdoor clothing and gear, consumer health products, and pet supplies.
Enhancing Consumer Experience
While price and promotions drive people to Double 11, opaque promotion mechanisms have dampened excitement. For instance, consumers often need to reach certain spending thresholds to unlock discounts, making the shopping experience confusing and cumbersome. Brands have the opportunity to invest in providing a better experience that goes beyond just price. This includes improving customer service and the use of AI, such as AI-based skin consultations or custom-formulated products.
Cost Efficiency and Returns Management
Cost efficiency has become increasingly important. Rising cancellation and return rates make inventory planning difficult and have significant cost implications. Brands can reduce returns and cancellations by improving product descriptions and promotion mechanisms. Platforms are providing merchants with more autonomy to handle disputes directly, reducing logistics costs and driving efficiencies through AI.
Conclusion
While there is clear momentum in China’s consumption landscape, uncertainty persists. Companies must remain vigilant, map out scenarios, and be prepared to adapt quickly to market changes. The pace of change in China remains rapid, and businesses must stay agile to navigate this dynamic environment successfully.