Discounts, low prices heat up year-end online shopping

Era of high-tech, stiff competition, big data pushes large firms to change focus

Competition in China's online shopping sector is heating up as major e-commerce platforms are offering steep discounts and low-priced products to attract price-sensitive consumers and drum up sales during the year-end shopping extravaganza, experts said.

They also noted that traditional online retailers such as Alibaba Group Holding Ltd 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, experts said.

Alibaba's online marketplace Taobao kicked off its year-end promotional event at 8 pm on Saturday after canceling the annual Double 12 or 12-12 shopping spree, which usually takes place a month after its sister event Singles Day, also known as Double Eleven or 11-11 that signifies 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 festival.

Compared with previous Double 12 shopping carnivals, the discount intensity and scale have greatly improved this year, Taobao said. Merchants from Tmall, Alibaba's online marketplace for established brands, have also participated in the promotional gala, vowing to offer direct price cuts and discounts on merchandise.

PDD's growth in the domestic market has outstripped that of 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, saying he believes the company will walk out of the trough.

The net revenue of JD only increased 1.7 percent from a year ago in the third quarter. Liu blamed himself for JD's problems, and said it takes some time to change as the company's organizational structure is now bloated and low in efficiency.

Jack Ma, co-founder of Alibaba, said in November he believes Alibaba will innovate in response after seeing PDD's strong financial performance. He said the era of artificial intelligence-powered e-commerce has just begun.

"Enhancing user stickiness and cultivating high-quality users are crucial for Chinese online retailers, which have ramped up efforts to offer discounts and price cuts to lure price-conscious customers, given that the growth of the domestic e-commerce sector is slowing," said Mo Daiqing, a senior analyst at domestic consultancy Internet Economy Institute.

Mo said high-priced items might deter some price-sensitive consumers; so, the low-cost strategy will be key to acquiring new users, improving user loyalty and repurchase rates, and bolstering sales.

Li Chengdong, founder of Beijing-based e-commerce consultancy Dolphin, said major online retailers are accelerating steps to bring more competitively priced products to shoppers amid intensified competition in the domestic online shopping sector, adding they should also strike a balance between bringing in cheaper goods and improving users' shopping experience.

Dai Shan, CEO of Alibaba's Taobao and Tmall Group, said in an earlier earnings call that the company will continue to invest heavily in the value-for-money battle and aims to make customers understand that the product offerings on Taobao and Tmall are inexpensive.

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.

Zhuang Shuai, founder of Bailian Consulting and an expert in e-commerce and retail, said e-commerce platforms should improve the quality of products, strengthen the construction of supply chains and optimize their operational models in accordance with shoppers' buying habits.