The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
Expectations for this year’s Singles’ Day were muted, to say the least.
Continued Covid lockdowns, regulatory uncertainty in the technology sector, a real estate crisis and wider economic woes all helped to dampen forecasts for the world’s largest online shopping festival, which took place across China in the run-up to November 11th, also known as Double 11. (In one sign of the malaise, major tech platforms cancelled the star-studded galas, typically streamed nationwide, that have long served to generate consumer excitement ahead of November 11th).
Ten days later, it’s still hard to pinpoint just how bad sales were. Neither Alibaba-owned Tmall nor rival JD.com published precise Singles Day figures for the first time since the holiday’s commercialisation more than ten years ago. JD.com said that gross merchandise volume (GMV) hit a record high, without offering details, while Tmall reported volumes on par with last year ($84.54 billion).
But it’s no secret that sales growth has slowed significantly since 2020, when Alibaba and JD.com generated a combined $115 billion in Singles Day sales volume, and despite bracing themselves for lacklustre numbers, most fashion and luxury players were unhappy with this year’s results.
“2022 has been challenging, so brands entered Double 11 with higher inventory levels and a greater need to chase revenue,” said Jacques Roizen, the managing director of Digital Luxury Group China’s consulting arm. “The brands we’re talking to are disappointed.”
Part of the issue was the evolution of Singles’ Day itself. “Double 11 used to be the peak of excitement in the Chinese consumer calendar,” says Roizen. “It’s losing some of its panache, and is starting to become more of a seasonal sales period.” The length of the event, which this year kicked off across most channels on November 1, is one key factor, said Stuart McLennan, senior vice president, APAC, at Rakuten Advertising, who works on Singles’ Day marketing for the likes of Matchesfashion and Nordstrom. “Advertisers are increasingly using it as the campaign hook and hosting their own events much earlier to capture sales,” he explained. Rakuten advertising data revealed increased sales in early November, followed by a “tailing off” towards the 11th. While Singles’ Day remains the world’s largest online shopping event, its power is “levelling off,” added McLennan.
Certain categories performed better than others. Menswear shone, according to Elena Gatti, managing director of Europe for Azoya, a Shenzhen-based e-commerce provider, with Yeezy Gap items (which sold out in an hour) proving covetable despite ties to Kanye West. Meanwhile, demand for sustainable goods was strong: during the weeks-long programme, over 16.3 million shoppers purchased products marketed as eco-friendly on Taobao and Tmall. Alibaba’s Janet Wang, head of Alibaba’s luxury division, notes the strong appetite for hard luxury goods, with bracelets and watches proving “extremely popular.”
If Singles Day was traditionally about deep discounts, many brands are changing tack, using the event as a marketing moment. “11.11 is not just about sales,” says Wang. “Shopping festivals are evolving from discounting drives into an opportunity for brands to connect with new consumers and build a loyal fan base — this is particularly true for the luxury sector.”
Membership programmes have become increasingly important in China’s luxury sector. Female shoppers, who drive the bulk of luxury sales on Tmall, are especially engaged by membership benefits, said Janet Wang, head of Alibaba’s luxury division. According to Tmall, 82 brands including Nike, L’Oréal, Uniqlo, Anta and The North Face recorded 100 million yuan in member-generated sales on November 1st alone, while 2,700 companies saw members account for over half of their GMV figures.
Burberry, Moncler and Alexander McQueen were among the brands that leaned into novelty, revealing fresh product in the lead-up to Singles’ Day. Canada Goose used the event to talk about its collaboration with local designers Fengchen Wang and Xu Zhen, while Adidas and Balenciaga marketed their crossover collection.
Swiss watchmaker IWC Schaffhausen even used Singles’ Day to introduce its Year of the Rabbit special edition model months in advance of January’s Lunar New Year celebrations. “There’s no better moment to introduce novelty than the one moment a year when traffic peaks,” said Roizen.
For its Singles’ Day debut, Vacheron Constantin took a loyalty-centric approach: alongside inviting users to discover its limited edition 222 model (a modernised take on a 1976 design), the watchmaker tapped into a 3D showcase feature on the Tmall app. Members could register for pieces, book one-on-one sales consultations, access exclusive interest-free instalment payments and international warranties, says Frank Braillard, Vacheron Constantin’s managing director for China. No discounts and gifts were involved, but the company saw a 70 percent uptick in sales year-on-year, with a 46 percent increase in members.
Though Braillard says demand for luxury watches remains strong in China, Singles’ Day has yet to make waves on the company’s balance sheet. “Double 11 is interesting for us as a way to reach out and bring excitement to Tmall and our brand. Does it change our business fundamentally, in terms of sales? No.”
