China Live Commerce Enters a New Stage

In 2024 , China's e-commerce sector was generally affected by weak consumer sentiment. The competition from live-streaming e -commerce to traditional platform e-commerce showed a marginal easing trend, despite slower traffic growth. While the Chinese e-commerce industry benefited from increased government subsidies in Q4 2024, the specific duration of the subsidy extension and the extent of category expansion remain key concerns regarding whether this growth trend can be extrapolated to 2025. In the second half of 2024, guided by a focus on ROI, the overall competitive landscape of the e-commerce industry did not deteriorate significantly. However, e-commerce platforms are increasing investment in different areas to enhance their long-term competitiveness (e.g., JD.com addressing its shortcomings in apparel, Alibaba continuing to invest in improving the core user experience, and Pinduoduo investing in optimizing merchant operating costs and platform ecosystem). Therefore, high expectations for profits should not be overestimated. High shareholder returns during stock price fluctuations remain a key support for valuations. In 2025, the introduction of substantial new policies to stimulate consumption and the clarification of uncertainties such as US tariffs may be key factors supporting further upward movement in industry valuations. Based on current visibility, the baseline forecast predicts that online retail sales of physical goods will grow by 7.1% year-on-year in 2025 (compared to the current Wind consensus forecast of 5.1% for total retail sales of consumer goods).

In the short term, JD.com is expected to benefit more from national subsidies due to its larger GMV share in the electronics category compared to its peers and its supply chain advantages. However, in the medium term, it is still recommended to pay attention to Alibaba, which is expected to see a structural improvement in monetization rate after market expectations return to rationality and has a stable level of shareholder returns, and Pinduoduo, whose valuation has returned to the same range as its e-commerce peers, but whose revenue and profit growth rates are expected to be significantly higher than its peers.

Short-term benefits from increased government subsidies, but substantial increases in consumption-stimulating policies will be the main focus in 2025. In October 2024, online retail sales of physical goods reached RMB 10.3 trillion, a year-on-year increase of 8.3%. Data estimates suggest that the growth rate of online retail sales of physical goods in October alone was 11.3%, with the month-on-month growth rebound likely benefiting from government subsidies and the extended Double Eleven sales period, with some sales being brought forward to October. Data confirms the marginal recovery trend in consumer sentiment mentioned by some leading e-commerce platforms in October. With the continued implementation of the trade-in program in Q4, consumer sentiment may be supported. In October 2024, online retail sales of physical goods accounted for 25.9% of total retail sales of consumer goods, a year-on-year decrease of 0.8 percentage points, but a month-on-month increase of 0.2 percentage points.

The year-on-year growth rate of online retail sales of virtual goods in October also showed a month-on-month recovery trend: the year-on-year growth rate of online retail sales of non-physical goods in October alone was 10.3%, which may have benefited from the strong tourism consumption and the incremental growth brought by the launch of new games. In October 2024, the total online retail sales (physical goods + virtual/service goods) reached RMB 12.4 trillion, an increase of 8.8% year-on-year.

October's total retail sales of consumer goods and online retail sales of physical goods both benefited from the positive effects of government subsidies and the early start of the Double Eleven shopping festival. Data from the National Bureau of Statistics of China shows that retail sales of household appliances and audio-visual equipment increased by 39.2% year-on-year in October, significantly higher than the 7.8% increase in October 2024. Retail sales of cultural and office supplies increased by 18.0% year-on-year, significantly higher than the -0.6% increase in October 2024. Based on the latest information, government subsidies mainly cover eight categories of household appliances, including refrigerators, washing machines, televisions, air conditioners, computers, water heaters, stoves, and range hoods.

Given the current weak consumer sentiment, key concerns include whether the subsidy cycle will be extended, whether the range of product categories will be expanded, and whether the growth trend can be partially extrapolated to 2025. Looking ahead to 2025, the introduction of substantial policies to stimulate consumption and the clarification of uncertainties such as US tariffs could be key supporting factors for further upward movement in industry valuations. Based on current visibility, we predict that online retail sales of physical goods will grow by 7.1% year-on-year in 2025 (compared to the current Wind consensus forecast of 5.1% for total retail sales of consumer goods).

Competition in live-streaming e-commerce is expected to continue its slowing trend in 2025. Looking back at 2024, the overall year-on-year growth rate of live-streaming e-commerce GMV showed a quarter-on-quarter decline, indicating a continued weakening of its competitive impact on traditional e-commerce platforms. Given the still weak consumer sentiment, the gradual peaking of traffic and usage time on short-video platforms, and the difficulty in significantly optimizing platform operation and maintenance costs, while live-streaming e-commerce is still expected to maintain a faster growth rate than the overall market in 2025, the trend of weakening competition on traditional e-commerce platforms is likely to continue. Live-streaming e-commerce GMV is projected to grow by 15.5% year-on-year to RMB 6.8 trillion in 2025, reaching a penetration rate of 13.3% in total retail sales of consumer goods.

