Bloomberg: What are you expecting from this 618 shopping festival?
Jacob Cooke: We’re not expecting GMV numbers overall, but we’re looking at a four-horse race now. I would agree with JD. It’s a little bit better than expected, but we’re also coming off relatively slow consumption growth.
Alibaba only turned positive this year in March and then stayed positive since then. However, in certain sectors we were disappointed in Q1, we are seeing them come back in Q2, like cosmetics and luxury, for example. And there’s been a continuous change in lifestyle, too, as well. Pet has done really well. Certain niche sports have been doing really well, and discretionary spending. So, signs of growth.
But you’re right, without that stimulus, we’re still seeing a very slow recovery compared to what happened in the US and Canada.
Bloomberg: And earlier in the year, we were also concerned about seed discounting by all of these retail tech giants. And given, of course, the competition as well, is that still going to be an issue?
Jacob Cooke: Yeah, we’ve seen bigger discounting this year than we have in previous years. However, some of the brands have also had a reluctance to use some of those bigger live-streamers where commissions can be up in the 30 to 40%. So, they’re keeping a lot of that margin internally and passing a little bit of it onto the consumers.
Retailers in general will probably have a higher margin this year and just a change of tactics in general in terms of how they’ve been doing things before.
Bloomberg: What do you see as that change of tactics in terms of the longer-term trends that we’re seeing in the Chinese consumer?
Jacob Cooke: We’re seeing a lot more content and social commerce focus. We even saw Apple run their own livestreams this year. So as opposed to using the big celebrities, there’s been a real effort to build up those channels and that content and user base internally within brands. And now with Apple starting to do that as well, that would really sort of be the complete circle. Everybody is now going that route and that’s going to lead to a lot higher margins. Those influencers in China can be pretty expensive, even though they do have an incredible reach.
Bloomberg: In terms of sectors that you see as being less resilient, even as we say, perhaps more of a broader consumer downturn or at least, you know, a softening of the post-Covid the early days of the recovery, where do you see the most resilience?
Jacob Cooke: I think what we’re seeing in terms of households, like necessities, those were all we’ve been very resilient. We had a couple of points or data points that we see with cosmetics and more discretionary with luxury doing quite well right out of the gate.
We don’t have the final 618 numbers until the sales finish tomorrow, But, if you looked at the pre-sales numbers on the 31st and the 1st, a lot of them were record-setting even compared to where they were last year. So that’s a really good sign, especially because Queen’s Day, which was the first sales festival really of the year. Both of those sectors were quite disappointing.
Bloomberg: When it comes to social content, who’s doing it well?
Jacob Cooke: Well, Douyin is doing it really well, and you see that, of course, that now Tmall and especially Alibaba has announced that they’re going to be focused less on the overall GMV and more on increasing the DAU (daily average users). You’ve used the daily average users as well as content strategies.
They were one of the first companies to get there with short-form and live-form videos for shopping. But really, Douyin has taken off, you know, in that tip of triple-digit growth for a long time. So, I think, unlike the focus, I like what they’re doing there with that. And I think overall that’s really going to catch up in terms of replicating that shopping experience.
Alibaba’s always been very good if people had a predetermined intent of what they were going to buy. But, you know, Douyin has replicated that: “I’m going to the mall to shop. And maybe I didn’t know before I logged in what way I was going to buy. But I found some good offers. I found some interesting products.” Alibaba really got to catch up in that area.
And I think with the new strategy, what they’ve announced probably should be pretty successful.
Bloomberg: What does the earnings recovery look like to you?
Jacob Cooke: I think for the brands, it’s going to be pretty good. And again, I think that it’s also a strategy of the brands that are coming in to focus less on just getting the overall market share. And that’s going to be different from the platforms because of now with this four-horse race, really with Douyin, PPD, JD, and Tmall. It could be tough for them because they’re certainly fighting it out.
You know, the Q1 announcements from JD as well as the massive subsidies for consumers. Yeah, it’s going to be tough on their earnings lines. I mean, they’ve clearly indicated that they’re going to fight for this market share. And now there are a lot of horses in that race.
However, the brands are going to be focused a lot more on profit and less towards less big-name influences and more to actually having a margin.
