Discounts, price cuts heating up online shopping
Era of tech advances, competition prompts major e-commerce retailers to shift focus
Competition in China's online shopping sector is heating up as major e-commerce platforms are offering big discounts and competitively priced products to attract price-sensitive consumers and drum up sales during the year-end buying spree, experts said.
They noted that traditional online retailers such as Alibaba Group Holding and JD are doubling down on the low-price strategy to strengthen consumer engagement in the face of a massive challenge from online discounter PDD Holdings, which saw both its revenue and net profit surge in the third quarter.
Chinese e-commerce platforms should step up investments to improve consumer shopping experience by offering cost-effective commodities, and upgrade supply chain systems by leveraging innovative digital technologies, they said.
Alibaba's online marketplace Taobao kicked off its year-end promotional event at 8 pm on Saturday, after canceling the "Double 12"shopping event, which usually takes place on Dec 12 in line with the annual Double 11, or Singles Day, shopping festival on Nov 11.
Taobao has launched a discount campaign worth 10 billion yuan ($1.4 billion) and promised to provide an array of perks and deep discounts on a wide range of products, including smartphones, electronic devices, wine, fruits, cosmetics, shoes and apparel during the year-end shopping extravaganza.
Compared with previous "Double 12" events, the intensity and scale of discounts have greatly improved this year, Taobao said. Merchants from Tmall, Alibaba's online marketplace for established brands, have also participated in the promotional gala, pledging to offer direct price cuts and discounts on merchandise.
PDD's growth in the domestic market has outstripped the growth of its competitors, including Alibaba and JD.
Liu Qiangdong, founder and chairman of JD, said on an internal network of the company on Saturday night that JD must change, or there is no way out, emphasizing that he believes the company will walk out of the trough.
The net revenue of JD increased 1.7 percent from a year ago in the third quarter. Liu blamed himself for JD's problems, and said it takes time to change as the company's organizational structure is now bloated and low in efficiency.
After seeing PDD's strong financial performance, Jack Ma, co-founder of Alibaba, said last month that he believes Alibaba will innovate in response. The era of artificial intelligence-powered e-commerce has just started, he said.
Mo Daiqing, a senior analyst at domestic consultancy the Internet Economy Institute, said that enhancing user engagement and cultivating high-quality users are crucial for Chinese online retailers. "They are ramping up efforts to offer discounts and price cuts to lure price-sensitive customers, given that the growth of the domestic e-commerce sector is slowing."
Steep product prices could deter some consumers from making a purchase, so the low-cost strategy is key to acquiring new users, improving user loyalty and repurchase rates, and bolstering sales, Mo added.
Li Chengdong, founder of Beijing-based e-commerce consultancy Dolphin, said that major online retailers are accelerating steps to bring more competitively priced products amid intensified competition in the domestic online shopping sector.
They should also strike a balance between bringing in cheaper goods and improving the shopping experience of users, Li said.
As the Chinese consumer market gradually recovers from the COVID-19 pandemic, it is a critical time for brands and retailers to reshape strategies and strengthen market adaptability, according to a report from consultancy Bain& Company.
Retailers need to leverage data and technology to better understand consumer behavior, thus optimizing their product mix and promotional strategies, as well as balance the tasks of maintaining competitive pricing and focusing on product quality, product innovation, supply chain and sourcing, the report said.
fanfeifei@chinadaily.com.cn