THE LATEST NEWS FROM CHINA
by Annachiara Biondi
FASHION & BEAUTY
China’s Luxury Sales to Recover in 2023
According to a joint report from consultancy Bain & Co. and Altagamma, the Chinese luxury market won’t recover to 2021 levels until at least mid-2023, with the impact of Covid-19 regulations and a slowing domestic economy weighing on consumer confidence. Personal luxury goods sales in the country dropped 1 percent at current exchange rates to €59 billion in 2022, while globally sales increased 22 percent to €353 billion. China’s delayed recovery, as well as possible recession in Europe and the US, will impact personal luxury goods sales next year, with growth expected to slow to between 3 and 8 percent. (Business of Fashion)
Brands Struggle to Offset Weak Performance in China
Covid-19 restrictions and economic uncertainty in China continue to impact brands’ financial results. After reporting a 27 percent drop in revenue in the Chinese market for the third quarter (and following troubles with its Yeezy line), Adidas slashed its revenue and operating margin forecast for 2022. American conglomerate Capri Holdings, which owns Versace, Michael Kors and Jimmy Choo, also pointed to China’s “dynamic zero-Covid” policy as it lowered its forecast for fiscal 2023 revenue to $5.7 billion from a previous estimate of $5.85 billion. Slower spending in China, as well as a strong dollar and inflation, hit e-commerce platform Farfetch, which reported its first year-on-year decline in sales as a public company. Swiss luxury conglomerate Richemont saw positive signs of recovery in the Asia Pacific region, but chairman Johann Rupert stressed the high uncertainty of the current political, economic and social landscape in the company’s key markets. (Business of Fashion)
MyTheresa Launches ‘China Designer Program’
MyTheresa has launched its ‘China Designer Program,’ an initiative aimed at supporting and promoting emerging Chinese designers in their home country and beyond as part of a larger push to grow awareness in the key market. Designers Didu, Jacques Wei, Susan Fang and Xu Zhi will receive mentorship by industry leaders and design an exclusive capsule collection for the German luxury e-tailer, which in turn is committing to stocking their mainline collections for three seasons. MyTheresa is significantly under-penetrated in China compared to peers, but it has recently heightened its focus in the country with the opening of an office in Shanghai and the hiring of Steven Xu as president of China and Asia Pacific. (Business of Fashion)
Alibaba Veteran Wei Zhang Joins Ralph Lauren
Ralph Lauren has elected Wei Zhang to its board of directors, in what president and CEO Patrice Louvet describes as a “timely and relevant addition,” highlighting Zhang’s knowledge of business operations in Asia, business development, media and digital transformation. Zhang, who was most recently senior advisor and president of Alibaba Pictures Group, joined Alibaba in 2008 and worked for the company for the next 14 years, covering roles including senior vice president of investment and acquisition. Ralph Lauren has reported positive results in Asia for the second quarter of 2022, with revenue increasing 17 percent to $316 million. (FashionUnited)
CONSUMER & RETAIL
China’s Economic Slowdown Hits Singles’ Day
For the first time since the commercialisation of Singles’ Day in 2009, this year Alibaba didn’t disclose sales results from the shopping event it pioneered, suggesting a dramatic slow-down in growth. According to the Chinese e-commerce giant, the results were “in line with last year’s GMV performance despite macro challenges and Covid-related impact.” Research from consultancy Bain & Co. shows that between 2014 and 2020 Singles’ Day sales grew between 25 percent and 50 percent each year, but in 2021 growth dropped to 13 percent. The change of pace comes as Chinese consumers rein in their spending following the country’s economic slowdown and on-going Covid-19 restrictions. Rival JD.com also didn’t publish sales results, but said “growth rate exceeded the industry average.” (Financial Times)
Gap Sells Its Greater China Business to Baozun
After 12 years in the region, Gap has agreed to sell its Greater China business to Chinese e-commerce operator Baozun for between $40 and $50 million. The deal includes the American retailer’s Shanghai and Taiwan subsidiaries, which in 2021 reported net losses of $35 million and $6.3 million respectively. Like other mass-market brands, such as Forever 21, H&M, Nike and Adidas, Gap has struggled to find solid ground in the market, running into controversies and growing competition from domestic brands. The deal, which comes after Gap launched a strategic review of its worldwide business two years ago, is expected to close in 2023. (Business of Fashion)
Alibaba and JD.com Report Quarterly Results
Weak consumer demand and logistics issues caused by Covid-19 lockdowns across the country impaired Alibaba’s sales and earnings in the quarter ending Sept. 30. The company’s revenue increased 3 percent to 207.18 billion yuan ($28.96 billion), missing analyst estimates of 208.62 billion yuan. The group also reported a net loss attributable to shareholders of 20.56 billion yuan ($2.88 billion). Operations at rival JD.com, which has invested in building its own logistics network, were less disrupted. The company reported a 11.4 percent increase in third-quarter revenue to 243.5 billion yuan ($34.21 billion), with a net income attributable to ordinary shareholders of 6 billion yuan ($837.37 million). (Reuters, Business of Fashion)
TECH & SUPPLY CHAIN
Private Markets Slash Xiaohongshu Value