Douyin's e-commerce GMV year-on-year growth rates were 60%+ in 2M24, below 40% in March 2024, below 30% in April-May 2024, and above 20% during the 618 shopping festival, showing a downward trend month by month. Kuaishou's e-commerce GMV growth was also weaker than expected, with year-on-year growth of 28% and 15% in 1Q24 and 2Q24 respectively, while 3Q GMV maintained a year-on-year growth of 15%.

The Double Eleven data also corroborates the slowing trend in live-streaming e-commerce: According to Analysys data, during the entire Double Eleven period in 2024, Douyin/Kuaishou/Pinduoduo/Taobao/Tmall/JD.com recorded GMV year-on-year growth of 18.8%/11.3%/15.8%/10.2%/7.0% respectively. Compared to the overall industry growth rate of 11.4%, Douyin/Pinduoduo continued to gain market share, while JD.com lagged behind Kuaishou/Taobao/Tmall by a significant margin. In comparison, during the entire 618 shopping festival this year, the year-on-year GMV growth rates for Douyin/Kuaishou/Pinduoduo/Taobao/Tmall/JD.com were 26.2%/16.1%/17.7%/12.0%/5.7%, respectively. Douyin/Kuaishou's GMV growth rate showed a further significant decline, while JD.com's GMV growth rate rebounded somewhat after overcoming the high base effect. Overall, the GMV growth rate of live-streaming e-commerce platforms continues to converge with the industry trend.

The slowdown in the growth of live-streaming e-commerce may be the main reason:

(1) Impulsive consumption is more affected by the weak macro consumption.

(2) The traffic and duration of live e-commerce are gradually reaching their peak (in the absence of incremental traffic, the support measures provided by the platform to merchants may not be sustainable) .

(3) Due to the lack of infrastructure support, the cultivation of users' mindset for the shelf e-commerce business of live e-commerce platforms is weaker than expected.

(4) The platform has high traffic costs, making it difficult to support the implementation of low-price strategies and competition with peers.

Guided by a focus on ROI, the overall competitive landscape of the e-commerce industry has not deteriorated significantly. However, e-commerce platforms are all increasing investment in different areas to enhance their long-term competitiveness (e.g., JD.com is addressing its shortcomings in the apparel category, Alibaba continues to invest in improving the experience for its core user base, and Pinduoduo is investing in optimizing merchant operating costs and platform ecosystem). Given this continued investment, high expectations for profit margin expansion from e-commerce platforms should not be placed on them in the short term.

Alibaba continues to invest in core user growth and user experience improvement. While this puts short-term pressure on Taobao Group's profitability, increased core user engagement will, in turn, encourage merchants to invest more resources and increase advertising spending on the Alibaba platform over time. According to Alibaba, it has accumulated 46 million 88VIP members, achieving double-digit year-on-year growth, and the number of 88VIP members placing orders during the Double Eleven shopping festival increased by over 50% year-on-year. Benefiting from price-competitive measures, Alibaba added over 20 million new users and over 140 million new orders in third-tier and lower-tier cities during this year's Double Eleven. Stronger user stickiness and better traffic allocation also resulted in better merchant ROI and stronger merchant willingness to pay. During the promotion, 402 brands on the Tmall platform achieved sales exceeding 100 million RMB, 38,000 brands saw sales growth exceeding 100% year-on-year, and the daily number of merchants paying for advertising achieved double-digit year-on-year growth.

Pinduoduo is committed to investing firmly to drive a healthier and more sustainable platform ecosystem. Management stated that it will continue to invest in the merchant ecosystem to lay a more solid foundation for long-term healthy and sustainable development. As of the third quarter of 2024, Pinduoduo's RMB 10 billion fee reduction plan and high-quality merchant support plan have saved costs and improved efficiency for over 10 million merchants. Simultaneously, the company has implemented several policies, such as refunding service fees, reducing security deposits, waiving transshipment fees for orders from remote areas, and strengthening after-sales support for merchants. Starting in the second half of 2024, JD.com resumed its planned increased investment in the apparel category, continuously addressing shortcomings in the apparel category and helping to acquire new customers and increase the purchase frequency of existing users. In 2025, under the baseline scenario, Pinduoduo and its live-streaming e-commerce platform are expected to further gain market share, although the pace may slow further.

In the third quarter of 2024, Temu's GMV was in the range of US$13-14 billion, with the sequential growth rate dropping to around 15% or even lower, compared to 50% growth in the second quarter of 2024. Meanwhile, Alibaba's international digital commerce revenue growth also slowed down compared to the previous high-speed growth phase. As the company continues to pursue quality growth and drive business expansion, user experience (UE) continues to improve.