HONG KONG -- Alibaba Group Holding may have yet again smashed its record for its annual online shopping carnival known as Singles Day, but no one should think this means Chinese consumers are feeling more optimistic than the recent spending slowdown has suggested.
While sales grew 27% to 213.5 billion yuan ($30.7 billion) -- bigger than its U.S. counterparts Black Friday and Cyber Monday combined -- a closer look at the figures shows that Chinese shoppers are refraining from buying valuable items despite big discounts. They remain distinctly gloomy, weighed down by a less than rosy outlook for the economy over the years ahead.
The Singles Day tally revealed that growth in sales of large home appliances has slowed along with China's cooling property market, Daniel Zhang, Alibaba's CEO said, summarizing the 24-hour sales event in Shanghai. Smartphone consumption also hit the brakes due to a lack of product innovation, he added.
Worse, the average value of individual orders appeared to shrink. A rough calculation by the Nikkei Asian Review -- which divided the gross merchandise value divided by the number of physical parcels -- shows the average value of individual baskets fell from 207.1 yuan in 2017 to 204.9 yuan.
Wang Dan, a Beijing-based analyst for the Economist Intelligence Unit said the weaker average spending reflects the "lack of consumer confidence" in China.
"The macro-environment has been bad since last year," Wang said, as both employment and household income are under mounting pressure.
Overall sales growth during the 24-hour period may not be an accurate indicator of China's consumption power, she said, as many shoppers turn price sensitive and would either postpone or bring forward buying to enjoy bigger discounts. Increased sales from international shoppers and rural residents who are new to online-shopping also boosted numbers.
In fact, the growth for this year's Singles Day sales was the slowest since the annual sales event began in 2009. Sales grew 39% in 2017.
The changing consumption climate has posed a great challenge for Zhang, who will be succeeding Jack Ma next year as group chairman. While the former accountant has made a name in the business world as creator of the Alibaba's blockbuster sales event 10 years ago, reducing its reliance on Chinese shoppers and merchants is now one of his priorities as Ma's successor.
"The days of rapid sales growth have gone," said Danny Law, an analyst at Guotai Junan Securities. Zhang will need to diversify Alibaba's business, Law said, which generates about 77% of its revenue from the core commerce business in China.
Bigger international exposure and expansion into wider industries are key for Alibaba's diversification plan. This year, a number of Alibaba's other business units -- including Lazada, its Southeast Asian e-commerce unit, food delivery platform Ele.me and supermarket chain Hema -- also joined the single day sales event.
However, the big transaction volume does not directly translate to Alibaba's revenue or profits. Rather, the group charges merchants a fee for conducting business on platforms it operates. And many of Alibaba's major clients -- small and medium-size enterprises -- are struggling amid a slowing economy and trade tensions with the U.S.
Law said this could adversely affect Alibaba's revenue and profits. To alleviate the operation pressure facing SMEs, Alibaba is now providing certain services to merchants for free even though they normally they would charge a fee.
Despite a slowdown in purchases of big-ticket items, Chinese buyers are still willing to spend on beauty products. Functional food, facial masks, facial essence, skin cream and makeup remover were among the top 10 categories with the highest sales.
But for overseas buyers, clothing made in China dominated their shopping lists, with dresses, pants, woolen coats, hoodies and sweaters recording the highest sales. And despite a slowdown in smartphone sales, mobile accessories still made it into the top 10 list.