The value of China’s social media app Xiaohongshu in private markets has dropped from $20 billion last year to between $10 billion and $16 billion, according to private equity data provider Altive. Analysts are questioning the app’s commercial strategy after it shelved plans for an IPO in New York following a government probe in car-sharing app Didi’s IPO earlier this year. Despite having 200 million active users and launching an e-commerce operation in 2014, Xiaohongshu is still heavily reliant on advertising, a sector which in China has seen spending decrease 10 percent in the eight months to August. (Financial Times)
Chinese Textile Companies Report Revenue Increase, But US Exports Lag
China’s largest textile companies, those with an annual revenue of at least 20 million yuan ($2.76 million) reported a 3.1 percent year-on-year increase in revenue to 3.86 trillion yuan ($538.71 billion) in the first nine months of the year. In the same period, China’s textile and garment exports increased 9.1 percent to $248.4 billion, but the country has been losing market share in the US since June, when a ban on cotton imports from Xinjiang came into effect. China exported $78.9 million worth of fabrics to the US in September 2022, down from $120.76 million in June 2022. Overall, China’s textile exports to the US were down 26 per cent in the third quarter of 2022 compared to a year earlier. (Fibre2Fashion)
Tencent Reports Revenue Drop
WeChat-owner Tencent reported a second consecutive quarter of revenue decline, with sales falling 2 percent to 140 billion yuan ($19 billion). China’s regulatory crackdown on the internet sector, initiated in 2020, has affected the company’s advertising and gaming operations, which have struggled with weaker sales. Known for aggressively investing in start-ups and tech businesses, Tencent has changed course following the government crackdown. In the last year, the company has shed shares of e-commerce JD.com and Singapore-based firm Sea Ltd., while on Nov. 16 it announced it would distribute more than 958 million shares of food-delivery company Meituan as a dividend to shareholders. (Wall Street Journal)
China Doubles Investment in Virtual and Augmented Reality
According to research firm Tuoluo Research funding, merger and acquisition volume in the virtual and augmented reality industries in China increased 67 percent in the first half of this year compared to 2021, reaching 6.19 billion yuan ($871 million). Earlier in November, the Chinese government unveiled its ambitions to grow the output of the country’s virtual reality industry sixfolds by 2026 to 350 billion yuan ($49.16 billion) and sell 25 million units of VR devices, compared to 3.7 million in 2021. Beijing has classified the virtual reality industry as one of the seven key industries of the digital economy and it aims to push it past its current focus on hardware manufacturing. (South China Morning Post)
POLITICS, ECONOMY, SOCIETY
Joe Biden and Xi Jinping Lower Tensions in Bali
In their first in-person meeting since Biden took office last year, the US President and China’s leader Xi Jinping expressed a shared desire to stabilise relations and reopen communication channels after years of deteriorating US-China relations. During the meeting, which lasted three hours and took place the day before the start of the G20 Summit in Bali, the politicians discussed pressing issues such as Taiwan and North Korea, the war in Ukraine and the climate crisis. The conciliatory nature of the meeting was welcomed by stock markets and analysts, who described it as a “baby step” towards better relations between the two superpowers and a positive sign for global stability. (NPR)
Beijing Publishes Measures to Support Economic Growth
The Chinese government is softening some Covid-19 restrictions and easing its crackdown on the property sector as it tries to revive the domestic economy. On Nov. 11, Beijing unveiled a series of measures to help the struggling real estate sector, including allowing banks to extend maturing loans to developers. The government also reduced quarantine for close contacts and inbound travellers by two days. Both policy changes were welcomed by markets, but analysts sounded a note of caution on the impact of the new Covid-19 regulations, describing the changes as “marginal” in the context of China’s domestic economic activity. The country is battling against a worrying Covid-19 outbreak, with more than 26,000 new cases on Nov. 20 and the first Covid-19-related deaths since May, while restrictions are still in place in large city centres including Beijing, Shijiazhuang, Guangzhou and Chongqing. (CNN, The Wall Street Journal, Reuters)
China’s October Economic Data Disappoints
Data published by China’s National Bureau of Statistics missed analysts’s expectations, highlighting China’s ongoing economic slowdown and the impact of Covid-19 related restrictions on the domestic economy. Retail sales fell 0.5 percent over a year earlier, against an expected growth of 1 percent, while industrial output grew 5 percent, below the expected 5.2 percent. Property investment and property sales also fell 16 percent and 23.2 percent respectively compared to October 2021. Following the release, JPMorgan and Citi revised their forecast for China’s fourth quarter year-on-year GDP growth to 2.7 percent and 3.7 percent respectively, from a previous 3.4 percent and 4.6 percent. (Reuters)
Super-Rich’s Total Wealth Drops 18 Percent in China
Only 1,305 people figure in this year’s Hurun Rich list, the annual ranking of China’s wealthiest people, an 11 percent drop from last year. Many of the country’s super rich didn’t reach the minimum threshold of 5 billion yuan ($690 million) in net worth needed to be included, as Covid-19 restrictions, a crisis in the local property market and a slowing economic growth impacted personal wealth. The decrease reflects an 18 percent drop in the super rich’s total wealth to $3.5 trillion. The list also shows the consequence of the government tech crackdown, with Tencent’s founder Pony Ma and Alibaba’s founder Jack Ma sliding to fifth and ninth position respectively. (The Guardian)
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