How China’s sluggish economy has made Singles Day gloomy for retailers

China’s famous Singles’ Day celebration is here. However, this year’s festivities seem less lively.

Known as one of the world’s largest shopping events, Singles’ Day typically reflects China’s passion for shopping. Traditionally, both merchants and consumers contribute to the massive sales, while e-commerce giants like Alibaba, JD.com, and Pinduoduo offer huge discounts.

First launched by Alibaba, the annual event on November 11 expanded from a one-day sale to a weeks-long shopping season, which is seen as a key indicator of consumer sentiment in China.

However, this year, enthusiasm seemed to dim as e-commerce firms began looking abroad for growth.

What is Singles’ Day?

Singles’ Day, observed on November 11, celebrates singlehood with a massive shopping frenzy that kicks off weeks in advance and drives billions in sales for retailers.

The day began in the 1990s as a playful response to Valentine’s Day when a group of university students in China decided that singles deserved their own celebration. The tradition is believed to have started at Nanjing University in Jiangsu province, where four single male students embraced their single status and chose November 11 as the date.

Initially called Bachelor’s Day, the celebration gained popularity across campuses, with both men and women joining in to celebrate singlehood. It later became known as Singles’ Day or Double 11 and spread across social media.

Notably, the choice of 11/11 was symbolic, since the number “1” resembles a bare branch, a Chinese internet slang term for an unmarried man who does not add branches to the family tree.

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How did the lagging economy affect the celebrations this year?

Amid China’s lagging domestic economy, dragged down by a real estate crisis and deflationary pressures, consumers no longer go all out on purchases during the shopping extravaganza.

“I only spent a few hundred yuan on daily necessities,” said Wang Haihua, who owns a fitness centre in Beijing.

Wang said that the prices offered on e-commerce platforms during Singles’ Day are not necessarily cheaper than usual.

“They’re all tricks and we’ve seen through it over the years,” she said.

Zhang Jiewei, a 34-year-old who runs a barber shop in Xi’an city, echoed Wang’s sentiments, saying that he no longer trusts Singles’ Day promotions as some merchants tend to raise the usual price of a product before offering a discount, giving consumers the illusion they are getting a deal.

“I used to buy a lot two or three years ago and I even purchased a mobile phone (during Singles’ Day),” he said.

“I stopped doing that following the pandemic because of less income. I am not going to buy anything this year,” Zhang added.

Some experts say that Beijing’s recent stimulus measures have had little impact to boost consumer confidence.

“People are not interested in spending and are cutting back on big-ticket items,” said Shaun Rein, founder and managing director of China Market Research Group in Shanghai. “Since October 2022, the weak economy means that everything has been on discount year-round, 11.11 is not going to bring in more discounts than the month before.”

Rein said he expects low growth for the Singles’ Day shopping festival as consumers tighten their spending in anticipation of difficult economic times ahead.

Categories such as sportswear and fitness, however, have been doing well as customers “trade down a Gucci bag for Lululemon sportswear,” he said.

Platforms like JD.com and Alibaba, which operates e-commerce platforms Taobao and Tmall, previously used to publish the value of transactions made during the festival, but have since stopped revealing the total figure. While yearly growth used to be in the double digits, estimates of recent figures have dwindled to low single-digit growth.

Syntun, a data provider, estimated that last year’s gross merchandising volume sales across major e-commerce platforms grew just 2% to 1.14 trillion yuan (£156.40 billion), a far cry from double-digit growth before COVID-19.

Merchants who typically take part in the Singles’ Day shopping festivals say the costs of participation no longer pay off, amid high advertising fees and unsatisfactory sales.

Zhao Gao, who owns a garment factory in eastern Zhejiang province, said that after paying advertising costs to e-commerce platforms he would only break even after sales.

“The platforms have so many rules for promotions and customers have become more sceptical,” he said. “As a merchant, I no longer participate in the Singles’ Day promotions.”

Another merchant, Du Baonian who runs a food company processing mutton in Inner Mongolia, said that overall sales in the past year have fallen 15% as consumers downgraded and reduced consumption.

Du said that while he still takes part in the Singles’ Day promotions, the higher expenses do not typically generate returns because of sluggish sales.

“We are seeing shrinking revenue, but advertisement on the platform can help us to maintain our leading sales position,” he said, adding that he was considering advertising on more e-commerce platforms to target more consumers.

Meanwhile, the e-commerce platforms are facing a slowing domestic market, which has led many to turn to overseas markets for growth. To attract international shoppers, platforms are offering promotions such as global free shipping and allowing merchants to easily sell worldwide.

Alibaba, for instance, stated in a blog post on its Alizila site that nearly 70,000 merchants experienced a boost in sales, with some doubling their revenue through global free shipping. In markets like Singapore and Hong Kong, Alibaba also saw a surge in new customers, with their numbers doubling as well.

With inputs from AP