A person walks next to the Alibaba company logo in front of the Alibaba office building in Chaoyang Science and Technology Park in Beijing, China.
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BEIJING—Chinese e-commerce giant Alibaba and JingdongQuarterly results released on Thursday highlighted a slowdown in China’s consumer market, with retailers struggling to attract value-conscious customers.
Major U.S. consumer brands highlighted weak demand in China in their second-quarter reports, and some companies said local brands had emerged as stronger competitors.
Alibaba said Merchant commission income and advertising on its Chinese platforms up 1% for the quarter ended June 30 last year. This is from 5% annual increase in the last season. Documents show that the annual decline in direct sales fell sharply from 2% to 9% in the two quarters.
JD.com said its average order value fell annually in the quarter ended June 30, partly due to “weak consumer spending.” Thanks to its in-house logistics operations, the company is known for slightly higher-priced products and next-day delivery.
Wednesday, TencentWeChat, which operates the social media and messaging app WeChat, also reported a slowdown in user financial transaction revenue at an annual rate of 4%, compared with 7% in the previous quarter and 15% in the same period last year. WeChat is one of the two main mobile payment apps in China.
Alibaba said on Thursday that a decline in the valuation of its affiliate Ant Group, which operates Alipay, another major mobile payments app in China, led to impairment charges related to stock-based employee awards. This resulted in a 10% annual decrease in Alibaba’s related profits this quarter.
China reported on Thursday that retail sales rose 2.7% year-on-year in July, after rising just 2% in June. This is well below past retail sales growth.
A downturn in the real estate market, which accounts for the majority of Chinese household assets, and uncertainty about future income have weighed on consumer confidence.
GMV growth slows
Alibaba said on Thursday that its main e-commerce businesses in China, Taobao and Tmall, achieved “high single-digit online GMV growth” in the quarter ended June 30. Gross merchandise value is an industry metric that measures sales over a period of time.
Alibaba did not provide specific GMV data. The total revenue of Taobao and Tmall Group decreased by 1% compared with the same period last year.
The company said Taobao and Tmall’s GMV achieved double-digit growth last quarter, while in the same period last year, Alibaba said Taobao and Tmall’s GMV had grown, but did not specify the extent of the growth.
Dealing with value hunters
Jasmine Bai, China internet analyst at Haitong International Securities Group, told CNBC on Friday that Chinese consumers are increasingly looking for value-for-money products, regardless of income level.Asian road sign.
Bai said this has led to fierce competition among e-commerce platforms such as Pinduoduo, JD.com and Alibaba as they focus on more cost-conscious, value-seeking consumers.
Alibaba and JD.com have struggled to compete with heavily discounted products Pinduoduo HoldingsChina’s Pinduoduo app, and the byte-beating Douyin, the Chinese version of TikTok.
Byte Bounce is not publicly traded. PDD has not yet announced when it will release its second-quarter earnings. That’s what was done on August 29 last year.
Is the price war coming to an end?
Nomura analysts said this week that a conversation they had with an unnamed Douyin employee showed the app’s e-commerce growth slowed so sharply in the second quarter that the company may not achieve its 30% growth rate this year. GMV growth goals.
The report quoted the same conversation as saying that Douyin’s management realized that excessive emphasis on low prices has led to a decline in GMV, and will ease the pressure on merchants to sell at low prices this month.
ByteDance did not immediately respond to a request for comment.
Analysts at Nomura Securities said Douyin’s measures could help boost profit margins in the e-commerce industry, benefiting Alibaba, the largest player in the space.
Alibaba’s Hong Kong-listed shares rose 5% on Friday afternoon, while JD.com’s shares rose 9%. Tencent shares rose more than 1% on Friday.
Michael Burry is best known for his prescient views on mortgage-backed securities before the 2008 global financial crisis, Last quarter, China Internet stocks became one of his top holdings, the latest filings show.
— CNBC’s Sonia Heng reported from Singapore.
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