A Glance at China’s Changing Consumption Trends through JD.com’s 6.18 Sales

This year’s shopping promotion was a period of continued growth for cosmetic sales with a total of CNY 51.2 billion, consisting of 74% skincare and 26% make-up. The explosive rise in domestic cosmetics sales indicates its momentum amid the epidemic. The transaction volume of local Chinese brands skyrocketed 64 times.

The abovementioned data shows how consumers have responded to firms’ heavy marketing expenditure. In 2021, with a steady growth trend, the overall industry emphasized the importance of advertising, extending the cooperative relationship with e-commerce platforms. In the context of the shopping event, while the distribution of advertising expenses for traditional industries, like food & beverages and home appliances, declined year on year, the cosmetic industry has shown a completely different trend. Statistically, the beauty industry became the key player in ad placement, making up 46.8% of the overall advertising market.

With a low concentration in advertising and a higher penetration rate over previous years, emerging companies are directly competing with numerous industry-leading brands. Those high-growth domestic startups have recorded an astonishing growth rate of 78% compared with 23% for the overall market in 2020. On the JD platform, PERFECT DIARY has entered the Top 3 list of cosmetic brands since 2020, maintaining its momentum up to the same period this year. Emerging Chinese cosmetic brands, such as Florasis and WINONA, are frequently featured in the list and take up an increasing share of the market segment. 

Despite the decelerating growth of the overall market, the purchasing power of Chinese consumers has become increasingly prominent, especially for high-end cosmetic products. According to some surveys (link in Chinese), the country’s cosmetics market is still dominated by female consumers, while the overall consumption level for males possesses more room for growth. At present, with a growing awareness of product basics, the consumer groups are less price sensitive. In addition, with advanced education of rational consumption, consumers are paying more attention to product ingredients in the cosmetics industry, along with raising the public’s awareness about safety and efficacy. In 2021, over 60% of Chinese consumers will primarily consider product effectiveness prior to their purchases, followed by factors like cost-effectiveness, product ingredients and user reviews.

With a variety of sales items from fridges, freezers and air conditioning to the kitchen and small appliances, 618 sales in home appliances grew at 32.6% year-on-year, with a CNY 82.4 billion GMV. It once again led the 618 Shopping Festival on the JD platform, witnessing a 328% growth in GMV. Among them, fresh air conditioners’ sales were rocketing, up a staggering 720%.

In light of the economic instability and market weakness, a shrinking electronics market was actively seeking its redemption during the shopping festival from 2018 to 2019. Amid the epidemic, however, mobile phones fell from the No. 1 ranking, while the GMV of home appliances had reached the top. The top 3 players, Midea, Haier and GREE, maintained their position until the same period (the 618 event) this year. Nevertheless, the more intense competition of product quality and services is waiting for all players due to the higher general price level. 

The shopping event has disclosed a new trend in the home appliances market, emphasizing the importance of product quality and services. This year’s higher price of overall home appliances was mainly caused by the rising cost of raw materials and essential components in the first half of 2021, which is owed to the overseas supply shortage and the economic recovery from the COVID-19 pandemic. The prices of refrigerators, air conditioners, washing machines and other products have risen to various degrees; some prices have even exceeded 25%. As China’s home appliance industry matures, the set prices of selling home appliances are not easily changeable. This circumstance is also affected by technological advancements, logistics and rising employment. Thus, the rising price will be the leading engine driving a positive growth of sales amid events like 618, especially for traditional home appliances.

The rising proportion of those high-end brands’ sales (home appliances with high price levels and advanced product quality & services) has also shown a changing consumption trend. Armed with more information, consumers can compare the same products on different platforms simultaneously. Statistically, 80% of online shoppers will choose more than three e-commerce platforms for horizontal comparison in price, user reviews and after-sales services. In other words, consumers are more price-sensitive and increasingly focusing on quality. 

Consumers demonstrated an eagerness to get their hands on the latest and greatest, as well as extremely niche products and innovative services online. During the 18-day promotion campaign, the overall pre-sales of those goods increased over ten times year-on-year, including ‘mystery boxes,’ gaming mobile phones and smart pet products. Meanwhile, JD.com cooperated with 12 airlines to launch 15 air-ticket mystery-box products, reporting a 28x growth in sales. In addition, genetic testing service sales rose 23 times, making it the newly fastest-growing category of healthcare services on JD.

Mystery boxes have undeniably become a new trend, with an accelerating growth rate over previous years. Several engines drove this year’s consumption craze. To begin with, it can be attributed to the emphasizing commercialization of handmade goods, enabling consumers to purchase such products at a much lower price than, for one, traditionally designed toys, including brands like Disney and Pokémon. Besides, the rise of ‘Guochao’ characterized the expansion of China’s native fashion trends. By collaborating with numerous museums like the Palace Museum and the Sanxingdui Museum, these boxes attracted more consumers due to their diverse cultural elements.

A significant headroom for penetration growth across industries has boosted the development of the market as a whole. Several top players of the tourism industry have tried the mystery-box promotion this year and launched many air-ticket mystery-box products. After purchasing, consumers will receive a domestic one-way ticket with a designated departure place but a random destination and data. Owing to its unpredictable nature, many netizens have associated these mystery boxes with the idea of “a spur-of-the-moment trip.” This innovative marketing strategy has generated a new collaboration between airlines and travel platforms, stimulating the market as a whole.

High uncertainty and randomness generated by this kind of product are fueling an appetite for buyers’ expectations. According to MobTech, the core consumers are young females in first-tier cities who are more likely to pay for curiosity. Statistically, generation Z has made up 40% of the overall consumption. Furthermore, nearly 20% of users tend to buy a complete set of mystery boxes at once, highlighting their strong purchasing power. Meanwhile, there is still a great potential of the mystery boxes market for male consumers, as they only took up 37.4% in 2020.

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This analysis was first published on EqualOcean, an information service provider and investment research firm that focuses on China’s business landscape and thriving eco-system.
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