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China’s biggest shopping event of the year exceeds low expectations

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Staff sort express deliveries at China Post’s Zaozhuang branch in east China’s Shandong province on November 10, 2024

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BEIJING — China’s Singles’ Day shopping festival saw consumers spend more than expected in what has otherwise been a tepid retail environment, consulting executives told CNBC.

The country’s version of Black Friday kicked off this year on Oct. 14, more than a week earlier than in 2023, and wrapped up Monday. Major e-commerce companies used to report gross merchandise value, an industry measure of sales over time, but did not for a third consecutive year amid weak consumer sentiment.

“I do think for many brands it probably will have turned out a bit better than they thought, but on a low level. Probably nobody would say we hit it out of the ballpark,” said Chris Reitermann, CEO of Ogilvy APAC and Greater China. He is also president of WPP China.

Many multinational corporations that sell consumer products in China are more cautious on the market, if not struggling, Reitermann said. But he pointed out many of the companies are still “very profitable” in the country, even if their growth has slowed to the low single digits, instead of high double digits.

For this year’s Singles Day, Alibaba claimed “robust growth” in GMV and a “record number of active buyers,” while JD.com said the number of shoppers on its platform rose by more than 20% year-over-year.

The shopping season that celebrates single people, also known as Double 11, came as the Chinese government has announced a series of stimulus measures since late September, fueling a stock market rally.

The market 'is very misplaced' in terms of looking at China stimulus: UBS

“There seems to be an uptick” in consumer sentiment over the last six weeks, said Daniel Zipser, senior partner at McKinsey and leader of its Asia Pacific consumer and retail division. It’s “hard to predict what that means going forward.”

Singles Day exceeded expectations for most brands, Zipser said. But rather than sales rising across the board, he pointed out pockets of growth in categories such as outdoors, pet care and “blind box” toys — in which consumers buy uniformly marked boxes for a chance at winning a new collectible.

He noted that the blind box category is one that went from $0 before Covid-19 to an industry more than $2 billion in size, reflecting the potential speed of consumer adoption in China.

China’s retail sales for October are expected to have risen by 3.8% from a year ago, according to a Reuters poll. That would be an improvement from 3.2% growth in September.

“We saw people spending more this year,” Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, told CNBC on Tuesday. The company helps foreign brands — such as Vitamix and IS Clinical — sell online in China and other parts of Asia.

He estimated 16% growth in GMV for the shopping festival from last year, in likely the strongest performance in years. Cooke added that brands didn’t have to cut prices as much.

Research firm Syntun said Tuesday it estimated 20.1% year-on-year growth in sales over the Singles Day period to 1.11 trillion ($150 billion) for Alibaba’s Tmall, JD.com and PDD.

Investors could get more details on China consumption later this week. JD.com is scheduled to release quarterly results Thursday, followed by Alibaba on Friday.

“We’ve seen consumers who have, if you will, save for a rainy day, and they’ve purchased on this Double 11 shopping festival,” Deborah Weinswig, founder and CEO of Coresight Research, said Tuesday on CNBC’s “Squawk Box Asia.”

Singles' Day shopping festival sales 'better than expected,' says Coresight Research

She said the company’s weekly survey has indicated some “differences” in consumer sentiment over the last month.

Hopes for a recovery in 2025

China’s consumer spending has come under pressure since the Covid-19 pandemic as households grapple with economic uncertainty. A real estate slump has cut into household wealth, while economic growth has slowed.

While premium or mid-tier brands are “disappearing very fast,” higher-end brands such as Lululemon can do well, Reitermann said. He noted generally that local brands are often lower-priced and able to go to market faster.

He expects some rebound in consumer confidence in the second half of next year, after additional stimulus is likely announced in the first half.

China’s Ministry of Finance last week indicated more fiscal support could come in 2025. While China did not hand out cash to consumers during the pandemic, this year, the country did roll out a trade-in program to subsidize a portion of car and home appliance purchases.

— CNBC’s Sonia Heng contributed to this report.

