E-commerce growth in China slows to 9.1%

Research from Insider Intelligence has forecast China’s 2022 e-commerce sales to grow at their slowest pace since 2008, in a sign of broader economic troubles in the largest e-commerce market on the planet.

Why it matters

It’s important to remember that the competitive set is difficult to match – for a long time, China’s economy was used to retail sales growing by an average of 12% per month, according to the Wall Street Journal.

In an online shopping economy worth $6.1 trillion – one that would presumably grow at an accelerated pace given the ongoing zero Covid policy in the country which has continued to lock down regularly – it’s surprising to see such trepidation.

Deeper troubles

What it suggests is not that the fundamental utility of e-commerce no longer makes sense to people, but rather that it’s a sign of economic attitudes as people hold back on discretionary purchases at a time of broader economic woes: the property market has dipped, inflation begins to take hold and wages can’t keep up.

Who wins?

It appears that more aggressive competitors are selling more (even if that may not be a long-term recipe for profitability). Pinduoduo’s value offering has spurred sales growth of 36%.

Where e-commerce excels appears to be in grocery which has continued its fast growth (albeit a little slower). Generally, consumption patterns reflect ongoing lockdown situations: food, household, personal care, fitness, pet, home improvement, and even camping categories have all done well, while fashion has struggled.

Giants struggle to maintain stellar performance

E-commerce giants have felt the pinch, with Alibaba’s June results showing a 1% dip in China sales, while rival JD.com saw growth slow to just 5.4%. It’s worth pointing out that both these firms dwarf Pinduoduo’s sales. Alibaba remains the biggest and likely the strongest brand in the space.

Sourced from The Wall Street Journal, WARC