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CFPB expands oversight of Apple Pay, other digital payments services

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Rohit Chopra, director of the CFPB, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress,” in the Dirksen Building on Nov. 30, 2023.

Tom Williams | Cq-roll Call, Inc. | Getty Images

The Consumer Financial Protection Bureau on Thursday issued a finalized version of a rule saying it will soon supervise nonbank firms that offer financial services likes payments and wallet apps.

Tech giants and payments firms that handle at least 50 million transactions annually will fall under the review, which is meant to ensure the newer entrants adhere to the laws that banks and credit unions abide by, the CFPB said in a release. That would include popular services from Apple and Google, as well as payment firms like PayPal and Block.  

While the CFPB already had some authority over digital payment companies because of its oversight of electronic fund transfers, the new rule allows it to treat tech companies more like banks. It makes the firms subject to “proactive examinations” to ensure legal compliance, enabling it to demand records and interview employees.

“Digital payments have gone from novelty to necessity and our oversight must reflect this reality,” said CFPB Director Rohit Chopra. “The rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures.”

A year ago, the CFPB said it wanted to extend its oversight to tech and fintech companies that offer financial services but that have sidestepped more scrutiny by partnering with banks. Americans are increasingly using payment apps as de facto bank accounts, storing cash and making everyday purchases through their mobile phones.

The most popular apps covered by the rule collectively process more than 13 billion consumer payments a year, and have gained “particularly strong adoption” among low- and middle-income users, the CFPB said on Thursday.

“What began as a convenient alternative to cash has evolved into a critical financial tool, processing over a trillion dollars in payments between consumers and their friends, families, and businesses,” the regulator said.

The initial proposal would’ve subjected companies that process at least 5 million transactions annually to some of the same examinations that the CFPB conducts on banks and credit unions. That threshold got raised to 50 million transactions in the final rule, the agency said Thursday.

Payment apps that only work at a particular retailer, like Starbucks, are excluded from the rule.

The new CFPB rule is one of the rare instances where the U.S. banking industry publicly supported the regulator’s actions; banks have long felt that tech firms making inroads in financial services ought to be more scrutinized.

The CFPB said the rule will take effect 30 days after its publication in the Federal Register.

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Baidu Q3 2024 earnings:

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Baidu on Nov. 12, 2024, unveiled a pair of glasses with a built-in AI assistant, putting up a Chinese rival to the Meta Ray-Bans that have proven a rare success in AI-powered hardware. 

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BEIJING — Chinese tech giant Baidu on Thursday posted a 3% annual drop in third-quarter revenue, nevertheless beating market expectations amid AI cloud growth.

The revenue print came in at $4.78 billion for the quarter ending on Sept. 30. Net income for the period rose by 14% to $1.09 billion.

Baidu noted a 12% surge in its non-online marketing revenue to the equivalent of $1.1 billion, mainly driven by its artificial intelligence cloud business.

Here’s what analysts expected the company to report for the quarter, according to LSEG estimates:

  • Revenue: $4.63 billion
  • Net income: $857.17 million

Baidu had reported revenue of 34.45 billion yuan ($4.75 billion) and net income of 6.68 billion yuan for the third quarter of 2023.

Beijing-based Baidu operates one of the major web browser search engines in China, along with a frequently used maps app. The company also sells cloud computing services. Online marketing drives a significant portion of the firm’s revenue.

In artificial intelligence, Baidu has promoted its Ernie chatbot as a local alternative to OpenAI’s ChatGPT, which isn’t available in China. Ernie bot now has 430 million users, Baidu said last week.

The company this month also announced that its Xiaodu AI Glasses will begin sales in the first half of next year. The wearable has at least one camera and uses Ernie’s AI capabilities and Baidu’s maps and search functions. While Baidu hasn’t revealed a price, the product is widely expected to be a Chinese alternative to Meta’s popular Ray-Ban smart glasses.

Baidu announced a management rotation last month, with Junjie He, formerly head of the mobile ecosystem group, becoming the company’s interim Chief Financial Officer, while former CFO Rong Luo assumed leadership of the mobile division.

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